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Question 1. Critically analyse the industry and market environments of Lenovo and comment on how well Lenovo is positioned to mitigate against potential adverse conditions, and/or take advantage of opportunities that may arise in markets of interest to the company. (You may use any models that
Lenovo creates and builds exceptionally engineered personal technology; Lenovo builds on its dominant position in China to grow globally. A PESTLE analysis is a useful tool for understanding the big picture of the environment in which LENOVO is operating. Specifically a PESTLE analysis is a useful tool for understanding risks associated with the Hitech market growth or decline, and as such the position, potential and direction, to help make decisions and to plan for future events. . PESTLE analysis includes Political, Economic, Social, Technological, Legal, and Environmental factors. This PESTLE analysis is done only United States or neighbour countries as a foreign market.
Lenovo coping strategy
Government Regulation Legal Issues Political stability
Per capital income Buying habits Internal cash flow Internal cash flow
Consumer attitude Consumer buying habits Education
European estates government help and support all foreign investing companies like Lenovo to establish their business in this regin Due to the acquisition with IBM there is not facing those legal issues which facing other independent companies Political conditions of this region are very sound for foreign investors Per capita personal income in US is almost 40 grant which is very good for computer industry Peoples of this region loves to use new technology, therefore Lenovo expands its R&D and innovate new technology (e.g tablets) with its partner Due to the acquisition with IBM, in US Lenovo comes in very strong financial position Due to the acquisition with IBM, in US Lenovo comes in very strong financial position Due to the Chinese brand Lenovo has not a good image in US market which is as a negative sign for Lenovo, but acquisition with IBM is goes in favour If Lenovo provide innovative and user friendly computers, this obviously attract more consumer Literacy rate in US is very good which help to increase sales of Lenovo Seven research centres which works under the umbrella of Lenovo Increase research and development have caused permanent innovation which leads to product life cycles resulting in a faster depreciation of the product
Transportation Legal Employment Law Environmental regulation Environmental Ecological Customer values Management style Stakeholder / investor values
Before acquisition Lenovo spend massive amount on shipping which is save now Lenovo is an Equal Opportunity Employer and prohibits discrimination and harassment of any kind Lenovo develop sustainable products using materials that are safe; which are environmentally preferable; and which have increased recycled content, recycling rate is greater than 95% Lenovo laptops are user friendly, received Green Product award for desktop PC from China Environmental Protection Foundation Lenovo established customer-focused direct business model Lenovo follow and authoritative management style Lenovo embraces the values of customer service, innovative and entrepreneurial spirit, and integrity.
This PESTLE analysis is in effect an audit of Lenovo environmental influences with the purpose of using this information to guide strategic decision-making. The strategic position of Lenovo is concerned with the impact on strategy of the external environment, internal resources and competences. Strategic group of Lenovo are clusters of organisation that compete on the basis of a similar positioning, product quality and target very similar customers, the strategic group of Lenovo providing strength to it and helping to increase its market share, the potential strategic group of Lenovo are as follows; HP with the 18.1% market share, Dell stand on second position with 15.6% of total market share, Acer got 9.4% market share, other companies 49.1% share as contrast of Lenovo 7.8% total market share. In a generic group high risk industries earn high return, because they focus on developing new products and they spend heavy amount on their R&D
In order to get a better sense for Lenovos outlook in terms of the corporate market and the impending loss of the IBM branding, SWOT would be discussed after the PESTEL analysis, it is helpful to analyze the companys strengths, weaknesses, opportunities and threats in terms of the problem. These key parameters are summarized here, Strengths and weaknesses are often internal to the organization, while opportunities and threats generally relate to external factors. Strength
Weakness National Image (China) Knowledge about local market (due to the acquisition with IBM Mass manufacturing capability
Poor global perception Low inventory turnover Limited knowledge of global market
Quick responsiveness Low cost (manufacturing plant in China)
No pure electronic sales Less R&D budget 13%
Lenovos major strengths lie in its current brand image and market share. On the international scale, Lenovo ranks third in corporate sales behind Hewlett-Packard and Dell. It shows tremendous capability for improvement, however, due to its clearly superior reputation for high quality, high end products inherited from IBM. In addition, executives maintained from IBMs notebook division provide the valuable experience that a relatively new foreign player normally would not have in the corporate (especially US) market. However, Lenovo already has a strong base in China, with a 29% share of Chinas PC market, and continuing innovation in the highend market makes products like the ThinkPad X300 a Strengths Furthermore Lenovo is a computer maker, not a computer manufacturer. It buys from a group of concentrated hi-tech component manufacturers. Lenovo has a significant weakness in targeting the college and school student segment of the market and also Lenovo lack a large amount of relationship with educational institution.
SWOT analysis is lacks detailed structure, so key elements may get missed, but in the light of above mention Strength and Weakness Lenovo is an up growing star of Hi-tech industry, because after getting home advantage it would become an international star and overcome its weaknesses by good leadership quality, innovation and R&D. In addition to and in combination with SWOT analysis, the Five Forces model by Porters provides another analysis tool to identify opportunities and risks when entering untapped territory in market. Porters Five Forces model, other than a SWOT analysis, provides clear action for analysing the competitive strength.New Market Entrants
Bargaining power of Suppliers
Rivalry among competing firm in industry
Bargaining power of Buyers
Threats of substitute
Threats of new Entrants (Moderate): High capital requirement Product differentiation (there is constant need of technology improvement to attract customer) Moderate customer switching cost (due to standardization of most of computer
component, it becomes easy for customer to change their laptop) Access distribution channel (availability of direct-to-customer service) Economies of scale Decreasing profitability due to high competition
Bargaining power of Buyer (Moderate):
Buyers have full information about computer Due to the hyper competition buyers get more advantage and face few switching cost Buyers price sensitivity Availability of existing substitute products (Dell, HP, etc) Differential advantage (uniqueness) of industry products
Bargaining power of Supplier (High):
A few larger suppliers (there are few suppliers wchich are trustable, recognized and provide good quality raw material such as Foxconn, Intel, Hitachi). Supplier concentration to firm concentration ratio supplier switching cost relative to firm switching cost is high There is also difficulty in re-producing specalized technology (which becomes competitive advantage of supplier) Strength of distribution channel High number of customers who are fragmented (customers are highly fragmented so to provide products to them is not an easy task, that is why suppliers bargain highly)
Threats of Substitute (Moderate):
Relative price performance of substitute Buyers switching costs Percived level of product differentiation number of substitute products available in the market (HP, Dell etc) Substandard product
High Fixed cost (cost for setup of manufacturing units increased fixed cost which makes difficult for existing players to exit) Constant changes in product and price makes intercategory competition stiffer Two big players hold the top two market share spots in the computer industry (HP & Dell) Low switching cost increases rivalry Low levels of product differentitation are associated witth higher levels of rivalry High exit barriers place a high cost on abandoning the product. the firm must compete. high exit barriers cause a firm to remain in an industry, even when the venture is not profitable.
Porters Five forces model targets the assessment of the structural attractiveness of the analysed industry, finally the Five Forces analysis pinpoint strength and weaknesses in a accompany and discovers opportunities of threats within the industry.
Question 2. Apply the BM Canvas model to illustrate Lenovo business model and critically comment on the Lenovo model. In addition, highlight and discuss the Resources; Activities and Competences of Lenovo that help give the company the competitive advantage that i