Strategic Analysis of Lenovo's Business Model

This assignment requires you to delve into the strategic analysis of Lenovo's business model. You will examine various aspects such as cost leadership versus differentiation strategies, the impact of political influence on their operations, and how they leverage factors like service characteristics and supply chain management to achieve success. Additionally, the analysis should encompass Lenovo's sustainability efforts and future growth strategies within a dynamic global market landscape.

Running head: INTRODUCTION OF MANAGEMENT
Introduction of management
Name of the student
Name of the university
Author note

1INTRODUCTION OF MANAGEMENT
Executive summary
The aim of this report is to discuss about the about the diverse environmental factors being faced
by Lenovo in their global business operation. This report discussed about the political,
economical and socio-cultural environment being faced by Lenovo. Competitive environment of
Lenovo is also being discussed in this report with the use of the porter five forces model. This
report concludes that, Lenovo is facing various issues in their global business operation along
with increase in the threat of competition. In accordance to these issues, various recommended
steps are being discussed in this report.

2INTRODUCTION OF MANAGEMENT
Table of Contents
Introduction..................................................................................................................................4
Analysis of the external environment of Lenovo............................................................................5
Political environment...................................................................................................................5
Economical environment.............................................................................................................6
Socio-cultural environment.........................................................................................................8
Determination of competitive environment of Lenovo...................................................................8
Bargaining power of suppliers.....................................................................................................8
Bargaining power of buyers.........................................................................................................9
Threat of new entrants.................................................................................................................9
Threat of substitutes...................................................................................................................10
Industry rivalry..........................................................................................................................10
Recommendations..........................................................................................................................10
Brand extension.........................................................................................................................10
Change management..................................................................................................................11
Product diversification...............................................................................................................11
Targeting developing market.....................................................................................................11
Conclusion.....................................................................................................................................12
Reference.......................................................................................................................................13

3INTRODUCTION OF MANAGEMENT

4INTRODUCTION OF MANAGEMENT
Introduction
The current business scenario is highly competitive in nature and with the growing
intensity of globalization; challenges for the contemporary business organizations are becoming
more diverse (Alden et al., 2013). This is due to the fact that, contemporary business
organizations operate in different countries around the world and thus they face diverse business
environment and competition. Thus, it is important for the contemporary business organizations
to have effective and efficient mechanisms to determine the environmental factors and the
intensity of the competition. It will help them to initiate their business policies accordingly.
However, multinational organizations are having the major need of determining the diverse
factors due to the reason that, they operate in different locations around the world.
Lenovo is one of the leading multinational organizations in the market of electronic
gadgets in the world. They were being incorporated in 1984 in China and currently they are
having their market presence in more than 160 countries (About Lenovo | Lenovo India, 2018).
Moreover, Lenovo is the largest electronics gadget company in the world in terms of sales. Two
of their major revenue generating products is personal and notebook computers and mobile
devices. In the recent times, they have acquired Motorola Mobility in order to strengthen their
presence in the highly competitive market of smartphones.
This report will discuss about the political, economical and socio-cultural environment
being faced by Lenovo with the help of the PESTEL analysis. Moreover, Porter five forces will
also be involved in order to determine the intensity of the competition faced by them. In
accordance to the identified challenges, various recommendations will also be discussed in this
report.

5INTRODUCTION OF MANAGEMENT
Analysis of the external environment of Lenovo
As discussed in the previous section, Lenovo is having their operations in different
locations around the world and thus they are facing different and diverse environmental factors.
In order to analyze the external environment for Lenovo, PESTEL analysis will be used. This is
due to the reason that, with the help of the PESTEL analysis, different elements ranging from the
political to environmental can be analyzed. However, in this report, three environmental factors
namely, political, economical and socio-cultural factors will be discussed.
Political environment
Political environment refers to the political scenario being faced by the business
organizations in different countries around the world along with differences in rules and
regulations (Lawton, McGuire & Rajwani, 2013). The more effective will be the alignment of
the business policies with the different political scenarios, the more effective will be the business
operation of the organizations. Lenovo is having their presence in more than 160 countries and
thus, the political faced by them is also diverse in nature. The home country of Lenovo, China is
having autocratic communist type of government, while major western countries are having
democratic type of government that is their major markets. However, in the recent time, the
removal of the trade barriers by the World Trade Organization helped Lenovo to ease the
process of doing business in different countries around the world.
There are various challenges also being faced by Lenovo in terms of the instability of the
political scenario in the world. One of the key challenges is the growing popularity of the
populist ideologies and extremism in different countries (Kee, Neagu & Nicita, 2013). According
to the reports, the influence of authoritarian populism is increasingly rapidly. Thus, it is leading

6INTRODUCTION OF MANAGEMENT
to the imposition of barriers in the process of globalization. It will be challenge for Lenovo to
operate in the global scenario if the political differences and barriers get increased.
Figure: 1
Growth of the populism ideologies
Source: (Heinö, 2018)
Economical environment
Lenovo mainly caters to the mass market with their affordable products. Thus, it helps
them to increase the volume of their sales. Moreover, China, their home country is having lower
cost of production, which further helps them to gain cost leadership in the market (Banker,
Mashruwala & Tripathy, 2014). In the global market also, Lenovo is having their manufacturing
facilities in Brazil and Argentina, which are having lower cost of production. However, there are
various economical factors that have negative impact on their business operation. One of the key

