Lenovo Group is engaged in manufacturing of personal computers (PCs) related IT products and services and has been working steadily to become China’s first global brand. Lenovo is an innovative, international technology company formed as a result of the acquisition by the Lenovo Group of the IBM Personal Computing Division. Together IBM and Lenovo offer high-quality, reliable mobile computing hardware including the highly acclaimed Think Pad laptop and Think Centre desktop which are the best known brands in the computer industry.
Lenovo’s strategy is to link its name with the better known products until they become synonymous in the customer’s mind. In order to ensure marketing is being maximised the concerned authority should have an understanding of how marketing research and marketing strategy and tactics work together. Do mergers and acquisition always bring the desired effects?
The major objectives of the study is to analyse the marketing strategy and marketing plan of Lenovo’s acquisition IBM’s PC Division, using SWOT, PEST Analysis. For this purpose we should have a thorough knowledge of the company goals and missions and what all marketing strategies and marketing plans are implied to achieve their desired results and the most important thing used is the allotment of SWOT and PEST analysis to the study. In order to ascertain the details of the same we should known each in a most perspective manner and how it’s being affected also.
Developing a marketing strategy is vital for any business. Central to any successful marketing strategy is an understanding of your customers and their needs and without one your efforts to attract customers are likely to be haphazard and inefficient. Once you have created and implemented your strategy, it is equally important to monitor its effectiveness and to make any adjustments required to maintain its success. It may also help you to identify whole new markets that you can successfully target. These help you to identify which customers to focus on and your key objectives in reaching them. It explains what to include in your marketing strategy and how it can be used as the basis for effective action.
Once this has been completed the decisions on the best marketing activity that will ensure your target market know about the products or services you offer and why they meet their needs and a element often overlooked is that of monitoring and evaluating how effective your strategy has been. This sort of control element not only helps you how the strategy is performing in practice it can also help inform your future marketing strategy.
Once you have decided on your marketing strategy, draw up a marketing plan to set out how you plan to execute and evaluate the success of that strategy. The plan should be constantly reviewed so it can respond quickly to changes in customer needs and attitudes in your industry, and in the broader economic climate. SWOT and PEST analysis helps the marketing strategy and planning involved performing in a better efficient and in an effective manner.
SWOT analysis indicates the Strengths, Weakness, Opportunities and Threats of a business. PEST analysis indicates the Political, Economical, Social and Technological factors the performance of a business. With an understanding of your business’ internal strengths and weaknesses and the external opportunities and threats, you can develop a strategy that plays to your own strengths and matches them to the emerging opportunities and will also helps to identify your weaknesses and try to minimise them in marketing concepts. Lets analyse by using these factors how the marketing strategy and market planning draws an impact on Lenovo’s acquisition IBM’s PC Division.
Lenovo is an innovative, international technology company. It is the world’s third-largest PC vendor, as a result of the acquisition of the IBM Personal Computing Division by Lenovo Group. The transaction was completed in May 2005.
Lenovo has been the number-one PC vendor in China for ten consecutive years. IBM’s PC Division, prior to becoming part of Lenovo, was ranked third in the global market
Lenovo is an innovative, international technology company formed as a result of the acquisition by the Lenovo Group of the IBM Personal Computing Division.
Lenovo develops, manufactures and markets cutting-edge, reliable, and secure high-quality PC products and value-added professional services that provide customers around the world with smarter ways to be productive and competitive.
Worldwide, the company sells the award-winning ThinkPad notebooks and Think Centre desktops — featuring the Think Vantage Technologies software tools — Lenovo 3000 PCs, Think Vision monitors, and a full line of PC accessories and options.
In China, Lenovo commands about one-third of the PC market, covering all segments. Its leading-edge PCs are highly-acclaimed for their user-friendly, tailor-made designs and customized solutions for various customer needs, including the Tianjiao and Fengxing consumer desktops and Yangtian and Kaitian enterprise desktops. Lenovo also has a broad and expanding product line encompassing mobile handsets, servers, peripherals and digital entertainment products for the China market. Lenovo’s executive headquarters are in Raleigh, North Carolina, USA with principal operations in Beijing, China, and a sales organization worldwide. The company employs approximately 24,500 people worldwide Research and development centres are in Beijing, Shenzhen, Xiamen, Chengdu, and Shanghai, China; Tokyo, Japan; and Raleigh, North Carolina.
Primary PC manufacturing and assembly facilities are located in Shenzhen, Huiyang, Beijing, and Shanghai, China. Additional manufacturing and distribution facilities are located in the United States, Mexico, Brazil, Scotland, Hungary, India, Malaysia, Japan, and Australia. Lenovo’s extensive PC distribution network includes approximately 6,000 retail outlets in China for the consumer business. Lenovo’s mobile handset assembly facilities are in Xiamen, China. Lenovo is the world’s third-largest PC vendor, with approximately 7 percent of the worldwide PC market (source: IDC). In China, Lenovo holds the leading share of the PC market, about one-third.
