The Competitiveness Of Lenovo Based On: PESTEL ModelPESTEL model is a framework majorly used by marketers to venture and deeply look into the macro-environmental factors having an impact on an organization and the findings are used for decision making and conducting proper SWOT analysis that can be used to identify the strengths and weaknesses so as to maximize on the strengths and work on the weaknesses.PESTEL is an acronym whereby the letters stand for:P – Political, E – Economic, S – Social, T – Technological, E – Environmental, L – Legal Political Factors These are the government forces that influence and take part in moulding a country’s economy such forces include; government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law, trade restrictions and so on. The political factors have kept growing very important for businesses in the 21st century. As seen in the case study, the Chinese market is a stronghold of Lenovo and there is a major role of the political forces behind it therefore the business organisations need to be able to respond to the modern and predictable future laws, and adjust their marketing policies accordingly.
It is seen on how they took into on considerable political, not just commercial, risks in the 1980s. Legend/Lenovo also understood the effects that could fall on them if they played politics instead of business (Legend was a survivor of the political turmoil thanks in no small part to Liu?s astute in leadership pg 7). However, political factors affect the international businesses in other ways too.
For the businesses operating in the global environment, political stability in the overseas markets is very important. Political stability also means economic stability and a stable business environment. However, political turmoil on the other hand does not just disrupt sales but can also disrupt the supply chain and the distribution system which is not good for any business’ health. In this way, favorable political climate means profitable business and high revenues whereas political disruption means just the opposite.Economic factorsSince the global economic environment has changed a lot since the recession economic factors have a major role and impact on how organizations do their businesses and how they realize their profit margins. These major factors include; inflation, disposable income of consumers and businesses, interest rates, exchange rates and other notable changes on the economy. However, the situation is not the same globally. Several economies are still caught in a poor situation which is a threat for Lenovo’s business.
In several emerging markets due to the significant currency volatility, the revenue and profits of Lenovo are being affected. From the case study, one strategy that saw Legend (Lenovo) boost its market share in China and become the largest PC distributor in the country was to take advantage of the growing Chinese economy and also to benefit from taxes, tariffs and quotas imposed to foreign companies like Apple, HP, this lead to increased market share and production rates in the 1990s for the PCs and 2011 for the laptops. A notable event is that there is intense pressure of competition in the PC industry and the price competition between the PC and personal technology brands is also intense and the demand for the low cost models is higher. Thus, the economic challenges are of major importance in the case of Lenovo.Social factorsThese are the socio-cultural factors, which involve the shared belief and attitudes in the society as a whole. Socially, the acceptance of personal technology has increased.
Apart from PCs, Lenovo has full range of personal technology products like smart phones, tablets and smart TVs. However the PC market has decline and the smart phone and tablets have kept growing in sales. The demand for personal technology is especially the highest among the young generation and the middle class. They form a major part of Lenovo’s niche market.
As seen on the case study, this came as a point of strength when Lenovo developed a PC with softwares that are customized in Chinese language and the company relied on the customers? feedback to further modify the specifications so as to fit the customers’ needs. Therefore this has given Lenovo a marginal advantage in its marketing and supply chain. Social trends can also have a major impact one of the trend is mobile computing which is an opportunity for Lenovo as an innovative brand. However, society and culture are also major forces in this era of globalization which do not just affect popularity of brands and their products but require to be considered when crafting a marketing strategy. The demand for detachable and gaming machines is on a rise too and these changing preferences of the consumers must be considered for sales and profitability.Technological factorsThese are the technical factors affecting the market and can be viewed as the new ways of producing and distributing goods and services and how to communicate with the target markets using modern and advanced ways. It would be impossible to remain the leader if one does not focus on technological innovation. Apart from these things, heavy competition in the PC market also makes it essential to focus continuously on innovation.
Technological changes keep happening and it does not take very long for a new technology to grow old and obsolete. Moreover, Lenovo’s market presence in the smart phone segment is still weak. However, its propulsion as per Reuters report Lenovo has decided to invest 1.2 Billion on R&D into AI, big data and IoT over the next years to come. It is also working with Google and Amazon to raise the contribution of smart phones and other new businesses to its total sales. Environmental factorsSustainability is an important trend and big and small businesses are investing in sustainable practices not just to control costs but also to create a sustainable brand image. The government is also known to support businesses which keep their carbon footprint and environmental impact minimized.
