How Lenovo became a global company
Lenovo, in the contemporary period, belongs to one of the dominant global producers of personal computers, along with that of HP, Acer and Dell. With its base in China and operations across the world, the company generates nearly $38 billion sales revenue, much of which can be attributed to the robust global strategic framework and operations of the company, over the years.
The primary reason behind the global expansion of the concerned company, in an increasingly competitive market of personal computers, is that of its emphasis on organizational learning and also optimisation and continuous improvements in its value-chain activities. The company mainly expands through relevant mergers and acquisitions, the primary one of which was the acquisition of PC business of that of IBM in 2005 and the merger with NEC, to infiltrate the Japanese market, in 2011. The company adopts a “Protect-and-attack” strategy, thereby protecting and improving its business in core countries like China and fiercely expanding in emerging markets of the developing economies, through its diversified, user-friendly and affordable products.
PESTLE Analysis of Lenovo
To understand the macro environmental factors affecting the business of Lenovo, the PESTLE Analysis is conducted as follows:
Political Factors- The inherent political favour of the government of China, towards the local brands can be seen to be benefiting Lenovo considerably. However, the political instability of the developing countries, where the company tends to expand, being subjected to frequent turbulence, can have adverse impacts on its business.
Economic Factors- In the current period, the economies of the developing countries, especially the Asian countries, can be seen to be growing, with the increase in the income and standard of living of major share of the population. This, along with sectoral changes in jobs, from agricultural to industrial, has led to increased demands for the products sold by the company and is expected to increase even more, thereby benefiting the company. However, economic challenges like currency volatility across the globe, increasing price competition and others pose threats to the company.
Social Factors- The social acceptance of technology, internet, social media has increased hugely in both developed and developing countries, thereby increasing the demands for the products sold by the company, adding to its profits and business expansion.
Technological Factors- The constant development and innovations in technological aspects and huge competitions in the PC business across the globe are one of the major issues to be taken into consideration by Lenovo. The company is also expected to invest 1.2 Billion on R&D in the coming years.
Legal Factors- Being a global brand, the company is subjected to legal frameworks and diverse production, pricing, marketing and taxing rules in different countries, violation of which can cause fines in millions of dollars.
Environmental Factors- With increasing global environmental awareness and the need for sustainable production taking the centre-stage, Lenovo has also committed to raise its target for carbon emission reduction by 40% in 2016 and has been working on usage of renewable energy in its production chain.
To understand the internal as well as external strengths, limitations as well as the threats and opportunities of Lenovo, the SWOT Analysis is conducted as follows:
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Strengths · One of the leaders in global PC market with huge market presence · Diverse product lines with efficient performance record · Stronghold in Chinese and Asian markets · Constantly innovating product line · Efficient and affordable pricing |
Weaknesses · Product recall numbers rising with time · Low presence and brand recognition in the developed countries · Does not attract high end customers |
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Opportunities · Constantly growing demand in the global market · Cloud computing market expanding · Strong potential of more merger and acquisitions in developing and developed countries to boost the product portfolio |
Threats · Increasing competitive pressures · Declining sales of PC due to increasing sales of technologically advanced and capable smartphones and tablets · Declining average prices, in the pressure of increasing competition, leading to decline in the profit margins |
Analysis of different operational aspects and market conditions of Lenovo
To understand the position of the company in the global market, this analysis is conducted as follows:
Bargaining Power of Suppliers- Most of the suppliers of the company being small and the suppliers also being high in number, their bargaining power is low.
Bargaining Power of Buyers- Due to presence of many competitors and a decline in the current sales of the PC market, the bargaining power of the consumers have increased and is in a moderate level.
Threats of new entries- The oligopolistic and highly competitive nature and the huge requirement of initial investment makes this threat very low and non-credible.
Threats of substitutes- Presence of other laptop and PC companies as well as increasing usage of smartphones and tablets make the level of this threat high.
Rivalry among existing companies- The PC market being competitive and highly oligopolistic, consisting of few dominant and powerful player, the market rivalry is high.
Primary Activities
Inbound Logistics- Components come from multiple sources and the PC division started with acquisition of IBM’s business in 2005.
Operations- Uses the economies of scale of original equivalent manufacturers by outsourcing production to them.
Services- Provides reliability and quality to the customers.
Outbound Logistics- Usage of various direct and indirect channel for distribution and expands its capacities across the globe.
Marketing and Sales- Divides the markets into emerging and matured ones and acts accordingly.
Support Activities
Infrastructure- Has announced and established distinct business groups, each dedicated to achieve connected but diverse goals.
Human Resource- Believes in hiring innovating minds and constant training and evolution of the employees.
Technology Development- Needs to constantly innovate to stay sustainable.
Procurement- Emphasise on low cost products to achieve greatest competitive advantage.
Country risk- The company is hugely protective regarding its market and prosperity in its base country China and keeping that sustainable tries to capture the emerging markets, where the risk of competition is low.
Cultural Risk- Having its base in an Asian country, the company minimises cultural risk by mostly venturing in the emerging Asian markets.
Currency Risk- Lenovo considers the high currency volatility and operates according to the same.
Commercial Risk- Acknowledging the high risks of competition, the company keeps on innovating and diversifying.
Standardization- Although the company divides its markets into emerging and matured and adopt different pricing strategies, however, in terms of quality the company standardizes its products as per the global mark-up uniformly.
Adaptation- The company is highly interactive with the global customers and adapts as well as incorporates their feedbacks and demands in their productions, thereby attracting greater clientele.
Global Innovation- Acquisition of IBM’s business helped the company to acquire internationally standardised technological base, which the company has improved by constantly innovating and investing, as can be seen from their 6,500 patents and increasing R&D activities. The company has also started investing in green technologies.
Global Brandings and Products- The company adopts modular architecture with interchangeable components, which can be used for multiple devices. The prices are kept affordable for the majority of the population and marketing is adjusted as per local demographics, thereby increasing the brand presence. The company has acquired the IMB brand name and also the name of ThinkPad, which the company has used to reach to a global level of brand awareness, by using social media and other platforms.
Global Human Resources- The company has an employee strength of 27,000, comprising f hugely diverse people from all national and organizational levels and it conducts global training programs to develop the skill sets of its employees.
Global Culture- The company has a diversified employee base and encourages a culturally inclusive environment by respecting work-place diversity. High socialisation across all tiers also helps the company to facilitate global knowledge exchange and free flow of ideas and innovations, coming from the employees with a global mind-set.
Conclusion
With a diversified employee base, an immensely innovative and dynamic product chain, zeal to venture into global markets and explore new opportunities and with their cost-effective and diversified products and huge supplier and client base, Lenovo currently enjoys the position of a global leader in the Personal Computer market and aims to remain so by investing more in innovations, diversity, mergers and acquisitions and green technologies and sustainability.
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