Lenovos Entrance in Argentina for Mobile Phone - Essay Example

?Lenovo’s Entrance in Argentina for Mobile Phone Table of Contents Introduction 4 1 Background 4 2 Aims and Objectives 4 2. Introduction of Lenovo 5 2.1 History 5 2.2 Lenovo’s Culture 5 2.3 Lenovo’s Global Experience 6 2.4 Lenovo’s Demand in the Emerging Market 7 3. Mobile Phone Market in Argentina 8 3.1. Market Environment 8 3.2 Political Environment 8 3.3 Economic Environment 9 4. Challenges and Risks Analysis 10 4.1 Lenovo’s Opportunity 10 4.2 Lenovo’s Challenges 11 4.3 Competition Analysis 11 Competitive Rivalry 12 Threats of New Entrants 12 Threat of Substitute Products 13 4.4 Risk Mitigations 13 5. Proposed Entry Strategic Plan 14 6. Conclusion and Recommendations 15 References 16 1. Introduction 1.1 Background Lenovo Group Limited directs its focus on four vital dimensions. These dimensions are innovation, operational efficiency, sustainability and customer satisfaction. Lenovo is considered to be a strong market player with respect to the computer and notebook segment in the global industry. The company operates in around 60 countries but endures no established headquarters. Moreover, on part of the company, it has become one of the brightest innovators, which greatly contributes to the collaborative organisational culture. One of the company’s main focus areas is customer satisfaction. Quality, healthy workplace and safety among others pertaining to the product are prior motives of the company. Lenovo greatly commits towards creating sustainability within the competitive market scenario (Lenovo 2013). 1.2 Aims and Objectives The aim of this study is to explain and explore the market entry strategic plan of Lenovo within the Argentina’s mobile phone market. Moreover, the study intends to discuss Lenovo’s culture and Argentina’s market environment as well. It also entails the detailed discussion of the political and economic conditions of Argentina that will help the company to derive in-depth knowledge about the opportunities, competitors and risks in the new market. The study will further focus on the challenges pertaining to the emerging market entry i.e. entry to prospective Argentina market for Lenovo. It will reflect upon the strategies to mitigate the challenges as well (Lenovo 2013). 2. Introduction of Lenovo 2.1 History Legend Group Holdings Co. was the initial name of Lenovo. Lui Chuanzhi was the founder of the company. In the initial stage, the company was mainly into selling of merchandising that ranged from television to roller stakes. The company has established a subsidiary in Hong Kong that mainly focuses on the PC distribution i.e. Legend Holding Limited. The success of the concerned brand was the key reason that facilitated the expansion of the company (Lenovo 2013). Correspondingly, in the year 1990, the strategy taken by the Chinese government was to reduce the rate of import tariffs. This further ensured effective international trade between the company and another company named IBM. This strategy led to the expansion of the Legend Group Holdings, which is a subsidiary company within the Hong Kong Stock Exchange. During these years, the company had flourished within the international boundaries. This is the reason the name was changed and reframed as Lenovo. 2.2 Lenovo’s Culture In the year 2005, Lenovo, the Chinese company made acquisition of IBM’s PC divisions. This emancipated spectacular changes within the company’s history. This change within IBM was a cultural shock for the employees of IBM. The cultural shock of the employees was effectively mitigated by the management of Lenovo. In case of the Chinese management, they efficiently responded to the insecurity pertaining to the employees by hosting cultural events. In this regard, such cultural events helped in boosting the motivation of the employees. Moreover, it was effectively conveyed by the Lenovo’s management to the employees that they intend to expand the operations rather than liquidating anything. Correspondingly, on part of Lenovo’s culture, it has been ascertained that while restructuring the new company, the management did not give preference to nationality (Lippisch n.d.). In keeping with Lenovo’s cultural reflection, it has been observed that ‘cultural integration’ is considered to be the main factor for success. Lenovo’s corporate culture is influenced by the major Chinese companies. On further analysis, it has been observed that communicative language within the organisation is English. Inside Lenovo, there exists the trend of addressing the employees by their initial names rather than titles which depicts respect and equality for each other (Chao 2004). 