Introduction
Lenovo is the Chinese company headquarters in Beijing, china and the second head quarter is in North Carolina, United States. The company Lenovo is indulged in the making of the personal computers, tablets, smart phones, and a lot of IT software, workstations, televisions, servers, and smart televisions. The Lenovo is successful in getting the largest unit sales. They develop, design and manufacture all the items mentioned above. They market the think pad for the notebook computers. Similarly, idea pads for the notebook computers. Idea center helps the desktop line, and yoga line helps in marketing the notebook laptops and the think center lines for the desktops.
Lenovo is performing its operation in the 60 different countries of the world, and its product is bringing phenomenal effects in the 160 different countries of the world. It is operating in the several countries through joint ventures means by doing partnerships with the well-reputed companies. It has joint ventures with EMC, Lenovo EMC, which sells network-attached storage solutions. They also have joint ventures with NEC holdings which are serving Japanese and making them the personal computers.
Lenovo acquired IBM computers in 2005, and the agreement of acquiring of its Intel based business was also taking place. Lenovo entered the market of smartphones in 2012 and by the end of 2014, it has become the world’s largest smartphone selling brand (Liu, 2007).
Mission of Lenovo
The mission statement of Lenovo states that
“We want to become the world’s largest and greatest personal technology computers.”
Their mission statement is quite clear as they want to rule the world by bringing the utmost desired and innovative features and technology in their products which they are making. They are fulfilling their missions by working in the three areas (Zhijun, 2006).
Personal Computer
They want to lead the attire of personal computers and want to get respect In return from their customers by providing the quality products and latest designs.
Convergence
It is leading the industry with the enormous number of appliances includes devices, applications, services, and a lot of content for the people who are internet user and provide them the web information and necessary data.
Culture
It has become the most respected and the well-reputed company by providing the friendly atmosphere and the cultured environment. The company is most trusted and respected and the other companies love to work with it due to its rich culture.
Vision of Lenovo
The vision statement of Lenovo states that:
“Lenovo tries to be a world’s best company that makes the world’s best engineered personal computer.”
Their vision is also quite clear in which they tell that they want to make the computers which cannot be made by anyone else, and we should be known in the world by our identity and the trust of the customers. The development of the best computers demand the best engineers and the best technicians which they have and they all are working on it to bring the company on the top of the list (Zhijun, 2006).
Current strategic objectives
The current strategic objectives of Lenovo are to expand the market share, participate in the international market. They are developing the new market and retail stores in the China and it in return stabilize the market share and increase the power in the China market. Their strategy is to understand the brand management and the retail is about the selling targets, and they just don not want to put their products on the shelves but also want to increase the sales. They are making strategies to beat the Apple. The major strategic actions include that they sponsor the Olympic Games and promote their brands in all over the world by putting their slogans in the displays (Hill, Jones and Schilling, 2014).
Financial strategy
They are making good relations with the US government which later on help them in increase their target market. By making the strong relationships, the doors would be open for them to enter the huge market of US. They are focusing on the American market if they firms their steps in that then it would surely become the core market of Lenovo. This entrance would lead them to earn the 30% total revenue of the company (Biediger et al, 2005).
SMART analysis of Objectives
The SMART stands for specific, measurable, attainable, realistic and timely achieved goals.
The smart goals by Lenovo include the following attributes. These attributes include
Power cycle
It will count the hard disk drives count. All power on and off cycles are included in this. This thing makes it efficient, and the things would do timely and make it specific. It should be timely achieved otherwise it would cause the failure (Liu, 2007).
Reallocations
It attributes accounts for the efficiency. In this, all the unwanted raw material is placed, and the spare material is allocated to the different departments. These are transferred from the allocated areas to the areas where they can be placed which include the spare areas. In this, both attempts are counted i.e. successful and unsuccessful (Zhijun, 2006).
Pending reallocation count
It will count the pending allocation resources. It will prove more specific and yet the efficient utilization of the spare raw material. They save it and make it use for the future use.
Power on hours
The power on hours shows the total number of hours that are used by the company to produce the single unit. The power required manufacturing the number of units. It tells about the seconds, minutes and hours which are utilized in the production of the single unit. Decrease in this attribute would cause the failures and it would have the bad impact on the overall company reputation (Hill, Jones and Schilling, 2014).
Load cycle count
It counts the number of the loading and unloading count cycles into the head landing zone positions. It includes the count of spindle stop and starts cycles. When the spindle is about to turn the count increases in both the cases when the hard disk is turned on and off. It would be more specific to the devices for which they do (Freeman, 2010).
Environmental Analysis of Lenovo
The SWOT analysis of the company includes the external factors and the internal factors. The internal analysis accounts for the strengths and weaknesses of the company whereas the external analysis gives us the information about the opportunities and the threats that the company is facing.
Internal Analysis
The internal analysis includes the strengths and weaknesses.