Lenovo and IBM have a strategic alliance designed to provide a best-in-class experience for enterprise customers. The companies have entered into significant, long-term agreements that give customers preferred access to IBM’s world-class customer service organization and global financing offerings, and that enable Lenovo to take advantage of IBM’s powerful worldwide distribution and sales network. IBM will also provide Lenovo with warranty services and offer Lenovo customers leasing and financing arrangements. Through this long-term relationship, customers will receive the best products with the lowest total-cost-of-ownership.
Lenovo and its employees are committed to four company values that are the foundation for all that they do:
- Customer service
- Dedicated to the satisfaction and success of every customer.
- Innovative and entrepreneurial spirit
- Innovation that matters to customers, and company, created and delivered with speed and efficiency.
- Accuracy and truth-seeking
- Managing business and make decisions based on carefully understood facts.
- Trustworthiness and integrity
- Trust and personal responsibility in all relationships
Lenovo is committed to being a responsible and active corporate citizen, consistently working to improve its business while contributing to the development of society. Lenovo believes that business is an integral part of society and it is dedicated to working together with its employees and local communities to improve the quality of life at work and at home.
IBM has engaged in an historic alliance with Lenovo. To bring long-term value for clients, companies need to continually reinvent themselves. IBM’s multi-year agreement with Lenovo is broad-based and allows IBM to continue to provide end-to-end solutions to our clients. Lenovo is now the preferred provider of IBM-branded personal computers to our clients, and IBM will continue to provide financing and maintenance services for those PC solutions. This alliance is consistent with IBM’s strategy to be the world leader in providing technology and transformation solutions, for you, our enterprise and our small and medium business clients, in all industries and countries worldwide.
Lenovo has the leading position in the fastest growing market in the world. Their acquisition of IBM’s PC business makes them the third largest PC supplier in the world. In addition, the people of ThinkPad notebooks and Think Centre desktops are now part of the Lenovo team — the award-winning engineers, the manufacturing teams, the sales representatives, the business partners. In short, the people you know. The ones you count on. This sale moves our PC business from an element in the IBM portfolio to a key element in IBM’s network of alliances. It extends IBM’s reach and capabilities in areas where you, our IBM clients, are better served through this alliance. Lenovo shares our passion for innovation, quality and service. IBM’s strategy is clear. Lenovo’s strategy is clear. Together we’re a powerful combination for your business and we are committed to your success. (Frequently Asked Questions about Lenovo).
Lenovo is the world’s third-largest PC vendor as a result of the acquisition of the IBM Personal Computing Division by Lenovo Group and it is innovative and international technology company. With their acquisition Lenovo not only develops and secured
High quality PC products and added up valuable professional services to their valuable customers in and around the world with the most smartest and effective ways to be productive and competitive. Lenovo also has a broad and expanding product line encompassing mobile handsets, servers, peripherals and digital entertainment products for the China market. Lenovo and IBM have a strategic alliance designed to provide better experience for their customers.
The companies have entered into significant, long-term agreements that give customers preferred access to IBM’s world-class customer service organization and global financing offerings and that enable Lenovo to take advantage of IBM’s powerful worldwide distribution and sales network. IBM will also provide Lenovo with warranty services and offer Lenovo customers leasing and financing arrangements. Through this long-term relationship, customers will receive the best products with the lowest total-cost-of-ownership. These concepts shows it’s purely a customer oriented and upgrades customer needs and wants accordingly
Marketing strategy provides the basis of a framework for meeting organisational needs and customer wants in an integrative and innovative way. Essentially marketing strategy should identify specific segments of the market towards which the organisations marketing activities and programmes might be aimed. The strategic planning process is most applicable to strategic management at the business unit level of the organisation. Lenovo is the international technology company which is innovative in nature. For large corporations like Lenovo, strategy at the corporate level is more concerned with managing a portfolio of businesses.
Corporate level strategy involves decisions about which business units to grow, resource allocation, among the business units, taking advantage of synergies among the business units and mergers and acquisitions. In the strategy formulation process the mission statement sets the mood of where the company should go. The major missions of Lenovo include customer service with trustworthiness and integrity. The objectives should be challenging and should be achievable that the organisation seeks to reach. Strategic plans are well defined to reach those objectives. Objectives are very much accurate and trust seeking.
