Legend Holding was established in 1984 and was incorporated in Hong Kong in 1988 then changed its name to Lenovo in 2004. As one of the leading personal technology companies in the world, it produces desktop computers, servers, notebook computers, mobile phones, electronic storage devices and other products. Lenovo is the world’s largest PC supplier and third largest smart-phone company. The headquarters is located in Beijing of China, and the manufacturing centers in countries around the world.
According to the definition of Philip Kotler distribution channel is a means used to transfer a commodity or service from manufacturers to consumers which is the most important decisions will directly affect other marketing decision. Therefore, in order to achieve a splendid success, a suitable distribution strategy is crucial to be considered to sell their products in response to the huge changes in market. Normally, there are direct and indirect distribution as shown below.
The advantages and disadvantages of direct and indirect distribution as shown in the figure below. Therefore, different distributions suit different companies in different situation. For example, Dell adopt direct distribution while Lenove through its own distribution strategy.
Distribution of Lenovo
With the rapid development of the society, Lenovo cannot succeed without a series of distribution strategy. Different strategies were adopted in each period of the development which can be divided into three stages: traditional distribution; intensive distribution and integrated distribution.
Lenovo used traditional distribution model which is a indirect distribution as a starting point to distribute the product from 1994 to 1997. This distribution model has three levels which is producer, wholesaler and the retailer. Lenovo through distributors and dealers to spread their products to all parts of the country. However, sometimes , this type of layer upon layer distribution is inefficient. It does not suitable for long-term development.
Thus, how to design a suitable channel is necessary. There are three types of distribution are intensive, selective and exclusive distribution. Intensive distribution which means the ways and places to display the product as many as possible so consumers could purchase it due to widely distribution. Selective distribution is a limited distribution. However, due to the fewer relationships, the manufacturer has more control. The producer has the most control and may become monopolistic because of adopting exclusive distribution. According to its situation, Lenovo entered in the intensive distribution stage during 1997 to 2004. In order to putting forward ‘ big lenovo’ concept, Lenovo established its own distribution channel and focus on the development of small cities and countryside. Just because it put the most effort into building a nationwide distribution network in China, the distribution channel system is more comprehensive than foreign rivals which contribute to its competitiveness. Also, through this distribution pattern, more consumers can know and understand the product due to large number of sales outlets, so Lenovo develops rapidly and account for large share of the market, especially small cities and countryside.
After China joined the World Trade Organization in 2001, Lenovo prepared to enter the international markets. Consequently, in 2005, Lenovo adopted a integrated distribution strategy which means customer product line and small to medium size business line. Develop chain retailers and strengthen cooperation with the TV shopping. Meanwhile, Lenovo has established their own telephone direct sales team and build the company-owned stored in China. It is useful to provide sales plan more comprehensive and more efficient to customer to cover more and more consumers.
By: Dandan Liu 214353927
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