Lenovo is committed to sustainability right since its beginning and in 2016 it strengthened its commitment by raising its carbon emission reduction target to 40 percent. Apart from these things Lenovo is focusing upon expanding its renewable energy portfolio and reducing the energy usage down its production chain.Legal factorsThese are factors such as health and safety, equal opportunities, advertising standards, consumer rights and laws, product labeling and product safety. Therefore Lenovo being an international company it is subjected to several laws which differ from state to state and compliance everywhere is more than essential. There are laws related to taxation, labor, intellectual property and even the environment that affect Lenovo and all of them require being complied with. Liability can result in major fines in millions of dollars. Thus, the legal risks are also an important factor in Lenovo’s macroeconomic environment that can cause major pressures. As seen in the case study, Lenovo had clear policies of shareholding, dividends sharing and acquisition of other related companies and also in manufacturing including the Lenovo tablet without infringing to the rights of other well established companies like Apple.
The Competitiveness Of Apple Based On:PESTEL ModelPolitical AnalysisFactors such as bad global relations, wars, and terrorism can affect the business of Apple Inc.Apple Inc. is exposed to many political problems, as company had a decent number of contract suppliers in world especially in Asia (CNET 2012). According to Datamonitor (2012), 38.6% of the total revenues of Apple Inc. were from US during FY 2011. Therefore, 61.4 % of sales of Apple Inc.
were from outside America. Apple Inc also manages its business in the Middle East . During Iraq war, this company was affected by uncertainty in terms of currency volatility, shipping cost and insurance cost. Therefore any political insurgence for sure leaves Apple to danger. Furthermore, Apple recently was in political pressure and its supplier worker issues, suicides cases were registered against one of its biggest supplier, Foxconn, long working hours brings stress to workers and in May 2010 two of workers lost their life and sixteen were injured during an explosive in one of Apple’s supplier facility (Torres et al 2012). In addition, U.
S. has withdrawn its combat forces from Iraq by the end of 2011. However, there are still conflicts in northern Iraq and these conflicts between Arab and Kurdish communities create potential risk for Apple’s business in these regions (Hanauer,Martini, Al-Shahery,2011). Furthermore, Apple Inc manufactures many of its products and parts outside the U.S. like Czech Republic, Korea, Ireland, Cork, and China.
Recently, China is preparing for its leadership transition later this year, which may influence the business of the Apple Inc (Carnegie Endowment website, 2012).Economic Analysis Factors such as global recession, high inflation rate and consumer’s earning not having any significant changes, amplified unemployment rate has affected consumers to spend less, especially on ‘Luxury products’. However, Apple’s revenue is not affected by this economic recession although most of the products of this company are luxury. Apple made it possible by designing different unique products from its competitors, which has increased the demand of Apple’s products (Apple website, 2012). Apple has been affected by crisis that is the change in American region sales for current year was 9% in 2012-13 compared to 50% of 2011-12, in Europe 4% in comparison to 31% and in greater China 13% in comparison to 78% (Apple10-K).
In addition, Apple Inc has used financial instrument like foreign currency forward and option contracts, to hedge certain exposures in foreign currency exchange rates (Apple annual report, 2009). Apple spreads financial assets across several currencies. For example, Apple could be protected from dollar devaluation if it carried enough Taiwan dollars to pay the metal component suppliers for the IPod cases. Additionally, the U.S. dollar depreciation has amplified Apple’s sales in the international market (Yahoo Uk ; Ireland finance, 2012).
Social AnalysisThese days our social life is influenced by technology and Apple Inc, is considered as the master of technology because of its quality and design. Another big social impact is the music industry, which has become virtual and established its market to the cyberspace. Apple Inc. has created the largest virtual media store of digital music which is known as iTunes and devices of playing the music known as IPod. Throughout its history, Apple has been making a series of changes in its products to satisfy and fulfill what its customers expect. Technological Analysis Apple is a trend setter in consumer electronics business and had aggressive philosophy on innovation. One of the biggest mobile wireless developments in 2008 was the increased availability of 3G mobile phones, such as Apple’s iPhone 3G.
Moreover, Sprint is planning to offer a Wimax based 4G services by 2009. Apple designs are unique but consumers are also giving preferences to screen size. Moreover, it is famous for its one floor software application offering which is third party software, bringing risk to its continuation of contract with the Apple (Apple 10-K).Along with above mentioned positive technology industry related points for Apple Inc.
there are some risk factors also present. Apple needs to invest more and more in R&D as of competitive and short product life cycle nature of industry (Apple 10-K). Apple Inc. is on top of the market because of investing highly in research and product development. Moreover, innovation has shown big portion of this brand and has shown to pay out (Apple website, 2012).Environmental factorsFactors such as the new U.S. laws and regulations that make manufacturers responsible for recycling, Apple Inc.
introduces domestic recycling facilities instead of shipping waste overseas. Moreover, Apple Inc. has enhanced their expectation about green production.