Changes in the external environment often present new opportunities and new ways to reach the objectives and an environmental scan is performed to identify the available opportunities with a scan of its own capabilities and limitations. The situational analysis involves an analysis of both the external and internal environment. The external environment has two aspects like the macro environment which affects all firms and a micro environment that may affect only the firms in a particular industry. The macro environmental analysis includes political, economic, social and technological factors and is referred as PEST analysis.
Such external factors usually are beyond the organizations control and sometimes present themselves as threats. The internal analysis considers the various situations within an organisation such as company culture, image, its structure, market share, brand awareness, financial resources etc.. A situation analysis can generate a larger amount of information much of which are not particularly relevant to strategy formulation and in order to make the information more manageable its being categorise into internal factors ( strengths and weakness ) and external environmental factors ( opportunities and threats) and such analysis is called as a SWOT analysis.
The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. By getting a clear performing nature of an organisation and its environment specific strategies alternatives should be developed which could be applied across a wide range of firms depending on their situations and nature of work and thus for an effective implementation strategies which are expressed in high level conceptual terms and priorities needs to be translated into more detailed policies that can be understood at the functional level of the organisation. Implementing the marketing plan is probably one of the most challenging and often fraught areas of business strategy.
Once implemented the results of the strategy needs to be measured and evaluated with changes made as required to keep the marketing plans on track and should maintained a control system. The strategic management process is dynamic and continuous. As we got an idea of the subject lets see how its being implied to analyze the Lenovo’s acquisition IBM’s PC Division.
By creating a marketing strategy will ensure the business to take an account of various strengths, weakness, opportunities and threats with the changes of political, economical, social and technological factors influenced in marketing. It is more advisable to start a marketing strategy with an honest and rigorous SWOT analysis. It provides recommendations on their performance and growth potential and thus it proves to be a powerful tool for analysing both complex qualitative and quantitative facts of decision making process involved in marketing. The results of this analysis have been fed into marketing and organisational strategic plans and have been highly successful in strategy formulation.
Through the SWOT analysis the Lenovo’s customers have been able to take advantage of our rich markets and focus on product innovation which allows them to capture greater margins of profitability. Our SWOT analysis identifies strengths and weaknesses and relates them with forward looking opportunities and threats. These analyses helps the analysts to identify their company’s strengths to build on, weakness to cover, opportunities to capture and threats to defend against.
- Strengths could include
- personal and flexible customer service
- special features or benefits that your product offers
- specialist skills
- Weaknesses could include:
- limited financial resources
- lack of an established reputation
- inefficient accounting systems
- Opportunities could include:
- increased demand from a particular market sector
- using the Internet to reach new markets
- new technologies that allow you to improve product quality
- Threats could include:
- the emergence of a new competitor
- more sophisticated, attractive or cheaper versions of your product or service
- new legislation increasing your costs
- a downturn in the economy, reducing overall demand
Then measure the potential effects each element may have on your marketing strategy.
China is now the world’s fastest growing IT market with greatest potential and as the China market grows domestic IT enterprises are bound to face more diverse and international competitions. Striving to capture opportunity in market segments other than the government and education sectors, domestic brands are increasing their investment in developing high-end products. After assessing the strategy adopted and implemented in the last few years the management decided to make adjustments where ever required and they believed that PC business is the base for developing their company and supporting further diversification and internationalisation.
Hence IT business will be their strategic focus so that all management resources will be directed to enhance its competitiveness. More and more PC vendors are accentuating services and applications as the key differentials of products to combat homogeneous price competition. To compete effectively with international players, Lenovo will continue to capitalise on the strengths in sales and distribution network and will provide full spectrum product lines. Applying a combined sales model Lenovo will be able to cover more effectively the extensive requirements of their customers by making up for the limitations channels of distribution.
Thus they will strengthen coverage of the demands of retail customers and small and medium enterprises and at the same time meet the diverse needs of large-scale corporations. Having the ability to integrate the services is critical to the further strengthening of Lenovo market leadership positioning and their customers have always been appreciative of the quality of services they receive. Continuation of stepping up in integration of internal and external resources to fulfill their customers’ diverse needs adds up special value to the business with integrated services. Thus Lenovo by creating reliable computing environment helps to seek corporate customers to enhance their competitiveness
Now we shall have a look on the research methods and data’s secured for our dissertation about Lenovo’s acquisition of IBM PC”s division and then we shall have an analysis with SWOT and PEST analysis of factors influencing their marketing strategies and plans which helping providing the major marketing guidelines and adopting a perfect marketing grid for the study.
Research means the study aimed to describe an entire collection of data and information about a particular subject.Marketing research method is used to provide facts and direction that managers need to make important decision. Marketing research involves a systematic process.It involves steps like defining the problem, determining the research design, identifying data type and sources, designing data collection form and questionnaire , determining sample plan and size, collection of data , analyse and interpret the data incurred and finally prepare the research report. A company can obtain marketing research in a number of ways.
