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					                               PART-A
                             CHAPTER 1
                  INDUSTRY PROFILE




1.1 Indian Economy Overview:
India has been one of the best performers in the world economy in recent years, but
rapidly rising inflation and the complexities of running the world’s biggest democracy are
proving challenging.
                                            1
India’s economy has been one of the stars of global economics in recent years, growing
9.2% in 2007 and 9.6% in 2006. Growth had been supported by markets reforms, huge
inflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and a
flourishing capital market.
Like most of the world, however, India is facing testing economic times in 2008. The
Reserve Bank of India had set an inflation target of 4%, but by the middle of the year it
was running at 11%, the highest level seen for a decade. The rising costs of oil, food and
the resources needed for India’s construction boom are all playing a part.
India has to compete ever harder in the energy market place in particular and has not been
as adept at securing new fossil fuel sources as the Chinese. The Indian Government is
looking at alternatives, and has signed a wide-ranging nuclear treaty with the US, in part
to gain access to nuclear power plant technology that can reduce its oil thirst. This has
proved contentious though, leading to leftist members of the ruling coalition pulling out
of the government.
As part of the fight against inflation a tighter monetary policy is expected, but this will
help slow the growth of the Indian economy still further, as domestic demand will be
dampened. External demand is also slowing, further adding to the downside risks.
The Indian stock market has fallen more than 40% in six months from its January 2008
high. $6b of foreign funds has flowed out of the country in that period, reacting both to
slowing economic growth and perceptions that the market was over-valued.
It is not all doom and gloom, however. A growing number of investors feel that the
market may now be undervalued and are seeing this as a buying opportunity. If their
optimism about the long term health of the Indian economy is correct, then this will be a
needed correction rather than a downtrend.
The Indian government certainly hopes that is the case. It views investment in the
creaking infrastructure of the country as being a key requirement, and has ear-marked
23.8 trillion rupees, approximately $559 billion, for infrastructure upgrades during the
11th five year plan. It expects to fund 70% of project costs, with the other 30% being
supplied by the private sector. Ports, airports, roads and railways are all seen as vital for
the Indian Economy and have been targeted for investment.




                                             2
Further hope comes from the confidence of India’s home bred companies. As well as
taking over the domestic reins, where they now account for most of the economic
activity, they are also increasingly expanding abroad. India has contributed more new
members to the Forbes Global 2000 than any other country in the last four years.

1.1.1 Recent Growth Trends in Indian Economy
India’s Economy has grown by more than 9% for three years running, and has seen a
decade of 7%+ growth. This has reduced poverty by 10%, but with 60% of India’s 1.1
billion population living off agriculture and with droughts and floods increasing, poverty
alleviation is still a major challenge.
The structural transformation that has been adopted by the national government in recent
times has reduced growth constraints and contributed greatly to the overall growth and
prosperity of the country. However there are still major issues around federal vs. state
bureaucracy, corruption and tariffs that require addressing. India’s public debt is 58% of
GDP according to the CIA World Fact book, and this represents another challenge.
During this period of stable growth, the performance of the Indian service sector has been
particularly significant. The growth rate of the service sector was 11.18% in 2007 and
now contributes 53% of GDP. The industrial sector grew 10.63% in the same period and
is now 29% of GDP Agriculture is 17% of the Indian economy.
Growth in the manufacturing sector has also complemented the country’s excellent
growth momentum. The growth rate of the manufacturing sector rose steadily from
8.98% in 2005, to 12% in 2006. The storage and communication sector also registered a
significant growth rate of 16.64% in the same year.
Additional factors that have contributed to this robust environment are sustained in
investment and high savings rates. As far as the percentage of gross capital formation in
GDP is concerned, there has been a significant rise from 22.8% in the fiscal year 2001, to
35.9% in the fiscal year 2006. Further, the gross rate of savings as a proportion to GDP
registered solid growth from 23.5% to 34.8% for the same period.
Large, dynamic and steadily expanding, the Indian economy is characterized by a huge
workforce operating in many new sectors of opportunity.
The economy of India is as diverse as it is large, with a number of major sectors
including manufacturing industries, agriculture, textiles and handicrafts, and services.
                                            3
Agriculture is a major component of the Indian economy, as over 66% of the Indian
population earns its livelihood from this area.
However, the service sector is greatly expanding and has started to assume an
increasingly important role. The fact that the Indian speaking population in India is
growing by the day means that India has become a hub of outsourcing activities for some
of the major economies of the world including the United Kingdom and the United
States. Outsourcing to India has been primarily in the areas of technical support and
customer services.
In general, the Indian economy is controlled by the government, and there remains a great
disparity between the rich and the poor. Ranked by the exchange rate of the United States
Dollar, the Indian economy is the twelfth largest in the world.
In Purchasing Power Parity GDP, the figure for India was 1.5 trillion US Dollars in 2008.
The per capita income of India is 4,542 US Dollars in the context of Purchasing Power
Parity. This is primarily due to the 1.1 billion population of India, the second largest in
the world after China. In nominal terms, the figure comes down to 1,089 US Dollars,
based on 2007 figures. According to the World Bank, India is classed as a low-income
economy.
Recent trends have seen India exporting the services of a numerous information
technology (IT) professionals. IT professionals have been sought for their expertise in
software, software engineering and other financial services. This has been possible as a
result of the high skill levels of Indian IT professionals.
Other areas where India is expected to make progress include manufacturing,
construction of ships, pharmaceuticals, aviation, biotechnology, tourism, nanotechnology,
retailing and telecommunications. Growth rates in these sectors are expected to increase
dramatically.
Over the years the Indian government has taken an economic approach that has been
influenced, in part, by the Socialist movements. The Indian national government has
maintained a high and authoritative level of control over certain areas of the Indian
economy like the participation of the private sector, foreign direct investment, and
foreign trade.



                                               4
It may be observed that in spite of the tremendous debate about the justification of the
privatization of industries traditionally owned by the government, the process of
privatization has still continued at a steady pace.
One of the major challenges before the Indian economy, or those who are responsible for
operating it, is to remove the economic inequalities that are still persistent in India after
its independence in 1947. Poverty is still one of the major issues although these levels
have dropped significantly in recent years. As per official surveys, it has been observed
that in the 2004, almost 27% of the working Indian populace was living              below the
poverty line.
Poverty is a challenge that’s becoming increasingly important in relationship to the
alarming rate of new births. This implies that ever more rapid change, or birth control
policies like the ‘One Child’ policy in China, are needed to reduce the numbers affected
by poverty in the vast Indian economy.
Indian economy has been witnessing a phenomenal growth since the last decade. The
country is still holding its ground in the midst of the current global financial crisis.
Quarterly gross domestic product (GDP) at factor cost at constant (1999-2000) prices for
Q3 of 2008-09 is estimated at US$ 171.24 billion, as against US$ 162.57 billion in Q3 of
2007-08, showing a growth rate of 5.3 per cent over the corresponding quarter of
previous year.
Despite the global slowdown, the Indian economy is estimated to have grown at close to
6.7 per cent in 2008-09. The Confederation of Indian Industry (CII) pegs the GDP growth
at 6.1 per cent in 2009-10. This scenario factors in sectoral growth rates of 2.8-3 per cent,
5-5.5 per cent and 7.5-8 per cent, respectively, for agriculture, industry and services.
A number of leading indicators, such as increase in hiring, freight movement at major
ports and encouraging data from a number of key manufacturing segments, such as steel
and cement, indicate that the downturn has bottomed out and highlight the Indian
economy's resilience. Recent indicators from leading indices, such as Nomura's
Composite Leading Index (CLI), UBS' Lead Economic Indicator (LEI) and ABN Amro'
Purchasing Managers' Index (PMI), too bear out this optimism in the Indian economy.
Meanwhile, foreign institutional investors (FIIs) turned net buyers in the Indian market in
2009. Direct investment inflows also remain strong, prompting official expectations that


                                               5
foreign direct investment (FDI) inflows in 2009 would better the realized inflows of US$
33 billion in 2008 and touch US$ 40 billion.
According to the Asian Development Bank's (ADB) 'Asia Capital Markets Monitor'
report, the Indian equity market has emerged as the third biggest after China and Hong
Kong in the emerging Asian region, with a market capitalization of nearly US$ 600
billion.
1.1.2 The Economic scenario
Investor sentiment in India has improved significantly in the first quarter of 2009,
according to a survey conducted by Dutch financial services firm ING. With foreign
assets growing by more than 100 per cent annually in recent years, Indian multinational
enterprises (MNEs) have become significant investors in global business markets and
India is rapidly staking a claim to being a true global business power, according to a
survey by the Indian School of Business and the Vale Columbia Center on Sustainable
International Investment.
Despite the global financial crisis, inflow of foreign capital to the country has increased
sharply in 2008-09.
    •      India's foreign exchange reserves increased by US$ 4.2 billion to US$ 255.9
           billion for the week ended May 8, 2009, according to figures released in the
           Reserve Bank of India's (RBI) weekly statistical supplement.
    •      Net inflows through various non-resident Indians (NRIs) deposits surged from
           US$ 179 million in 2007-08 to US$ 3,999 million in 2008-09, according to the
           RBI.
    •      FDI inflows during April 2008-January 2009 stood at US$ 23.9 billion compared
           with US$ 14.4 billion in the corresponding period of the previous fiscal,
           witnessing a growth of 65 per cent, according to the Department of Industrial
           Policy & Promotion.
    •      FIIs have made investments of around US$ 2 billion as of May 14, 2009,
           including a record single day net purchase of US$ 824.72 million on May 13,
           2009, according to the Securities and Exchange Board of India (SEBI).
    •      Inflation for the week ended March 7, 2009, fell to an all time low of 0.44 per
           cent. The sharp fall in inflation was due to several factors including easing prices