2.3 Lenovo’s Global Experience Apparently, it has been noted that Lenovo has over the years realised about the global expansion strategies for the sustainability within the competitive market scenario. According to the view of Lenovo’s management, internationalisation is regarded as the process for accretion of the experiential knowledge along with the market commitment within the foreign markets. It has noted that any of the firms tend to initiate the process pertaining to internationalisation by export mechanism within the countries of similar cultures. In case of Lenovo, it adapted the most efficient way for expanding globally within the foreign market. The strategic decision of Lenovo pertaining to global expansion reflects about the acquisition of IBM PC division. This acquisition of Lenovo clearly depicts it’s strive for expanding globally and maintaining sustainability within the competitive scenario. With regard to the global expansion strategies of Lenovo, it has been considered that monetary investment stands to be a vital factor. The managers have revealed that it is necessary to weigh investment cost being incurred in order to enhance the quality of the products to be exported globally. Lenovo’s management team has decided upon the differential aspects that are required to be identified (Ahrens & Zhou 2013; Spulber 2012: 185). 2.4 Lenovo’s Demand in the Emerging Market For modern day industries, the emerging markets are considered as the essential factor for medium-term growth. It has been observed that in order to expand their business within the market. Lenovo adapts the strategy of extending the existing brands. Moreover, in order to create demand within any market, it is necessary for Lenovo to create consumer awareness. This strategy was also adapted by Lenovo to accelerate demand amidst the customers’ within the market. In recent observations, it has been observed that Lenovo had initially developed its product focusing only on the Chinese consumers. Nevertheless, as the company thought for global expansion, it directed its strategy to accelerate the product demand amidst the general customers (Mundim, Sharma, Arora & McManus 2009). It has been recently observed that Lenovo, which is considered as the leading maker of PCs in China has shown an increase of 36% on the sales of smartphones in the year 2013. It has been further noted that the company also depicted a growth in the third quarters within its profit margin. Furthermore, on part of Lenovo’s demand in the competitive market scenario, it has reported an increase in the demand rate. 3. Mobile Phone Market in Argentina 3.1. Market Environment Argentina is measured to be one of the most dynamic markets pertaining to the mobile phone industry. Moreover, Argentina is also considered to be enduring the third largest mobile market within the region of Latin America and Mexico. In recent observations, it has been affirmed that the mobile phone penetration within Argentina has reached an unprecedented height in the year 2013. On part of the consumers, the Argentineans prefer to use multiple SIMs. The people dwelling in Argentina use numerous mobile phones. They have diffident mobiles for personal and professional use. Moreover, the customers are always keen to adapt the offers being available related to SIM cards. Additionally, there are three mobile companies within Argentina that involve in a neck to neck competition with each other. The three companies are America’s Movil’s Claro, Telecom Personal and Telefonica’s Movistar. In the year 2012, the smartphone penetration within Argentina had been estimated to be around 24%. Consequently, it is assumed that Argentina’s mobile phone market will outperform a majority of other regions in the concerned dimension. This shows an advantage and a better opportunity for Lenovo pertaining to the launching of mobile phones in Argentina (Paul Budde Communication Pty Ltd 2013). 3.2 Political Environment Argentina’s scenario pertaining to the political factors reflects about the republican division related to power, judicial and executive concerns among others. In case of executive branch in Argentina, it is essentially directed by the president. National Congress is the leading body that monitors the legislative branch (Paul Budde Communication Pty Ltd 2013). The above mentioned political bodies are the key players within Argentina. The rules and regulations being framed within Argentina are designed and issued by these three governing bodies. It is necessary for Lenovo to have in-depth knowledge about the political scenario of Argentina for entering the market. In Argentina, there are governmental policies that greatly affect the telecom sector. However, Foreign Direct Investment (FDI) has grown in the recent years in Argentina owing to the government support and initiatives which bodes well for Lenovo to expand its business successfully (Paul Budde Communication Pty Ltd 2013). 3.3 Economic Environment In the view of the economic historians, international economists and the development economists, Argentina’s economic failure has been considered for case studies for national development. In recent observations, it has been projected that there will be a tentative growth of around 6.2% in the economy in the next year i.e. 2014. The economic growth of Argentina is linked with payment of debt. The Gross Domestic Product (GDP) of Argentina replicates around 5.1% growth in the year 2013. Furthermore, it has been affirmed that the implementation of latest trade policies, heavy regulations along with currency controls have helped the country to foster its economic growth. Argentina’s forecast for the year 2013 depicted greater regional economic growth. Moreover, the policies implemented within the Argentina’s economy mainly focus on providing employment opportunities to the people dwelling in the nation. These policies have greatly assisted the country to grow and endure growth in the domestic economic market. Moreover, in case of Argentina, it depicts projected trade surplus of around USD 10.1 billion in the year 2014. This ensures constant economic growth of Argentina. Keeping all the aforementioned possibilities, positivity along with opportunities, Lenovo can prepare strategies to enter the prospective mobile phones market of Argentina (Nejamkis 2013). 