Some of the tips to the authorities involved in research design and requires information in order to produce goods and service that will create a high values in the minds of the viewers. Managers require information in order to produce goods and services that create value in the mind of the customers. Perception of the value of the product is the subjective one and what the customer’s value will change from year to year. So that the attributes that create value cannot be deducted from common knowledge. Data must be collected and analysed. The objective of the marketing research is to provide the facts and direction that manger is required for decision-making process. For optimum benefit of marketing research is the identifying of the research process and proper application.
There are three types of research designs, which are used for marketing research and strategy. It involves Exploratory, Descriptive and Casual research.
Exploratory research is aimed at formulating problems more precisely; clarifying concepts, gathering explanations etc. exploratory research can be performed using a literature search, surveying certain people about their experiences, focus groups and case studies. It may develop hypothesis but it does not seek to test them and is widely characterized by its flexibility. Descriptive research is more rigid than exploratory research and seeks to describe users of a product, determine the proportion of the population that uses a product or predict the future demand of the product. Sometimes it allows the opportunity to make any required change before the costly process of data collection has begun. Casual research seeks to find cause and effective relationships between variables and it accomplishes its goals through laboratory and field experiments.
Collections of information’s are called a data. Data is of two types. They are primary data and secondary data. Primary data are those which are collected a fresh and for the first time and is original in character. Primary data can be collected in four broad ways of observations, focus groups, surveys and experiments. Secondary data are those which have already been collected by someone else and which have already been passed through statistical process.
Secondary data may be published or unpublished data. A secondary data collection method consists of various publications of central state and local government, books, magazines and reports. Reports and publications of various associations connected with business and industry, banks, stock exchanges etc. For this particular study, we have used data from company profile. In this marketing research strategy we used exploratory research to find cause and effect of various variables in micro and macro environment of company. In this we used PEST analysis and SWOT analysis for finding various microenvironment and macro environmental factors, which is helped in finding the marketing strategies and various plans involved Lenovo’s acquisition of IBM PC division.This research is also aimed for providing information about the micro and macro environment factors.
The research design helps to study the theme of the project in a better and well explained manner which will enables the completion of the project with the most appropriate and sufficient data’s and information incurred. Marketing research by itself does not reach at marketing decision nor does it assure that the company will be successful in marketing its products. However when marketing research conducted in a systematic analytical and objective manner will reduce uncertainty in the decision making process and increase the profitability and success of the business.
Analysis and discussions
Analysis of Lenovo’s acquisition of IBM’s PC Division using the Marketing Mix (the ‘4 Ps’ – Product, Price, Promotion and Place
The marketing mix is the central part of an organisation’s marketing tactics. Once the market situation have been identified and evaluated and once the devise has been made to penetrate or develop particular market then the marketing mix is crucial. Marketing mix is the combination of competitive efforts exerted by an organisation to accomplish some sales or profit goal. These efforts usually include variations in the products or services being offered to customers, variation in prices of products being offered, variations in the promotional blends utilized, variations in the channels of distribution utilized.
By using the marketing mix as a tactical tool of an organisation’s marketing plans it is possible to adopt a speedily and profitably changes in the marketing environment. Thus the development of the mix is to meet conditions at a particular point or period in time is essentially a contingency approach to marketing management. Marketing is more than simply advertising or selling a product; it involves developing and managing a product that will satisfy customer needs.
It focuses on making the product available in the right place and at a price acceptable to buyers. It also requires communicating information that helps customers determine if the product will satisfy their needs. These activities are planned, organized, implemented, and controlled to meet the needs of customers within the target market. Managers evaluated marketing planning and price management as the most important marketing functions, while product management, marketing research and communications management appeared to be less impor-tant. The analysis based on characteristics of companies and their markets disclosed more differences in opinions.
From the aspect of the Marketing Mix of IBM, the advantages of its PC Division are that it had become suitable and comfortable for larger customers’ choice and had also shown an outstanding achievement in selling desktop and laptop. As the Lenovo has the best products called Think laptop and Think desktop which makes them popular among their competitors as its better functioning and performing nature and its being widely used in the global market. The following marketing mix are analysed from a perspective of IBM’s PC Division and have briefly introduced.
A product is a physical entity which can touch and feel or a service or it may be an idea. Successful marketing efforts result in products that become part of everyday life. The product variable of the marketing mix deals with researching customers’ needs and wants and designing a product that satisfies them. The product variable also involves creating or modifying brand names and packaging and may include decisions regarding warranty and repair services.