                                                6
       of food articles and fuel items along with a high base effect. Currently, the
       inflation rate stood at 0.7 per cent for the week ended April 25, 2009.
   •   The year-on-year (y-o-y) aggregate bank deposits stood at 21.2 per cent as on
       January 2, 2009. Bank credit touched 24 per cent (y-o-y) on January 2, 2009, as
       against 21.4 per cent on January 4, 2008.
   •   Since October 2008, the RBI has cut the cash reserve ratio (CRR) and the repo
       rate by 400 basis points each. Also, the reverse repo rate has been lowered by 200
       basis points. Till April 7, 2009, the CRR had further been lowered by 50 basis
       points, while the repo and reverse repo rates have been lowered by 150 basis
       points each.
   •   Exports from special economic zones (SEZs) rose 33 per cent during the year to
       end-March 2009. Exports from such tax-free manufacturing hubs totalled US$
       18.16 billion last year up from US$ 13.60 billion a year before.
1.1.3 The rural India growth story
The Indian growth story is spreading to the rural and semi-urban areas as well. The next
phase of growth is expected to come from rural markets with rural India accounting for
almost half of the domestic retail market, valued over US$ 300 billion. Rural India is set
to witness an economic boom, with per capita income having grown by 50 per cent over
the last 10 years, mainly on account of rising commodity prices and improved
productivity. Development of basic infrastructure, generation of employment guarantee
schemes, better information services and access to funding are also bringing prosperity to
rural households.
1.1.4 Per Capita Income
The per capita income in real terms (at 1999-2000 prices) during 2008-09 is likely to
attain a level of US$ 528 as compared to the Quick Estimate for the year 2007-08 of US$
500. The growth rate in per capita income is estimated at 5.6 per cent during 2008-09, as
against the previous year's estimate of 7.6 per cent.
1.1.5 Advantage India
   •   According to the World Fact Book, India is among the world's youngest nations
       with a median age of 25 years as compared to 43 in Japan and 36 in USA. Of the
       BRIC—Brazil, Russia, India and China—countries, India is projected to stay the
       youngest with its working-age population estimated to rise to 70 per cent of the
                                              7
      total demographic by 2030, the largest in the world. India will see 70 million new
      entrants to its workforce over the next 5 years.
  •   India has the second largest area of arable land in the world, making it one of the
      world's largest food producers—over 200 million tonnes of food grains are
      produced annually. India is the world's largest producer of milk (100 million
      tonnes per annum), sugarcane (315 million tonnes per annum) and tea (930
      million kg per annum) and the second largest producer of rice, fruit and
      vegetables.
  •   With the largest number of listed companies - 10,000 across 23 stock exchanges,
      India has the third largest investor base in the world.
  •   India's healthy banking system with a network of 70,000 branches is among the
      largest in the world.
  •   According to a study by the McKinsey Global Institute (MGI), India's consumer
      market will be the world's fifth largest (from twelfth) in the world by 2025 and
      India's middle class will swell by over ten times from its current size of 50 million
      to 583 million people by 2025.
1.1.6 Growth potential
  •   Special Economic Zones (SEZs) are set to see major investments after the
      straightening out of certain regulatory tangles. The commerce department expects
      about 120 SEZs to be operational by 2009-end, up from existing 87.
  •   According to the CII Ernst & Young report titled 'India 2012: Telecom growth
      continues,' India's telecom services industry revenues are projected to reach US$
      54 billion in 2012, up from US$ 31 billion in 2008. The Indian telecom industry
      registered the highest number of subscriber additions at 15.84 million in March
      2009, setting a global record.
  •   A McKinsey report, 'The rise of Indian Consumer Market', estimates that the
      Indian consumer market is likely to grow four times by 2025, which is currently
      valued at US$ 511 billion.
  •   The volume of mergers and acquisitions (M&As) and group restructuring deals in
      India witnessed a sharp nine times jump at US$ 2.27 billion during March 2009



                                            8
          against the volume of deals in February 2009, according to a Grant Thornton
          report.
      •   India ranks among the top 12 producers of manufacturing value added (MVA)—
          witnessing an increase of 12.3 per cent in its MVA output in 2005-07 as against
          6.9 per cent in 2000-05—according to the United Nations Industrial Development
          Organization (UNIDO).
      •   In textiles, the country is ranked fourth, while in electrical machinery and
          apparatus it is ranked fifth. It holds sixth position in the basic metals category;
          seventh in chemicals and chemical products; 10th in leather, leather products,
          refined petroleum products and nuclear fuel; twelfth in machinery and equipment
          and motor vehicles.
      •   In a development slated to enhance India's macroeconomic health as well as
          energy security, Reliance Industries (RIL) has commenced natural gas production
          from its D-6 block in the Krishna-Godavari (KG) basin.
      •   India has a market value of US$ 270.98 billion in low-carbon and environmental
          goods & services (LCEGS). With a 6 per cent share of the US$ 4.32 trillion global
          market, the country is tied with Japan at the third position.




This space has been left blank intentionally.




1.2   Industry Overview



                                                9
The impact of the global economic crisis in 2008 reached far and wide. It has
significantly affected the worldwide PC market demand as many large enterprises
delayed purchase decisions and reduced IT budgets. Even the growth of the China PC
market has slowed down under the economic challenges. At the same time, the PC
industry as a whole has shifted dramatically and rapidly to lower price points, imposing
additional pressures on industry players. During the 2008/09 fiscal year, the year-on-year
growth of worldwide PC market shipments decelerated to approximately 4 percent
mainly supported by consumer and low-priced notebook segments. The China PC market
and worldwide commercial PC segment in which Lenovo® is heavily weighted showed
significant slowdown in the second half of the fiscal year under the economic crisis. In
addition, the Group could not enjoy the benefits of the growth in transaction space as it
has not adequately addressed the worldwide transaction segment outside China, in
particular the consumer market. Lenovo reported lower-than-market growth in its
worldwide PC shipments which only increased by approximately 2 percent year-on-year.
As a result, the Group’s market share decreased slightly to 7.6 percent, ranking number
four worldwide during the fiscal year. The Group’s financial performance in the second
half of the 2008/09 fiscal year was significantly impacted by the widespread economic
slowdown. Lenovo’s overall sales for the fiscal year decreased 9 percent year-on-year to
approximately US$14,901 million, resulting from the slower PC shipment growth and a
steeper-than-normal decline in average selling prices exacerbated by the weak economic
backdrop. The Group’s gross margin performance was further affected by the continued
shift in the market to lower price points, aggressive pricing and currency fluctuations.
The gross margin (excluding one-off items) for the fiscal year declined to 11.9 percent
from 15.0 percent while gross profit (excluding one-off items) decreased 27 percent year-
on-year to approximately US$1,779 million. In anticipation of continued deterioration in
the global economic environment, Lenovo announced a global resource restructuring plan
in January 2009 to reduce costs and enhance operational efficiency. About 2,500
employees were eliminated as a result of this action which is expected to realize annual
savings of approximately US$300 million on a run rate basis in the coming fiscal year.
Despite Lenovo’s efforts to control expenses during the 2008/09 fiscal year, the decline in
sales and pressure on gross margin resulted in 95 percent year-on-year decline in the
Group’s profit before taxation (excluding the cost of restructuring actions and one-off

                                            10
charges) to approximately US$29 million for the year. The Group reported a loss
attributable to shareholders of approximately US$226 million, after accounting for
US$146 million of restructuring costs and US$71 million of one-off charges. This
compared to a profit attributable to shareholders (including US$20 million net profit from
discontinued operations) of US$484 million in the previous fiscal year.

1.2.1 Vendor highlights
Hewlett-Packard (HP) made further inroads into consumer portables through the retail
channel and continued to gain share overall. The vendor's shipments grew 3.6% on year
worldwide with above-market performance in the US. The company also performed well
in Europe and Asia Pacific.
Although still heavily affected by the commercial slump, Dell saw good growth from
consumer-focused SKUs and reclaimed the number one spot in the US. The company
continues to restructure operations, develop its consumer business, and should benefit
from an eventual rebound in the commercial segment.

Acer continues to capitalize on its growing channel presence to ship portables geared
toward a wide range of cost-conscious consumers. The company maintained its lead in
mini notebook PCs while its early entry into Atom-based netbooks should also pay
dividends later in the year. The company saw a significant gain in the US market, likely
benefiting from the troubles of Dell and Lenovo.
Lenovo's renewed focus on notebooks and emerging regions produced positive growth
following declines in the past two quarters. Solid growth was reported in Latin America
and Asia Pacific market excluding Japan, while yearly declines in mature regions slowed
compared to the first quarter of 2009. Its home court advantage in Asia Pacific market
excluding Japan also has led it to focus on a myriad of government stimulus programs,
which could pay dividends while riding through the commercial downturn.

Toshiba had a solid second quarter where it outgrew the market in most regions and
moved up to the fourth spot in the US. Toshiba's mini notebook offering has helped it to
weather the storm comparatively better than other Japan-based OEMs and it was the only
major Japan-based OEM to have positive yearly growth in Japan.
Table 1.1- Top five vendors’ worldwide PC shipments

IDC: Top-5 vendors' worldwide PC shipments, 2Q09 (k units)
                                           11
                     2Q09          Market        2Q08           Market
Rank      Vendor      shipments    share         shipments      share         Y/Y
1         HP          13,095       19.8%         12,644         18.5%         3.6%
2         Dell        9,108        13.7%         10,984         16.1%         (17.1%)
3         Acer        8,431        12.7%         6,815          10%           23.7%
4         Lenovo      5,757        8.7%          5,596          8.2%          2.9%
5         Toshiba     3,494        5.3%          3,163          4.6%          10.5%
          Others      26,407       39.8%         29,202         42.7%         (9.6%)
          All Vendors 66,291       100%          68,403         100%          (3.1%)
* PCs include desktop and portable PCs (including mini notebooks), but
exclude x86 servers.

Source: IDC, compiled by Digitimes, July 2009




Table 1.2: India Client PC (Desktop + Notebook) Shipments: Top 3
Vendor Market Shares (% of units), 4Q 2008 vs. 4Q 2007*
4Q ’07 Client PC Shipments                  4Q ’08 Client PC Shipments

(Notebook PCs + Desktop PCs)                (Notebook PCs + Desktop PCs)
Vendor             Market Share             Vendor             Market Share
Hewlett-Packard    17.6%                    Hewlett-Packard    15.6%
HCL                10.8%                    Dell               10.9%
Lenovo             8.9%                     HCL                9.6%
*According to IDC’s India Quarterly PC Tracker 2008, 4Q 2008 quarter, March 2009
release



Table 1.3- PC Shipments’ Market Share
4Q 2008 PC Shipments                        1Q 2009 PC Shipments
(Desktop PCs + Notebook PCs)                (Desktop PCs + Notebook PCs)
Vendor                   Market Share       Vendor              Market Share

                                           12
Hewlett-Packard         15.6%                 Hewlett-Packard         18.2%
Dell                    11.0%                 HCL Infosystems         9.8%
HCL Infosystems         9.6%                  Dell                    9.7%
Acer                    7.7%                  Acer                    7.3%
Lenovo                  6.6%                  Lenovo                  4.7%


1.3 PEST Analysis


1.3.1 Political (inc. legal)
Political factors include government regulations and legal issues determining the
conditions under which companies have to operate. In this field, the computer industry
has to face certain restraints. Problems can arise in countries where political stability is
not guaranteed, no matter whether companies operate production facilities or if they do
business with the country through exports. Many countries still have restrictive policies
which are maintained to protect domestic manufacturers and production. Such policies
often hinder foreign companies from entering into this market. The only possibility to do
business in those countries is to establish partnerships with local companies, where they
are additionally forced to accept minority shares and to provide money and technological
know-how. However, the computer industry sees great potential in those countries which
lose their restrictions. This is especially true for China which has opened for many
industries since its accession to WTO in2001. In the course of globalization trade barriers
decline and new markets emerge, allowing free trade to expand.

1.3.2 Economic
The computer industry expects a growth of approximately 10 percent over the next years.
This growth is influenced by the economic situation in a specific country, having an
impact on the purchasing power of potential customers. Additionally, changing inflation
rates and currency fluctuation also determine the profitability of a company.

1.3.3 Social
The national demand for computers is dependent on the educational level prevailing in a
specific country. The higher the educational standard, the higher is the demand.
Furthermore, computers get more and more involved in daily life. Today, children already
get familiar with the use of computers at a very young age, representing a generation that
will hardly live or work without a computer in future. Additionally, the brand image of a
computer and lifestyle trends get more and more decisive for the purchasing decisions.
The computer industry adapts to this trend, e.g. by offering a wide range of notebooks
and by trying to create a strong brand name.
                                            13
1.3.4 Technological
There is hardly any industry that is characterized by a faster technological development
than computer industry. Increased research and development have caused permanent
innovation processes which lead to short product life cycles resulting in a faster
depreciation of the products.

