CHAPTER 1

INTRODUCTION

1.1

About the industry

The Economic scenario in India
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 worlds biggest democracy are
proving challenging.
Indias 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.
Investor sentiment in India has improved significantly in the first quarter of 2009,
according to a survey conducted by Dutch financial services firm ING. With foreign
assets growing by more than 100 per cent annually in recent years, Indian multinational
enterprises (MNEs) have become significant investors in global business markets and
India is rapidly staking a claim to being a true global business power, according to a
survey by the Indian School of Business and the Vale Columbia Center on Sustainable
International Investment.
Despite the global financial crisis, inflow of foreign capital to the country has increased
sharply in 2008-09.

India's foreign exchange reserves increased by US$ 4.2 billion to US$ 255.9
billion for the week ended May 8, 2009, according to figures released in the
Reserve Bank of India's (RBI) weekly statistical supplement.

Net inflows through various non-resident Indians (NRIs) deposits surged from
US$ 179 million in 2007-08 to US$ 3,999 million in 2008-09, according to the
RBI.

FDI inflows during April 2008-January 2009 stood at US$ 23.9 billion compared
with US$ 14.4 billion in the corresponding period of the previous fiscal,
witnessing a growth of 65 per cent, according to the Department of Industrial
Policy & Promotion.

FIIs have made investments of around US$ 2 billion as of May 14, 2009,
including a record single day net purchase of US$ 824.72 million on May 13,
2009, according to the Securities and Exchange Board of India (SEBI).

Inflation for the week ended March 7, 2009, fell to an all time low of 0.44 per
cent. The sharp fall in inflation was due to several factors including easing prices
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.

Industry Overview
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
Groups market share decreased slightly to 7.6 percent, ranking number four worldwide
3

during the fiscal year. The Groups financial performance in the second half of the
2008/09 fiscal year was significantly impacted by the widespread economic slowdown.
Lenovos 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 Groups 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-onyear 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
Lenovos 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 Groups
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.
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.
4

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

Table 1.1- Top five vendors worldwide PC shipments

IDC: Top-5 vendors' worldwide PC shipments, 2Q09 (k units)

Ran
2Q09
Market
2Q08
Market
k
1
2
3
4
5

Vendor
shipments
share
shipments
share
HP
13,095
19.8%
12,644
18.5%
Dell
9,108
13.7%
10,984
16.1%
Acer
8,431
12.7%
6,815
10%
Lenovo
5,757
8.7%
5,596
8.2%
Toshiba
3,494
5.3%
3,163
4.6%
Others
26,407
39.8%
29,202
42.7%
All Vendors 66,291
100%
68,403
100%
* PCs include desktop and portable PCs (including mini notebooks), but
exclude x86 servers.
5

Y/Y
3.6%
(17.1%)
23.7%
2.9%
10.5%
(9.6%)
(3.1%)

Source: IDC, compiled by Digitimes, July 2009

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

07

Client

PC

Shipments 4Q

08

Client

PC

Shipments

(Notebook PCs + Desktop PCs)

(Notebook PCs + Desktop PCs)

Vendor

Market Share

Vendor

Market Share

Hewlett-Packard

17.6%

Hewlett-Packard

15.6%

HCL

10.8%

Dell

10.9%

Lenovo

8.9%

HCL

9.6%

*According to IDCs India Quarterly PC Tracker 2008, 4Q 2008 quarter, March 2009
release

Table 1.3- PC Shipments Market Share

4Q 2008 PC Shipments

1Q 2009 PC Shipments

(Desktop PCs + Notebook PCs)

(Desktop PCs + Notebook PCs)

Vendor

Market Share

Vendor

Market Share

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%

PEST Analysis
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
6

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.
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.
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.
Technological
There is hardly any industry that is characterized by a faster technological development
than computer industry. Increased research and development have caused permanent
innovation processes which lead to short product life cycles resulting in a faster
depreciation of the products.