Strengths
Lenovo Company is producing the best quality products. Its brand and traditional reputation are very high. They have a diversified product line. They have good public relations and the well-known sponsorships (Hill, Jones and Schilling, 2014).
Weaknesses
Their product styles are too fewer to choose. There is a large number of the products offered by the competitors for the customer choice. Moreover, the prices of the products are not low. They are quite high. Their marketing area is weak (Zhijun, 2006).
External Analysis
The external analysis involves the opportunities and threats. Now here let’s see where the company Lenovo is standing and what the opportunities they can avail are and what are the major threats they can face.
Opportunities
They can take over the competition to become the largest computer selling brand. They can bring specialization in their computers and related products. The specialized product has its worth in the world. They should target the countries like England, France, and all the European countries to increase the market. They can bring division in their products (Murphy and Scharl, 2007).
Threats
There are many products which are relatively lower in prices, and they are quite inexpensive and cheap. These cheap products can be proving as a threat to the company. There are a lot of competitors who are making the similar products. Their competitors give them a tough competition. The economic crises could be the greater threat. The economy of a country fluctuates at a greater pace so they may face the decrease in the sales (Hill, Jones and Schilling, 2014).
PESTEL ANALYSIS
The PESTEL analysis of the firm is given in the below table
Impact of Macro-Environmental Trends on Strategy
Secondly, the focus of the company on the Chinese market has proven beneficial in the past and helped in fighting the global recession. The moving back to the base country for the sales revenue has helped the company to boast its sales. China is a large market with increasing population and literacy. It is an attractive market for the technological companies. Lenovo has an edge of being the native company and the Chinese people favor the local brands. Therefore, the company has an advantage over the competing brands. It can exploit the potential of the Chinese market like no other company. This macro-environmental trend is an opportunity for the company and will direct the future strategic formulation
Moreover, the technological revolution and the innovation has no bounds to the geographical boundaries. Recently it has been observed the technological revolution is coming from the developed nations. The current production facilities of the company are either in China or the South American countries. These countries have less expensive resources that helps in cost saving. However, the rate of technological diffusion in these regions is low as compared to the other developed countries like US, UK and Japan. The over reliance on these regions is a weakness that can turn into a threat if not taken care of properly.
Porter’s Five Forces Analysis
Industry Rivalry
The rivalry among the existing brands in the personal computers market is intense. Currently, three large players make the most of the PC market share. These players are Lenovo, Dell, and HP. These three brands cover 60 percent market share. The differentiation among these brands regarding quality and product features is limited, and all the players are offering top of the line products and sophisticated technology to its customers. However, the difference lies in the support and after sales services. Lenovo has best product support services among these brands. The customer relationship management of Lenovo is strongest compared to the other brands. Lenovo has lost the trademark rights of IBM, and it is very important for the brand to have increased brand recognition to compete with the other large PC brands (Times, 2004).
The largest player giving fierce competition to Lenovo is Dell. It is the top supplier of Desktop and Laptops in the world. The company is known for its value chain that reduces the costs. The unique selling proposition of the Dell is its low cost and competitive pricing that is winning the competition. Dell has double the sales as compared to the closest competitor. The sales of the Desktop computers stand at 60% and the laptops at 58% in the North American and European Market. The strengths of the company are its strong support services and low cost of the products. However, the weak point is its low spending on the R&D. The products of Dell are less innovative as compared to the Lenovo product line (Biediger et al, 2005).
HP is the second largest supplier of the desktops and the laptops to the enterprise customers. It has overtaken Lenovo in the laptop sales to the North American and European customers. The company has improved its operational capacity and the product line over the recent years. The company has managed to gain 6% and 5% market share in the European and North American Enterprise sales respectively in the last year. The market shares are expected to increase as the company has refreshed its product line and introduced new Intel-based laptops in its product offerings. The customer satisfaction surveys indicate the products of the HP are behind the competition in quality and support services (Biediger et al, 2005).
Threat of New Entrants
The increased investment in the high-tech products and the technological revolution has resulted in the disruptive innovation and increased technological products in the consumer markets. Therefore, the market liberalization and the decreasing cost of the technology is favoring the new entrants in the PC market. However, the threat of new entrants to Lenovo is minimal due to the significant size of the firm. The company is enjoying enormous economies of scale that are not possible for a new entrant to enjoy. The capital requirements for the new entrants are significantly high. These factors protect the company from the potential entrants into the market. Moreover, Lenovo has strong brand recognition and loyalty both locally as well as globally. It is not possible to a new brand to build such brand equity without considerable investment of resources and time. Moreover, Lenovo has made a significant investment in the Research and Development to boost the customer experience and the product support. As a result, it is offering durable and reliable products to the customers. The company has a loyal customer base that is difficult for a new brand to acquire (Zhijun, 2006).