1.3.5 Market structure
The computer industry is characterized by a quasi-oligopolistic structure. It is dominated
by 5 major global players although there are a lot of small companies which often serve
only regional markets. The following graph illustrates the division of the computer
market of each individual company.

 Company                                      Market share
 HP                                           18.1%
 DELL                                         15.6%
 LENOVO                                       7.8%
 ACER                                         9.4%
 TOSHIBA                                      4.4%
 OTHERS                                       44.7%


Chart 1.1- Market Share of various players in PC Industry




1.4Industry Profile
In India, the software boom started somewhere in the late 1990s. Most of the Indian
software companies at that moment offered only limited software services such as
the banking and the engineering software. The business software boom started with
the emergence of Y2K problem, when a large number of skilled personnel were
required to fulfill the mammoth database-correction demand in order to cope up with
the advent of the new millennium.
The profile of the Indian IT Services has been undergoing a change in the last few
years, partly as it moves up the value chain and partly as a response to the market
dynamics. Ten years ago, most US companies would not even consider outsourcing
some of their IT projects to outside vendors. Now, ten years later, a vast majority of
US companies use the professional services of Indian Software engineers in some

                                           14
manner, through large, medium or small companies or through individuals recruited
directly.
The market competition is forcing organizations to cut down on costs of products.
The professional IT services on the other hand are becoming increasingly expensive.
The offshore software development model is today where onsite professional
services were ten years ago. There is a high chance (almost a mathematical
certainty), that in less than ten years, the vast majority of IT services (software
development being just one of them) from developed countries, will be, one,
outsourced and two, outsourced to an offshore vendor.
Despite the global economic slowdown, the Indian IT software and services industry
is maintaining a steady pace of growth. Software development activity is not
confined to a few cities in India. Software development centers, such as Bangalore,
Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi-Noida-Gurgaon, Vadodara,
Bhubaneswar, Ahmedabad, Goa, Chandigarh, and Trivandrum are all developing
quickly. All of these places have state-of-the-art software facilities and the presence
of a large number of overseas vendors. India’s most prized resource is its readily
available technical work force. India has the second largest English-speaking
scientific professionals in the world, second only to the U.S. It is estimated that India
has over 4 million technical workers, over 1,832 educational institutions and
polytechnics, which train more than 67,785 computer software professionals every
year. The enormous base of skilled manpower is a major draw for global customers.
India provides IT services at one-tenth the price. No wonder more and more
companies are basing their operations in India.
The industry is in an expansion mode right now, with dozens of new offshore IT
services vendors emerging every day, the industry has a high probability of being
subjected to the 80:20 rule in not too distant a future. In perhaps another ten years,
80 percent of all outsourced offshore development work will be done by 20 percent
of all vendors, a small number of high qualities, trusted vendors. Only a few select
countries and only the most professional companies in those countries will emerge as
winners. India will definitely be the country of choice for offshore software
development. It has the potential to become and remain the country of choice for all



                                             15
software developments and IT enabled services, second only to the USA. The third
choice could be far distant.
India is among the three countries that have built supercomputers on their own. The
other two are USA and Japan. India is among six countries that launch satellites and
do so even for Germany and Belgium. India's INSAT is among the world's largest
domestic    satellite   communication   systems.      India   has   the   third   largest
telecommunications network among the emerging economies, and it is among the top
ten networks of the world.
To become a global leader in the IT industry and retain that position, India needs to
constantly keep moving up the value chain, focusing on finished products and
solutions, rather than purely on skill sets and resumes. It also needs to be able to
package its services as products, rather than offering them as raw material. It needs
to be able to recognize and build up on its strengths and work on weaknesses.
Another extension of the IT industry is the ITES (Information Technology Enabled
Services) which is a sector dependent on IT sector.
Information technology consulting (IT consulting or business and technology
services) is a field that focuses on advising businesses on how best to use
information technology to meet their business objectives. In addition to providing
advice, IT consultancies often implement, deploy, and administer IT systems on
businesses' behalf.
The PC industry is one of the strangest in the world. There is probably no other type
of product that is so technologically sophisticated, sells for so much money, and yet
is sold by so many companies for so little profit. The severe competition in the
industry is the #1 reason why so many problems are encountered by those who deal
with PC vendors. While I consider there to be absolutely no excuse for a company
not treating its customers fairly, at the same time I think customers should have some
idea of what vendors are up against in this demanding marketplace.


1.4.1 Features of the Industry


It Is Very Price Competitive: By far, the most important thing to remember about
the PC industry is this: it is one of the most competitive in the world. The main
                                           16
reason for this is the simple fact that making a PC is just not that difficult. Most are
assembled from standardized components and not a lot of expertise is required.
There are few barriers to entry to the market, meaning it is easy to set up a new PC
company. As a result, there are tens of thousands of companies making PCs that
perform similar functions. This causes the market to be extremely price-competitive.
Most of the other characteristics of the industry follow directly from this fact.
       •   Systems and Components Sell with Low Margins: Since the market is
           so competitive, vendors often sell at very low margins. Computers aren't
           like many other products, where the company selling the device is
           making upwards of 50% of the price of the product as gross profit
           (meaning, profit before overhead and general expenses). For PCs it is
           more like 10% or less. Many people buy a $1500 PC thinking the vendor
           is making, say, $500-700 on the item, and they find it hard to understand
           why these companies aren't getting rich. It's more typical for the vendor
           to make less than $100 profit on such a PC. Some small companies make
           virtually no profit at all on straight PC sales, and survive on post-warranty
           support and consulting!
       •   The Market Experiences Rapid Price Fluctuations: There is probably
           no other industry that has prices change as dramatically and frequently as
           the PC industry. Usually, prices are decreasing. This is good for the
           consumer but very bad for vendors, because it means that their already
           low margins get squeezed if prices drop between the time that they buy a
           product and the time they sell it. It's not unheard of for a vendor to buy a
           component wholesale at price $X and find 24 hours later that the retail
           price has dropped below $X! The vendor must then try to dump the
           product as fast as possible to limit his losses. You won't find many
           industries where this occurs with regularity.
       •   Vendors Keep Low Inventories: In an environment where margins are
           low and prices are generally dropping, keeping high inventory is a death
           sentence--whenever prices drop the vendor potentially loses money on
           every component in inventory at the time. For this reason, most
           companies try to keep as little in inventory as they can get away with.
                                             17
       •   Vendors Contend With High Bankruptcy Rates: Because of all the
           challenges involved in running a PC business, the bankruptcy rate is high.
           Many vendors have been in business only a short time. Some open a
           store, have it fail, and then open another one with a new name, sometimes
           year after year.
       •   The structure of PC industry is almost unique. The original equipment
           manufacturers (OEMs) that produce and sell PCs bear most of the risk,
           while the downstream suppliers of components make most of the profit.
           Many analogies have been drawn with other mature-product industries,
           such as automobiles, but we find such comparisons inaccurate. The key
           difference is that the suppliers of PCs are struggling to identify
           meaningful differentiation vs. competitors. This leaves manufacturers
           competing primarily on price, which exacerbates the pressure on margins.
           The airline business presents a more realistic comparison. Aircraft
           manufacturers and airports are profitable and continue to benefit from
           growth in demand, but the carriers are struggling and further
           consolidation is viewed as inevitable.
Although the apparent inability to differentiate products drives the PC industry's
focus on price competition, the downward movement of pricing is also because of
oversupply. There are too many suppliers, all struggling with similar challenges in
this highly cash-intensive business. We continue to observe fire sales resulting from
overproduction and price-led promotions by PC suppliers looking to accelerate cash
flow or boost market share. The result is an industry which, in some market
segments, seems locked into a "race to the bottom" in the pricing of products.
Clearly, this trend is unsustainable.
In November 2004, these observations, combined with our market expectations for
2006 through 2008, led us to predict that by 2007, three of the top 10 PC suppliers
would exit the market. Within weeks, IBM announced the sale of its PC Division to
Lenovo Group. Our market analysis was straightforward. Unit growth between 2006
and 2008 will average about 6 percent, but revenue will remain flat. Key PC
component suppliers, such as Intel and Microsoft, have historically been highly adept
at maintaining their PC revenue, and their overall revenue from PCs will probably

                                           18
continue to grow as the market continues to shift toward mobile PCs. This leaves PC
suppliers facing the prospect of producing more PCs for dwindling revenue. This
situation will inevitably lead to further consolidation among the leading suppliers.
The impact of consolidation will not be limited to PC suppliers. Intel, AMD,
Microsoft and other component suppliers will also see change as the structure of
their market evolves. Although these changes will ultimately result in a healthier PC
industry that is better able to equate innovation to sustainable business, the period of
adjustment will bring additional challenges to the buyers and users of PCs. Choice of
supplier and continuity of supply will be less certain, while the adoption of emerging
PC technologies will present additional risk.
This collection of research further explores the analysis behind these observations
and examines the likely impact for PC suppliers, key component suppliers and the
buyers of PCs.


1.5 Major Players      in the PC Industry


1.5.1   HP

The Hewlett-Packard Company commonly referred to as HP, is the largest PC
manufacturer in the world. The company was founded by Stanford University classmates
Bill Hewlett and David Packard in 1939.It is headquartered in Palo Alto, California,
United State and operates in more than 170 countries around the world. HP specializes in
developing and manufacturing computing, storage, and networking hardware, software
and services. HP is a Fortune 500 company and is ranked 9 in 2009. In august 2001, HP
and Compaq came together to merge by a 25 billion$ stock deal.
The company employs 321,000 people as on 31st December, 2008. Mark V. Hurd chief
executive officer and the chairperson of HP since September 22, 2006 has focused on
maintaining the companies leadership in exploring how technology and services can help
people and companies address their problems and challenges, and realize their
possibilities, aspirations and dreams.
Even in the poor economic conditions of 2008, the company had a net revenue growth of
13% from $104.2 billion in FY07 to $118.3 billion in FY08.
                                            19
1.5.1.1 HP’s Product Line
The company HP provides a wide range of products and services to its customers and is
divided into six business segments:
   •   Personal Systems: Hewlett-Packard is the world's largest manufacturer of
       personal computers, and its Personal Systems Group (PSG) is responsible for the
       development and sale of HP's commercial and consumer PCs, workstations,
       handheld devices, digital entertainment systems, and other related services and
       accessories.
   •   Imaging and Printing: Hewlett-Packard is the leading provider of imaging and
       printing systems in the world. HP's Imaging and Printing Group (IPG) provides
       consumer and commercial printer hardware, printing supplies, printing media and
       accessories, and scanning devices.
   •   Enterprise Storage and Servers: HP is one of the leading providers of servers in
       the world, offering a wide range of servers and storage products and solutions for
       small businesses and larger corporations.
   •   HP Services: This segment offers a large variety of information technology
       services, including technology services, consulting and integration services, and
       managed services.
   •   Software: HP's Software segment provides management software solutions that
       assist large companies in managing their operations and information technology
       infrastructure,
   •   HP Financial Services: Hewlett-Packard offers financing, leasing, and other
       financial management services for its larger enterprise customers, small
       businesses, and educational and governmental customers in order to allow its
       customers to purchase complete end-to-end information technology solutions.
The company sets its corporate objectives as:
   •   Customer loyalty
   •   Profit
   •   Growth
   •   Market leadership
   •   Leadership

                                            20
   •    Commitment to employees
   •    Leadership capability
   •    Global citizenship