7INTRODUCTION OF MANAGEMENT
negative impacts faced by them is due to the emergence of the global economic crisis in 2008.
This caused reduction the sales volume of them.
Moreover, with the frequent fluctuations in the currency rates between different
countries, it becomes difficult for them to maintain their profitability (Schulmeister, 2013). The
mass market where Lenovo is currently operating is highly competitive in nature and with the
recent influx of different low cost Chinese vendors in the market of electronic gadgets; the
competition is becoming more intense for Lenovo. It is affecting their profitability in the market.
Figure: 2
Impact of economical factors on Lenovo
Source: (Dawson, 2018)

8INTRODUCTION OF MANAGEMENT
Socio-cultural environment
One of the key negative impacts of the social environment in the current global business
is the shifting of the customer preference from the personal computers. Thus, the personal
computer business of Lenovo is taking the toll and witnessing negative growth in the recent time
(Pearce & Rice, 2013). However, Lenovo is having the advantages of having the presence in the
mobile device market, which is showing positive growth in the global market. With the increase
in the literacy level of the global population, the demand for technological products is also
increasing. This will have positive impact on the business operation of Lenovo.
However, the differences in the social preferences in the global market are having
negative impact on the business operation of Lenovo. This is due to the fact that, customers from
the developing countries are having the preferences for the low cost products, while customers
from the developed countries are having the need of technologically advanced products (Batel,
Devine-Wright & Tangeland, 2013). Thus, it is a challenge for Lenovo to meet the diverse
criterion of the customers in the global market.
Determination of competitive environment of Lenovo
As discussed earlier, Lenovo is operating in highly competitive market and thus, they are
facing intense competition and rivalry in the industry. Porter five forces model will be used in
order to determine the competitive environment of Lenovo.
Bargaining power of suppliers
Bargaining power of the suppliers refers to the influence of the suppliers in bargain price
with Lenovo (Sheu & Gao, 2014). Presence of good number of suppliers in the global market is

9INTRODUCTION OF MANAGEMENT
providing upper hand to Lenovo. Majority of the suppliers are smaller brand compared to
Lenovo. They gain their brand value by supplying to renowned brand like Lenovo. Thus, Lenovo
is having the upper hand in managing the bargaining power of the suppliers (Fabbri & Klapper,
2016). It can be concluded that, bargaining power of suppliers is low for Lenovo.
Bargaining power of buyers
Bargaining power of buyers refers to the influence of the buyers or customers in business
process of Lenovo (Moatti et al., 2015). Buyers for Lenovo are segmented in both individuals
and industrial sectors. However, with having huge number of competitors in the market,
customers is having more options available to them to choose from. Switching cost is also low
for the customers (Blut et al., 2014). However, the brand value and identify possessed by Lenovo
along with their innovative products helps in having distinctive image in the market. Thus,
bargaining power for buyers for Lenovo is moderate.
Threat of new entrants
Threat of new entrants refers to the possibility of the entry of the new players in the
market. Huge capital investment is required to enter in the market of electronic gadgets. This is
due to the reason that, it involves global supply chain management, brand promotion, setting up
manufacturing facilities and investing in research and development (Fresard & Valta, 2016).
Thus, it is difficult for the new entrants to match up with the economies of scale of Lenovo.
Moreover, the brand value gained by Lenovo in the global market is difficult to imitate by the
new entrants. Thus, the threat of new entrants for Lenovo is low.

10INTRODUCTION OF MANAGEMENT
Threat of substitutes
Threat of substitutes refers to the influence of the substitute products in the business
process and revenue generation of Lenovo. As earlier discussed, there are number of similar
players operating in the market with Lenovo (Porter & Heppelmann, 2014). Majority of the
players are offering similar set of products. However, diversified range of products helps Lenovo
to cut off the intensity of the threat of substitutes. Thus, threat of substitutes is increasing with
the increase in the number of competitors. Therefore, threat of substitutes for Lenovo is high.
Industry rivalry
Industry rivalry refers to the pace of competition in the market and to what extent the
companies are going to stay ahead in the competition. With having more number of players in
the market, the intensity of the rivalry in the industry is also high (Ellram, Tate & Feitzinger,
2013). More companies are introducing technologically advanced products in the market in order
to attract more customers. Cost of promotion is rapidly increasing in order to maintain the
existing customer base. Thus, the industry rivalry for Lenovo is high.
Recommendations
Brand extension
It is being recommended that, Lenovo should initiate the strategy of brand extension by
introducing premium products in the market. This is due to the reason that, from the above
discussion, it is being seen that, Lenovo is having their market presence only in the mass market.
Thus, having premium products will help them to gain the positive and niche brand value in the
market. Moreover, it will help to enhance the market coverage for Lenovo by catering to top of