Product variable decisions and related activities are important because they are directly involved with creating products that address customers’ needs and wants. As far our study is concerned the product involved is PC and Lenovo has got great advantages out of it. Their product marks an era in globalisation. In order to gain a strong status throughout the competition with the companies such as Dell and HP, IBM and other smaller competitors had set a target on how to reduce the production cost in order to get a lower price point. With the production of laptops with DVD and CDRW drivers, IBM’s product strategy had become very highly provoked.
Their products ThinkPad are the most important contributor to the company’s success. However from the aspects of marketing strategy both product’s function and pricing were not at all exploitable. Value is a customer’s subjective assessment of benefits relative to costs in determining the worth of a product. The product mix is the full list of all products offered for sale by a company and the positioning of the product indicates the managements ability to position a product appropriately in the market is a major determinant of company profits.
The price variable relates to decisions and actions associated with establishing pricing objectives and policies and determining product prices. Price is a critical component of the marketing mix because customers are concerned about the value obtained in an exchange. Price is often used as a competitive tool.
In order to satisfy the premium positioning, IBM has focused on high prices and corresponding production quality all the time. This had become the same pricing strategy as Dell, HP and other competitors with a significantly different cost strategy. For example, comparing with Gateway, who can make gross margin of 15.9% at least to sell their desktops and laptops, IBM needs to sell the same quantity over 22%.
As the data shown, IBM had to sell their products at a lower price. Once this was considered, it was obviously that IBM’s PC Division had to be put up to sale… Benefits include anything a buyer receives in an exchange, while costs include anything a buyer must give up to obtain the benefits the product provides. The price of a product affects the firm’s marketing program and management should decide on its pricing objectives before determining the price itself.
The promotion variable relates to activities used to inform individuals or groups about the organisation and its products. Promotion can aim to increase public awareness of the organisation and of new or existing products. In the 1980s, IBM adopted Charlie Chaplin as their mascot for the establishment of the company in order to against the fearsome feeling in front of the furious competition of PC market. With their advanced development, the company had a new promotional strategy that is called ‘Always on’, which means, focusing on the wired, every worker can complete work at office, at home or on the road. This concept is what Lenovo acquired for with their brand image. Management has to determine what combinations of advertising, personal selling and other promotional tools will make the most effective promotional program for a company.
To satisfy customers’ products must be available at the right time and in convenient locations. In dealing with the distribution variable a marketing manager makes products available in the quantities desired to as many target market customers as possible by keeping total inventory, transportation, and storage costs as low as possible.
By using their own product and strategy in the US, IBM underwrote their own channel in their PC Division. Unfortunately, as the company’s production costs was overfull and excessive that unsuitable for the growth in sale, IBM had to sell their Product Centres after three and half years. Since then, IBM’s PC Division had to corporate with other indirect channels such as different type and level of distributors. Ingram Micro and Tech Data are one of them to support IBM for their upgrading activities. Hence, IBM had to resell its desktop and laptop products to 3,500 to 4,000 reseller gradually during sale into small, medium and large business. This made the biggest challenge of making these distributors and resellers trustworthy to Lenovo.
The marketing mix variables are often viewed as controllable because they can be modified. However there are limits to how much marketing principles can alter Lenovo.
Economic conditions, competitive structure, or government regulations may prevent the Lenovo authorities from adjusting prices frequently or significantly. Making changes in the size, shape, and design of most tangible goods is expensive and therefore such product features cannot be altered very often. Marketing activities help produce the profits that are essential to the survival of individual businesses. Without profits, businesses would find it difficult to continue. The marketing environment which includes competitive, economic, political, legal and regulatory, technological, and sociocultural forces surrounds the customer and the marketing mix. These forces can create threats to marketers but they also generate opportunities for new products and new methods of reaching customers.
Marketing Perspective of Lenovo
Customers are the focal point of all marketing activities. Organisations have to define their products not as what the companies make or produce but as what they do to satisfy customers. The essence of marketing is to develop satisfying exchanges from which both customers and marketers benefit. The customer expects to gain a reward or benefit in excess of the costs incurred in a marketing transaction. The marketer expects to gain something of value in return generally the price charged for the product.
The experience of Lenovo’s growth suggested that it’s very important to select right innovation strategies throughout its life cycle stages and should adopt radical innovation for technology, management and marketing. As the company established a partnership with Intel Lenovo has become more powerful in innovating PC and high technical knowledge of distributing the framework in China, this has shown and continues to show potential of Lenovo.
Since then Lenovo will focus their marketing direction on advantages of technology of Intel, Microsoft and other companies while at the same time, applying these innovation to the production of PC throughout the most economic development countries such as China and India. Understanding the existing gaps in the process of information and technology management will assist in implementing more sustainable arrangement for successful technology transfer and development of the secured strategies. Marketing strategies have got a vital in providing guidelines to the better performance to marketing planning.
