PESTEL/PESTLE Analysis of Lenovo
Lenovo, the largest PC maker in the world has registered some magnificent wins over a short period of time. Since its incorporation in 1988, the brand has grown a lot and managed to retain a market share of 21% even in a period when the entire PC market is facing a decline. It makes a large range of products and IT solutions. The fast growing Asian markets are its stronghold but in case of the European and developed markets, Lenovo may still need to grow its presence there. The decline of the PC industry is affected by several factors. The aim of the technology brand is to grow into the world’s largest technology company. However, there are several forces which need to be in favour to reach that position. The fluctuations in the global and local economies are already creating difficulties. This is a PESTEL analysis of Lenovo that analyzes how these various kinds of forces affect the world’s largest PC maker.
The political factors have kept growing very important for businesses in the 21st century. If the Chinese market is a stronghold of Lenovo then there is a major role of the political forces behind it. China is already known to favor the local brands. However, around the world such situations have frequently come to light. Even the American companies face difficulties while doing business overseas in several markets. EU slapped fines over US technological giants for debatable reasons. If Lenovo’s market presence is not as strong in the developed or European markets, then the political environment is an important cause behind it. 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.
The global economic environment has changed a lot since the recession. Consumer spending and employment level, both had given up. 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. The currency volatility is affecting the brands in the personal technology industry and will continue to affect them. The severe macroeconomic challenges before Lenovo along with the decline in PC industry will continue to have an effect on Lenovo. Apart from these things there is intense pressure of competition in the PC industry. Despite being ahead of the others, Lenovo will continue to feel the pinch because the other brands too are behaving quite aggressively to gain their hold back on the PC market. 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.
Socially, the acceptance of personal technology has increased. Apart from PCs, it makes a full range of personal technology products like smart phones, tablets and smart TVs. It is also the second largest smart phone brand in China. While the PC market has decline the smart phone and tablets have kept growing in sales. The demand for personal technology is especially the highest among the millenials and the middle class. They form a major part of Lenovo’s target market. These social trends can have a major effect on the business of the international brands like Lenovo. The hot trend of mobile computing is an opportunity for Lenovo which is 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 growing importance of design and mobility has also made it important that PC vendors focus on these factors while releasing new products. The demand for detachable and gaming machines is on a rise due to these factors. After all, the changing preferences of the consumers must be considered for sales and profitability.
Technology decided the game in the 21st century and for the technology giants like Lenovo, it would be impossible to remain the leader if they do 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. The race is stiff and Lenovo is also growing by acquiring key names in the technology industry that benefit its core business. Apart from IBM’s PC division Lenovo has acquired Motorola mobility and system X for its future growth. Moreover, Lenovo’s market presence in the smart phone segment is still weak. However, it has caught momentum and is going to receive a lot of focus from Lenovo in the coming years. As per Reuters report Lenovo has decided to invest 1.2 Billion on R&D into AI, big data and IoT over the next four years. It is also working with Google and Amazon to raise the contribution of smart phones and other new businesses to its total sales. While Lenovo has focused a lot on innovation, the game is tough because of the intense competition.
Sustainability is an important trend in the 21st century. Big and small businesses are investing in sustainable practices not just to control costs but also to create a sustainable brand image. Such an image can be highly favorable for businesses since not just the customers but governments are also known to support such 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.
Being an international company subjects Lenovo to several laws. These laws differ from state to state and country to country ad compliance everywhere is more than essential. Liability can result in major fines in millions of dollars. There are laws related to taxation, labor, intellectual property and even the environment that affect Lenovo and all of them require being complied with. These laws escalate the costs related to compliance and any litigation can result in unpredictably large fines which is detrimental to a global business’ financial health. Thus, the legal risks are also an important factor in Lenovo’s macroeconomic environment that can cause major pressures.