Marketing Audit of Lenovo - Essay Example

Marketing Audit of Lenovo Table of Content 3 Introduction 4 Organizational resource 9 SWOT analysis 9 Marketing mix management 10 Strategic triangle 11 Data collection 11 Human resource 11 Marketing share and financial performance 11 Organizational strategy 12 Customers’ response 13 Data analysis 13 Macro-environmental analysis 13 PEST analysis 13 Micro-environmental analysis 15 SWOT analysis 15 Marketing mix 17 Strategic triangle 18 Conclusion 19 Recommendation 20 Reference 22 Bibliography 25 Appendices 25 Abstract Adopting a right marketing strategy is the only key for present day organizations to generate maximum revenue and face the intense competition prevalent in the industry. Present report is attempt to study the subtle nuances of the information technology industry with special focus on the companies involved in the manufacturing and selling of personal computers and associated technological products. The study has specifically focused on the marketing audit of Lenovo to analyze the marketing strategies adopted by the company to gain the competitive advantage. The study discusses potential theories and literatures available on marketing audit and describes its importance for present day organizations. Conducting a marketing audit for any organization involves analysis of the external and internal environments of the organization. Analysis of the external environment can be done through various models and frameworks which have been proposed by previous researchers. These analytical frameworks consider various crucial aspects of the external environment which have potential influence on the business operations of the organization. While scanning the environmental elements of Lenovo various factors have been considered which are external to the organization and have significant influence on it. Similarly the internal environment of the organization has also been analyzed deeply to identify the potential strengths and barriers which exist within the organization. While scanning the internal environmental of the organisation, various theories and analysis have been implemented to analyse the resources and capabilities present within it. For data collection various news and texts have been used as secondary sources. These organizational data are analyzed and inferred for identifying the strengths and weaknesses of the organization. A systematic plan for action has been suggested as recommendation at the end of the report. Introduction Marketing audit states the importance of aligning the marketing operations with the objectives of the business as well as the capabilities of the organization. Once it gets aligned, the organization experiences increased level of potential in its profit making and marketing activities. If classified broadly the process of marketing audit involves proper understanding of the goals, identifying current resources and techniques to be utilized by the organization, collecting information from organizational and non-organizational sources for understanding the internal environment of the organization and finally analysing the gathered data for gaining insight of the marketing functions adopted by the organization and ways for its improvements. The entire process is finally documented in a full report describing each of the steps performed under the marketing audit process (Anonymous-a, n.d.). About the company Lenovo the brain child of the Legend Group, formed with the initial amount of US$25,000.. The company was started by Liu Chuanzhi with the support of ten colleagues of his previous organization. Initially the company was named as New Technology Developer Inc. and was funded by the Chinese Academy of Science. The company focused on manufacturing and selling personal computers in the Chinese market. The company adopted innovative marketing strategies to increase its business in the Chinese market by gaining maximum customer base. During 1999 the company grabbed the top most position in the list of PC vendor across the Asia-Pacific region and held the same in the Chinese national Top 100 Electronic Enterprise ranking. By 2000 the company made its place in top 10 list of the world’s best managed PC vendors. During 2003 Legend declared the birth of its new logo as “Lenovo” with an intention to expand the business to overseas market. The company with its new name initiated several potential projects by involving several large organizations with the support of the Chinese Ministry of the Information Industry. The company desired to develop its industrial standard and promoted the same to its project partners (Lenovo-website-a, n.d.). What is marketing audit? According to Kotler(1988) Marketing audit can be described as “A comprehensive, systematic, independent, and periodic examination of a company’s –or business unit’s- marketing environment, objective, strategies, and activities to determine problem areas and identify the opportunities. In view of the above a plan of action is recommended to improve the company’s marketing performance”. The marketing audit is a comprehensive process adopted by the organizations which supports them in analyzing their total marketing efforts which also includes the strategies and their objectives and the elements of marketing mix considered by the organizations (Winston, 1995, p.327). Marketing audit involves crucial analyses of both the external and internal environment of the organization which are categorized into micro and macro environment. In micro-environment all the internal affairs of the organization are considered which involves understanding the goals and objectives of the organization, its resource capabilities and resource utilization, strategic planning and control, and