1.5.1.2 The SWOT analysis of HP

   STRENGTH                                        WEAKNESS

        •   Leadership position                        •   Low flexibility: it does not have
        •   Consumer centric brand                         high customization available
        •   Strong after sales service                 •   Decline in digital entertainment

        •   Design strategy: looks cost                    market

            strategy                                   •   Software service


   OPPORTUNITY                                     THREAT

        •   PC business                                •   Pricing pressure
        •   Service     industry:        bought        •   Component pricing
            world’s No 2                               •   Slow revenue growth
            Service provider EDS




1.5.2 Dell
Dell,   a multinational technology corporation         with   its   head   quarters   in   Round
Rock, TX, USA develops, manufactures, sells, and supports personal computers and
other computer-related. Based in Round Rock, Texas, Dell employs more than 82,700
people worldwide.
Michael Dell founded the company as PC's Limited with capital of $1000 in 1984. He is
the present CEO and chairman of the company. Operating from Michael Dell's off-
campus      dorm-room        at Dobie      Center, the startup aimed       to   sell IBM     PC-
compatible computers .Michael Dell started trading in the belief that by selling personal
                                                  21
computer-systems directly to customers, PC's Limited could better understand customers'
needs and provide the most effective computing solutions to meet those needs. The
company changed its name to "Dell Computer Corporation" in 1988.
Dell became the first company in the information technology industry to establish a
product-recycling goal (in 2004) and completed the implementation of its global
consumer recycling-program in 2006.
Dell offers a variety of products and services. Among its offerings are a wide array of
desktop and notebook computers, peripherals and software, technical support services,
and corporate servers and storage systems.
1.5.2.1 Dell’s Product Line
PCs (60% of revenue)
Dell produces several lines of consumer and commercial PC systems, including both
desktop and notebook models. Overall, Dell holds about 14% of the worldwide PC
market. Within the PC segment, desktops contributed 32% of Dell’s Fiscal 2008 revenue,
and notebooks accounted for 28%.
Software, Peripherals, and Accessories (16% of revenue)
Dell sells various software programs with its PC systems, such as productivity software,
security programs, and games. Dell also sells a number of computer-related peripherals,
including LCD monitors, printers, input and storage devices, etc. Aside from PC-related
items, Dell sells various accessories and electronic devices, such as LCD televisions,
digital cameras, and MP3 players.
Servers and Storage (15% of total revenue in 2008)
For its corporate customers, Dell provides both servers and storage systems. Dell also
sells customized servers and enterprise systems designed to meet the specific needs of
certain customers.
Technical Support and Services (9% of total revenue in 2008)
Dell also sells technical support services for its products, providing customers with
assistance after they purchase their systems. In Fiscal 2008, revenue increased 6% year-
over-year to $61.1 billion, The company recorded net income of $351 million for the
fourth quarter ended Jan. 30, a 48 percent drop from the $679 million it recorded in last
year's fourth quarter. Net income per share was $0.18. Revenue fell to $13.4 billion, a 16
percent drop from a year ago.
                                             22
1.5.2.2 SWOT analysis of Dell
 STRENGTH                                          Weakness

    •   Inventory turnover rate is 6 days.            •     No proprietary technology
    •   Revenue growth at 100%                        •     High dependency on component
    •   Cost efficiency                                     suppliers
    •   Direct to customer business model:            •     Lack    of    software   support   for
        minimum credit risk                                 customers
    •   Latest technology customization
    •   Internet   sales   leadership:   $5M
       everyday worldwide
 Opportunity                                       Threat

    •   Network service in B2B                        •     Dell’s market share is very less
    •   Strong potential in china and India           •     Price range considered premium
    •   Low costs and advanced technology             •     Currently       fluctuation    policy
    •   Growth in business, education and                   instability
        government markets                            •     Tariff trade barriers




1.5.3   Acer
Acer Incorporated is a Taiwan-based multinational electronics manufacturer. Originally
named Multitech, it was founded by Stan Shih , his wife Carolyn Yeh, and a group of five
others in 1976. Multitech was eventually renamed Acer in 1987.
Acer is renowned for the development and manufacture of sophisticatedly and intuitively
designed, easy to use products. Focused on marketing its brand-name IT products around
the globe, Acer ranks as the world's No. 3 vendor for total PCs and No. 2 for notebooks,
with the fastest growth among the top-five players.
1.5.3.1 Acer’s product line

                                              23
Notebook (71% of revenue): Notebooks are Acer's most profitable product, generating
NT$417 billion in revenue in 2008. Within the past decade, growth in notebook sales has
far outpaced growth in desktop sales. For example, in 2007, overall notebook shipments
grew 33.8%, while desktop shipments grew only 4.8%.
Netbook (9% of revenue): Netbooks are an emerging type of scaled-down portable
computer, that are designed to be cheap, light weight, and easy to use. Acer is the #1
producer of netbooks worldwide by unit sales, with a 38% market share.
Desktop (12% of revenue): Annual revenue growth in desktop sales has slowed from
50.2% from 2004 to 2005 to 3.8% in 2008 as consumers demand more laptops. The
company expects desktop sales growth of 3-4% from 2009 to 2011.
Display (5% of revenue): Acer manufactures LCD monitors, HDTVs, and projectors. In
addition to consumers, the company is targeting businesses and governmental agencies
for volume sales.
Other (3% of revenue): Acer offers information security management, software systems
development, data center services, and other IT support services. In addition, in 2008,
Acer acquired E-Ten, a Taiwanese manufacturer of Pocket PC phones and PDAs.
1.5.3.2 SWOT analysis of Acer
 STRENGTHS                                         WEAKNESS
    •   Operational Efficiency — Tight               •   Low Profit Margins
        Control on Overhead Costs                    •   Multiple Brands, Which Increase
    •   Improved Economies of Scale                      Costs and Dilute Resource
    •   Fast Reactions to Market Changes             •   Brand perception as Low-Cost PC
        After Cautious ROI Evaluation                    Provider
    •   Aggressive    Price   Strategy    —          •   Insufficient Attention to the Chinese
        Particularly Suitable to a Time of               Market the Second-Largest in the
        Economic Recession                               World
    •   Strong global logistics                      •   Limited    Product   Portfolio    for
    •   Strong relationships with suppliers              Midsize Business




                                              24
OPPORTUNITIES                               THREAT
  •   Economic Downturn, Which Favors         •   Continued Price Decline in Mobile
      Low-Price Products                          PCs,   Due     in   Part    to   Mini-
  •   Growth of Mobile PCs in Homes in            notebooks, Which Erodes Margins
      Emerging Markets, Where Brand               and profitability
      Preferences Are Weaker                  •   Excessive Reliance on Western
  •   Growth Into the Chinese Market              Europe, Which Contributed 40% of
  •   Growth     Into   Midsize-Business          Acer's Total Mobile-PC Revenue in

      Markets                                     2008

  •   Reaching    Larger   Numbers     of     •   Dell's Expansion Into Indirect Sales

      Customers by Targeting Various          •   Samsung’s entering into consumer
      Segments Through Multiple Brands            mobile PC s.
                                              •   Profit margin squeezed by sales to
                                                  telecom service provider.




                           CHAPTER 2
                 COMPANY PROFILE

                                       25
2.1 Company History
The following is a brief history of Lenovo:
2000: Legend shares peak at HK$14.75 on March 6.


2001: Dell takes the largest share of the worldwide PC market for the first time. Legend
sales reach a peak of HK$27.2 billion in the fiscal year ended March 2000 and decline to
HK$23.2 billion in the most recent fiscal year ended March 2004.


2003: The Company changes brand name to Lenovo from Legend to avoid infringement
of overseas brands. The company says it is preparing for expansion outside China, which
has overtaken Japan to become the world's second-largest PC market. The US remains
the world's largest PC market.


2004: The Company changes its name to Lenovo Group. Time Warner Inc, the world's
largest media company, on January 7 exits a US$50 million Internet venture in China
with Lenovo. China accounts for 99 percent of Lenovo's sales in fiscal year ended March
2004 and 98 percent in the previous 12-month period. Lenovo's first-quarter PC shipment
growth in China lags rivals such as Dell, according to market researcher IDC Corp.
Lenovo has a 10.9 percent share of the Asian market excluding Japan, compared with 7.3
percent for Dell. Lenovo's Asian shipments rise 19 percent, compared with 52 percent for
                                              26
Dell. Lenovo's sales of services and hand-held electronics grow the fastest of all its
products in the most recent two fiscal years, each at an average rate that roughly
quadruples. Computer sales rise at an average rate of 9 percent in the same period.
Lenovo becomes an Olympic worldwide partner. It is the first Chinese company to
become a computer technology equipment partner of the IOC. Lenovo decides to develop
the rural market by launching the "Yuanmeng" PC series designed for township
home users. Lenovo and IBM announce an agreement by which Lenovo will acquire
IBM’s Personal Computing Division, its global PC (desktop and notebook computer)
business. The acquisition forms a top-tier (third-largest) global PC leader.



2005: Lenovo completes the acquisition of IBM's Personal Computing Division, making
it a new international IT competitor and the third-largest personal computer company in
the world. Lenovo announces the closing of a US$350 million strategic investment by
three leading private equity firms: Texas Pacific Group, General Atlantic LLC and New
bridge Capital LLC. Lenovo establishes a new Innovation Center in Research Triangle
Park, N.C., to enable customers, business partners, solution providers and independent
software vendors to collaborate on new personal computing solutions. Lenovo introduces
the industry's thinnest, lightest and most secure Tablet PC, the ThinkPad X41 Tablet.
Lenovo introduces the first widescreen ThinkPad with embedded wireless WAN, the
ThinkPad Z60, available for the first time with a titanium cover. Lenovo becomes the
world's largest provider of biometric-enabled PCs by selling its one-millionth PC with an
integrated fingerprint reader. William J. Amelio is appointed as CEO and President of
Lenovo.


2006: Lenovo introduces the first dual-core ThinkPad notebook PCs, improving
productivity and extending battery life for up to 11 hours. Lenovo technology flawlessly
supports the 2006 Olympic Winter Games in Torino, Italy, supplying 5,000 desktop PCs,
350 servers and 1,000 notebook computers. Lenovo also hosts seven Internet i.lounges
for use by Olympic athletes and visitors. The first Lenovo-branded products outside of
China debut worldwide. Researchers, scientists and product design teams from around
the world combine Lenovo's heritage in enterprise and consumer PC technology to design

                                            27
the Lenovo 3000 product line, which features new desktop and notebook models
specifically designed to provide worry-free computing to the small business market
segment.




2.2 Organizational Structure
It is the formal and informal framework of policies and rules, within which an
organization arranges its lines of authority and communications, and allocates rights and
duties. Organizational structure determines the manner and extent to which roles, power,
and responsibilities are delegated, controlled, and coordinated, and how information
flows between levels of management. This structure depends entirely on the
organization’s objective and the strategy chosen to achieve them. In a centralized
structure, the decision making power is concentrated in the top layer of the management
and tight control is exercised over departments and divisions. In a decentralized structure,
the decision making power is distributed and the departments and divisions have varying
degree of autonomy.
There are various functional departments like-
HR Department
Financial Department
Marketing Department
Transactional Department
Relational Department
Strategic Department
Legal Department
Chart 2.71- Organizational Structure

2.3 Awards and Certifications:


1)"Client of the Year" in the Advertising Big Bang 08, organized by the Ad Club,
Bangalore.

