Lenovo: Chinese multinational Computer Technology Company

 

 

 

 

Lenovo: Chinese multinational Computer Technology Company

 

 

 

 

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Table of contents

Introduction ……………………………………………………………………………………………………………..4

Macro-environment…………………………………………………………………………………………………….5

Political forces both national and International……………………………………………………5

Social factors…………………………………………………………………………………………………..5

Technological forces…………………………………………………………………………………………6

Natural forces……………………………………………………………………………………………………7

Economic forces………………………………………………………………………………………………..7

Micro-environment of Lenovo ………………………………………………………………………………………7

Employees………………………………………………………………………………………………………..8

Suppliers…………………………………………………………………………………………………………..8

Customers…………………………………………………………………………………………………………8

Shareholders………………………………………………………………………….…8

Media………………………………………………………………………..………..…8

SWOT Analysis of Lenovo…………………………………………………………………………………………….9

Strengths of Lenovo……………………………………………………………………9

Weaknesses of Lenovo …………………………………………………………………………………….11

Lenovo’s opportunities…………………………………………………………….…………12

Threats………………………………………………………………………………..13

Marketing Strategy of the Lenovo…. ………………………………………………………..14

Conclusion……………………………………………………………………………………16

List of references…………………………………………………………………………..…17

Apendices……………………………………………………………………………………20

 

 

 

 

 

 

 

 

 

 

 

UNDERSTANDING BUSINESS

Lenovo: Chinese multinational Computer Technology Company

Introduction

Lenovo is a Chinese global computer technology business corporation with headquarters in Beijing, China, Morrisville, North Carolina, and the United States (About Lenovo 2013, 32). Lenovo designs and develops personal computers, smart-phones, workstations, smart televisions, and electronic storage devices. In 2013 Lenovo became the world’s largest personal computer vendors (Gartner.com. 2014). Lenovo also deals in ThinkPad line of notebook processors and Think Center desktops (Fletcher et al., 2011, 23).

According to Armenakes and Bedeian (1999) successful organization is characterized by how well it regulates its tangible and intangible properties to cope with its environment. This paper analyses the micro and macro external environmental forces that affect of Lenovo. In order to effectively understand both the macro and micro environment of Lenovo, and to finally justify a forward strategy for the organization, the PESTEL and the SWOT strategic analysis would be used. PESTEL is a contraction for Political, Economic, Socio-cultural and Technological Environment (Collins). It is a useful analytic method for understanding political, economic, socio-cultural and technological environment within which it Lenovo performs. On the other hand SWOT is an acronym for Strength, Weaknesses, Opportunities, and Threats. The findings will be used in formulating strategies that Lenovo will use for future success, by evaluating market development or decline, and finding company’s strategic market position. According to Dillerup and Stoi (2006) an organization can secure its success in future by adopting strategies that take advantage of its environment.

Macro-environment

According to Jeffs (2008) macro-environment encompasses the external forces that an organization cannot directly control; rather an organization can strategise to make fair advantages out of them. These forces, Political, Economic, Socio-cultural and Technological, influence an organization’s performance.

Political forces both national and International

Making the scientific industry bigger and stronger has been the focus of Communist Party of China (CPC). This was stated by the party’s General Secretary through the scientific development forum (Gupta & Rigby 2013, 76). This has shown greater consideration and promotion of scientific research by the Chinese government. This shows that Lenovo is thriving in a politically enabling environment favouring the internationalization vision target of Lenovo.

International business environment is complex. It is an embodiment of economic, political, socio-cultural and technological influence. All these factors are interrelated through globalization. World Trade Organization’s core objective has been to restructure trade liberations to sustain collective international growth (Lenovo; Investor relations 2013, 25). Global diversity shapes the Lenovo strategies, required to respond to the rapidly changing technological environment. Trade Policy Review (TPR) of China highlights the key role the World Trade Organization’s trading policies play in increasing transparency, and facilitating discussion with WTO members in order to avoid misinterpretation and trade disputes when trade friction occur. This has helped Lenovo in expanding its trade to large international markets in Asia and Russia. A well-functioning bilateral trading system has contributed considerably to China’s sustainable economic expansion and development from the recession that struck it in 2008. The Government of China has responded to Trade challenges by establishing expansionary fiscal and financial policies, a as well as Y4 trillion (13% of 2008 GDP) incentive package (Lenovo; Investor relations 2013, 53). China has invested in gradual liberalization of its trade. The government has incessantly reduced authoritarian and other barrier to trade through custom procedures, procedural regulations, certifications, import licensing, and export boundaries focusing taxes and partial VAT rebates. China’s indigenous innovation regulations and their impact in restricting right of entry for foreign products in technology while promoting indigenous creativity has made Lenovo increase its production for the electronic demand within china and other nations.

