Introduction:
As we all know, Internet become a necessity in the past few decades. People cannot live without it. Therefore, more and more internet-capable devices have been invented such as iPad, smart phones. This phenomenon also motivated a number of companies to transform their uni-operational policies into multi-operational policies. And most of them invent and manufacture diverse internet-enabled products instead of just produce desktop computer. Lenovo is one of these companies. It is a Chinese computer technology company which invent and develop a variety of internet-capable devices such as personal computers, tablets, and even smart televisions. And now, it becomes the largest personal computer producer in the world (“Lenovo ousts …show more content…
Vertical integration is one of the strengths. This is because it empowers Lenovo to control supply chain. Since they have their own company/department to produce the raw materials and intermediate goods, they don’t need to rely on other suppliers which avoid the hold-up problem. This gives Lenovo the ability to change the decision of their production very quickly and thus helps it to manufacture up-to-date products. Just like what Yang Yuanqing, who was the chief executive of Lenovo, said vertical integration help Lenovo to keep up with pace and control inventory in order to match supply with demand and handle very fast turnover since the speed of innovation is very fast (Chao, 2012). Therefore, compared to Lenovo’s major competitors such as Dell and HP, in-house manufacturing aid Lenovo to have greater ability to fit in the market and hence create and produce more updated devices since its competitors have contracted out their manufacturing to other suppliers. Besides, in-house manufacturing enables a company to produce high quality products as vertical integration aid it to have more budget to manufacture goods (Balakrishnan & Wernerfel, 1986). Since Lenovo have their own department to produce raw materials, it would have a better control of the allocation of resources and hence eliminating the transaction cost and waste, as a result, more money are available to produce products. Therefore, Lenovo …show more content…
According to the data from Statista, the average selling price of desktop computer in the world is USD379 (2015). However, people need to pay at least USD500 to purchase a Lenovo’s personal computer (Lenovo Group Ltd, 2015). Also, not only is the selling price of Lenovo’s desktop far more than the average price but also the selling price of its major competitors. For example, people only need to pay USD330 to buy a Dell’s personal computer (Dell Inc., 2015). Actually, the differences of computer’s selling price between Lenovo and other companies are quite large. High selling price would decrease the attractiveness of Lenovo computer and thus less people would purchase it since it is too expensive. Therefore, unreasonable selling price would weaken the ability of Lenovo to compete with
As we all know, Internet become a necessity in the past few decades. People cannot live without it. Therefore, more and more internet-capable devices have been invented such as iPad, smart phones. This phenomenon also motivated a number of companies to transform their uni-operational policies into multi-operational policies. And most of them invent and manufacture diverse internet-enabled products instead of just produce desktop computer. Lenovo is one of these companies. It is a Chinese computer technology company which invent and develop a variety of internet-capable devices such as personal computers, tablets, and even smart televisions. And now, it becomes the largest personal computer producer in the world (“Lenovo ousts …show more content…
Vertical integration is one of the strengths. This is because it empowers Lenovo to control supply chain. Since they have their own company/department to produce the raw materials and intermediate goods, they don’t need to rely on other suppliers which avoid the hold-up problem. This gives Lenovo the ability to change the decision of their production very quickly and thus helps it to manufacture up-to-date products. Just like what Yang Yuanqing, who was the chief executive of Lenovo, said vertical integration help Lenovo to keep up with pace and control inventory in order to match supply with demand and handle very fast turnover since the speed of innovation is very fast (Chao, 2012). Therefore, compared to Lenovo’s major competitors such as Dell and HP, in-house manufacturing aid Lenovo to have greater ability to fit in the market and hence create and produce more updated devices since its competitors have contracted out their manufacturing to other suppliers. Besides, in-house manufacturing enables a company to produce high quality products as vertical integration aid it to have more budget to manufacture goods (Balakrishnan & Wernerfel, 1986). Since Lenovo have their own department to produce raw materials, it would have a better control of the allocation of resources and hence eliminating the transaction cost and waste, as a result, more money are available to produce products. Therefore, Lenovo …show more content…
According to the data from Statista, the average selling price of desktop computer in the world is USD379 (2015). However, people need to pay at least USD500 to purchase a Lenovo’s personal computer (Lenovo Group Ltd, 2015). Also, not only is the selling price of Lenovo’s desktop far more than the average price but also the selling price of its major competitors. For example, people only need to pay USD330 to buy a Dell’s personal computer (Dell Inc., 2015). Actually, the differences of computer’s selling price between Lenovo and other companies are quite large. High selling price would decrease the attractiveness of Lenovo computer and thus less people would purchase it since it is too expensive. Therefore, unreasonable selling price would weaken the ability of Lenovo to compete with