As Lenovo accumulate experience, people learn to do their jobs more efficiently and effectively because of accumulated learning. So costs come down significantly over time. That puts the firm in a position to cut the price and expand the market further. One strategy which firms can pursue is to start with a relatively high price and bring down the price progressively over time.
Analysis of Lenovo after the acquisition of IBM’s PC Division using the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis
Lenovo has had significant strengths after it acquired IBM’s PC Division as the company could quickly expand product sale into Chinese market in order to adopt the special needs of Chinese market as the largest PC market. Moreover in order to exhibit an outstanding achievement during the upcoming Olympics Lenovo has begun to concentrate on its branding which proves to be the biggest strength. Lastly the professional technology in manufactory and the product distribution also played important roles in their success and this has shown many efforts in the market of China and India.
Because of the faulty supply chain and networks the growth of Lenovo’s desktop market might become slow and this results in low-margin and decrease of profits as the same as IBM’s PC Division. A SWOT analysis engages managers to ascertain the PC business strengths and weakness on activities by activities basis relative to their rivals. The relationship between valuable resources and capabilities and firm performance is straightforward. Instead of becoming strengths the non value adding resources and capabilities of IBM’s historical expertise in hardware may become weakness and these shall affect the Lenovo for a greater extend to its future profitability.
As Lenovo has the ability to plan and perform the innovation while reducing production costs and therefore selling price, there are still many opportunities for company’s growth. Additionally, as the trend of the stability and big growth of Chinese currency, which influenced by US currency, Lenovo will also benefits from the economic growth in China to maintain its profit margin.
Because of the lack of potential of technology to control the handsets at a low enough price in order to make them suitable to be sold in the Chinese market to make higher profit, all low-cost manufacturers will have to reduce prices for PCs and handsets in a short time, hence break into separate new markets. There is also a real risk to the acquisitions unsuccessful as the lack of experience or technological potential in the merger of the systems, processes and people in order to achieve the goals of business objectives. Furthermore, cultural clashes will be the greatest risk of all.
Analysis of Lenovo after the acquisition of IBM’s PC Division using the PEST (Political, economical, social and technological) analysis
It analysis the external macro-environment in which the firm operates can be expressed in terms of Political, Economic, Social and Technological.
Political factors include government regulations and legal issues and define both formal and informal rules under which the firm operates. This may involve tax policy, employment laws, political stability etc. Lenovo has been the number-one PC vendor in China for ten consecutive years. “China will need more supercomputing power in the years ahead to maintain its economic growth and development, China cannot rely on other countries to develop a supercomputer that meets its needs.”(InfoWorld, 28 July 2005). In short, IT innovations pose a difficult challenge – investment requirements are huge and require substantial government support, while markets are likely to be limited. There may however be indirect commercial benefits, as successful completion of a radical innovation project may help to establish a company as a serious player and foster its brand image’ Lenovo owes its success at home to the development of products and services that are user-friendly; less over-engineered and less expensive than those provided by global market leaders; and that contain unique performance features that address peculiar needs of China’s markets.
Economic factors affect the purchasing power of potential customers and the firms cost of capital. The factors in macro economy involve economic growth, interest rates, exchange rates and inflation rate. Specifically, the economic structure is an important determinant of a firm’s specialization that is its marketing mix.
Social Factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some factors include age distribution, population growth rate, etc.
Technological Factors helps in reducing entry barriers, and influence out sourcing decisions. It includes Research and Development, rate of technological change, automation etc. Customers of the Lenovo will benefit from the union of Lenovo’s and IBM Personal Computing Division’s extraordinary R&D capabilities. Lenovo’s global research and development centres in China, Japan and the United States have produced some of the world’s most important advances in PC technology. The company is rich in talent, with teams that have won hundreds of technology and design awards – including more than 2,000 patents – and introduced many industry firsts.
And many more are on the way. The goal of Lenovo’s R&D team is ultimately to improve the overall experience of PC ownership while driving down total cost of ownership. In turn, this commitment distinguishes Lenovo from its competitors and attracts PC customers who demand the increased productivity that real innovation provides. Lenovo’s mobile business unit also shares this commitment to innovation. Its leadership in developing proprietary mobile handsets has resulted in tailor-made designs that satisfy individual communication needs.
Analysis of Lenovo after its acquisition using the Marketing Mix (the ‘4Ps’) – Product, Price, Promotion and Place
Lenovo is committed to being a responsible and active corporate member consistently working to improve its business while contributing to the development of society. Lenovo believes that business is an integral part of society and it is dedicated to working together with its employees and local communities to improve the quality of life at work and at home. Currently the world’s third largest PC manufacturer Lenovo has a very clear strategy for future growth. They are building the most efficient supply chain in the world today. Supply chain management is a key focus for those highly concentrated in consumer oriented strategies.