its marketing mix management. In case of macro-environment all of the external factors are considered bearing certain relationship with the organization such as the economic condition of the location, stability of its government and political conditions, social and technological factors present with the location, etc. Though these factors are entirely external to the organization yet they have potential impact on the business of the organization. External audit PEST analysis of external environmental scanning PEST analysis is conducted by the organizations to gain knowledge on the current situation of the market and their position in relation to it. The analysis helps organizations to know their current status in the market by providing a clear understanding of their market share (Williams & Green, 1997, p.166). The analysis considers the political, economical, social, and technological factors which are purely external to the organization and have no direct connection with the organization. But these factors have found to have tremendous influence on the business operations and profitability of the organizations across the world. The report aims to study the industry of information technology and the sample organization is Lenovo, so conducting PEST analysis for Lenovo will involve the political environment of its origin nation China and also the global politics. The economic analysis involves the study of Chinese economy in contrast to the global economic condition and identification of potential opportunities and threats which are external to the organization. Analysis of the social system prevalent within the company can help it to identify the new strategies to develop their business in the society. Lastly, the technological analysis of the sample organization can be interpreted as the significant technological developments which have taken place which are available in the market and are being used by the industries. Identifying the technological trend can support the organization in development of new ideas for technological advancements for enhancing the business processes. PEST analysis is a comprehensive framework for analysing the whole environment which is external to the organization. It highlights the probable opportunities and possible threats which are present in the organizations line of business. Internal audit HR capabilities The HR capabilities of the sample organization are analyzed in the context of internal marketing which signifies an inter-relation between the human resource and the other employees of the organization including the employees who are directly involved with the external marketing activities. Many authors have given their views on the topic of internal marketing, and its relationship with the human resource and the marketing people of the organization. Reardon and Enis (1990) describe internal marketing in terms of its effectiveness as a marketing technique of internal marketplace. The authors defined internal marketing as an application of persuasion strategies, both novel ones and those common to external marketing, to convince people in-house that they are connected to the customers Another author Ballantyne (2000) describes internal marketing as a strategic approach that challenges both the attitudes and behaviour of staff towards an understanding of the centrality of the customer (Sinčić & Vokić, 2007, p.5). Human resource capabilities of the sample organization and the internal marketing activities performed within it will support it in gaining ideas on improving marketing activities. Financial capabilities Financial capabilities of an organization play a significant role in the marketing activities of the organization by supporting the development of effective marketing policies. Organizations develop marketing policies with two different purposes. One concentrates the short run of the organization while the other set of policies are developed with long run planning of the organization. The financial capabilities of an organization support it to face the uncertainty level of the present day business environment. Financial tools are effective in determining the effects of the marketing policies held by the organization. Organizations also consider their financial metrics which have its influence on the marketing policies of their organization and have relation with the stakeholders if not privately owned. Then financial tools used by the organizations also support them in identifying the rewards system to be adopted for the managers and ensure long term performance from their maximized activities. Organizations face both the certain and uncertain phases in the business environment. They need to understand their financial capabilities so that they can resist the challenges which are posed by the uncertain business conditions. Analysis of the financial performances can help the organization to identify their weaknesses and loopholes present in the marketing policies adopted by them (Jagpal & Jagpal, 2008, p.19-20). Organizational resource The organizational resources provide an overview of all the capabilities possessed by the organization in all of the aspects crucial for the assessment of its ultimate performance in the market place. These capabilities include the human resource, marketing, finances, technological capabilities, and production capabilities possessed by the organization. Organizational members are also required to identify the opportunities which they can grab with the support of their capabilities and develop strategies to turn the opportunities into organizational success. Marketers present within the organization emphasize on developing a marketing plan which considers the identified opportunities and relates them with the