Summer Internship Report on lenovo

PART-A

CHAPTER 1

INDUSTRY PROFILE

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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.

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

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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.

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

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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.

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.

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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.

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.

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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

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.

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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

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.

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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

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.

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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

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;

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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

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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

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Group’s profit before taxation (excluding the cost of restructuring actions and one-off

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.

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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)

Rank Vendor

2Q09

shipments

Market

share

2Q08

shipments

Market

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

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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

(Notebook PCs + Desktop PCs)

4Q ’08 Client PC Shipments

(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

(Desktop PCs + Notebook PCs)

1Q 2009 PC Shipments

(Desktop PCs + Notebook PCs)

Vendor Market Share Vendor Market Share

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%

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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.

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

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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 shareHP 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

HP; 18.10%

DELL; 15.60%

LENOVO; 7.80%ACER; 9.40%

TOSHIBA; 4.40%

OTHERS; 44.70%

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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

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

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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

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

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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

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!

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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.

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

20

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

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.

21

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.

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.

22

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 

Commitment to employees

Leadership capability

Global citizenship

23

1.5.1.2 The SWOT analysis of HP

STRENGTH

Leadership position

Consumer centric brand

Strong after sales service

Design strategy: looks cost

strategy

WEAKNESS

Low flexibility: it does not have

high customization available

Decline in digital entertainment

market

Software service

OPPORTUNITY

PC business

Service industry: bought

world’s No 2

Service provider EDS

THREAT

Pricing pressure

Component pricing

Slow revenue growth

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

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.

24

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)

25

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.

1.5.2.2 SWOT analysis of Dell

STRENGTH

Inventory turnover rate is 6 days.

Revenue growth at 100%

Cost efficiency

Direct to customer business model:

minimum credit risk

Latest technology customization

Internet sales leadership: $5M

everyday worldwide

Weakness

No proprietary technology

High dependency on component

suppliers

Lack of software support for

customers

Opportunity

Network service in B2B

Strong potential in china and India

Low costs and advanced technology

Growth in business, education and

government markets

Threat

Dell’s market share is very less

Price range considered premium

Currently fluctuation policy

instability

Tariff trade barriers

1.5.3 Acer

26

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

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

27

STRENGTHS

Operational Efficiency — Tight

Control on Overhead Costs

Improved Economies of Scale

Fast Reactions to Market Changes

After Cautious ROI Evaluation

Aggressive Price Strategy —

Particularly Suitable to a Time of

Economic Recession

Strong global logistics

Strong relationships with suppliers

WEAKNESS

Low Profit Margins

Multiple Brands, Which Increase

Costs and Dilute Resource

Brand perception as Low-Cost PC

Provider

Insufficient Attention to the

Chinese Market the Second-

Largest in the World

Limited Product Portfolio for

Midsize Business

OPPORTUNITIES

Economic Downturn, Which Favors

Low-Price Products

Growth of Mobile PCs in Homes in

Emerging Markets, Where Brand

Preferences Are Weaker

Growth Into the Chinese Market

Growth Into Midsize-Business

Markets

Reaching Larger Numbers of

Customers by Targeting Various

Segments Through Multiple Brands

THREAT

Continued Price Decline in Mobile

PCs, Due in Part to Mini-

notebooks, Which Erodes Margins

and profitability

Excessive Reliance on Western

Europe, Which Contributed 40% of

Acer's Total Mobile-PC Revenue in

2008

Dell's Expansion Into Indirect Sales

Samsung’s entering into consumer

mobile PC s.

Profit margin squeezed by sales to

telecom service provider.

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CHAPTER 2

COMPANY PROFILE

29

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

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.

30

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

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

31

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:

32

Managing

Director

Director of T

Model

MarketingManager

HR Manager

Director of R

Model

Director of Finance

Country Manager for

Legal Department

Services and

support Manager

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

Bangalore.

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.

