PESTEL Analysis is a strategic tool which has been utilized by the strategists and marketers to determine and analyze the external or Macro-environmental factors that could have positive and negative impact on Organization. This article will discuss the PESTEL or PEST analysis of Lenovo to perform analysis of external factors ( Political, Economic, Social, Technological, Environmental and Legal ) that have impact on the Organization.
Lenovo is a Fortune 500 company with high tech products in almost all fields; it has laptops and LCDs with the same name where as smart phone with the brand name Motorola. It is the biggest Chinese computer making company and it is third world wide; ranking after HP and Dell. It has its headquarters in Beijing, it is the brand of this century, and whatever it has achieved up till now it did so in a very short span of time. The founder Lui Chuanzhi was a government scientist and started the company by taking a government loan worth $24000 during Cultural Revolution era and now Lenovo stands as a $46 billion company. It took over ACER, a Taiwanese company in order to increase its market share and brand equity. It was one of the first companies to offer sponsorship in 2008 Olympics. They also signed a deal with IBM and took charge of their x86 server business. Think Pad, the famous iconic tablet that James Bond used in his 1995 sequel, belongs to Lenovo. (LENOVO, 2012)
Lenovo is not only operating in China but all over the world, therefore it has to keep its business strategy in line with global and local politics. The Communist Party of China has made it their manifesto that they want scientific growth for their country hence it becomes very easy for Lenovo to think of expansion. WTO has liberalized trade for international companies to take advantage of markets dispersed around the world; Chinese government talked with WTO in order to ensure that mutual agreement exists between the two institutions and in case of any dispute or friction there is established set of laws which are agreed upon beforehand. In order for Chinese companies to become international, China also had to open its borders and soften its laws for imports and arrival of foreign brands. China is a hugely populous country and the entire world has its eyes upon this market. (Dozier)
Lenovo was stagnating in China, with no remarkable increase in sales and revenue, it thought that it should become global and expanded its brand in international markets. Luckily for them, international markets accepted the brand due to its takeover strategies of some of the biggest names of this industry. But when economic crisis hit the world economy, Lenovo was also hit badly and hence it decided to go back to its roots and gain from the Chinese market, now China was more acceptable of this brand since it has association with some foreign reputable brands. In order to take advantage of economies of scale, it has set its manufacturing units in low labor cost countries like China, Argentina and Brazil, which helps it in staying competitive and avoid price fluctuations in case of any economic shock.
The literacy rate of China prior to this government was as low as 20%, now the level is satisfactory which has resulted in increase in household income and therefore increase in purchasing power parity. This has done favor to Lenovo as it is in the high tech business which is directly proportional to literacy rate. The more people become literate the more they will need connectivity and high tech products. Another challenge for Lenovo is to increase its market share in countries where the demand for high tech products has already saturated. In countries like U.S. and U.K. this brand is associated with low price and low quality; it does not have that much of a bright future there as it has in developing nations who are not familiar with great brands and look for cheaper alternatives.
This is the era of modern technological breakthrough; companies are inventing new products and updating older ones every other day. Those who could not keep up die, like Blackberry and Nokia; once market leader are now either liquidated or left behind in the race. Lenovo also has to take care of this feat; it does not only have to innovate but also look for strategic partners in order to build reputation in product quality and distribution, so that people consider it synonymous with innovation and quality. It is important to evolve but it is more important to develop capabilities that are hard to imitate this gives competitive advantage to companies.
Lenovo is one of the most environmental friendly companies where all the operations from the product to packaging are recyclable. It uses PCC in all its products including laptop, Smart phones, TV and tablets etc. the newly developed products even cross the threshold for using PCC materials. By using PCC materials Lenovo is saving considerable amount of natural resources which could have been used again had the recycled material not used by them. Apart from this it is committed to produce low Halogen content in its products in order to be more environments friendly. PVC has been eliminated from most of its products. Lenovo also uses water and energy in the most efficient way in order to conserve these rapidly depleting resources which are most scarce. (ENVIRONMENTALLY RESPONSIBLE SOLUTIONS)
In China there are laws to protect the rights of consumers for example the right against any illegal actions or fraudulent actions that a firm might conduct in order to engage consumers and make sales. There is also a law which prohibits the firms from selling any inferior quality product to consumers and these laws make an environment of healthy competition where firms succeed on the basis of their great product ideas and marketing techniques and not by mere luck or cheat. Although laws have got it covered but still companies are in constant struggle to protect their intellectual rights, Apple and Samsung are in series of suits and counter suits in different countries in order to claim their right to certain software or feature.
Dozier, B. (n.d.). Lenovo: Chinese multinational Computer Technology Company. Retrieved December 27, 2015, from wordpress: https://barbradozier.wordpress.com/2014/12/21/lenovo-chinese-multinational-computer-technology-company/
ENVIRONMENTALLY RESPONSIBLE SOLUTIONS. (n.d.). Retrieved December 27, 2015, from Lenovo: http://www.lenovo.com/social_responsibility/us/en/materials/
LENOVO. (2012, April). Retrieved December 27, 2015, from Facts and Details: http://factsanddetails.com/china/cat9/sub61/item1890.html