present capabilities of the organization. An effective marketing plan developed by the marketers of the organization supports them in increasing the efficiency, flexibility, and adaptability of the marketing strategy. It involves a prefect blend of the elements of the marketing mix which involves product, its distribution, promotion, and its price, where each of these elements plays a crucial role in the marketing strategy of the organization. Through an efficient marketing plan organization targets a market segment and identifies their needs and expectations to fulfil them through the right blend of the above mentioned elements of marketing mix (Kurtz et al., 2009, p.55). SWOT analysis SWOT analysis is one of the highly adopted frameworks by the organizations to identify the strengths, weaknesses, opportunities, and threats which are associated with their current business conditions. Basically the SWOT analysis helps organizations to know about their current situation, i.e. “where they are now?”. The framework consists of SW which signifies the strengths and weaknesses of the organization which are considered at the micro-environmental level. The OT part of the framework signifies the opportunities and threats present with the organizations and are considered under the macro-environment part for the organization. SWOT can be beneficial for organizations in visualizing the issues needed to be handled by them and understand the changes needed to be brought for resolving the issues. The identified strengths are needed to be developed with handling the weaknesses by taking support of the identified opportunities present in the external environment of the organization. Identified threats are needed to be avoided by the organizations to ensure smooth running of business operations with continuous increase of revenue and productivity (Anonymous-b, n.d., p.4). Marketing mix management The marketing mix management adopted by the organizations supports them in compilation of all the departmental efforts such as production, pricing, customer service, promotional activities, to focus on the development of strategies for achieving the mutual satisfaction of the target customers and the organization. The marketing mix model is also referred as four Ps’ model which involves Product, Place, Promotion, and Price associated with the products and services offered by the organizations. The process initiates with the product offered by the organization which requires to be promoted in the market for attracting customers. Activities such as ad campaigns, public relations, advertisements are included under promotion. The targeted business location is the place where the products are planned to be introduced. The price of the product refers to the amount at which the customers agree to avail the product. The price element of the marketing mix is the most easily changeable element among the all elements present in the marketing mix model (Lamb et al., 2008, p.52). Strategic triangle Strategic triangle helps in the analytical activities of identifying the interactions which takes place between the company, its competitors, and the customers. The model is used by the consultants for performing the analysis of an organization. Data from various sources are collected and segregated into three groups- Company, Customer, and Competitors. Relevant data are put in its respective group for analyses (Lowman, 2002, p.474). Data collection Human resource At Lenovo, the human resource is encouraged for a lifetime learning concept through the Lenovo’s People Enrichment Program (PEP). The PEP is intended to equip its employees with the opportunities for acquiring the competencies and skills which are needed in the future and assure its competitive advantage. The PEP provides employees with innovative ideas for career planning and development for which the program facilitates them with online training and individual career planning. The program also targets to develop the multi-cultural environment across the organization (See Appendix-1). Marketing share and financial performance Lenovo recorded sales of US$1.6 billion in its third fiscal quarter from the market of Greater China which contributed 45% to the worldwide sales of the company. Economic downturn impacted the shipments and reduced them by 1% against the previous year. Lenovo’s total market share in China rose by 1.8 points and recorded as 30.5%. In American territory Lenovo recorded sales of US$904 million during its third quarter accounted for 20% of its global sales value. Continual weakening of the commercial market and entry of low priced PCs impacted the American shipments by reducing its total shipments by 6% and its industrial shipments by 3%. The company performed well in Canada, and increased its market share in South America. In Europe, Middle East and Africa the company recorded sales of US$735 million in its third quarter of 2008 and contributed to the global sales of the company by 20%. In this geographical region the company faced a decline by 3% in PC shipments and the industry shipments of the company for these regions raised by 1%. The company faced negative impacts on its business in these regions because of adverse currency impacts. Fortunately the company identified new markets at Turkey and Russia. The Asia-Pacific regions recorded for 10% of the global sales value of the company. The total shipments fall significantly for these regions by 23% while the industrial shipments decreased by 4%. Shipments for India were returned back to the company due to the economic recession (Lenovo –website-c, Feb 5, 2009). Organizational strategy Lenovo dominated the domestic market of China with its computer products and gradually empowered itself to enter new