Business Strategy on Lenovo

PEST ANALYSIS

Based on the financial results for FY2011, Lenovo has achieved a steady market growth and has recorded an annual market share of 13% in the worldwide PC market. China is still the company's main sales driver as it has achieved a record annual market share of 29.5%. This motivates us to analyse the business environment and strategic situation of the PC industry in China using PEST analysis.

POLITICAL

The political aspect in the PEST analysis is concerned with taxation policies, employment laws, environmental regulations, trade restrictions and imposition of specific tariffs involved in Lenovo's daily operations in China.

 China will usher in a new generation of leaders that could potentially change the strategic landscape in business and political cycles often trigger changes at China's top state-owned firms, as officials want to put friends and family in those powerful positions. Even today, there are claims that Lenovo is a state-owned enterprise.

 Territorial dispute between China and Japan drains investor confidence and the joint venture that Lenovo has formed with NEC, a Japanese IT company may suffer a huge setback.

 China's corporate income tax rate is 25% but the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encourage by the China government. With the change of political leadership, the corporate tax rate might change in the near future.

ECONOMIC

The economic aspect in the PEST analysis is concerned with economic growth rates, interest rates, exchange rates and inflation rates associated between various financing sources and Lenovo.

 Due to the global economic slowdown, the demand in US and Europe is declining. China GDP growth rate is also on the decline at 7.7% in 2012 as compared to 9.2% in 2011. This signals a lower export growth for Lenovo. However, as the China market is still growing at a steady rate, it will help to cushion some of the impact from the slowdown in the US and Europe.

 According to Gartner, the compound annual growth rate in the Chinese PC market will be around 16.5% from 2011 to 2015, lower that 24% recorded from 2006 to 2010. Lenovo would need to strategize its business plan in order to maintain its stronghold in the Chinese PC market with over 25% of the market share.

SOCIAL

The social aspect in the PEST analysis is concerned with cultural implications, health consciousness, population growth rates, age distribution, career attitudes and safety concerns between Lenovo, as an employer and its employees.

 The rising affluence in China has created a higher purchasing power for IT products.

 There is still a big untapped market in the western and inner parts of China.

 Many businesses

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