Social factors

The success of an organization depends on the social trends, views and adjustment towards the consumption of the products it produces. China is a big market for computer based products, considering the country’s population and its ever evolving development in computer technology. Lenovo being a native enterprise in China is well established and enjoys the large China market. Lenovo stretches its markets to the most populous markets in the world, Russia, India and Brazil, which have strong purchasing power and good recommendations on China based products. Lenovo produces electronic products full of leisure, considering electronic games. China having a large population has a big number of youths who pay much attention to leisure and spend on leisure oriented electronic products (Lenovo annual report 2013, 85).

Technological forces

Lenovo enjoys immense technological environment favoured by the political influences. The government favours international acquisition of other technologies such as the IBM, Medion and CCE. These are advanced technologies that supply Lenovo with required electronic products.

Natural forces

Beijing, Shanghai and Huizhou are the location for the production base of Lenovo, cities convenient for transportation and distribution of Lenovo products. In addition, China is rich in natural human resource with sound interest in technology. This has boosted Lenovo in designing, developing, manufacturing, and selling personal computers, tablets computers, workstations, smart-phones, servers, and electronic storage devices.

Economic forces

In the previous years in China there has been international financial predicament that has lead to a worldwide fluctuation in the market. This resulted into a decrease in the purchasing power of consumers who spent less in IT and commercial PC. However, the China’s economy has been steadily growing according to the WTO’s concerns. This has given the population purchasing power that favours Lenovo (About Lenovo 2013, 27)

Micro-environment of Lenovo

A micro-environment consists of diverse stakeholders outside the company. The micro-environment is a constituent of customers, suppliers, creditors, distributors, and dealers. They form its ability to serve the customers. The micro-environment is an external environment to the company as they do not directly control the company, but the company’s management can actively control them through its policies and strategies. (Dr. Karminder Ghuman 2010, 37). The micro-environmental forces that influence the success of Lenovo involve Employees, Suppliers, and Customers.

Employees

Employees are the potential human resource of a company. They are critical to any success that can be realised by the Lenovo. The success depends on employing innovative, inventive, and pioneering staff, and self motivated to work in accordance with the mission of Lenovo and to achieve its visions.

Suppliers

Suppliers are those who make available goods and services which are transformed into value by an organization.    Lenovo gets its supplies from companies such as Shenzhen Smart Technology which supplies Lenovo with smartphones and other products (Lenovo 2013, 35)

Customers

The customers make the Lenovo market. The major markets of Lenovo are in India, Russia and China itself. Lenovo has made good marketing in Africa as well. India and Africa have been significant to Lenovo due to their low purchasing power, given that Lenovo products are low priced compared to other products from other states like the European countries and the US

Shareholders

Stakeholder is a group or entities who have interest in the company, and whose action influences the organization directly or indirectly (Freeman 2013, 53). Shareholders cause pressure on the company to make profit. Every decision made must involve the interest of the company.

Media

Positive attention of media on the products promotes the company. An organization must manage every media that tends to promote its product. Media help in establishing Public Relationship with the company. Television, for example has a wide and a more direct audience. The modern media that Lenovo exploits for marketing include facebook, twitter, and youtube in addition to the traditional televisions. Companies that do not have access to ever-growing China’s score lowly in marketing. Lenovo controls the its marketing through such media.

SWOT Analysis of Lenovo

After analysing the external environment of Lenovo, in order to develop a strategic plan that will respond to its changing environment, it is imperative that a focus on its Strength, Weaknesses, Opportunities, Resources, and Threats, from which the construction of SWORT is obtained, is carried out for strategic analysis. Professor Les Worrall of Wolverhampton Business School attributes strategic analysis of an organization to the process that involves the detection and evaluation of information about its environment relevant to strategy development using a range of analytical methods (Matthew 2007, 25).