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
HP
DELL
LENOVO
ACER
TOSHIBA
OTHERS

Market share
18.1%
15.6%
7.8%
9.4%
4.4%
44.7%

Chart 1.1- Market Share of various players in PC Industry

HP; 18%
OTHERS;
45%
DELL;
16%
LENOVO;
8%
ACER;
9%
TOSHIBA;
4%

Industry 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
8

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. Indias most prized resource is its readily
available technical work force. India has the second largest English-speaking
scientific professionals in the world, second only to the U.S. It is estimated that India
has over 4 million technical workers, over 1,832 educational institutions and
polytechnics, which train more than 67,785 computer software professionals every
year. The enormous base of skilled manpower is a major draw for global customers.
India provides IT services at one-tenth the price. No wonder more and more
companies are basing their operations in India.
The industry is in an expansion mode right now, with dozens of new offshore IT
services vendors emerging every day, the industry has a high probability of being
subjected to the 80:20 rule in not too distant a future. In perhaps another ten years, 80
percent of all outsourced offshore development work will be done by 20 percent of
all vendors, a small number of high qualities, trusted vendors. Only a few select
countries and only the most professional companies in those countries will emerge as
9

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 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.

10

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!

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
11

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
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
12

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.

13

1.2 About the Organization

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
14

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
IBMs Personal Computing Division, its global PC (desktop and notebook computer)
business. The acquisition forms a top-tier (third-largest) global PC leader.
2005: Lenovo completes the acquisition of IBM's Personal Computing Division, making
it a new international IT competitor and the third-largest personal computer company in
the world. Lenovo announces the closing of a US$350 million strategic investment by
three leading private equity firms: Texas Pacific Group, General Atlantic LLC and New
bridge Capital LLC. Lenovo establishes a new Innovation Center in Research Triangle
Park, N.C., to enable customers, business partners, solution providers and independent
software vendors to collaborate on new personal computing solutions. Lenovo introduces
the industry's thinnest, lightest and most secure Tablet PC, the ThinkPad X41 Tablet.
Lenovo introduces the first widescreen ThinkPad with embedded wireless WAN, the
ThinkPad Z60, available for the first time with a titanium cover. Lenovo becomes the
world's largest provider of biometric-enabled PCs by selling its one-millionth PC with an
integrated fingerprint reader. William J. Amelio is appointed as CEO and President of
Lenovo.
2006: Lenovo introduces the first dual-core ThinkPad notebook PCs, improving
productivity and extending battery life for up to 11 hours. Lenovo technology flawlessly
supports the 2006 Olympic Winter Games in Torino, Italy, supplying 5,000 desktop PCs,
350 servers and 1,000 notebook computers. Lenovo also hosts seven Internet i.lounges for
use by Olympic athletes and visitors. The first Lenovo-branded products outside of China
debut worldwide. Researchers, scientists and product design teams from around the world
combine Lenovo's heritage in enterprise and consumer PC technology to design 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.

Organizational Structure
It is the formal and informal framework of policies and rules, within which an
organization arranges its lines of authority and communications, and allocates rights and
15

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
organizations 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 likeHR Department
Financial Department
Marketing Department
Transactional Department
Relational Department
Strategic Department
Legal Department

Chart 2.71- Organizational Structure

Awards and Certifications:

16

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

years

Asia-Pacific

PR

Awards.

In particular, Lenovos 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

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.
SWOT analysis
STRENGTH

Lean cost structure

Effective business model
Innovation leadership
Event sponsoring
Good marketing and

WEAKNESS
Unable to maintain sustained growth rate
in all market segment
Ignoring potential market
Retaining of largest
distribution

strategies
17

competitors
Poor global perception

shares

by

 Strategic alliance with suppliers

High delivery time:3 weeks
Quick responsiveness
Strong R&D: taken over from IBM
OPPORTUNITY
THREAT
Increasing global demand for PC
Competition threat from both local and
Specialty shops proving one stop
international markets
Industry reaching maturity
platform for distribution
Government organizations increasing
Software piracy and clone market
Price war
their spending on IT
Emerging small firms
Internet boom
International competitors forming
Increasing product portfolios/ product

lines
Netbooks
Converting

alliances with local competitors.

manual

orders

to

automotive orders
STRENGTH
1. Lean cost structure:
The Groups 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:
Lenovos dual business model sets its products, services and business process
around customer need and market segmentation. This tightly integrated, end toend 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

18

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.

OPPORTUNITY
1. Increasing global demand for PC:
2. Signing of memorandum of understanding: The company can develop their market in
3.
4.
5.
6.
7.
8.