4. Challenges and Risks Analysis 4.1 Lenovo’s Opportunity Lenovo Group Limited is one of the leading PC producers with a wide market share. It is the second largest provider of PCs in Argentina with a market share of 17.3 per cent (Xinhua 2011). The growing demand for the Lenovo products is creating an opportunity for the Lenovo mobiles as well. Consequently, it is anticipated that the loyal customer would be attracted towards the new product offered by Lenovo. As the company has the experience and knowledge about the customer needs, it creates unique features in the offered mobile to attract the customers and endure a profitable growth. The efficiency of Lenovo to provide a better technologically driven product with a better operating system would be a key opportunity to create the demand for the mobile devices in Argentina. The smartphone market in Argentina is emerging, so the opportunity for ascertaining a gain in the market is more and can be rapid. The strategy to provide the phones at a lower cost as compared to others with better features would create an opportunity for Lenovo. The design of the phones, the internet-Wi-Fi facility and many other applications would help in gaining market prominence. The opportunity for the mobile phones in Argentina is more due to the popularity of social networks and the need for connectivity. In addition, the product of Lenovo is environment friendly and hence would attract people. The Argentina market exhibits a growing trend in the mobile phone industry from 1.2 % in 2011 to 2.1% in 2012 (ComScore Inc 2012). Lenovo might derive the opportunity to attract new customers by focusing on niche market. Hence, the features such as gaming, internet, music and many other features create an opportunity for the Lenovo phones in Argentina. The increasing presence of the mobiles smartphones would help in leveraging the opportunity and profitable growth for Lenovo (Wang, Chu & Chen n.d.). 4.2 Lenovo’s Challenges One of the key challenges faced by Lenovo in the mobile phone sector in Argentina would be to ensure regular ‘open source operating system.’ Lenovo might face a challenge to create a proper framework in the mobile devices to secure it from virus attacks. The other challenges faced by Lenovo include the resistance faced from other operators of various networks such as T- mobiles and Sprint. The threat from the competitor and their already exiting market share is also a reason that might cause an obstacle for Lenovo. The company might face obstacle from Blackberry producer RIM because of its strong market existence. The features of Blackberry can also be a threat for Lenovo mobiles to get its due market share. The growing competition from the existing products, threat from the substitutes and the government rules are few challenges that might be faced by the new entrant. Another challenge faced by Lenovo is the risk of facing the mature market and the risk of low pricing strategy from the competitors. Furthermore, these challenges primarily would emerge because of the inevitable cultural clashes (Madan n.d.; Wang, Chu & Chen n.d.). 4.3 Competition Analysis Argentina has a dynamic mobile phone market. The mobile phone penetration was projected to reach 147% by 2013 in Argentina which creates an opportunity for Lenovo’s mobile phone section to get its own market share by evaluation of few key factors. With the help of few key factors derived through Porter’s Five Forces analysis, the competition analysis can be done (Paul Budde Communication Pty Ltd 2013). Competitive Rivalry The three major competitors in the mobile phone sector in Argentina are America Movil’s Claro, Telecom Personal and Telefonica’s Movistar. Nextel and Fecosur too have a market share of 3% in Argentina. These are the leading mobile networks which would create challenges for Lenovo mobiles. Moreover, the market of the smartphone was above the world’s average at about 24% in the year 2012. It is thus evaluated that the market of smartphone would outperform in 2013; this would create opportunity for Lenovo mobile phone product to gain its desired market share in the coming years. According to a survey, it is recognised that product differentiation amid the market leaders is less in terms of the features and application (Paul Budde Communication Pty Ltd 2013). On the other hand, Lenovo PC has a high level of customer satisfaction and the mobile products too have various features which would enable it to get the initial market rapidly. Additionally, the rivalry can also be in the form of price competition from the existing competitors and advertisements. The rivalry is fierce in mobile market because the market in Argentina is an oligopoly (Oetelaar 2013). The trend of growth in the mobile phone industry is likely to increase in Argentina due to the growing demand of the phones. Threats of New Entrants Mobile phone industry has the