Lenovo has developed technology that enables the customers to log on to their machines by fingerprint. For Lenovo the biggest challenge for itself is that the company not only need to know how to gain to use the power and knowledge from the brand of IBM, and also need show that the brand of Lenovo is trustworthy to the customers and other corporations and should get ahead of IBM in the ability of executing the product strategy. In order to achieve the above goals, Lenovo should pay more attention on how to deal with the marketing mix which is discussed as recommendations for the company to accomplish further goals as following:
For Lenovo, because of the growth of their consumer and business they need to focus on the most basic structure of product effectively and efficiency. The PC manufactures are slightly or largely changing their ideas and views on their products the market will be aggressive and the most upcoming company should adopt a better and effective product in order to promote their customers. Lenovo is focused on the safety of its products throughout their entire lifecycle, from manufacturing, transportation and installation to use, service and disposal. Lenovo strives to ensure that its products meet all applicable legal requirements and voluntary safety and ergonomics practices to which the Company subscribes wherever its products are sold. Through stringent emphasis on product safety and quality, Lenovo is achieving high customer satisfaction, and delivering quality products, solutions and services.
Lenovo has the ability to keep the cost of manufacture of products under control and also make the gross margin in excess of 20% in production. This will influence the company to develop new and highly technology production. Although Lenovo is the lower price leader in specific markets and in order to gain a higher profit margin to keep the company’s growth and prosperity they need to make the price elasticity to sustain different type of markets through the furious competition in the future. Powerful marketing strategy applies with a marketing plan that sets out actions, dates, costs, resources and effective selling programmes
Lenovo should concentrate on being trustworthy to all their customers with proper understanding and taking the acquisition of one of the world’s largest PC manufactures as important issue to deal with. They should also focus on the product strategy of the US channels in accordance with trust of the brand, reliability, suitability, price and high performance, especially the innovation on technology and suitable, elasticity price. Promotion plan was developed with sorting out the optimal communication tools, such as advertisement, sales promotion and publicity with the account for the main strategic objective and the target market to be achieved.
As IBM has established and dealt with different relationships between thousands of resellers, distributors and a wide range of channels and it has become a main problem to Lenovo to figure out. They have to go through those channels carefully by making them retainable and establishing new partnerships with those channels in order to sustain and make big growth of the company. The focus needs to be on first integrating order capture and order management systems throughout all of Lenovo and IBM’s PC Division manufacturing systems to ensure the highest level of performance. According to this regulation Lenovo must sell the existing products at a low enough price as soon as possible and at the same time take a note on the selling of those products through channels on the internet.
Lenovo might find out some new product strategies of PC design that are more suitable to Chinese people. An effective marketing strategy and marketing plan adopted by Lenovo helps to develop their network of partnerships, raising brand awareness, positioning themselves as strategic thinkers of their market and this enables them to secure more business referrals too. Lenovo’s branding strategy has been constructed to address markets across the world at various stages of penetration of the Lenovo brand. Customers will still have access to IBM’s trusted sales network, financing, service and support which will now be part of Lenovo.
The global marketplace demands a flexible, fast-moving, and innovative IT provider, and that is exactly what Lenovo delivers to their customers.. Lenovo is one of the major providers of PC’s with a substantial market share of 34.6% in the Chinese markets. Lenovo offers a wide range of PCs including desktops, laptops and notebooks, projectors, printers, PC related accessories and Mobile phones. Lenovo’s mobile handsets account for 4% of its total revenues.
Lenovo has global operations and considers geographic segmentation as its primary reporting format. They contribute a variety range of notebook computers, desktop computers and mobile handsets. And thus pro videos computer accessories and upgrades, computer software and services which includes ser vices f or small, medium and large businesses. Some of the major reasons for their acquisition are by supporting sales activities by understanding the customers’ businesses better and Qualify prospective partners and suppliers. Lenovo keep fully up to date with their competitors’ business structure, strategy and prospects.
One of the most useful techniques for evaluating the competition is creation of a marketing grid. Marketing concepts and impact have got a major role for any business to success or achieve its major objectives. The integration of customer service into social media marketing programs is a logical imperative and usually will follow right on the heels of integrating corporate communications involved in IT business. Analysts believe the biggest challenge for Lenovo will be retaining IBM’s enterprise customers while increasing profits. IBM originally wanted to sell off the division due to stagnation in the market and decreasing profits.