The growth of the enterprise market of PC has made the segment attractive, and there are foreseeable new entrants. However, the potential entry problems and higher capital requirements have raised the bar. Moreover, the corporations are satisfied with the current suppliers as the technological gaps are limited. All the above factors make the threat of new entrants into the market significantly low (Liu, 2007).
Threat of Substitutes
The advancement in the technology and technological revolution has increased the chances of new and innovative products in the markets. Therefore, the substitute products are increasing as well. The substitute products for the Lenovo product line are the iPads and other tablets. The young generation has increased adoption of the substitute products as well. People tend to purchase and use tablets and handheld devices as compared to the computers and the laptops (Murphy and Scharl, 2007). However, there are many tasks that cannot be performed on the tablets. Therefore, the use of the computers and laptops is inevitable and cannot be eliminated. Moreover, the corporate and enterprise clients have not adopted the handheld devices and rely on the traditional computers due to the increased reliability. The new age substitute of the laptops and the desktop computers have created a fashion and lifestyle statement but failed to deliver the performance. The threat of the substitute products of Lenovo is, therefore, moderate. Despite the heavy advertisement and the promotional programs these devices have failed to affect the sales of the laptops and the desktop computers (Knoop, 2006).
Moreover, Lenovo is an innovative company and applies innovation to come up with the new and attractive products. The company has product lines to counter the effect of the handheld devices and the tablets. It has introduced new tablet PCs with the functionality of both computers and the sleek designs of the tablets. These products have greater portability as well as reliability and durability. It has given a competitive edge to the company over the substitute products (Liu and Buck, 2009).
Bargaining Power of Suppliers
The production facility of the Lenovo is based in China giving it access to the diverse suppliers, cheap raw material, and less expensive labor. There are diverse suppliers in the Chinese market reducing the bargaining power of the suppliers. It gives the company a competitive advantage over the other brands available in the market. The other players have to spend more. Therefore, the cost of the Lenovo products is less as compared to the competition. The overall bargaining power of the suppliers of Lenovo is low (Knoop, 2006).
Bargaining Power of Buyers
The bargaining power of the customers regarding the technological products is considerably higher due to the availability of some alternatives, substitutes, and intense competition. The companies are moving towards the increased differentiation to reduce the bargaining power of the buyers and to increase the customer loyalty. Lenovo has been successful in introducing an increased level of customization in its products to attract the loyal customers. Moreover, the company has a reach in less developed markets of the Middle East and Africa. It offers products to the customers in areas where other brands do not have a presence. This move reduces the bargaining power of the buyers, and the company can charge premium prices. The overall bargaining power of the buyers is high (Biediger et al, 2005).
Key Industry Pressures
The three key industry pressures identified for the PC industry are the cost control, changing consumer preferences and continuous technological improvement. The impact of these KIPs on the five forces of competition is discussed below
Cost Control
The control on the process cost has intensified the competitive rivalry among the brands. The companies are going to far lengths to reduce the cost so that they can price the products more competitively. It has increased the entry barriers as well. The companies are making huge investments in technology to gain the economies of the scales. The fixed costs are increased as a result the capital requirements for new entrants are increased by many folds. Similarly, the cost control aspirations of the PC companies have led them to choose from a long list of suppliers reducing the bargaining power of the suppliers. However, the bargaining power of the customers has no reasonable effect of the cost control by the firms. Moreover, the value creation in the supply chains by the PC suppliers particularly Dell has fueled the innovation resulting in the innovative substitute products.
Changing Consumer Preferences
The consumer preferences are ever changing and the customers want newness all the time. It has led to the increased interest of the brands in the consumer behavior research. The changing preferences are affecting the competitive landscape as well. More players are entering the PC market to offer the products to the meet the changing customer needs. The competitive rivalry among the brands is increasing so does the threat of the new entrants. The purchasing power of the customers has increased due to the availability of a large product ranges offered by various brands. The substitute products are also increasing due to the increased competition. However, the bargaining power of the suppliers has reduced as the number of the suppliers has increased considerably to cater to the increasing competition. The focus has shifted from the standardization to the customization.
Continuous Technological Improvement
The technology industry demands continuous improvement and technological improvement. The ownership of the competitive advantage rests with the firms that are more vigilant in research and development. No technology can offer sustainable advantage over a longer time as the advancements brings innovative solutions. It has increased the spending of the firms in R&D. The increased R&D spending has raised the entry barriers and it is becoming tough for the new entrants to compete with the existing players that have years of experience and expertise at their disposal. Moreover, the competitive rivalry between the brands has increased and the companies are spending more on technological development to remain in the game. Changing technology has made the customers choosy and the bargaining power of the buyers has increased. The bargaining power of the suppliers has risen as well as the suppliers with innovative solutions are able to mark their own prices and charge premiums. Moreover, the technological improvements have made way for the innovative substitute products as well. The clear example is the recent adoption of the tablets as alternative to the personal computers.
References
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