features of growth, market outlook and innovation, showing attractiveness to new entrants. Lenovo is rich in technological aspect and has a strong network for distribution, thus it can act as a threat to the existing providers. Hence, with these features the new entrants such as Lenovo mobile can intensify the competition. Moreover, the key threat involved with the new entrant is high price for the admission in the new business with various barriers. The capital investment requirement is high for entering the new market of Argentina with several competitors (Oetelaar 2013). Threat of Substitute Products The threat for the mobile phones is mainly from Tablets and new developments such as iPad mini. Arguably, the real threat of substitutes for the mobile phones is relatively low. The use of software such as Skype can be a threat for the type of communication followed through the use of mobile phones but with the advancement of technology and use of these features, Lenovo mobile phones can eliminate such threats (Oetelaar 2013). 4.4 Risk Mitigations Risk mitigation is done to decrease the opposing effects. The risk mitigation strategy that can be used by Lenovo in Argentina is the risk limitation management strategy. The risk limitation is done by taking actions to avoid and accept risk for the long-term sustainability of the new product in the market with profit (Melissa 2013). The risk can be mitigated through the use of promotional and distribution strategy. Good sales and supply network with the help of wholesale and direct distribution model can facilitate in establishing prominent market share. Pricing strategy that can be used to mitigate the risk related to the price is the penetration pricing strategy. This strategy is used by the new products launched to get access to the market quickly. Promoting the new product and gaining customer attention would facilitate Lenovo to gain competitive advantage over others (Smith 2011: 270). 5. Proposed Entry Strategic Plan Lenovo to get success in Argentina can use strategic alliance mode of entry for its mobile phone by collaborating with the leading market player in the mobile sector America Movil’s Claro. This alliance would help in creating a strong market base because of the brand name of Lenovo and its technological advantage. The reason for the alliance would be to derive the benefit of access to supplementary services. This would enable both the companies to use their core competencies and deliver better product to the customers along with meeting their needs. The alliance would create an opportunity to reach the new market with a decisive brand name and product awareness. The alliance would enable Lenovo mobiles to reach mass audience along with generating brand awareness. Moreover, the alliance would assist the company to take the advantage of both the companies’ strength and Lenovo will get an easy access to the new customer base. The risk involved because of the cultural differences can be mitigated through the alliance with the already existing market leader. Also, the alliance would create a strong management base with better strategic decision on mutual consent (Glowik & Smyczek 2011: 96). This entry strategy would help Lenovo to get success in the Argentina market similar to Unicom Telecommunications market entry strategy made it a huge success. Unicom collaborated with Cisco to gain strong market knowledge and derive comprehension about the market trends to satisfy the customers with their product in prudent manner. This collaboration has assisted Unicom to gain market growth and penetration (Cisco System 2003). 6. Conclusion and Recommendations The emerging demand of mobile phones in Argentina has been the major factor that motivated Lenovo to seek the expansion strategy. The political environment of Argentina as per the analysis is not very supportive for the new market entrants. Thus, to ensure a smooth entry in Argentina, Lenovo needs to use the alliance strategy with the market leader. Moreover, it is to be recommended that a proper internal and external environment market scanning is done through the research and development team to continuously understand the trend of customer preferences. Furthermore, the use of proper pricing strategy along with understanding of the cultural aspect of the country is to be followed by the management by proper entry mode strategy. It is also recommended that the awareness of the global brand should be created affectively in the minds of the people. Conclusively, it can be affirmed that the market environment, the demand of the new products and consumer behaviour are favouring the entry of Lenovo with its mobile phone product to gain decisive market share. Strategic alliance used as the entry strategy mode would enable Lenovo to gain success in Argentina. References Ahrens, N., & Zhou, Y. (2013). ‘China’s Competitiveness: Myth, Reality and Lessons for the United States and Japan’. Case Study: Lenovo, 1-35 ComScore Inc (2012). Smartphones And Tablets Drive A Growing Share Of Internet Content Consumption In Argentina [online] available from [30 December 2013] Chao, J. (2004). 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Xinhua (2011) Lenovo Consolidates Argentine Market Share [online] available from [30 December 2013]. Read More