Lexmark Case Analysis Essay

Lexmark is a leading developer, manufacturer and supplier of printing and imaging solutions for offices and homes in over 150 countries. Lexmark, despite declining revenues, has a strong competitive position in the printers market. The company is the third largest player in the inkjet printer segment behind Hewlett-Packard and Canon. Lexmark is one of the significant players in the laser printers market. Strong competitive position in the printers market provides the company with a platform for launching growth initiatives, which would help in wresting market share from rivals.

Intense competition, however, could adversely affect the revenues of the company. Strengths Strong competitive position Lexmark, despite declining revenues, has a strong competitive position in the global printers market. The company is the third largest player in the global inkjet printer market behind Hewlett-Packard and Canon. Lexmark’s share of the inkjet printer market stands at 16% is the same as that of Epson (16%), but is lower than that of Hewlett-Packard (45%) and Canon (18%). Lexmark’s inkjet printers portfolio includes low-end single-function printers, high-end photo and all-in-one printers.

The company’s inkjet printer portfolio is not as comprehensive as that of rivals such as Hewlett-Packard. The company makes up for lack of breadth in the inkjet printers market by providing attractive features at a low price. Lexmark is also one of the significant players in the laser printers market. Lexmark is the fifth largest player in the global laser printer market with a market share of 7%. The company trails Hewlett- Packard (40%), Samsung (10%), Canon (9%) and Brother (8%) in the laser printers market.

Strong competitive position in the printers market provides the company with a platform for launching growth initiatives, which would help in wresting market share from rivals. Growing services business Lexmark has a growing services business. The company provides an expanding range of services, including professional services, distributed fleet management and managed print services. The professional services of the company range from assessment and evaluation consultations to system design and implementation engagements.

Distributed fleet management is a comprehensive set of output fleet reporting and management services that enables customers to take control of their output assets and drive down output costs. The managed print services allow organizations to outsource fleet management, technical support, supplies replenishment and maintenance activities to Lexmark. The company has secured a number of services contracts in recent quarters, which underscore its growing strength in the services segment. In April 2006, the company along with Dell concluded a five-year, multi-million dollar printer management contract with Boeing.

Under this contract, Dell and Lexmark would manage thousands of Boeing’s printers across North America. In 2006, the company secured contracts from Health First, an 850-bed health care network located in Central Florida and The Children’s Hospital at Westmead, a leading pediatric hospital in Australia. Under the three-year agreement with Health First, the company would implement a fleet management solution. After the implementation is completed, Lexmark will manage approximately 1,000 devices throughout Health First’s network.

Under the five-year contract with The Children’s Hospital at Westmead, the company is expected to improve workflow for hospital staff, reducing complicated, multi-step processes to the touch of an icon, and allowing staff to quickly complete critical tasks such as patient admission and pharmacy requests. Growing services business diversifies the revenue base of the company. Strong R&D capabilities Lexmark has strong research and development (R&D) capabilities. The company has R&D centers in Lexington, Kentucky; Boulder, Colorado; Cebu City, Philippines and Kolkata, India.

The company’s R&D activities are focused on laser and inkjet printers, multifunction printers, and associated supplies, features and related technologies. Lexmark designs and develops new products and improves existing products. Its engineering efforts focus on laser, inkjet, connectivity and document management technologies, as well as design features that will increase performance, improve ease of use and lower production costs. R&D expenditure was $371 million in 2006, $336 million in 2005 and $313 million in 2004.

The company increased its R&D spending by 10% in 2006, 8% in 2005 and 18% in 2004. The R&D expenditure was 7. 3%, 6. 4%, 5. 9% and 5. 6% of its total revenues during 2006, 2005, 2004 and 2003, respectively. Lexmark holds 1,200 US patents and has an additional 900 patents applications pending. The company also holds over 2,900 foreign patents and pending patent applications. Strong R&D capabilities have enabled the company to refresh its product line on a consistent basis and provided it with a robust pipeline of new products and technologies.