11INTRODUCTION OF MANAGEMENT
the pyramid also. The profitability in the premium products is more and the intensity of the
competition is less.
Change management
The internal management and organizational process should be effective enough to cope
with the frequent change in the market trend and requirements. Thus, it is being recommended
that change management process should be initiated in the organization in order to put a flexible
organizational process, which can be adjusted according to the market requirement. This will
increase their effectiveness in the market.
Product diversification
It is also being recommended that, Lenovo should initiate the product diversification
strategy in order to have their market presence in different sectors. With the help of the product
diversification strategy, Lenovo can introduce electronic devices such as gaming consoles in the
market. The positive brand image of them will help to push the new products in the market
effectively. Moreover, it will also help them to increase their customer segments in the global
market and will reduce the dependency of them from their existing product category.
Targeting developing market
Lenovo should target the emerging market such as India more in order to gain revenue.
This is due to the reason that, emerging economies are having huge untapped market and with
the growth in the economy, the purchasing power of the customers is increasing rapidly. Thus,
offering their products in these countries will help them to obtain huge untapped market along

12INTRODUCTION OF MANAGEMENT
with huge market opportunities. Moreover, the mass market and affordable products of Lenovo
will be more applicable for the growing economies of the developing countries.
Conclusion
Thus, from the above discussion, it can be concluded that, Lenovo is one of the leading
multinational organizations in the world with having their business operations in different
countries around the world. This report discussed about the political, economical and socio-
cultural factors being faced by them in their global operation. It is being concluded that, Lenovo
is facing diverse environmental factors in their business due to the fact that, these factors vary in
different locations around the world. On the other hand, there are various opportunities also
being identified in this report from the analysis of the environmental factors.
Porter five forces model is also being used in this report in order to determine the
competitive environment of Lenovo in the global market. It is being seen that, some of the
elements are having high and some are having low impact on the business process of Lenovo.
Thus, they are having mixed impact from the competition in the market. In accordance to the
issues being identified, there are various recommendations being discussed in this report.
Effective implementation of the recommended steps will help them to enhance their market share
in the global market.

13INTRODUCTION OF MANAGEMENT
Reference
About Lenovo | Lenovo India. (2018). Www3.lenovo.com. Retrieved 26 January 2018, from
https://www3.lenovo.com/in/en/lenovo/
Alden, D. L., Kelley, J. B., Riefler, P., Lee, J. A., & Soutar, G. N. (2013). The effect of global
company animosity on global brand attitudes in emerging and developed markets: Does
perceived value matter?. Journal of International Marketing, 21(2), 17-38.
Batel, S., Devine-Wright, P., & Tangeland, T. (2013). Social acceptance of low carbon energy
and associated infrastructures: A critical discussion. Energy Policy, 58, 1-5.
Blut, M., Beatty, S. E., Evanschitzky, H., & Brock, C. (2014). The impact of service
characteristics on the switching costs–customer loyalty link. Journal of Retailing, 90(2),
275-290.
D. Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to
more sustainable financial performance than a cost leadership strategy?. Management
Decision, 52(5), 872-896.
Dawson, J. (2018). Lenovo | Beyond Devices. Beyonddevic.es. Retrieved 26 January 2018, from
http://www.beyonddevic.es/category/lenovo/
Ellram, L. M., Tate, W. L., & Feitzinger, E. G. (2013). Factor‐market rivalry and competition for
supply chain resources. Journal of Supply Chain Management, 49(1), 29-46.
Fabbri, D., & Klapper, L. F. (2016). Bargaining power and trade credit. Journal of Corporate
Finance, 41, 66-80.

14INTRODUCTION OF MANAGEMENT
Frésard, L., & Valta, P. (2016). How does corporate investment respond to increased entry
threat?. The Review of Corporate Finance Studies, 5(1), 1-35.
Heinö, A. (2018). Timbro Authoritarian Populism Index 2017. Timbro. Retrieved 26 January
2018, from https://timbro.se/allmant/timbro-authoritarian-populism-index2017/
Kee, H. L., Neagu, C., & Nicita, A. (2013). Is protectionism on the rise? Assessing national trade
policies during the crisis of 2008. Review of Economics and Statistics, 95(1), 342-346.
Lawton, T., McGuire, S., & Rajwani, T. (2013). Corporate political activity: A literature review
and research agenda. International Journal of Management Reviews, 15(1), 86-105.
Moatti, V., Ren, C. R., Anand, J., & Dussauge, P. (2015). Disentangling the performance effects
of efficiency and bargaining power in horizontal growth strategies: An empirical
investigation in the global retail industry. Strategic Management Journal, 36(5), 745-757.
Pearce, K. E., & Rice, R. E. (2013). Digital divides from access to activities: Comparing mobile
and personal computer Internet users. Journal of Communication, 63(4), 721-744.
Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming
competition. Harvard Business Review, 92(11), 64-88.
Schulmeister, S. (2013). Currency speculation and dollar fluctuations. PSL Quarterly Review,
41(167).
Sheu, J. B., & Gao, X. Q. (2014). Alliance or no alliance—Bargaining power in competing
reverse supply chains. European Journal of Operational Research, 233(2), 313-325.