                                            28
2) MEDIA, the premier marketing trade publication in Asia has awarded Lenovo the
‘Communicator of the Year’ for this year’s Asia-Pacific PR Awards.
In particular, Lenovo’s sophisticated usage of social media and willingness to blur the
lines between conventional marketing and PR impressed the
Media editorial team this year.


3)In DIGIT's cover story ‘Icons of Trust 2008 – which brands can you rely on?’:
Lenovo/IBM beat all other brands to bag the top spot on the Trust Index
Lenovo has been voted the most trusted brand in the Laptops category


4) Lenovo India wins three awards in the DQ Channels “Channel Choice Awards 2009”
        a) Best Marketing Support- Silver award
        b) Best Commercial Terms- Silver award
        c) Best Online Support – Silver award




2.3 Vision and Mission
Lenovo strives to be a new world company that makes award-winning PCs for our
customers. We operate as a company uninhibited by walls or organizational structures
using world sourcing to harness the power of innovation across our global team. We
design innovative and exciting products and services to meet our customers’ needs.




2.4 SWOT analysis
 STRENGTH                                       WEAKNESS

    •    Lean cost structure                      •   Unable    to   maintain     sustained
                                                      growth rate in all market segment
    •    Effective business model
                                                  •   Ignoring potential market
    •    Innovation leadership
                                                  •   Retaining of largest shares by
    •    Event sponsoring
                                                      competitors
                                           29
   •    Good marketing and distribution             •   Poor global perception
        strategies                                  •   High delivery time:3 weeks
   •    Strategic alliance with suppliers
   •    Quick responsiveness
  • Strong R&D: taken over from IBM
OPPORTUNITY                                       THREAT
   •    Increasing global demand for PC             •   Competition threat from both local
   •    Specialty shops proving one stop                and international markets
        platform for distribution                   •   Industry reaching maturity
   •    Government                organizations     •   Software piracy and clone market
        increasing their spending on IT             •   Price war
   •    Internet boom                               •   Emerging small firms
   •    Increasing      product     portfolios/     •   International competitors forming
        product lines                                   alliances with local competitors.
   •    Netbooks
   •    Converting      manual      orders   to
        automotive orders




STRENGTH
  1. Lean cost structure:
       The Group’s distinctive capability and expertise in managing costs and expenses
       allows it to achieve high efficiency and has been one of the most important factors
       for its success. This has become more critical under the current economic
       conditions.


  2. Effective business model:



                                             30
   Lenovo’s dual business model sets its products, services and business process
   around customer need and market segmentation. This tightly integrated, end to-
   end model allows the Group to quickly react to market dynamics and changes in
   the back-end.


3. Innovation leadership:
   Lenovo owns the greatest track record for innovation in the PC industry and
   remains committed to innovation in its products and technology. While it needs to
   be cost-effective, innovation can drive business and add value for customers.



4. Good marketing and distribution strategies:
   Promotion and distribution at Lenovo is done through a network of channel
   partners, retail stores, Teleweb, and Lenovo authorized dealers across the globe.
   Lenovo also promotes environmental friendly ‘green’ products- ThinkPad X300
   series is the first notebook to earn ‘Green Guard’ certification


5. Strategic alliance with suppliers:
   Since Lenovo is horizontally integrated, it depends on the outsourced suppliers for
   in time delivery of quality products; like many companies, keeping the customer
   always in mind, time and quality.



6. Quick responsiveness:
   The company has Best-in-Class Service. It has 24/7 Technical/Sales Support
   centers across the globe.


7. Strong R&D: taken over from IBM:
   Acquiring a reliable/well-known company such as IBM has helped boost its
   products, especially ThinkPad and IdeaPad.


8. Event sponsoring:

                                        31
       Lenovo was the TOP Sponsor of the Olympic Games and provided the technology
       hardware for these Games in 2008. Nearly every aspect of the management of the
       Games, from gathering and storing participant data to displaying the scores, was
       dependent on hardware provided by Lenovo. It gave Lenovo an upper edge as
       compared to other competitors.



OPPORTUNITY


  1. Increasing global demand for PC:
  2. Signing of memorandum of understanding: The company can develop their
  market in US by signing a memorandum of understanding with the US
  3. Specialty shops proving one stop platform for distribution
  4. Government organizations increasing their spending on IT
  5. Internet boom
  6. Increasing product portfolios/product Lines
  7. Netbooks
  8. Converting manual orders to automative orders




WEAKNESS


  1.    Unable to maintain sustained growth rate in all market segment: Lenovo is
       heavily weighted showed significant slowdown in the second half of the fiscal
       year under the economic crisis because it has not adequately addressed the
       worldwide transaction segment outside China, in particular the consumer market.
  2.    Ignoring potential markets: The main focus of Lenovo is on the established
       markets and they lack marketing strategies to enter into the untapped markets.
  3.    Retaining of largest shares by competitors:



                                           32
        Lenovo’s competitors have larger number of shares in the market. HP (18.1%),
        Dell (15.6)%, Acer(9.4)% give Lenovo a tough competition.
   4.    Poor global perception: In China, the customers perceive Lenovo as a premium
        brand, but Lenovo has to reinforce this perception to its global brand.
   5.    High delivery time:
        The order delivery time in Lenovo is around 3 weeks. This results in customers
        waiting for a longer time.


THREAT
   1. Competition threat from both local and international markets:
   2. Industry reaching maturity:
   3. Software piracy and clone market:
   4. Price war
   5. Emerging small firms
   6. International competitors forming alliances with local competitors.




   2.5 People
“Company believes that their people provide them the cutting edge and for the
sustainable success, their performance orientation and customer focus is imperative. The
company believes that only where people grow, the organization grows”. People are the
biggest asset of the company. They believe that the “biggest brands” they stand for today
are a consequential of our “best people”. The company has measurement systems and
recognition schemes to identify and encourage individuals and teams demonstrating
customer service excellence.
Rewards, promotions and growth opportunities at Lenovo are based on performance. The
company ensures that all of their policies, forward-looking initiatives and goals are fully
                                            33
communicated to all the employees and that they understand and relate to these.
Company’s commitment to their people is reflected in the sense of belonging and pride
they feel towards the company and the passion and commitment they bring to their work.




2.6 Policies
Lenovo has staff welfare policies and some Business guidelines for all employees.
1. Leave Policy for regular employees i.e. Privilege leave, Sick leave, Casual leave,
Maternity leave, Post- maternity leave, Leave of Absence.
2. CLC scheme
3. Loan Policy: The Company provides its employees with various kinds of loans such as
Car Loan, Housing Loan etc.
Apart from welfare policies company also has some conduct guidelines for the employees
such as legal remedies, privacy in workplace, protection and use of Lenovo assets etc.




2.7 Lenovo Products
Notebooks


ThinkPad Notebooks




                                            34
Track record of success, cost-savings
Industry-leading capabilities that dramatically increase productivity and reduce cost.
Features:
    ✔ Business class technology
    ✔ Thin, light widescreen designs
    ✔ Extra long battery life
    ✔ Advanced mobile workstations



IdeaPad Notebooks




Engineered for a great user experience
Perfect for home/home office, with distinctive designs and features for entertainment and
multimedia.



Features:

    ✔   Home/office versatility
    ✔   11.1 to 17 inches widescreen displays
    ✔   Dolby home theatre audio
    ✔   Touch sensitive controls
    ✔   VeriFace face recognition securities




Lenovo 3000 Notebooks




                                               35
Worry-free computing at a great value
A smart choice for business computing needs and budgets. Plus, new models ideal for
home/home office.



Features:

    ✔   Roomy, widescreen displays
    ✔   Stylish silver colored top covers
    ✔   Preloaded small business softwares
    ✔   LenovoCare tools, support and services




Desktops
ThinkCentre Desktops




Award winning quality and innovation
Industry-leading capabilities that dramatically increase productivity and reduce cost.

                                                36
Features:

   ✔   Energy efficient desktops
   ✔   Security on a corporate level at a small business price
   ✔   Dual Independence Display (DID)
   ✔   The ThinkCentre Energy Calculator

IdeaCentre Desktops




New PCs for home/home office
Loaded with features for everything from family finance to multimedia and entertainment.

Features:

   ✔   VeriFace face recognition
   ✔   Automatic brightness adjustment
   ✔   Antibacterial keyboard
   ✔   OneKey convenience

Workstations




ThinkCentre Workstations
Features:

   ✔ User centric design
   ✔ Cool and quiet

                                              37
   ✔ ISV certifications
   ✔ Environment-friendly

Servers




Tower Servers
Features:

   ✔   Single and dual sockets
   ✔   Easier cooling
   ✔   Existing-network scalability
   ✔   Hard disk drive optimization

Rack Servers
Features:

   ✔   Single and dual sockets
   ✔   Space-optimized design
   ✔   Centralized cable management
   ✔   Centralized server management

Accessories and Upgrades




                                       38
2.8 Departments
2.8.1HR
Human resources are an increasingly broadening term that refers to managing "human
capital," the people of an organization. The field has moved from a traditionally
administrative function to a strategic one that recognizes the link between talented and
engaged people and organizational success. The field draws upon concepts developed in
Industrial/Organizational Psychology and System Theory. Human resources have at least
two related interpretations depending on context. The original usage derives from
political economy and economics, where it was traditionally called labor, one of four
factors of production although this perspective is changing as a function of new and
ongoing research into more strategic approaches at national levels. This first usage is

                                          39
used more in terms of 'human resources development', and can go beyond just
organizations to the level of nations. The more traditional usage within corporations and
businesses refers to the individuals within a firm or agency, and to the portion of the
organization that deals with hiring, firing, training, and other personnel issues, typically
referred to as 'human resources management.
Functions of Senior Manager- Talent Management/C&B/Partner

   •   Compensation and Benefits:
       Compensation includes topics in regard to wage and/or salary programs and
       structures, for example, salary ranges for job descriptions, merit-based programs,
       bonus-based programs, commission-based programs, etc. There are altogether 10
       structures in the organization. Employee benefits typically refer to retirement
       plans, health life insurance, life insurance, disability insurance, vacation etc.
       Benefits are increasingly expensive for businesses to provide to employees, so the
       range and options of benefits are changing rapidly to include, for example,
       flexible benefit plans.
   •   The development and integration of the organization as a whole is another
       important function performed by the senior management.
   •   Various individual development plans and strategies are planned, executed and
       proper follow up is done.


