The Importance of Competitive Strategies for Business: Analysis of Lenovo

Executive Summary

Competitive strategies are considered as the key to success of any firms. Operating in technology area, Lenovo is seen as the leading company, not only locally but also globally. The achievement of Lenovo was descended from appropriately competitive strategies including corporate strategy, international strategy and sustainability. The importance of competitive strategies, especially corporate strategy, international strategy and sustainability and the application of these strategies in case of Lenovo is discussed in this report. The key reason for the competitive ability and success of Lenovo lies in the effective application of strategies including corporate strategies, international strategies and sustainability. The first point that Lenovo considered whilst implementing corporate strategy was relocating corporate portfolio. It not only helps to enhance the position of the company but also align with the core value of Lenovo, which is innovation. Moreover, the achievement of Lenovo in many countries are considerably descended from international strategies. The sustainability strategies of Lenovo were recognized and Lenovo branches in China and United States were awarded for their contribution to society and environment. These awards not only prove the social responsibility of Lenovo but also help to enhance the reputation and strengthen the position of Lenovo in the global market. These strategies by Lenovo has been applied effectively in a long period of time and help to turn Lenovo into one of the most successful PC makers in the world.

Introduction

The world is becoming flat and it opens doors for many industries to expand their business globally. There are a large number of opportunities available to companies. However, in order to take advantage of globalization and be successful, firms also have to face and overcome lots of challenges. One of the most notable challenges is the competition. The reason why competition plays an important role in the growth of any firms is that in the era of internationalization, firms not only compete with local firms in the same industry but also competitors from various countries. Additionally, competition in business also aligns with the improvement in economic efficiency and the satisfaction of customers (Ford & Hakansson, 2013). As a result, competitive strategies are considered as the key to success of any firms. Operating in technology area, Lenovo is seen as the leading company, not only locally but also globally. The achievement of Lenovo was descended from appropriately competitive strategies including corporate strategy, international strategy and sustainability. According, this report will demonstrate the importance of competitive strategies, especially corporate strategy, international strategy and sustainability and the application of these strategies in case of Lenovo.

Competitive Strategies

The importance of competitive strategies

Chevalier-Roignant and Trigeorgis (2012) insist that although internationalization opens many chances for companies, there are only a few have managed to take advantage of all opportunities, meanwhile, the majority of firms has been struggling to come up with competitive strategies. Notably, Grundy (2017) believes that the idea of 90% of business plan is only at the average level and is not able to make breakthrough or innovation to the business performance. Hence, managers are always under pressure of creating the most effective competitive strategies as they are the core value of the successful business. There are some popular types of competitive strategies, which are business strategy, competitive dynamics, corporate strategy, acquisitions and structure, international strategy, cooperative strategy and sustainability. Although all strategies are important, the priority for each strategy is not identical among companies, even companies in the same industry. Specifically, for McKinsey, the leading global consulting firm, corporate strategy, international strategy and sustainability are three priorities.

Corporate strategy

The first strategy that firms have to focus on all the time is corporate strategy. Corporate strategy is defined as the combination of corporate policies and plans in order to achieve corporate long-term objectives (Lynch, 2006). Furthermore, Johnson et al. (2008) add that corporate strategy should consider all business units of the corporate as well as deal with challenges, especially corporate portfolio management and resource allocation. Particularly, among all considerations of a business, the first point that firms have to give thought about is corporate portfolio management. The reason is that corporate portfolio management is related to which business should be involved in the operation of the firms, how the capital should be disbursed into business units and guarantee the alignment of individual goals with corporate goals (Pidun et al., 2011). As a result, corporate portfolio management is able to lay the groundwork for a business.

Apart from corporate portfolio management, resource allocation is also at the center of corporate strategy. Resource allocation describes the distribution of raw materials, human resources, technology and managerial resources to all parts of an organization (Morris & Jamieson, 2004). Huang et al. (2011) highlight that allocating resources plays an important part in business operation as it helps to guarantee each business units are provided with the appropriate resources and balance the demand of business departments and the availability of resources. Additionally, resource allocation is not consistent all the time because it depends on the priority and goals of firms in different period of time (Huang et al., 2011). Thus, distributing resources in a suitable way is likely to help firms to avoid the scarcity of materials as well as immediately adapt to any changes in company objectives.

International strategy

Internationalization means that the boundaries among countries is blurred as a result of free trade (Velho, 1999). Accordingly, globalization lays the groundwork for the establishment of multinational enterprises and one if the requirements for multinational companies is that they have to reassessment their international strategies continuously to improve the financial and social performance (Hitt et al., 2016). In particular, firms need to identify their core values that satisfy the strict requirements of customer globally whereas the rivals are not able as well as set an identical guideline for both local staffs and international staffs to assure the mutual objectives of the firms (Collis, 2014). One of the benefits of globalization is that companies can take advantage of overseas materials and resources to make up for the limitations of local resources whilst introducing the outstanding strengths to international customers as well as reducing cost (Luo & Bu, 2018). As a coin with two faces, when a firm decide to go internationally, it also has to deal with discrepancies in foreign laws and regulations and find ways to adapt with diversification of cultural values (Reynolds, 2016). Hence, going international is not only a chance but also a challenge for both big firms and small firms. With the aim of optimizing the benefits of globalization, firms have to consider all advantages and disadvantages to set up the most appropriate international strategies.