business locations across the globe. Considering the open trade market system of China the company started observing high competitive forces from its overseas competitors like Dell and HP. To solve the issue Lenovo decided to expand its business overseas and entered U.S. and other European nations with its PCs and other products. Lenovo faced tough competition in European and U.S. market where its competitors created several restrictions along with the governmental interventions. It becomes essential for the organization to expand its business and explore more potential business locations (Anonymous-c, n.d., p.2). Customers’ response Lenovo has received positive responses from customers in the domestic market of China and the company has dominated the market with its leading performances. After winning the domestic market with significant result the company entered into the international market to capture market in different nations (See Appendix-3). In 2008 Lenovo entered Australian market with aggressive marketing approaches to capture maximum number of customers. The company adopted “pull” strategy which has purpose of attracting and retaining maximum number of customers. The company offered attractive offers to attract maximum number of customers (CIIMS, 2008). Data analysis Macro-environmental analysis PEST analysis Political environment – Lenovo has faced interventions from the U.S. Government which acted as a response of economic downturn making U.S. low on expending on IT (Reuters, January 2009). In European nations also the company ahs faced tough competition from its rival organizations. In China the government has eminently supported the company during its initial days making it an international brand. Political environment of major economies have become conscious after the recent economic recession which has created barriers for Lenovo however technological development has remained prominent among developing nations. Economical environment – Lenovo has fragmented its R&D, marketing, and production headquarters in U.S., India, and China and systematically allocates resources to each of the divisions. Recent economic down turn influenced the PCs shipments of Lenovo across all of its potential locations such as U.S., India, and European nations. Rapid growth of Chinese economy has supported Lenovo and protected it from the intense impact of recession in U.S. Social environment – High increase has been observed in the consumer segments for personal computers for home use. Technological innovation has entered into medium class consumers segments which have increased the demands for computers, consumer electronics, and related technological products. In China the company has already dominated the market place and gained significant response in Turkey and Russia too. Technological environment – The global demand for computing aids has increased for both commercial as well as personal uses for simplification of work. Innovative approaches have led organizations to develop technological products with minimal cost and durable to meet customers’ expectations. Low priced PCs have received significant response from customers in most of the regions of U.S. and European markets. Lenovo has planned to focus on Personal computer manufacturing and offering them at low prices competent over its rivals’ prices. Micro-environmental analysis SWOT analysis Strengths – Dominant player in Chinese IT industry and globally ranked as 3rd largest PC manufacturer across the globe. Effective workforce with diversified cultures has opened roads for the organization towards innovation. Lenovo with taking possession of IBM’s PC business has inherited the brand name of IBM which has significantly supported the company. Innovative thinking and importance of change management has been clearly understood and implemented by the organization. Weaknesses – Low marketing activities performed due to which the company has remained unrecognized for a longer duration. Lenovo has encountered complaints against its products life in comparison with its rivals. The company has to operate within the strict trade laws and regulations of its domestic market. Opportunities – The company has identified some other business locations at locations other than developed economies where competition level is already very high. The global increase in the demand for information technological developments is potential opportunity for the organization. Apart from PC making the company has also emphasized the low pricing which could offer competence to the company against its rivals. Threats – Low branding activities on global platform has emerged as a threat for the organization reducing its recognition in the market. High level of competition in grasping maximum customer base has increased the threat for the organization as its rivals creates barriers in its overseas business operations. Marketing mix Product – The company developed highly efficient PCs which it offered to the customers at competent prices and dominated the domestic market place of China. Lenovo accounted for the largest PC manufacturer in China and gained the third position in the world. Marketing of its products became convenient after taking over the IBM’s PC business as its brand supported Lenovo in gaining advantage in the international market. Place – Lenovo gained its name in Chinese domestic market and later on expanded its business to overseas regions such as U.S, Europe, Middle East, and Asia-Pacific which covered most of the developing and developed economies. Considering the diversified business locations and crucial factors which are associated with each of the locations, Lenovo should come up with comprehensive strategies for identifying the place and approaching