Functions of Senior Manager – HR Operations/ Performance Management

   •   HR Operations: The Human Resource operations include

       Payroll is the sum of all financial records of salaries, wages, bonuses and
       deductions. The other feature being maintaining a database of list of employees
       receiving wages or salaries, with the amounts due to each and also the total sum
       of money to be paid out to employees at a given time.
   •   Performance Management, performance is the sum of behaviour and results, and
       cannot be viewed as         independent of either component. It is an outcome of
       effective management. Performance Management is found in the success of its
       employees in serving customer needs, creating a culture of respect and
       commitment, with a focus on active learning etc., a culture where the predominate
                                            40
       method of building habits of success involving knowing when and how to “carve
       mistakes in sand and success in stone” (Benjamin Franklin quote). The benefits of
       performance management are: Direct financial gains results in growing sales
       volume, reduced costs and aligns the organization directly behind the CEO’s
       goals. The other advantage is the firm gets motivated workforce, which optimizes
       incentive plans to specific goals for overachievement, not just business as usual;
       creates transparency in achievement of goals. Also helps the other departments for
       example assists in auditing process and compliance with legislative requirements.
   •   Statutory related aspects: As per the laws, the database and other records are to be
       maintained in accordance.
Functions of Asst. Manager- Talent acquisition/L&D/ E- engagement
   •   Talent Acquisition:       The Talent Management Systems or "Strategic Human
       Capital Management Applications” are the next-generation extensions of
       traditional Human Resource Management Systems (HRMS).Talent acquisition
       involves all the sub processes around finding, attracting and engaging highly
       talented individuals into the organization. Talent acquisition is part of a broader
       strategic approach in the quest to gain and sustain a competitive advantage.
       Talent acquisition takes a long term view of not only filling positions of today, but
       also identify talents for future openings. These future positions may be
       identifiable by looking at the succession management plan or by analyzing the
       attrition.
   •   Training (Learning and Development): Training and development is the field
       concerned with organizational activity aimed at bettering the performance of
       individuals and groups in organizational settings. Training is basically considered
       to be of short term or task specific education but the organisation aims and has
       built a scientific learning process among the employees, which helps them
       (employees) to achieve knowledge at the workplace.
Learning and development encompasses three main activities:
   Training: This activity is both focused upon, and evaluated against, the job that an
   individual currently holds.


                                            41
    Education: This activity focuses upon the jobs that an individual may potentially hold
    in the future, and is evaluated against those jobs.
    Development: This activity focuses upon the activities that the organization
    employing the individual, or that the individual is part of, may partake in the future,
    and is almost impossible to evaluate.

    •   Employee Relations: Employee Relations involves the body of work concerned
        with maintaining employer-employee relationships that contribute to satisfactory
        productivity, motivation, and morale. Essentially, Employee Relations is
        concerned with preventing and resolving problems involving individuals who
        arise out of or affect work situations.
        Advice is provided to supervisors on how to correct poor performance and
        employee misconduct. In such instances, progressive discipline and regulatory
        and other requirements must be considered in effecting disciplinary actions and in
        resolving employee grievances and appeals.
        The firm is continuously engaged in building employee and employee relations
        and also has many activities running to help the workers have a high standard
        social life, like kids at work, traditional days etc,.
2.8.2 Accounts Receivables
Accounts receivable (A/R) is one of a series of accounting transactions dealing with
the billing of   customers      who     owe       money    to    company   or   organization
for goods and services that have been provided to the customer. This is typically done by
generating an invoice and mailing or electronically delivering it to the customer, who in
turn must pay it within an established timeframe called credit or payment terms. On a
company's balance sheet, accounts receivable is the amount that customers owe to the
company.     Sometimes called trade receivables, they are classified as current
assets assuming that they are due within one year. To record a journal entry for a sale on
account, one must debit a receivable and credit a revenue account. When the customer
pays off their accounts, one debits cash and credits the receivable in the journal entry.
Companies can use their accounts receivable as collateral when obtaining a loan (asset-
based lending) or sell them through factoring. Pools or portfolios of accounts receivable
can be sold in

                                               42
2.8.3 Customer Service and Support
Customer service and support (CSS) is the part of a company's customer relationship
management (CRM) department that interacts with a customer for their immediate
benefit, including components such as the contact centre, the help desk, and the call
management system. To increase customer satisfaction, while minimizing the costs
involved, companies today are turning to customer-based service applications such
as Web self-service and online communities for customer-to-customer support.
Technical support may be delivered by different technologies depending on the situation.
For example, direct questions can be addressed using SMS, Online chat, E-mail or Fax;
basic software problems can be addressed over the telephone or, increasingly, by using
remote access repair services; while more complicated problems with hardware may need
to be dealt with in person.
2.8.4 India Finance
Corporate finance is the task of providing the funds for a corporation's activities. It
involves balancing risk and profitability, while attempting to maximize an entity's wealth
and the value of its stock. Long term funds are provided by ownership equity and long-
term credit, often in the form of bonds. The balance between these forms the company's
capital structure. Short-term funding or working capital is mostly provided by banks
extending a line of credit. In case of Lenovo India Pvt. Ltd, it’s the holding company
Lenovo Group Ltd., which contributes majorly to the both long term as well as short term
financial requirements.
On the important part of Lenovo’s finance team was when the company acquired the
IBM’s PC division the accounting department was not transferred along with some other
teams. Hence it was both a challenge and an opportunity for the Lenovo team to build a
finance team which would see that they grow up from the scratch. The finance team
which is headed by CFO, for Indian operations its Mr. Rama Subramanian, determines
the requirements of peers and develops a system, a strategy and work in co-ordination
with other teams in the organisation. The culture of the organisation is such that the best
person in the job is allotted the work, as a result the efficiency and employee morale is
high.
2.8.5 Pricing team

                                            43
Pricing is the last bastion of guesswork in global business, but researches shows
companies that make pricing a priority, and implement solutions from a specialized
pricing team can see a effective contribution on the profit side., sometimes as high as 20
percent. Pricing is generally accepted as a core business practice, but the process the
companies use varies and also sometimes it is arbitrary.
Pricing policy is defined as a standard procedure used by a firm to set wholesale and
retail prices for its products or services. In other words, price planning takes into view
factors such as a firm’s overall marketing objectives, consumer demand, product
attributes, competitors’ pricing and market and economic trends. Pricing Objectives:
Pricing objectives or goals give direction to the whole pricing process, determining the
objectives is the first step in pricing. When deciding on pricing the important features
considered are:

   •   The overall financial, marketing and strategic objectives of the company.

   •   The objectives of your product or brand.

   •   Consumer price elasticity and price points.

   •   Maximize long-run profit

   •   Increase Market share and Company growth

   •   Obtain or maintain the loyalty and enthusiasm of distributors and other sales
       personnel.

   •   To enhance the image of the brand and get competitive edge

   •   Social, ethical, or ideological objectives

2.8.6 Accounts Payable Team / Disbursement Team
Accounts payable is a strategic, value-added accounting function that performs the
primary non-payroll disbursement functions in an organization. As such, the AP operation
plays a critical role in the financial cycle of the organization. AP enables an organization
to accomplish its objectives by bringing a systematic, disciplined approach to evaluate
and improve the effectiveness of the entire payables process. In addition to the traditional
AP activities whereby liabilities to third-party entities (suppliers, vendors, taxing
authorities, etc.) are recognized and paid based on the credit policies agreed to between
the company and its suppliers, today's AP departments have taken on much wider roles
                                            44
including fraud prevention, cost reduction, workflow system solutions, cash-flow
management, internal controls and vendor (supply chain) financing. Large firms like
Lenovo are using specialized Accounts Payable Automation, like SAPto automate the
paper and manual elements of processing an organization's invoices. The firm also uses
PAW software which has been procured from IBM when the firm acquired the PC
division. However, coming next financial year the operations of the team will be
completely carried out in SAP.
2.8.7   Internal Audit
Internal auditing is a profession and activity involved in helping organizations achieve
their stated objectives. It does this by using a systematic methodology for analyzing
business processes, procedures and activities with the goal of highlighting organizational
problems and recommending solutions. Professionals called internal auditors are
employed by organizations to perform the internal auditing activity.
The scope of internal auditing within an organization is broad and may involve topics
such as the efficacy of operations, the reliability of financial reporting, deterring and
investigating fraud, safeguarding assets, and compliance with laws and regulations.
Internal auditing frequently involves measuring compliance with the entity's policies and
procedures. However, internal auditors are not responsible for the execution of company
activities. As a result of their broad scope of involvement, internal auditors may have a
variety of higher educational and professional backgrounds.
2.8.8 Business Control
In accounting and auditing, internal or business control is defined as a process affected
by an organization's structure, work and authority flows, people and management
information systems, designed to help the organization accomplish specific goals or
objectives. It plays an important role in preventing and detecting fraud and protecting the
organization's resources, both physical (e.g., machinery and property) and intangible
(e.g., reputation or intellectual property such as trademarks).


2.8.9 Claims Team
A claim is a legal action to obtain money, property, or the enforcement of a right against
another party. The legal document which carries a claim is called a Statement of Claim. It
                                             45
can be any communication notifying the addressee of alleged faulty execution which
resulted in damages, often expressed in amount of money the party should pay/reimburse.
There are several issues of concern when filing a statement of claim. Although to file a
Statement of Claim is fairly straight forward, it is important it be done properly or you
may lose your case due to a simple technicality.
A Claim is a Legal statement made to alert the accused of the legal implications.
2.8.10 Marketing and sales
Marketing is an integrated communications-based process through which individuals
and communities discover that existing and newly-identified needs and wants may be
satisfied by the products and services of others. Marketing is defined by the American
Marketing Association as the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large. The term developed from the original meaning
which referred literally to going to market, as in shopping, or going to a market to buy or
sell goods or services. In Lenovo, marketing division is responsible for marketing
strategy, advertising, researching, promoting, conducting customer surveys, branding,
public relations and creating of corporate style. All these responsibilities can be gathered
in several main functions of the marketing department. The main function of a sales
department is to co-ordinate sales activities, to meet the customer demand with
appropriate supply, to increase the sales volume considering a particular period of time,
to find appropriate persons/ agencies to carry out the sales activities, to help marketing
department in meeting the sales volume forecasted by them.




                                            46
                                 PART-B
                               Chapter-3
                           Research Design




3.1. Introduction to the Project Topic:
Performance management is the activity of tracking performance against targets
identifying opportunities for improvement - but not just looking back at past
performance. The focus of performance management is the future - what do you need to
be able to do and how can you do things better? Managing performance is about
managing for results. Performance-based management at any level in the organization
should demonstrate that:

   •   You know what you are aiming for
   •   You know what you have to do to meet your objectives
   •   You know how to measure progress towards your objectives
   •   You can detect performance problems and remedy them


3.2 Statement of the problem

                                          47
Measuring employee performance has come a long way from the annual performance
appraisal to an ongoing performance management system. Performance Management is
one of the key processes that, when effectively carried out, helps employees know that
their contributions are recognized and acknowledged. But at times it gets diverted from
its objectives.
There is a need that the opinion of the appraisees about the Performance management
system be discussed with the management so as to make the system highly effective.
Management desires information on the perception of the employees towards the existing
performance management system and hence wants to gauge its effectiveness. Hence this
study is being conducted and therefore the statement of the problem is:


“To study the Effectiveness of the Performance Management System at Lenovo
(India) Pvt. Ltd.”




3.3 Title of the study:
The project is titled as “A Study on the Effectiveness of the Performance Management
System at Lenovo (India) Pvt. Ltd.


3.4 Objectives of the study:
    •   To study the Effectiveness of the Performance Management System at Lenovo
        (India) Pvt. Ltd. from the perspectives of the management.
    •   To study the Effectiveness of the Performance Management System at Lenovo
        (India) Pvt. Ltd. from the perspectives of the employees.
    •   To understand the shortcomings of the Performance Management System at
        Lenovo (India) Pvt. Ltd.
    •   To come out with solutions that will help the organization in formulating better
        strategies for the development of the employees and the organization.


3.5 Scope of the study:

                                            48
The study is exclusively conducted on the employees of Lenovo (India) Pvt. Ltd. who
have undergone at least one appraisal cycle. The study is conducted to analyze and obtain
their insights about the Performance Management System. It was carried out within the
Lenovo office at Ferns Ikon in Bangalore city over a period of six weeks.