Strengths of Lenovo

Vertical integration: In an organization’s management, vertical integration is an understanding in which the supply chain is partially or wholly owned by the company (Folsom 2007, 94). In common practice the supply chain different market-specific products that at the end satisfy a common requirement (consider horizontal later). Vertical integration has helped Lenovo in avoiding the hold-up problem. According to Rogerson (1992) hold-up problem arises when two parties say Lenovo and its suppliers work efficiently by cooperating but at a time refrain from doing so doing to the ill idea that one may give the other party an improved bargaining power, and thus reduce its own profits. Lenovo’s approach to vertically integrate has been fruitful. The company has been capable of keeping low costs, keep up with both domestic and international competitions while relying less on original equipment manufacturers (OEM)

Good brand recognition and traditional reputation

According to Keller (1993) brand recognition is the degree to which a brand is recognized by a prospective customer. Brand recognition is the key goal for advertisement, promoting a brad by attributes (Percy & Rossiter 1992, 42). Due to Lenovo’s manufacturing of good quality electronic products, the China market easily recognizes its brands. Lenovo as a company has the full knowledge of the market trends. This has made it emerge in China market and continues to be one of the biggest in the domestic market. The firm’s familiarity with the China’s market and the capacity to satisfy Chinese feel has resulted to the wide reception and support for the company’s products.

Low cost production

Low-cost manufacturers utilize economies of scale so as to implement their strategies of low prices. Consumers who are keen at realizing price fluctuations are likely to shop at shops that offer the lowest prices, if the products in the market are of quality and relatively homogenous. Lenovo manufacturers have set nearly half of its hardware in low cost counties such as China, Brazil, and Argentina in order to benefit from higher market margins. Even though the prices are low, the products are price competitive (Lenovo 2013, 254).

Competency in Mergers and Acquisitions

According to Rumyantseva et al (2002), Mangers and Acquisitions (M&A) are all facets of Strategic management, corporate economics, and management concerned with buying, selling, dividing and uniting of diverse business institutions and alike entities that can assist an enterprise grow speedily in its sector. Lenovo continuously acquire firms in order to bring patents, new capabilities, resources and skills to the business. Through flourishing acquisitions and combined ventures, Lenovo expands its markets and distribution networks. Compaq is one of the notable acquisitions in the current years (Gupta & Rigby 2013, 52). By acquiring Compaq and Stoneware, and the use of other firm’s R&D, Lenovo has got together a strong patents portfolio associated to its PC and software business.

Weaknesses of Lenovo

According to Mehta (2000), a conversion strategy should be adopted after strategic analysis in order to formulate strategies that can secure the positive development of a company. This involves the conversion of weaknesses or threats in to opportunities or strengths. Business weaknesses are embodiments of features that put the company in a disadvantage strategic market position relative to others. Lenovo’s weaknesses include:

Poor brand perception in the developed economies

The world perception of the idea “China Made” is a big weakness of that Lenovo faces in the developed world market. Lenovo’s main market outside china is Asia, where the company sells most of its products. It is not easy for Lenovo to market in US and the Europe make where its brand perception is low.

Low differentiation

Lenovo’s products are not far much differentiated from other competitors’ products (Lenovo annual report 2013, 05). This presents a competitive difficulty to the company, and especially when other companies also lower their products’ prices.

Lenovo’s opportunities

Business opportunities involve elements that the company can exploit to its advantage (Menon et. al., 1999, 24). Identification of opportunities and threats is important for the organization since they are essential for informing future strategies that can be implemented to achieve its objectives for future success (Collis & Montgomery 2008, 87). Lenovo’s opportunities include:

International expansion

The company has a significantly growing India’s Smartphone market. India’s computer and Smartphone market is currently least penetrated by the by the US and European manufacturers among Asia and Pacific countries. Due low pricing and the low purchasing power of the bigger population in India, Lenovo can easily penetrate the market, as the population can afford low priced electronic products (Lenovo annual report 2014, 35). African states are also crippled economically and may not be in a position to purchase expensive Smartphone from US and other states in Europe. Lenovo can make its expansion to Africa and become a global seller.

Growth of tablets market

Lenovo has made most sales of tablets; it is currently ranked as the 4th biggest seller. By introducing better quality products Lenovo can increase its market shares. It can take the opportunity to become the best world tablet seller.

Obtaining patents through acquisitions

Lenovo can sustain its growth by obtaining more patents though acquisition of firms holding them like it did with IBM’s Compaq.