accordingly to expand its business at different business locations. Promotion – In promoting its products Lenovo got significant support from IBM which is already a brand name in the global market. The company adopted innovative approaches to promote its products such as endorsements of its products by significant and globally famous personalities. Price – Low priced PCs have become a significant feature of currently available PCs in the global market. Present day organizations are focused on producing low priced PCs which are effective in attracting and retaining maximum number of customers. Pricing competition has led companies to innovate their products with efficient utilization of resources to pull the cost of manufacturing. Lenovo remain stronger in this aspect as it has offered products at relatively lower prices than its competitors maintaining high quality of its products. Strategic triangle Company – Lenovo possesses most of the competencies needed to be an international level performer in terms of its organizational resources. The work culture adopted by the organization describes the dedication and commitment as per the traditional Chinese culture which emphasizes quality with optimal utilization of resources. After becoming global the company acquired workforce from diverse background and origin which created a pool of diverse talent. This enabled the organization to pursue the innovation and improve its business on a continuous basis. Competitors – Lenovo dominated he domestic Chinese market and grew up to the international market where it felt high competition level among numerous brands of PC manufacturers. On global platform, companies like Dell, HP, and Acer have given significant competition to the company in most of the geographical regions across the globe. Many OEMs created barriers in the ways of Lenovo to restrict it from entering their already dominated market place. Customers – Lenovo mainly focused on retail customers and provided personal computers to them. Realizing the changes in the business environment the company identified the digital revolution and focused on making robust PCs with low prices. The company also recognized the increasing demand for consumer electronics where it can have potential opportunities. Conclusion Legend Computers changed its name to “Lenovo” as a sign of change in terms of its business operations and took its business to the international level with the new name. Dominating domestic market pumped its confidence and resource levels which pushed it towards the international market. Lenovo on entering international market faced several difficulties initially due to low recognition among international brands. Lenovo faced high level of competition from its international level competitors both in-house and in global market. China opened its market place for foreign companies which attracted significant PC manufacturers to China raising the problems for Lenovo in domestic market. In response to this Lenovo launched itself internationally and competed in the international market. In case of the marketing activities practiced at Lenovo, identifying the business environment and adopting relevant approach has helped the organization in making its position in the global market. The company gained support from IBM by integrating its PC manufacturing with its own operations. As Lenovo-IBM deal came into existence, Lenovo fetched maximum publicity in the global market and build its reputation as a global brand. Lenovo has always considered the market condition in its strategy development as in the market driven business environment strategies need to be flexible and comprehensive to meet the objectives. Globally the company has gained significant attention but still due to intense competition level among PC manufacturers and governmental interventions the company is facing difficulties in gaining a firm grip in the international market. Another major threat for the organization is high level of uncertainty of the business environment which raises the question of survival rather than development for present day organizations. Recommendation In field of marketing Lenovo has already initiated several activities to increase the effectiveness of its marketing operations. Additionally the company should try to focus on exploratory activities and target marketing to identify other potential business locations across the globe where the competition level is comparatively low. Another approach for better marketing activities can be identification of different customer segments and their variable needs. Since the overall demand for computers are increasing on global basis it is an excellent opportunity for the organization to expand its business globally. Apart from gaining expertise in PC manufacturing it is also recommended for the organization to focus on expanding its product range with innovative products addressing the needs of present day customers across the globe. As the company has predicted rise in the demand for consumer electronics it should remain a point of concern for the company. Innovation has become an essential part for present day organizations and has its influence on all the functions present within a business unit. This is also true in case of Lenovo which should remain focused on innovation and try to introduce its applications across the organization and influence all of its business functions. 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Appendices Appendix – 1 (Source: Lenovo-website-b, Lenovo Sustainability Report 2007/08, p.31) Appendix – 2 (Source: News, LENOVO REPORTS THIRD QUARTER 2008/09 RESULTS) Appendix – 3 Sales figures recorded by locations for Chinese organizations (Source: Gao et al., 2003) Read More