3.6 Research Methodology:

3.6.1 Sources of Data
For the purpose of the study, both primary and secondary data are utilized.
   •   Primary data is collected through self administered structured questionnaire. Each
       respondent was interviewed and data was collected.
   •   The questionnaire contained Twenty Five questions and it was a mix of open
       ended and close ended questions.
   •   Secondary data is collected from Internet, Newspapers and magazines, company
       web link.


3.6.2 Research Type:
The type of research adopted for the project is descriptive research. It refers to those
studies used to describe phenomena associated with a subject population or to estimate
proportions of the population that have certain characteristics. Descriptive research
basically means discovery of association among different variables.


3.6.3 Sampling Plan:
   •   Type of sampling: Judgment sampling is a common non-probability method.
       The researcher selects the sample based on judgment. This is usually an extension
       of convenience sampling
   •   Sampling Unit: The study is conducted on the employees of Lenovo (India) Pvt.
       Ltd. who have at least undergone one appraisal cycle. The survey was conducted
       to know about their perception towards the Performance Management System.
       The main motive behind the survey is to study the effectiveness of the PMS from
       the employees’ perspective.


                                           49
   •   Sample Size: A sample of thirty respondents was considered as sample size for
       the research.


3.6.4 Research Instrument
The main tool that has been used in data collection is questionnaire that has been
constructed for this purpose. Primary data was collected by means of questionnaire which
was distributed to the employees of Lenovo (India) Pvt. Ltd. who have at least undergone
one appraisal cycle.


3.6.5 Data Collection Method
The survey was conducted by way of personal interview wherein the researcher gave the
respondent the questionnaire and initiated a two-way conversation to obtain information
from the participant.



3.6.6 Limitations of the Study
   •   In the project, non-random sampling has been used which is a non probability
       sampling method; it therefore does not provide estimates of precision.
   •   The sample size is restricted to only those employees of Lenovo (India) Pvt. Ltd.
       who have at least undergone one appraisal cycle.
   •   The study was done for a short period of time, which might not hold true over a
       long period of time.


3.6.7 Operational Definitions


a) Performance Management System
Performance management is an ongoing process of communication between a supervisor
and an employee that occurs throughout the year, in support of accomplishing the
strategic objectives of the organization. The communication process includes clarifying
expectations, setting objectives, identifying goals, providing feedback, and evaluating
results. It is an ongoing process that takes place throughout the year. The Performance
management process is a cycle, with discussions varying year-to-year based on changing

                                           50
objectives. The cycle includes Planning, Checking-In, and Assessment. It’s a 4 step
process. It includes: - Incumbent/Appraisees, Manager/ Appraiser, Reviewer, HR.


b) Incumbent/Appraisee
Appraisee is an individual, who is assessed as part of the performance cycle. He is the
key driver of his own performance management system.


c) Manager/ Appraiser
An Individual who helps plans performance and assesses the performance of one or more
appraisees that report to him/her. He also helps manage performance & provides
continuous feedback and coaching.




d) HR
HR to function as a facilitator in the process- would ensure adherence to guidelines,
support, and dispute resolution and modify design aspects to align with organization
requirements. They are responsible for the normalization of the scores and will facilitate
the process and ensure sanctity of implementation, process rigor and quality.


e) KPI

A performance indicator or key performance indicator (KPI) is a measure of
performance. Such measures are commonly used to help an organization define and
evaluate how successful it is, typically in terms of making progress towards its long-term
organizational goals. KPIs can be specified by answering the question, "What is really
important to different stakeholders". KPIs may be monitored using Business
Intelligence techniques to assess the present state of the business and to assist in
prescribing a course of action. The act of monitoring KPIs in real-time is known
as business activity monitoring (BAM). KPIs are frequently used to "value" difficult to
measure activities such as the benefits of leadership development, engagement, service,
and satisfaction. KPIs are typically tied to an organization's strategy using concepts.




                                           51
The KPIs differ depending on the nature of the organization and the organization's
strategy. They help to evaluate the progress of an organization towards its vision and
long-term goals, especially toward difficult to quantify knowledge-based goals.




                               Chapter-4
                           Data Analysis


                                         52
4.1. Analysis and Interpretation
Table 4.1 Showing frequency of the respondent’s familiarity with the process of
Performance Management System

                                       Frequency Percent Valid Percent
                Valid Yes                     26    86.7            86.7
                      No                       2     6.7             6.7
                      Up to some
                                               2       6.7                  6.7
                      extent
                      Total                  30     100.0                100.0


Graph 4.1 Showing frequency of the respondent’s familiarity with the process of
Performance Management System


                                     A formal PMS

              100


               80
    Percent




               60


               40


               20


                0
                               Yes            No             Up to some extent

                                        A formal PMS

                                            53
Inference:
87% of the respondents said YES when asked whether they were familiar with the
process of Performance Management System.


Table 4.2 Showing perception of employees regarding PMS’s simplicity


                           Frequenc                 Valid    Cumulative
                               y       Percent     Percent    Percent
 Valid Yes                       21        70.0         70.0       70.0
       No                         4        13.3         13.3       83.3
       Up to some
                                  4         13.3         13.3        96.7
       extent
       Can't say                  1          3.3         3.3        100.0
       Total                     30        100.0       100.0




Graph 4.2 Showing perception of employees regarding PMS’s simplicity




            60
  Percent




            40


            20


             0
                     Yes              No           Up to some     Can't say
                                                     extent

                                      Is PMS simple?



Inference:
Majority of the respondents (70%) feel that PMS is simple, 14% of respondents were not
agree and 14% of respondents were agree up to some extent.
                                           54
Table 4.3 Showing percentage of employees satisfied with the current PMS


                           Frequenc                  Valid    Cumulative
                               y       Percent      Percent    Percent
     Valid Yes                   15        50.0          50.0       50.0
           No                     6        20.0          20.0       70.0
           Up to some
                                  8       26.7             26.7       96.7
           extent
           Can't say              1        3.3             3.3      100.0
           Total                 30      100.0           100.0




Graph 4.3 Showing percentage of employees satisfied with the current PMS




            50




            40




            30
  Percent




            20




            10




             0
                  Yes             No          Up to some extent   Can't say

                             Satisfied with the current PMS


Inference:



                                        55
Half of the respondents (50%) are satisfied with the current PMS, 27% of respondents are
satisfied up to some extent and 20% of respondents are not satisfied with it.
Table 4.4 Showing percentage of employees satisfied with rating system


                            Frequenc                        Valid    Cumulative
                                y          Percent         Percent    Percent
 Valid Yes                        17           56.7             56.7       56.7
       No                          6           20.0             20.0       76.7
       Up to some
                                     5        16.7                 16.7        93.3
       extent
       Can't say                    2          6.7                 6.7       100.0
       Total                       30        100.0               100.0


Graph 4.4 Showing percentage of employees satisfied with rating system




            60




            50




            40
  Percent




            30




            20




            10




             0
                    Yes               No              Up to some extent   Can't say

                                Satisfied with the rating system



Inference:
Majority of the respondents are satisfied with the rating system and some of them are
satisfied up to some extent only a few (20%) are not satisfied and have given some
suggestions to improve the rating system.
                                              56
Table 4.5 Showing percentage of employees, who gets motivated from the
recognition given to high performers

                                    Frequenc                 Valid    Cumulative
                                        y      Percent      Percent    Percent
 Valid           Yes                      23       76.7          79.3       79.3
                 No                        4       13.3          13.8       93.1
                 Up to some
                                           2          6.7         6.9            100.0
                 extent
                 Total                    29         96.7      100.0
 Missin          100
                                           1          3.3
 g
 Total                                    30      100.0

Graph 4.5 Showing percentage of employees, who gets motivated from the
recognition given to high performers




            80




            60
  Percent




            40




            20




             0
                              Yes                     No                Up to some extent

                              Recognition given to high performers motivates



Inference:
Majority of the respondents gets motivated when the recognition is given to the high
performers.
                                                57
Table 4.6 Showing percentage of employees who feel that the PMS is biased
                                           Is it biased?

                                                                                     Cumulative
                                     Frequency        Percent    Valid Percent        Percent
 Valid           Yes                         4            13.3            13.3              13.3
                 No                         16            53.3            53.3              66.7
                 Up to some extent           2             6.7               6.7            73.3
                 Can't say                   8            26.7             26.7            100.0
                 Total                      30           100.0            100.0



Graph 4.6 Showing percentage of employees who feel that the PMS is biased




            60




            50




            40
  Percent




            30




            20




            10




             0
                             Yes                 No              Up to some extent         Can't say

                                                       Is it Biased?




Inference:
Majority of respondents feel that PMS is not biased and some of them (13%) feel that it is
biased.
Table 4.7 Showing response regarding getting opportunity to take part in goal
setting
                                                        58
                           Sufficient opportunity to take part in goal setting

                                                                                  Cumulative
                                       Frequency     Percent      Valid Percent    Percent
  Valid           Yes                         19         63.3              63.3          63.3
                  No                           5         16.7              16.7          80.0
                  Up to some extent             6         20.0             20.0           100.0
                  Total                        30        100.0           100.0




Graph 4.7 Showing responses regarding getting opportunity to take part in goal
setting




             60
   Percent




             40




             20




              0
                                 Yes                         No                   Up to some extent

                                  Sufficient opportunity to take part in goal setting



Inference:
Majority of the respondents gets opportunity to take part in the goal setting, while some
of them (20%) feel that they get opportunity up to some extent and some of them don’t
get sufficient opportunity to take part in goal setting.
Table 4.8 Showing response of employees and HR manager regarding career paths



                                                        59
                                Career paths are laid down with opportunities and
                                           limitations clearly specified

                                Very true      True        Partly true      Not true
                                                                                             Total
  Level           Employees               4           13             5                 8             30
                  Managers                0            0             3                 1              4

  Total                                   4           13             8                 9             34



Graph 4.8 Showing response of employees and HR manager regarding career paths




                                                                                            Career paths are laid
                                                                                           down with opportunities
                                                                                            and limitations clearly
           12.5                                                                                    specified
                                                                                                    Very true
                                                                                                    True
           10.0                                                                                     Partly true
                                                                                                    Not true
   Count




            7.5




            5.0




            2.5




            0.0
                              Employees                          Managers

                                               Level




Inference:
Majority of employees are sure that career paths are laid down with opportunities and
limitations clearly specified while on the other side HR Managers fell that it is partly true.




Table 4.9 Showing response of the employees and HR Managers regarding Goal
setting
                                                           60
                                    Goal setting exercises are used to stretch
                                              capabilities to the limit

                                Very true      True        Partly true      Not true
                                                                                            Total
 Level          Employees               1             21             6                 2            30
                Managers                2              1             1                 0             4

 Total                                  3             22             7                 2            34


Graph 4.9 Showing response of the employees and HR Managers regarding Goal
setting




           25
                                                                                           Goal setting exercises
                                                                                             are used to stretch
                                                                                           capabilities to the limit
                                                                                                   Very true
           20
                                                                                                   True
                                                                                                   Partly true
                                                                                                   Not true
   Count




           15




           10




            5




            0
                            Employees                            Managers

                                               Level



Inference:
Both the employees and HR Manager feel that goal setting exercises are used to stretch
capabilities to the limit.




