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.

Macro Factor

Generic Factor

Lenovo coping strategy

Political

Government Regulation Legal Issues Political stability

Economic

Per capital income Buying habits Internal cash flow Internal cash flow

Social

Consumer attitude Consumer buying habits Education

Technological

Innovation Technology

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

Rivalry (High):

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 it so clearly has in the Mobile market place. (You should pay particular attention to their ecosystem; modularisation and platform technologies. However, in addition, you may use any other models which you consider appropriate to illustrate your points) Core competencies Core competencies identify and specify areas of operations that Lenovo does very well for example mass production and low cost. Therefore these were competencies should be fully exploited and matched with our strategic choices for example Lenovo enjoys low cost production, cost which can be exploited in following cost leadership strategy.

Lenovo Ecosystem Ecosystem refers to the interaction between an organisation and its stakeholders, organisation cannot succeed on their own but need to interact with other stakeholders so that common objectives are achieved. Such stakeholders include the following;1. Shareholder capital contribution 2. Employees 3. Customers 4. Suppliers

In context of Lenovo its important to consider such stakeholder such as;1. Suppliers such as Microsoft (operating system provider) & Intel (Micro chip

provider)2. Distributor such as PC world 3. Customer such as government of China

Therefore in considering its strategic choices Lenovo need to ensure that there is a fit between its choices and ecosystem for example in developing new product it need to ensure that1. There are supliers available to provide the necessary inputs

2. Shareholder can contribute capital and the new products can generate return on

capital invested3. Employee have the necessary skills to develop the new product 4. Distributor are willing to stock the new product and generate sales 5. Customers need can be satisfied by the new product

The plan implemented by a Lenovo to generate revenue and make a profit from operations. The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.Key partnersHARD WARE PROVIDER Sony ----- Screen Compaq J.V Intel ----- Processor SOFTWARE PROVIDER Intel ---- Graphics Microsoft OS OTHER SERVICES PROVIDER Nec ----- Marketing Partnership

Key ActivitiesR&D Low cost manufacturing Modular production Economy of scale Bundling Customer relationship management High quality and reliability

Value PropositionInnovation Laptop Tablets Desktop computer Workstation Servers Services Warranty Protection Disposal & Recycling Deployment

Customer Relationship Customer service support Networking support Warranty B2B B2C

Customer Segment Home and Home office Enterprise Public sector Business partners Students

Key ResourcesFirm specific resources Manufacturin g plant Research centres Human resources manageme nt Financial status Staff Firm adversible resources Acquisition with IBM

Chanels Retailing E-tailing E-commerce

Customisation modular Differentiation -- design

Cost Structure Distribution and selling R&D Acquisition with IBM Economy of scale Merging market in china

Revenue Stream Competitive price Direct sale Retail & online sale Promotional bundle

Business Model Canvas for Lenovo starting from all the peoples (Commercial users, personal users and students) and organisations for which are Lenovo creating values such as laptos, workshtation, tablet or other services, these values are providing to the customer by the different channels such as direct selling or by a third party, customer relationship are like a bond between customer and Lenovo, for making it strong Lenovo provides very good after sales services, as a result of these its revenue is increasing numerously due to the increasing market share Lenovo setup new manufacturing plant and invest upto 13% on R&D

As I define above the opportunities and threats of SWOT analysis could only be found after evaluating and analysing the external environmental factors on the business, because these related to the external environment of Lenovo. Lenovo is a $US21 billion personal technology company and the second largest PC company in the world, serving customers in more than 160 countries and have a lot of opportunities to become number one in the world.

Opportunity

Threats Pc sales are expected to grow Fast growing international market Signing of memorandum of understanding with USA Specialty shops providing one stop platform for distribution Growing wireless PC Market`

Competition threats from local and international competitor Price war Threat of price completion with clone PC makers Industry reaching maturity Little firms growth popularity

Personal computer are being purchased and used more than ever before. The market for laptop, in particular, is growing much faster than of desktop computers. This general trend lends itself as a great opportunity for Lenovo laptop business to grow in all segments. Another great opportunity for all the target segments relates to the first trend that was mentioned, customers are more educated about personal computers therefore focus on students. The Boston Consulting Group (BCG) Matrix is a simple tool to assess a companys position in terms of its product range. It helps a company think about its products and services and make decisions about which it should keep, which it should let go and which it should invest in further.

High

STARS Stars generate large sums of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate; in case of Lenovo Tablets has a large share in the rapidly growing market. The implication is that stars should be mentioned and builds by improving its quality as well as promotion it aggressively.

QUESTION MARKS These units could be build, hold, harvest or divest, question marks have not achieved a dominant market position, and hence do not generate much cash, the result is a large net cash consumption, Lenovo services fall in this category

Rate

of market CASH COWS growth These products are said to have high profitability, and require low investment, the cash cows are hold and harvest, Lenovo laptops and desktop computers are milk extracting units, they provide the cash required to run question marks and stars into the market leader. Low High

DOGS Lenovo cell phones are close to this category, Dogs have a low market share and a low growth rate and neither generates nor consumes a large amount of cash.

