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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
Hi-tech 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

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

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

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
National Image (China)
Knowledge about local market (due
to the acquisition with IBM
Mass manufacturing capability
Quick responsiveness
Low cost (manufacturing plant in

Weakness
Poor global perception
Low inventory turnover

Limited knowledge of global market


No pure electronic sales
Less R&D budget 13%

China)
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 high-end
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
that
1. There are supliers available to provide the necessary inputs
2. Shareholder can contribute capital and the new products can generate return on capital

invested

3. 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 partners
HARD WARE
PROVIDER
Sony ----- Screen
Compaq J.V
Intel ----- Processor
SOFTWARE
PROVIDER
Intel ---- Graphics
Microsoft OS
OTHER SERVICES
PROVIDER
Nec ----- Marketing
Partnership

Key Activities
R&D
Low cost manufacturing
Modular production

Economy of scale

Bundling

Customer relationship
management
High quality and
reliability

Key Resources

Firm specific resources


Manufacturing plant
Research centres
Human resources
management
Financial status
Staff

Value Proposition
Innovation
Laptop
Tablets
Desktop computer
Workstation
Servers
Services
Warranty
Protection
Disposal & Recycling
Deployment
Customisation modular
Differentiation -- design

Customer
Relationship
Customer service
support
Networking support
Warranty
B2B
B2C

Customer Segment

Home and Home office


Enterprise
Public sector
Business partners
Students

Chanels
Retailing
E-tailing
E-commerce

Firm adversible
resources
Acquisition with IBM
Cost Structure

Revenue Stream

Distribution and selling


R&D
Acquisition with IBM
Economy of scale
Merging market in china

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
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`

Threats
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

QUESTION MARKS

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.

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
growt
h
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

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.

and stars into the market leader.


High
Relative market share
Low
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

DIFFERENTIATION

A business aims to differentiate within


just one or a small number of target
marget segment

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

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.
Low

High

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
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.
existin
g

Product

New

MARKET PENETRATION

MARKET DEVELOPMENT

(existing markets, existing products)


Market penetration occurs when a
company enters/penetrates a market with
current products
PRODUCT 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

(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

(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

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
Inbound
Logestic
s 20%

Operatio
n
30%

Outboun
d
Logestic
s 15%

Marketin Inbound
Margin 20%
g and
Logestic
sales
s 5%
10%

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
one-size-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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