Lenovo are committed to delivering the highest quality, most innovative PC products and services to their customers. Going forward IBM will sell Lenovo’s IBM-branded PCs through its own network. Lenovo brings its leadership position and brand recognition in an emerging market with IBM and contributes its expertise particularly in the notebook line, as well as a global distribution and sales team. IBM and Lenovo will collaborate in marketing and services alliance through which Lenovo’s PCs are marketed through IBM’s global distribution and sales network and this acquisition will lead to a successive perspective to the IT industry.
The IBM acquisition has marked another key milestone in the history of the company and Lenovo possesses necessary infrastructure to develop its markets around the world.. Lenovo has attracted significantly more attention from the global investment community as it moves forward with building a global business and the Company has made efforts in developing investor relations programs to facilitate communications with the investment community.The Lenovo give an active participation in investment conferences organised by securities houses as well as regular meetings ahead to meet with investors.
Lenovo will continue to make use of various platforms and tools to communicate efficiently with the investment community.Lenovo regards open communications with existing and potential investors as vital to its success. To this end the Company is committed to enhancing corporate transparency and timely communication with the investment community. With after its acquisition of IBM’s PC business Lenovo focused on communicating its growth strategies and progress of integration to investors worldwide. Lenovo also has been a major supporter of sports and physical fitness in China. Throughout corporate history Lenovo have been at the forefront of progressive and transparent business practices and were the first major firm in China, for example, to offer significant employee benefits and compensation structures that rewarded employees for corporate success.
Thus enabled Lenovo to be the intellectual property and got an opportunity to take part with its global software partners. When Lenovo merged with the IBM PC Division in 2005, the Lenovo emphasis on social responsibility dovetailed perfectly with IBM’s heritage of leadership in sustainable global business practices. The result is a culture in which sustainability is embedded in Lenovo’s core values and morals and its being a big part to be the company and the people to serve their customers. Most appropriate and effective implications of decision making process enhance the Lenovo to be the guiding lights throughout their corporate history and it enriches its future too.
As the company has evolved with responsibilities and have lots of challenges to face from the global economy. From environmental degradation and the prospect of global climate change to high profile corporate scandals to extreme poverty, disease, and exploitation, business can and should play a significant role in meeting the challenges of this new world. Lenovo aims to be a new world company that leads others in finding sustainable solutions to these challenges. Lenovo has base secrets of success on customers achieving their goals through the better and most prompt productivity in business and enhancement of personal life.
The PC industry has undergone a significant shift in structure since the mid-1990s, driven by industry-wide competitive pressures. Lenovo is clearly interested in IBM’s management expertise and its current international marketing chain. The problem of pricing and intelligence would also become the risks to the merger. IBM will provide good services on customers’ finance to Lenovo and Lenovo will supply IBM with a large quantity of PCs to IBM in order to create perfect business partnership in future. PC companies have revamped their supply and distribution chains to reduce costs and respond more quickly to demand signals. While these changes were driven by competitive and market conditions, information technology has enabled particular forms of organizational restructuring,
Such as the shift from supply-driven to demand-driven production and the formation of different value chains to most effectively support demand-driven production processes. Lenovo’s distribution strategy will continue to remain both direct and through the channel network with a clear focus on being channel-centric. Lenovo need to maintain IBM’s high quality in both price and product, in order to keep the big market share of IBM in the US.
The global marketplace demands a flexible, fast-moving, and innovative IT provider, and that is exactly what Lenovo delivers to their customers. Innovation & design that matters to PC our customers and products that are built accordingly, product quality that makes reliable, and customer service and support that makes a valued and trusted PC manufacturer. For ThinkPad notebooks and Think Centre desktops, Lenovo will continue to use the same manufacturing processes and vendors that the IBM PC Division used, and include the same high-quality components that have placed THINK PC’s as the standard to beat for PC quality.
Lenovo impresses because they accurately reflect the dual strategy of acquiring leading brands while building their own capabilities in brand creation and management. , Dell and HP are still big competitors to Lenovo in PC market and culture clashes between Lenovo and IBM would be a big problem in the integration of systems, processes and communications to achieve the further goals. The problem of pricing and intelligence would also become the risks to the merger. Lenovo’s combined environmental history through IBM and Lenovo demonstrates a commitment to developing, continuing and advancing environmental policy and programs.
By engaging stakeholders and through active participation in the PC industry, Lenovo continues its tradition of environmental commitment and strives always to operate in an ethical and legal manner. Lenovo’s people are its greatest asset and the Company is committed to providing a safe and healthy working environment to their employees and with the best service they provide they keen to serve their customers in a better manner. Thus the deal Lenovo’s acquisition IBM’s PC Division proved to the world that Chinese companies are not only competitive in domestic markets but can also compete at a global level.
Frequently Asked Questions about Lenovo. Lenovo. Web.