33

2.4 SWOT analysis

STRENGTH

Lean cost structure

Effective business model

Innovation leadership

Event sponsoring

Good marketing and distribution

strategies

Strategic alliance with suppliers

Quick responsiveness

Strong R&D: taken over from IBM

WEAKNESS

Unable to maintain sustained growth

rate in all market segment

Ignoring potential market

Retaining of largest shares by

competitors

Poor global perception

High delivery time:3 weeks

OPPORTUNITY

Increasing global demand for PC

Specialty shops proving one stop

platform for distribution

Government organizations

increasing their spending on IT

Internet boom

Increasing product portfolios/

product lines

Netbooks

Converting manual orders to

automotive orders

THREAT

Competition threat from both local

and international markets

Industry reaching maturity

Software piracy and clone market

Price war

Emerging small firms

International competitors forming

alliances with local competitors.

STRENGTH

1. Lean cost structure:

34

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:

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:

35

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:

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

36

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:

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.

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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

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.

38

2.7 Lenovo Products

Notebooks

ThinkPad Notebooks

Track record of success, cost-savingsIndustry-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 experiencePerfect for home/home office, with distinctive designs and features for entertainment and multimedia.

39

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

Worry-free computing at a great valueA 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

40

Desktops

ThinkCentre Desktops

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

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 officeLoaded with features for everything from family finance to multimedia and entertainment.

Features:

VeriFace face recognition Automatic brightness adjustment Antibacterial keyboard OneKey convenience

Workstations

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ThinkCentre Workstations

Features:

User centric design Cool and quiet ISV certifications Environment-friendly

Servers

Tower Servers

Features:

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

Rack Servers

42

Features:

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

Accessories and Upgrades

2.8 Departments

43

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

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.

44

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

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

45

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.

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

46

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

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;

47

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

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

48

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 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 SAP to automate the

49

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

50

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

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.

51

PART-B

Chapter-3

Research Design

3.1. Introduction to the Project Topic:

52

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

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:

53

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:

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.

54

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.

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

55

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

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

56

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.

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.

57

Chapter-4

Data Analysis

58

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

Vali

d

Yes26 86.7 86.7

No 2 6.7 6.7

Up to some

extent2 6.7 6.7

Total 30 100.0 100.0

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

Performance Management System

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

59

Up to some extentNoYes

A formal PMS

100

80

60

40

20

0

Perc

ent

A formal PMS

Table 4.2 Showing perception of employees regarding PMS’s simplicity

Frequenc

y PercentValid

PercentCumulative

PercentValid Yes 21 70.0 70.0 70.0

No 4 13.3 13.3 83.3Up to some extent

4 13.3 13.3 96.7

Can't say 1 3.3 3.3 100.0Total 30 100.0 100.0

Graph 4.2 Showing perception of employees regarding PMS’s simplicity

Can't sayUp to some extent

NoYes

Is PMS simple?

60

40

20

0

Perc

ent

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.

60

Table 4.3 Showing percentage of employees satisfied with the current PMS

Frequenc

y PercentValid

PercentCumulative

PercentValid Yes 15 50.0 50.0 50.0

No 6 20.0 20.0 70.0Up to some extent

8 26.7 26.7 96.7

Can't say 1 3.3 3.3 100.0Total 30 100.0 100.0

Graph 4.3 Showing percentage of employees satisfied with the current PMS

Can't sayUp to some extentNoYes

Satisfied with the current PMS

50

40

30

20

10

0

Perc

ent

Inference:

61

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

y PercentValid

PercentCumulative

PercentValid Yes 17 56.7 56.7 56.7

No 6 20.0 20.0 76.7Up to some extent

5 16.7 16.7 93.3

Can't say 2 6.7 6.7 100.0Total 30 100.0 100.0

Graph 4.4 Showing percentage of employees satisfied with rating system

Can't sayUp to some extentNoYes

Satisfied with the rating system

60

50

40

30

20

10

0

Perc

ent

Inference:

62

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.