Table 4.10 Showing response of employees and HR Managers regarding targets
Line managers always discuss performances and targets with you

                                                           61
                              Line managers always discuss performances aand
                                              targets with you

                               Very true    True        Partly true      Not true
                                                                                         Total
 Level         Employees               4           16             8                 2            30
               Managers                2            2             0                 0             4

 Total                                 6           18             8                 2            34


Graph 4.10 Showing response of employees and HR Managers regarding targets




          20
                                                                                        Line managers always
                                                                                        discuss performances
                                                                                         and targets with you
                                                                                               Very true
                                                                                               True
          15                                                                                   Partly true
                                                                                               Not true
  Count




          10




           5




           0
                           Employees                          Managers

                                            Level




Inference:
Majority of employees feel that line managers always discuss performances and targets
with them and Managers also feel the same. Only some of the employees (33%) feel that
it is partly true.
Table 4.11 Showing response regarding autonomy to plan, organize and do the work


                                                        62
                              Employees are empowered and have the autonomy
                                     to plan, organize and do their work

                               Very true    True        Partly true      Not true
                                                                                         Total
 Level         Employees               5           17             6                 2            30
               Managers                1            3             0                 0             4

 Total                                 6           20             6                 2            34


Graph 4.11 Showing response regarding autonomy to plan, organize and do the
work




          20
                                                                                            Employees are
                                                                                         empowered and have
                                                                                        the autonomy to plan,
                                                                                         organize and do their
                                                                                                 work
                                                                                                Very true
          15                                                                                    True
                                                                                                Partly true
                                                                                                Not true
  Count




          10




           5




           0
                           Employees                          Managers

                                           Level



Inference:
Majority of employees and HR Managers both feel that employees are empowered and
have the autonomy to plan, organize and do their work, which shows a level of comfort
among the employees.


Table 4.12 Showing response regarding the expectations from the employees

                                                        63
                                   PMS gives an idea what is expected from
                                                 employees

                               Very true     True        Partly true      Not true
                                                                                          Total
 Level         Employees               7            11             8                 2            28
               Managers                1             3             0                 0             4

 Total                                 8            14             8                 2            32




Graph 4.12 Showing response regarding the expectations from the employees




          12
                                                                                          PMS gives an idea
                                                                                         what is expected from
                                                                                              employees
                                                                                                 Very true
          10                                                                                     True
                                                                                                 Partly true
                                                                                                 Not true
           8
  Count




           6




           4




           2




           0
                           Employees                           Managers

                                             Level




Inference:
Employees and HR Managers both of them feel that PMS gives an idea what is expected
from employees and a very negligible number of employees disagree.




                                                         64
Table 4.13 Showing response regarding PMS whether it allows employees to express
their developmental needs

                                       PMS allows employees to express their
                                               developmental needs

                               Very true        True        Partly true      Not true
                                                                                             Total
 Level         Employees                  6            11             7                 3            27
               Managers                   1             3             0                 0             4

 Total                                    7            14             7                 3            31



Graph 4.13 Showing response regarding PMS whether it allows employees to
express their developmental needs




          12
                                                                                            PMS allows employees
                                                                                               to express their
                                                                                             developmental needs
                                                                                                   Very true
          10                                                                                       True
                                                                                                   Partly true
                                                                                                   Not true
           8
  Count




           6




           4




           2




           0
                           Employees                              Managers

                                                Level



Inference:




                                                            65
Table 4.14 Showing response towards quality of work

                                       A sense of pride in the quality of work
                               Very true         True        Partly true      Not true
                                                                                              Total
 Level         Employees                16              10             3                 1            30
               Managers                  0               3             1                 0             4

 Total                                  16              13             4                 1            34




Graph 4.14 Showing response towards quality of work




          20
                                                                                             A sense of pride in the
                                                                                                 quality of work
                                                                                                    Very true
                                                                                                    True
                                                                                                    Partly true
          15                                                                                        Not true
  Count




          10




           5




           0
                           Employees                               Managers

                                                Level




Inference:
Majority of employees feel a sense of pride in quality of work except a few. HR
Managers also feel the same way.



                                                             66
                      Chapter-5
                Findings, Suggestions &
                      Conclusion




5.1 Findings:




                          67
a) Majority of the employees are familiar with the process of Performance Management
System in Lenovo (India) Pvt. Ltd. Although 7% employees do not know that company
has a formal system for Performance Management.
b) Opinions of the respondents about the simplicity of the PMS are mixed. Majority of
the respondents (70%) find it simple whereas others consider it to be moderately
complex.
c) It was found that half of the employees (50%) are satisfied with the current
Performance Management System (PMS) whereas others are satisfied up to some extent
or not satisfied.
d) Majority of the employees feel that they get sufficient opportunity to take part in goal
setting whereas 15% do not feel so.
e) PMS is considered time consuming only by 20% of the employees whereas 67%
employees do not consider it to be time consuming.
f) Employees believe that PMS does not distract them from the other important activities
whereas only 10% employees do not agree to it.
g) Majority of the employees is satisfied with the rating system and some of them are not
satisfied and have given some suggestion to improve it.
h) Recognition given to high performers motivates the employees.
i) Employees also have enough courage to discuss all the matters of their goals with the
manager.
j) It was also found that superiors help their subordinates at the time of need.
k) Employees at Lenovo (India) Pvt. Ltd. believe the PMS is not biased. Majority of the
respondents in the survey gave a negative response when asked whether it is biased
whereas 10% of the respondents consider it to be biased.
l) Employees consider it to be true that career paths are laid down with opportunities and
limitations clearly specified.
m) Employees also agree that line managers always discuss performances and targets
with them.
n) Lenovo (India) Pvt. Ltd. follows the process of performance management system
effectively and efficiently. Most of the respondents agree that the appraisers communicate
the expectations clearly and provide the role clarity which thereby reflects the
effectiveness of the PMS.
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o) Employees are empowered and have the autonomy to plan, organize and do their work.
It shows that employees have freedom to do their work in their own way.
p) Respondents agree that total quality is the only key to sustained success.
q) Employees get all sorts of feedback i.e. numerical, formal and informal.
r) The most compelling factor for the employees’ turnover was found to be the job
insecurity and most to the employees gave more than one reason for the employees’
turnover including unclear job role, less growth and dissatisfaction with pay.
s) Employees also feel that work is not very well defined and some what it is defined.
t) Some of the employees do not feel any kind of stress in the organization whereas others
feel different kinds of stress i. e. work burden, less appreciation for work, criticism from
superiors and less support from subordinates.
u) A mixed response came with regard to the proper training, some employees agree that
proper training is provided and some feel that it only fulfills the purpose.
v) There is absence of 360 degree technique of appraisal. The relationship between
employees and the executives is one sided.
w) Extra achieved targets are being recognized and awarded at Lenovo (India) Pvt. Ltd.




5.2. RECOMMENDATIONS/SUGGESTIONS:
a) Special training and awareness programs should be conducted for the appraisers and
the appraisees on the purpose and the benefits of Performance Management System. It
should create consciousness and strive for self development.
·b) Performance appraisal should not be limited to incentives alone but should be made
use for identifying training needs, career developments and self improvement. It should
also be used for promotion and career growth.


                                             69
c) The performance management system should spell out the growth curve of an
employee. The management should provide with growth plan for each employee and
follow it effectively and efficiently.
d) There should be a special committee which keeps a check on the Performance
Management System and also address all the problems faced by the employees related to
their performance management.
e) Management should conduct regular sessions, group discussions and brain storming
exercises with employees to know about their expectations from the PMS.
f) Peer evaluations conducted by the employee’s co-workers may be initiated. They are
the ones who do the same work and must be aware of the co-workers performance.
g) In order to achieve better understanding and to develop skills, development and
training programs are of absolute necessity. So management may conduct training
programs based on the performance management system.
h) The preparation of a comprehensive manual guideline giving the objectives of the
system could be done. The process, the role of the appraiser, appraisees, HRD department
and the reviewing officer should be made clear. The manual should spell out the complete
guidelines of the performance management system.




5.3 Suggestions from Employees
Here are some of the suggestions given by employees
    •   According to employees, PMS should be more transparent as it is only one way
        now. The company should have a 360 degree appraisal system, wherein ratings
        should be given by managers, peers and subordinates.
    •   Actual facts and figures should be considered for goal setting and there should be
        two way communications between manager and employees.
                                           70
   •   Employees think that present PMS is subjective and it should be more objective.
   •   There should be clarity of the parameters for ratings along with soft skills and
       hard skills specified.
   •   End date should be provided for the development plans.




5.4 CONCLUSION
An organization's measurement system strongly affects the behavior of people both inside
and outside the organization. If companies are to survive and prosper in information age
competition, they must use measurement and management systems derived from their
strategies and capabilities. Performance Management is one of the key processes that,
when effectively carried out, helps employees know that their contributions are
recognized and acknowledged. Performance Management System drives Performance
Excellence in the Organization. It is a key to Strategic success.


                                             71
At Lenovo (India) Pvt. Ltd., Performance Management system is commendable. The
organization has a sound and effective Performance Management System. At Lenovo
(India) Pvt. Ltd. it is not considered as a mere routine affair but as a purposive
developmental exercise. It gives supervisors and subordinates an equal opportunity to
express themselves under structured conditions. Organization must keep up the good
practices. However, they should focus on certain aspects like societal perspective, peer
evaluations, forming a special committee etc.


Thus, Performance Management System at Lenovo (India) Pvt. Ltd. is effective as it
incorporates the major aspects like direction, awareness, support and rewards. It
successfully recognizes and differentiates between high and low performance; brings
about a feeling of transparency and fairness in the evaluation process; Increases the
objectivity and accuracy of measurement of performance; Increases alignment between
individual and organizational goals and increases the performance-reward linkage. It also
helps in keeping a check on the performance by various follow up programs and provides
various opportunities for self development. Hence, Performance Management system at
Lenovo (India) Pvt. Ltd. is indeed effective.




                                            72
                              My Learning




My Learning


My internship at Lenovo (India) Pvt. Ltd was a great experience. Before starting the
project I was totally naive of how complex the process of business world could be. My
knowledge of subjects and books was not sufficient enough to provide me a clear view of
what organizations are all about, how they form their strategies, how they achieve their
goals and what possibly makes successful organizations. After a period of six weeks now
I find myself in a much better position to explain what an organization and business is all
about. It was indeed my fortune that I got associated with an organization which has a
presence all over and is very much successful in its industry.


In the internship program, I learned about the personal computer industry, the company,
the various businesses of the organization and its various products and services. It was a
great learning experience and also gained firsthand knowledge about the company and its
activities from various top notches of the organization. I also got an opportunity to attend
Open Forum in the company, which was very helpful and informative.

                                            73
I got an opportunity to work with the HR team. I had hands on experience of various
functions of the HR department. Here, I learned to associate my academic knowledge
with practical experience. The company gave me an opportunity to do a study on the
effectiveness of the Performance Management System. During the study, I learnt the
complete process and gained a lot of useful insights on the performance management
system. The study helped me to gain knowledge and exposure about the Performance
Management System and its effectiveness.


Thus, the internship program provided me the platform to learn and experience the real
business world and will now help me in better understanding of my academic subjects
where I would be able to associate them with reality. The internship program was an
enriching experience indeed.




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Description: final project internship report