Threats                                  

According to Menon et al. (1999) business threats involve external environmental elements that could cause trouble to the company. It embodies what the company faces, what the competitors do public brand perception, technological changes, and other identified weaknesses. The major Lenovo’s threats are the currently emerging low priced electronic products in the world. Other shoppers occupy the low purchasing power market that Lenovo has monopolized for some years. Other threats include:

Slowing growth rate of the laptops market

The rate of growth of the computer market is diminishing as the market becomes saturated. Expanding a saturated market will not be easy for Lenovo; this will also lower its growth in market share. Saturation is already taking place in developed countries. It will not be easy for Lenovo to expand its markets to developed countries such as US and European countries where the products are also associated with low quality (About Lenovo 2013, 29)

Rapid technological change

This is a common threat though, among the computer related products sellers. Companies are under high pressure to produce new products with most modern technologies. If Lenovo fails to satisfy this demand in the countries where it sells its good s then it will not be able to compete fairly, given that other companies are also working hard to produce low priced products. The company also faces strong competition in all its business segments. It competes in terms of price, quality brand, rapid technological changes, reputation, distribution, and range of products with well Western and European companies that produce of products, with Acer, Apple, Dell, HP and Toshiba from Japan.

Marketing Strategy of the Lenovo

Both PESTEL and SWOT frameworks have been used to strategically analyse Lenovo’s micro and macro environmental forces as well as its strengths, weaknesses, opportunities, and threats that shapes its performance both in the national and international market. Chermack et al (2007) propose that SWOT analytical framework facilitates the organization of information that provides clear insight into an organizations strategic plan. SWOT model facilitates the conversion strategies used in converting weaknesses or threats in to opportunities or strengths. This conversion is applicable in formulating strategies that Lenovo should respond to effectively in order to prosper in its first changing technological environment.

American Marketing expert, Boughton (1964) formed the marketing mix model. The model is used in optimizing the various controllable environmental forces for the purpose of achieving organizations marketing goals. The model facilitates the identification of strategic marketing choices. Strategic choice involves an organization choosing an activity out of several possible actions with an aim of formulating strategise for countering potential threats (Macmillan & Tampoe 2000, 132).

Target marketing strategic choice for LenovoBrand awareness

With regards to the SWOT analysis above, the best options Lenovo should take are those options that will ensure that it gets successful in marketing by converting its weakness to opportunities and strength through; through brand awareness and international expansion. In a competitive and fast changing market environment effective brand awareness is a critical marketing to counter low differentiation and market saturation.

By definition, brand awareness is the proportion of a target population who know Lenovo exists and the services and products it offers. Increasing brand awareness is a critical strategy for changing the attitude and perception the market have towards the products of Lenovo. It also helps in making the potential market know that Lenovo is working hard just to serve. It is no doubt that brand awareness and brand loyalty are the two most significant variables in marketing. Brand marketing partly promotes brand loyalty.

In order that Lenovo expand its brand awareness, the company should do a survey in order to know how well its target market in Asia and Africa know about its products. From this survey Lenovo should do intensive and extensive Integrated Marketing Communication using media in order to sell its products by changing the market attitude from viewing products from as valuable. Lenovo can use the phrase “Not Just China but Lenovo”. This should be aimed at embracing the misconception on China made products and hence distancing itself from them in the global market. It is practical to increase low brand awareness by 100 to 200% with an intensive and extensive marketing campaign using the available media.

There a number of strategies that Lenovo can use in increasing its brand awareness. The tactics will enable the brands to be and the message being passed to be seen by many people over a long a time. These strategies should include the use of outdoor billboards, banners and posters that are constantly seen by many people throughout the day and throughout the months. Over these periods the majority of the target market will get to know about the Lenovo products. The use of international Television channels over time will also help Lenovo in its target market.

Conclusion

Lenovo faces real micro and macro environmental forces that influence its strategic plans and its future success. The company’s long term expansion is inseparable from a combined and correct guiding ideology drawn from constant strategic analysis using such frameworks as SWORT and PESTEL. Using information from these strategic analyses Lenovo will be able to create a sound management framework capable of guiding the company’s direction of development. Brand awareness is a specific marketing strategy that Lenovo can employ to in order to make its products known in the competitive market of computer products. Effective marketing will raise its market strategic position.

 

 

 

 

 

 

 

List of references

“Our Company”. About Lenovo. Lenovo, 2013. ‘we have headquarters in Beijing, China and Morrisville, North Carolina, U.S’.