Table 4.5 Showing percentage of employees, who gets motivated from the

recognition given to high performers

Frequenc

y PercentValid

PercentCumulative

PercentValid Yes 23 76.7 79.3 79.3

No 4 13.3 13.8 93.1Up to some extent

2 6.7 6.9 100.0

Total 29 96.7 100.0Missing

1001 3.3

Total 30 100.0

Graph 4.5 Showing percentage of employees, who gets motivated from the

recognition given to high performers

63

Up to some extentNoYes

Recognition given to high performers motivates

80

60

40

20

0

Perc

ent

Inference:

Majority of the respondents gets motivated when the recognition is given to the high

performers.

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

Is it biased?

Frequency Percent Valid PercentCumulative

PercentValid Yes 4 13.3 13.3 13.3

No 16 53.3 53.3 66.7Up to some extent 2 6.7 6.7 73.3Can't say 8 26.7 26.7 100.0Total 30 100.0 100.0

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

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Can't sayUp to some extentNoYes

Is it Biased?

60

50

40

30

20

10

0

Perc

ent

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

Sufficient opportunity to take part in goal setting

Frequency Percent Valid PercentCumulative

PercentValid Yes 19 63.3 63.3 63.3

No 5 16.7 16.7 80.0Up to some extent 6 20.0 20.0 100.0Total 30 100.0 100.0

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

setting

Up to some extentNoYes

Sufficient opportunity to take part in goal setting

60

40

20

0

Perc

ent

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

Career paths are laid down with opportunities and limitations clearly specified

TotalVery true True Partly true Not trueLevel Employees 4 13 5 8 30

Managers 0 0 3 1 4Total 4 13 8 9 34

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

66

ManagersEmployees

Level

12.5

10.0

7.5

5.0

2.5

0.0

Count

Not true

Partly true

True

Very true

Career paths are laid down with opportunities and limitations clearly

specified

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

Goal setting exercises are used to stretch capabilities to the limit

TotalVery true True Partly true Not trueLevel Employees 1 21 6 2 30

Managers 2 1 1 0 4Total 3 22 7 2 34

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

setting

ManagersEmployees

Level

25

20

15

10

5

0

Count

Not true

Partly true

True

Very true

Goal setting exercises are used to stretch

capabilities to the limit

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

Line managers always discuss performances aand targets with you

TotalVery true True Partly true Not trueLevel Employees 4 16 8 2 30

Managers 2 2 0 0 4Total 6 18 8 2 34

68

Graph 4.10 Showing response of employees and HR Managers regarding targets

ManagersEmployees

Level

20

15

10

5

0

Count

Not true

Partly true

True

Very true

Line managers always discuss performances and targets with you

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

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

TotalVery true True Partly true Not trueLevel Employees 5 17 6 2 30

Managers 1 3 0 0 4Total 6 20 6 2 34

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

ManagersEmployees

Level

20

15

10

5

0

Count Not true

Partly true

True

Very true

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

work

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

PMS gives an idea what is expected from employees

TotalVery true True Partly true Not trueLevel Employees 7 11 8 2 28

Managers 1 3 0 0 4Total 8 14 8 2 32

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Graph 4.12 Showing response regarding the expectations from the employees

ManagersEmployees

Level

12

10

8

6

4

2

0

Count

Not true

Partly true

True

Very true

PMS gives an idea what is expected from

employees

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.

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

PMS allows employees to express their developmental needs

TotalVery true True Partly true Not trueLevel Employees 6 11 7 3 27

Managers 1 3 0 0 4Total 7 14 7 3 31

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

ManagersEmployees

Level

12

10

8

6

4

2

0

Count

Not true

Partly true

True

Very true

PMS allows employees to express their

developmental needs

Inference:

Table 4.14 Showing response towards quality of work

A sense of pride in the quality of work

TotalVery true True Partly true Not trueLevel Employees 16 10 3 1 30

Managers 0 3 1 0 4Total 16 13 4 1 34

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Graph 4.14 Showing response towards quality of work

ManagersEmployees

Level

20

15

10

5

0

Count

Not true

Partly true

True

Very true

A sense of pride in the quality of work

Inference:

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

73

Chapter-5

Findings, Suggestions &Conclusion

5.1 Findings:

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.

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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.

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.

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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.

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·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.

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

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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.

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

78

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.

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.

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My Learning

My Learning

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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.

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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