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Contribution Margin
The Average of the industry Contribution Margin (CM) was 15.40% for 2004, 14.39% for 2005, and 13.18% for 2006. The chart showed that Contribution Margin for the industry has declined; however, Lenovo's CM has been very steadily. It's showed that Lenovo got the stable suppliers and the well-developed distribution channels. On the other hand, Lenovo's Contribution Margin is lower than the CM of Dell and HP. (5) Therefore, Lenovo needs to learn how Dell and HP drove down the variable costs. ((See exhibit ratios)
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