Chermack ,T. J. Bernadette K. K. 2007, “The Use of and Misuse of SWOT analysis and implications for HRD professionals”. Human Resource Development International 10 (4): 383–399.

Collins, R. 2014, “A Graphical Method for Exploring the Business Environment”.

Collis, D. and Montgomery, C. 2008, ‘Competing on Resources’.Harvard Business Review July–August 2008 pp140-150.

Dillerup, R., Stoi, R. 2006, “Unternehmensführung”,Vahlen, p. 179 et seq.; p. 187 et seq.

Fletcher, O., Shara T.,Nathalie T. 2011, “Lenovo passes Dell to become world’s No 2 PC maker”. MarketWatch

Folsom, B. 2007 pg 65, The Myth of the Robber Barons 5th edition”only we can develop ability and hold it in our service. Every year should be marked by the promotion of one or more of our young men.”

Gartner.com. 2013, “Gartner Says Worldwide PC Shipments Declined 6.9 Percent in Fourth Quarter of 2013”. Retrieved 2014 -8 -December

Gupta, P. and Rigby, P.2013, Lenovo entering ‘PC plus’ era, CEO says. Available at: http://uk.reuters.com/article/2013/01/10/us-ces-lenovo-interview-idUKBRE90903L20130110

Jeffs, C. 2008, “Strategic Management”, SAGE Publications Ltd., p. 29 et seq.

Johnson, G., Whittington, R. & Scholes, K. 2011, Exploring Strategy: Texts and cases.9th ed. Harlow, Prentice-Hall Europe. (chapter two)

Keller, K. 1993, “Conceptualizing, measuring, and managing customer-based brand equity”. The Journal of Marketing 1 (22).

Lenovo , 2013,. Investor relations – Annual & interim reports. Available at: http://www.lenovo.com/ww/lenovo/annual_interim_report.html

Lenovo, 2013, About Lenovo. Available at: http://www.lenovo.com/lenovo/uk/en/our_company.html

Matthew S. 2007, “CNET Networks rolls out BNET, Web site targeting business managers,” B to B,

Mehta, S. (2000) Marketing Strategy

Menon, A. et al. 1999, “Antecedents and Consequences of Marketing Strategy Making”. Journal of Marketing (American Marketing Association) 63 (2): 18–40. doi:10.2307/1251943. JSTOR 1251943.

Menon, A. et al. 1999, “Antecedents and Consequences of Marketing Strategy Making”. Journal of Marketing (American Marketing Association) 63 (2): 18–40. doi:10.2307/1251943. JSTOR 1251943.

Percy, L. & Rossiter, J. 1992, “A model of brand awareness and brand attitude advertising strategies”. Psychology & Marketing 9 (4): 263–274. doi:10.1002/mar.4220090402.

Rogerson, W.P. 1992, Contractual Solutions to the Hold-Up Problem. The Review of Economic Studies, 4(59), 777-793. Retrieved from http://www.jstor.org/stable/2297997

Rumyantseva, M. G. G. & Ellen E. 2002, “Knowledge Integration after Mergers & Acquisitions.” University of Mississippi Business Department. University of Mississippi,.

Skille, E. 2011, Change and Isomorphism – a case study of translation processes in a Norwegian sport club. Sport Management Review, 14.pp79–88.

Wikipedia, 2013, Lenovo. Available at: http://en.wikipedia.org/wiki/Lenovo

 

 

 

 

 

 

 

 

 

 

APENDICES

Appendix A Lenovo ownership

Lenovo is not a state owned enterprise. The CEO Yang Yuanqing clarifies this issue as the public more often take it for a state entity. As at October 1, 2011 the general public held about 58% of Lenovo stock. The Legend Holding Limited, a shareholder had its 34% of stock value while 8% was held by other entities. In 1984 Chinese Academy of science invested about $25,000 in Lenovo. Lenovo is no longer part of the academy however.

Appendix B: Corporate culture

Lenovo’s corporate culture is different from other companies in China. While the company was founded from the state seed capita, Lenovo runs a private enterprise with little state interference. The senior executives involve many non-Chinese. Major headquarters are in Beijing, Morrisville, and North Carolina. Two western nationals have served in Lenovo’s Executive committee.

Appendix C: Micro and Macro environmental forces influencing performance of a firm

Figure 1

Figure 2

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