Relative market share

Low

In the scenario of Hi-tech competitive environment Lenovo has achieved a considerable position in the world market, beside all these factors and investment and growth LIMITATIONS OF BCG MATRIX Market growth rate is only one factor in industry attractiveness, the framework assumes that each business unit is independent of the other, but in some cases one unit is helping other, the last one limitation of BCG matrix is that this matrix depend heavily upon the breadth of the definition of the market While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporations business portfolio at a glance, and may serve as a starting point for discussing resources allocation among strategic business units. PORTER'S GENERIC COMPETITIVE STRATEGIES If the primary determination of a firm profitability is the attractiveness of the industry in which it operates, and important secondary determinant is its position within that industry. Michael Porter has suggested a method of categorizing the various types of competitive strategies; these are four generic business strategies in order to get competitive advantage. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market by contrast the differentiation and cost focus strategy are adopted in a narrow market or industry. High DIFFERNTIATION FOCUS A business aims to differentiate within just one or a small number of target marget segment Degree of product COST FOCUS diff. Here a business seek a lower-cost advantage in just on or a small number of market segment. The product will be basic perhaps a similar product to the higher priced and featured market leader. DIFFERENTIATION This strategy is usually associated with charging a premium price for the product often to reflect the higher production cost and extra value added featured provided for the consumers. COST LEADERSHIP The objective is to become the lowest cost producer in the industry, emphasised on minimising cost. If achieved selling price can at least equal the average for the market then the

Low

High

lowest cost producer will enjoy the best profit scope of business activity Low

Lenovo has focused on cost leadership strategy, for to achieve its goal Lenovo trying to beat its competitor by decrease in its price, Lenovo prices are 40% less as compare to market leader (Dell).

If we discussed about the way of choice to grow Lenovo Business Ansoffs model is best tool that explain the choices that Lenove has in order to grow its business in term of increasing sales, market share and profit. The model specific four choices shown in the following diagram. existing MARKET PENETRATION (existing markets, existing products) Market penetration occurs when a company enters/penetrates a market with current products Product PRODUCT DEVELOPMENT (Existing markets, new products): A firm with a market for its current products might embark on a strategy of developing other products catering to the same market. Making a change to an existing product and re-launching it Existing Market MARKET DEVELOPMENT (new markets, existing products) An established product in the marketplace can be tweaked or targeted to a different customer segment, as a strategy to earn more revenue for the firm DIVERSIFICATION (new markets, new products) Diversification involves launching a new product in a new market. Richard Branson is an expert at this, and he needs to be - it's the riskiest way a business can go about making a living New

New

Market Penetration This growth strategy implies that Lenovo can grow its business by selling more of its existing product to its existing market by means of aggressive advertising and sales promotion such as in China, and other parts of Asia. This strategy helps Lenovo to;

Taking customers away from competitors by using penetration pricing. Persuading existing customers to buy more of the product by increasing their usage. Finding new customers altogether by expanding the market. This strategy is used most commonly by firms because it is the least risky.

Diversification

This strategy is risky and expensive but can be profitable, this is very suitable strategy for Lenovo to enter in Europe or US because here customers are not price sensitive, in this strategy a lot of research is needed to get things right and perhaps consultancies will be called in to help educate the business about its new challenges. Value Chain Analysis Value chain is defined as the links between key value adding activities and their interface with the support activities. Value chain has been implied as a strategic evaluation tool used for distinguishing the strength and weaknesses in value adding processes. The value chain of Lenovo has been demonstrated in the following digram;

Firm infrastructure HRM Technological Development Procurement Margin 20% Inbound Logestics 20% Operation 30% Outbound Marketing Inbound Logestics and sales Logestics 15% 10% 5%

Inbound Logistics The overall cost leadership strategic management of Lenovo is exhibited in its lean and agile inbound logistics function Operations Management Lenovo has been praised by a number of supply chain management critics for its effective use of IT systems that facilitate the companys low cost leadership strategy. Outbound Logistics Lenovo holds leadership position in online and offline sales, which is due to its efficient and effective outbound logistics. Marketing and Sales Loyalty programs like Lenovo protection, warranty, disposal and recycling are being introduced which dissuade the customers from switching over to their competitors Services Lenovo has been pursuing a dual strategy of cost leadership and differentiation, which has led to an increased importance placed on customer service

Question 3

The BCG Matrix method can help understand a frequently made strategy mistake: havng a onesize-fits-all-approach to strategy, such as a generic growth target (9 percent per year) or a generic return on capital of say 9,5% for an entire corporation.

If we discussed about the Chinese technological king (Lenovo) the most appropriate strategy for US or Europe is Product Differentiation because Lenovo has the opportunity to provide a broad spectrum of services specially to the corporate market with a reasonably high-quality, low cost (this is because of low labour and less raw material cost in China) computers in the Lenovo 3000 line. Lenovo has the potential to become a one-stop-shop in the corporate market. At the same time Lenovo needs to continue to focus on providing the most features in their high-end machines, not only for executives but also mid-spectrum machines for nonexecutive home or personal users, ensuring that they maintain the reputation that the high-end Thinkpad series has built. An executive purchasing a computer is less likely to worry about a $100 difference in prices than about the number of features a computer provide.

USA and European are the biggest corporate clients of computer and in this region of world the buyers are not price sensitive they need quality and new valuable features for their use which make their work more cosy and efficient to achieve this specific goal.

As well as continue its current strategy (Cost Leadership) for Asia region because mostly Asian customers are price sensitive specially India, China, Pakistan and Malaysia are developing countries, and they all have big population and the level of education is increasing very rapidly therefore in this region core customers of computer are students who need efficient machine in affordable or low price

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