• Lenovo Pestle and Swot Analysis 2017

Introduction

The technology industry has one of the most profitable markets in the world with two major players Samsung and Apple having a combined global market share of 39.0% with other companies such as Lenovo, Xiaomi, Huawei, OPPO, extra, accounting for the remaining 69% of the smartphone market. Lenovo is however a low-cost technology company and has a global PC market share of 22.0% with major competitors HP and Dell having 22.5% and 15.2% market shares respectively according to vendor unit shipment of fourth quarter of 2017 (Gartner 2017). In addition, Lenovo had the 3^rd highest Smartphone shipments in China totaling to 80 million units worldwide in 2017 (Statista 2018).

1. Porters Five Forces of Lenovo 2017

1.1 Competitive rivalry

Lenovo faces intense competition in both smartphone and PC markets both locally and internationally from major competitors like Huawei, Samsung, Apple, Xiaomi, Oppo-Vivo dual, among others which manufacture similar products like tablets, laptops, smart phones with similar prices hence low product switching costs. This has led to price wars, innovation through use of technology and intense product advertising. For example, Lenovo has designed a laptop having a Tri-Fold display which allows the device to be folded in a way that screens are facing both sides with multiple viewing regions and will be useful for presentations as well as multi-player games. This is intended to oust its competitors and grab a bigger market share (Jeet 2018). 

1.2 Bargaining power of buyers

Lenovo’s customers have high bargaining power due to many similar products present in the market for example, IPad from Apple, Tablets from Samsung, extra, from other technology companies like Huawei, Samsung, Apple, Xiaomi etc. These products have similar price ranges hence low product switching costs which gives customers power to choose between a wide range of products. For example, varieties for tablets include Apple I pad, Lenovo tab 7, Samsung Galaxy tab, Acer Chromebook tab, Huawei media tab, among others (Gadgets 2018).

1.3 Bargaining power of suppliers

Most of Lenovo’s suppliers have high bargaining power due to the technical nature of the components that go into smartphone making. Suppliers of memory, LCDs, DRAM, SSD, have a high bargaining power due to scarcity of their products hence suppliers request for the highest price possible for their products from technology companies which has resulted in increase in Lenovo PC prices (Shah 2017).

1.4 Threat of substitutes

Substitutes are referred to as products that offer similar benefits to the industry’s product. In this case, threats of substitutes can include landlines, satellite phones, pay phones and fax machines which are of late considered old fashioned in comparison to smart phones. The threat of substitutes for smart phones is very low which is an advantage for companies like Lenovo as more people are relying on smart phones abandoning the use of old technology.

1.5 Threat of entry/barriers to entry

This is perceived as a low threat by Lenovo because it requires huge capital investments, distribution channels, skilled human resource and plenty of time to fully establish a technology company and be able to compete with existing companies globally. And with the high competitive pressure between existing brands that has resulted in price wars, a new entrant would not be able to offer competitive prices because it would result in losses. For example, Samsung lowered the price of its Galaxy S8 to induce more sales (Snelling 2017).

Conclusion

The above competition analysis shows various ways in which competition has affected Lenovo in the technology industry highlighting different market opportunities, challenges and major Lenovo has several market opportunities to explore like fully exploiting the smart phone market and product innovation through use of artificial intelligence. However, Lenovo faces several threats such as high bargaining power of buyers and suppliers that affect both its sales and profit margins. Nonetheless, Lenovo’s major threat is intense competition in the low-end market induced by presence of many technology companies in the low-end market such as Huawei, Xiaomi, etc that produce similar products with similar costs.

References

Ashish (2018) “Why Haven’t Satellite Phones Become the Norm?” Science ABC [online] at https://www.scienceabc.com/innovation/why-havent-satellite-phones-become-the-norm.html [Accessed on 25th.5.2018].

Jeet (2018) “Lenovo Patents Laptop Design Having Tri-Fold Display” Gizmo China [online] at https://www.gizmochina.com/2018/05/14/lenovo-patents-laptop-design-having-tri-fold-display/ [Accessed on 24^th.5.2018]

Gartner (2017) “Gartner says worldwide PC shipments Declined by 2 percent in 4Q17 and 2.8 percent for the year” Gartner [online] at https://www.gartner.com/newsroom/id/3844572 [Accessed on 25^th.5.2018]

Martindale Jon (2017) “Research shows Apples Smartphones and tablets drive highest customer loyalty” [Accessed on 25^th.5.2018].

Shah Agam (2017) “PC prices will continue to go up due to SSD, DRAM, LCD shortages, Lenovo says” PC World [online] at https://www.pcworld.com/article/3171366/computers/pc-prices-will-continue-to-go-up-due-to-shortage-of-components.html [Accessed on 20th.5.2018].

Statista (2018) “Chinese smart phone brand unit shipments worldwide from 2011 to 2017 (in millions)” Statista [online] at https://www.statista.com/statistics/521986/china-smartphone-brands-shipments-by-brand/ [Accessed on 25^th.5.2018]

Vilner Yoav (2017) “Apple and Branding-what can we learn?” Virgin.com [online] at https://www.virgin.com/entrepreneur/apple-and-branding-what-can-we-learn [Accessed on 23rd.5.2018]