Sustainability

In recent years, with the aim of enhancing reputation, companies should not only care about the operational performance but also be responsible for community, environment, ethics and all stakeholders (Wagner & Svensson, 2014). In other words, economic, society and environment need to be taken into account by firms whilst implementing business activities (Asif et al., 2011). Furthermore, Bini et al. (2018) emphasize that engaging sustainability strategies into competitive strategies considerably support firms to reach long-term profitability. The reason why firms should also give a huge attention to sustainability strategies can be explained by symbolic capital theory. Specifically, symbolic capital illustrates good reputation and good brand name which can lay the groundwork for firms to expand their business or enter into new market (Gergs, 2003). Moreover, symbolic capital is able to act as a leverage for companies to strengthen their position in the market (De Clercq & Voronov, 2009). Therefore, to a certain extent, the role of sustainability has become undeniable and sustainable development has been given more attention. However, it is never easy to come up with suitable sustainable strategies for business. Teh and Corbitt (2015) argue that managers have to consider long-term objectives and have a clear vision on each step to implement sustainable strategies. In addition, companies have to balance the responsibility to society and environment with economic and financial development, which is very complicated and require thorough consideration of the board of managers (Borland, 2019). In spite of all requirements, in the long run, sustainability is still one of the final desires of any company and sustainable strategies are still the key concept of competition.

Lenovo and the application of competitive strategies

Lenovo and the competitive ability

Initially founded in China back in 1984, Lenovo now is among 500 companies in Fortune Global list and operating in 180 countries all over the world (Lenovo, 2019). Furthermore, according to annual report of Lenovo for the year of 2018/19, Lenovo is the leading company for innovation by always looking for new technology such as applying 5G technology and one of the top five companies which saw the fastest growth. Within 35 years, Lenovo also expanded their business from a developing country to 180 different market, including top developed markets such as the United States and United Kingdom. Although Lenovo has been developing at a very rapid level, managers of the company always prioritize to develop a global sustainable business. The key reason for the competitive ability and success of Lenovo lies in the effective application of strategies including corporate strategies, international strategies and sustainability.

The application of corporate strategy

The first point that Lenovo considered whilst implementing corporate strategy was relocating corporate portfolio. When managers realized the rapid development in mobile market in recent years, in 2018, Lenovo decided to transfer US$135 million which was supposed to be spent on advertisement into investing in core markets of mobile business (Lenovo, 2019). The result of this capital reallocation is the increase in financial assets by US$126 million. It can be seen that Lenovo distribute a certain amount of corporate portfolio in an effective way by investing in innovation. It not only helps to enhance the position of the company but also align with the core value of Lenovo, which is innovation. Apart from capital reallocation, other resources such as materials and human were also reallocated into markets that saw the bloom of mobile business. According to annual report of Lenovo (2019), the change in corporate strategy works successfully when the market share of Lenovo was improved, which led to the growth of total revenue by 15%. Therefore, the change in corporate strategies take a huge impact on the competitive ability of Lenovo in global market.

The application of international strategy

The achievement of Lenovo in many countries are considerably descended from international strategies. With the aim of expanding business into developed countries, one of the first steps of international strategies is acquiring IBM Personal Computing Division in 2004. As IBM was located in United State and the workforce of the firm was 25,000 globally, the acquisition of IBM Personal Computing Division immediately turned Lenovo into the leading global personal computer manufacture (Guo, 2018). Although there were lots of limitations at the beginning as Lenovo came from a developing market and the business culture in two countries are remarkably different, Lenovo still built a creative strategy when going abroad. Holstein (2014) explains that the way Lenovo accessed to global business is different from the other Chinese companies when Lenovo has been willing to invest a huge amount of money to make their brand name recognizable among other firms and always offer the most updated technology to customers. The outcome of the international strategies is massive when Lenovo now stands among 5 biggest PC makers in the world.

The application of sustainability

Along with the fast business development, Lenovo also pay lots of attention to sustainable development. As a PC manufacturer, Lenovo had to use a large number of materials which are proved to be harmful to the environment. Nevertheless, in recent years, Lenovo acts as a pioneer who make use of recycled plastic in their products (Lenovo, 2018). In additional, Lenovo also take advantage of natural materials such as bamboo and sugar cane to pack the finished goods (Lenovo, 2018). In terms of stakeholders, Lenovo has been trying to involve more stakeholders by undertaking surveys or questionnaire. Based on the information provided in surveys, Lenovo was able to deal with lots of controversy issues about conflicts minerals, human right protection and reduction in carbon emission (Lenovo, 2019). The sustainability strategies of Lenovo were recognized and Lenovo branches in China and United States were awarded for their contribution to society and environment. These awards not only prove the social responsibility of Lenovo but also help to enhance the reputation and strengthen the position of Lenovo in the global market.

Conclusion

It is never easy for any firm to be outstanding in the global market. As a result, in order to reach the purpose of expanding business, firms have to come up with creative and appropriate competitive strategies. In particular, firms have to make a decision among lots of specific competitive strategies such as corporate strategy, competitive dynamics and so on. However, managers need to depend on long-term objectives and vision of firms to establish strategies. In case of Lenovo, they mainly focus on corporate strategy, international strategy and sustainability to make them different and unique compared to the competitors. These strategies by Lenovo has been applied effectively in a long period of time and help to turn Lenovo into one of the most successful PC makers in the world.

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