The Competitiveness Of Lenovo Based On:
PESTEL 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
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.
Since 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.
These 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.
These 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.
Sustainability 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.
These 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:
Factors 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).
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).
These 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.
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).
Factors 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.
Apple 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).