Furthermore, Apple operates in a way that conserves the environment and protects the health and safety of their employees (Apple Annual Report, 2011).Following a Greenpeace protest, Apple released a statement on April 17, 2012, committing to ending its use of coal and shifting to 100% renewable clean energy.Legal factorsApple Inc is the participant in various legal proceedings and its competitors and peers are also engaged in litigation in its normal course of business for various reasons. Moreover, Apple Inc’s success depends on the intellectual property rights. Intellectual property right claims may increase against Apple Inc.
as the company has grown (Apple website, 2012).Recently. Apple has won the lawsuit against Samsung.
The jury ordered Samsung to pay Apple Inc. $ 1.05 billion and Apple Inc filed its patent infringement lawsuit in April 2011 (Yahoo Finance, 2012).In addition, Apple’s business is subject to a variety of U.S. and international rules, laws, policies, and other obligations. Therefore, any unfavorable changes in laws of U.S.
and other international countries can adversely affect this company (Apple Annual Report, 2011).The Competitiveness Of Lenovo Based On: Porter’s 5 forces modelRivalry among competing sellers: (High) There are three major players in the PC corporate market these are; Dell, HP and Lenovo, which take up around 90% of the market share. According to the customer satisfaction survey, there are relatively few contrast among these top producers in terms of product features and product quality.
While Lenovo has the best product support and strongest business relationship with customers among the three, for Lenovo to catch up with the other two competitors, keeping the brand name is the key, especially when the IBM trademark rights are lost. Potential entry of new competitors: (Low) The entry barrier is relatively high since enterprises generally seem to be satisfied with their current notebook providers, with littlemotivation to look beyond their current suppliers. However, in technology markets, there is a high probability for another company to come with a new invention to take over the market. As a result, existing companies take in highly skilled engineers and adopt new inventions so as to gain a competitive edge; this is a significant reason that Dell, HP and Lenovo maintain their dominant positions in the corporate market. Competitive pressure from substitute products: (High-Moderate) The recent ultra slim models have become more eye-catching to the millenials and middle income earners therefore Lenovo should adjust the models to fit the descriptions of other substitute products to their customersBargaining power of suppliers: (Low-Moderate) Lenovo are daily improving their products and service quality, offering extra features and maintaining strong customer relationship so as to maintain its success.Bargaining power of customers: (Low) This does not apply to Lenovo, who manufactures its own materials to a great degree – mainly, raw materials like boards and chips have reasonably standard prices.
The Competitiveness Of Apple Based On: Porter’s 5 forces modelRivalry among competing sellers: (High) Apple Inc. had a well-diversified portfolio of tech based products; it sells hardware and software which makes a tough situation for Apple to compete globally (Apple 10-K). Positive point of Apple is, its product line is less, simple and user friendly, so they manage to make sales out of it as compared to competitor’s one where enough choice is present to confuse consumers (Apple Form 10-K).
Apple products had high differentiation with competitor’s products. Moreover, Apple distribution channel i.e. via Amazon and direct outlets is very strong, helps Apple to strategically position their products. Looking into the intense competitive environment it should increase its investment more in mobile, computer and software. Potential entry of new competitors: (Low) Apples threat of new entrant’s competitors is low due to its unique products. Apple also use contract manufacturing strategy saving unnecessary cost and expense, as no need to spend money directly on social responsibilities helping them to be the world’s most profitable and capitalized corporation. Other reasons for low threat is copyrights, patents and high switching cost.
Competitive pressure from substitute products: (High-Moderate) Apple’s substitute product pressure is high-moderate. For almost every product of Apple there is a substitute present. IPod is substituted bySamsung mp3 player ; Sony mp3 player whilethe IPad by Samsung tab and Iphone by Samsung galaxy, Samsung note, HTC, Nokia, Sony Erickson But Apples OS still proves to be a strong area of Apple which is not having any near substitute while another positive area is the Apple own app store, iTunes and iclouds. Bargaining power of suppliers: (Low-Moderate) The unique capability to manufacture product for Apple makes the bargaining power of suppliers to be low-moderate. Apple has a very well diversified supplier numbers; they aren’t manufacturing everything from one supplier and one place and because Apple buys in large quantity, giving them higher buying power (Green Beagle 2012). Bargaining power of customers: (Low) Apple enjoys its bold image of being innovator, quality continuer and big investor in R&D helps it retains its current customers. Along with retention, Apple is also successful in switching competitor’s customers towards itself many times (Tech Crunch 2014).
(c) RBV (Resource Based Value) model Illustration of the challenges that need to be overcome as viewed against key identified competitors, with respect to 1 above. LenovoLenovo has become the global application company (sales) that have their own package plants in more than 7 countries and cooperation plants in many countries and make the local enterprises business license and distribution contract and from the case study Lenovo can be seen as one of the largest famous personal computer makers in the world. . On September 24, in 2004, Lenovo purchased the personal computer business and the brand “ThinkPad” famous computer IBM in the IT industry all over the world which indicates that Lenovo already in the United States has established a brand-name image localization. However, Lenovo has encountered and is still facing a number of challenges when compared to its competitors such as Apple, Dell and HP in a range of areas that start from the profitability, distribution, innovativeness and many more other challenges such as large number of product lines lie in the expansion of overseas; Marketing sources are not rich; Prices are not cheap and also there are too many cheap substitute products developed in the market The market protection in some countries is also strong, not forgetting the foreign exchange rate fluctuations that affect the market too.
It can be noted from the case study that one of the major policy that Lenovo has capitalized on is the policy of market base and distribution. This has seen the company not having a strong and a competitive advantage as compared to Dell and HP in terms of profits achieved despite them having high sales. This is a living proof showing that when a company makes massive sales and less profit, the company is not doing as better as its competitors. The below graph excerpt from the case study (pg 16) shows it all Another challenge that has been facing Lenovo, at its initial times and relatively today, is shareholder’s payments and compensation. Normally the challenge comes in when the owners expect much from the company and with low profits, the company can be overwhelmed since the money that could be used for its expansion is used for compensations and share payments. Also, regulations and control of the company in the 2009 to 2012 could be projected to be mixed up since the Legend (fathers of Lenovo) owned only 18.5% of the shares in the company with the majority being with the Chinese; making it difficult for major decisions that require giant shareholders to make significant decisions. This is not faced by their competitors thus Lenovo lags very much behind when compared with companies such as Dell and HP.
The single marketing channel is another major challenge that offers the competitors an added advantage over Lenovo. At Lenovo, the products and services are mainly sold by monopolized stores in its major 7 countries as per the report of 2015. HP and Dell are penetrating markets like Japan and the USA well because their marketing channels are diversified. In terms of research and development it can be argued that Lenovo’s investment in research is on the rising margin but its research department unlike the initial stages of development during the 1990?s, it is not becoming very innovative like its competitor APPLE. For example, when Lenovo wanted to come up with a new tablet, all the company did was to adopt a lot of features from the apple tablets and even give it a name that could easily be confused with a product produced by apple. This means that as much as the company has been allocating money for research, little is being done. This also shows that Lenovo’s Product styles are too fewer to choose.
For example, in 2011 Lenovo is said to be among the best five PC distributors in China and other markets in the world hitting at 16.6% as highlighted on pg 11 of the case study. Overall conclusion shows that companies like HP had moved to netbooks (laptops) manufacturing, internet supply, smartphones and other products like the tablets while Lenovo uses clones where it is said that like other Chinese companies do, Lenovo has been waiting for its rivals to come up with a product, then modify one or two ideas from it and sell it to market; making it hard for them to penetrate stiff markets like the USA.
This generally lowers their competitive advantage over their competitors. In comparison to its competitors like Dell and HP, Lenovo has suffered a lot of losses in relation to operating profit margin. This can be seen from the case study when Dell and HP maintained stable gross margins despite poor economic conditions, Lenovo suffered two consecutive negative 10 shocks in 2009 and 2009 and 2010, reflecting different corporate priorities. This is a challenge that puts its competitors at an upper hand as compared to the company. AppleOne of the major policies Apple has invested in is the policy of intensive research and development which has given Apple a competitive advantage among its competitors in the market.
The concept of competition countering is sustainable in apple since the company doesn’t only rest in massive innovations but the company has always invested in products that give the customers value for their money too. From the case study it can be seen that in 2001, Apple sales fell by a third and the company reported an operating loss of $350 million 6% of sales. This led them to the development of the concept of Mac as the digital hub for consumer products emerged – the iPod was launched. Since then Apple sales have increased from $5 billion to over $100 billion last year and profits have soared to $34 billion. Over this time, the company has followed the strategy of the digital hub moving along the Golden Staircase with constant product improvement and enlargement of the product offer.
In the first quarter of this financial year 2012 revenues increased by over 60%. Since launch the company has sold over 330 million iPods, 180 million iPhones and over 55 million iPads. Over 575 million digital devices sold. This shows that the strategy adopted by the company is very strategy.
However One of Apple biggest key issue is the rate that technology is growing and the ability to keep up with and also the prices at which their products are sold for; they are faced with the challenge of constant new arrivals from competitors at prices that are more affordable especially in today’s economy where everybody is looking for ways to save money.They are also faced with having to maintain its marketing, relationship building and brand management techniques as they spread into a much wider market, gaining a much larger customer base that includes a lot of more diverse customer. Technology and entertainment industry is constantly evolving; there are some doubts if apple will be able to maintain the reputation of its brand, their exclusive design and constantly able to put something new out in the market that will keep catching their consumer’s attention and justify why they would rather spend the money on a Mac instead of the much more affordable brands.