US by signing a memorandum of understanding with the US

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 automative orders

WEAKNESS
1.

Unable to maintain sustained growth rate in all market segment: Lenovo is

heavily weighted showed significant slowdown in the second half of the fiscal
year under the economic crisis because it has not adequately addressed the

worldwide transaction segment outside China, in particular the consumer market.

2.
Ignoring potential markets: The main focus of Lenovo is on the established
3.

markets and they lack marketing strategies to enter into the untapped markets.
Retaining of largest shares by competitors:
Lenovos 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
5.

premium brand, but Lenovo has to reinforce this perception to its global brand.
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.
19

Lenovo Products
Notebooks
ThinkPad Notebooks

Track record of success, cost-savings

Industry-leading capabilities that dramatically increase productivity and reduce cost.
Features:

Business class technology

Thin, light widescreen designs
Extra long battery life
Advanced mobile workstations

IdeaPad Notebooks

Engineered for a great user experience

Perfect for home/home office, with distinctive designs and features for entertainment and
multimedia.
Features:
Home/office versatility
11.1 to 17 inches widescreen displays
20

 Dolby home theatre audio

Touch sensitive controls
VeriFace face recognition securities
Lenovo 3000 Notebooks

Worry-free computing at a great value

A smart choice for business computing needs and budgets. Plus, new models ideal for
home/home office.
Features:

Roomy, widescreen displays

Stylish silver colored top covers
Preloaded small business softwares
LenovoCare tools, support and services

Desktops
ThinkCentre Desktops

Award winning quality and innovation

Industry-leading capabilities that dramatically increase productivity and reduce cost.
Features:
Energy efficient desktops
Security on a corporate level at a small business price
21

 Dual Independence Display (DID)

The ThinkCentre Energy Calculator
IdeaCentre Desktops

New PCs for home/home office

Loaded with features for everything from family finance to multimedia and
entertainment.
Features:

VeriFace face recognition

Automatic brightness adjustment
Antibacterial keyboard
OneKey convenience

Workstations

ThinkCentre Workstations
Features:

User centric design

Cool and quiet
ISV certifications
Environment-friendly

Servers
22

Tower Servers
Features:

Single and dual sockets

Easier cooling
Existing-network scalability
Hard disk drive optimization

Rack Servers
Features:

Single and dual sockets

Space-optimized design
Centralized cable management
Centralized server management

Accessories and Upgrades

23

Departments

HR
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
24

with hiring, firing, training, and other personnel issues, typically referred to as 'human
resources management.
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 CEOs
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.

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;
25

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.
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 longterm 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, its 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 Lenovos finance team was when the company acquired the
IBMs 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.
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
26

activities. As a result of their broad scope of involvement, internal auditors may have a
variety of higher educational and professional backgrounds.
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 coordinate 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.

27

CHAPTER 2
TOPIC INTRODUCTION
&
LITERATURE REVIEW

28

2.1 Topic Introduction

A Study on the Effectiveness of the Performance Management System at Lenovo (India)
Pvt. Ltd.

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

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.

Operational Definitions
a) Performance Management System
29

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. Its a 4 step
process. It includes: - Incumbent/Appraisees, Manager/ Appraiser, Reviewer, HR.
b) Incumbent/Appraisee
Appraisee is an individual, who is assessed as part of the performance cycle. He is the key
driver of his own performance management system.
c) Manager/ Appraiser
An Individual who helps plans performance and assesses the performance of one or more
appraisees that report to him/her. He also helps manage performance & provides
continuous feedback and coaching.
d) HR
HR to function as a facilitator in the process- would ensure adherence to guidelines,
support, and dispute resolution and modify design aspects to align with organization
requirements. They are responsible for the normalization of the scores and will facilitate
the process and ensure sanctity of implementation, process rigor and quality.
e) KPI
A performance indicator or key performance indicator (KPI) is a measure of performance.
Such measures are commonly used to help an organization define and evaluate how
successful it is, typically in terms of making progress towards its long-term organizational
goals. KPIs can be specified by answering the question, "What is really important to
different stakeholders". KPIs may be monitored using Business Intelligence techniques to
assess the present state of the business and to assist in prescribing a course of action. The
act of monitoring KPIs in real-time is known as business activity monitoring (BAM).
KPIs are frequently used to "value" difficult to measure activities such as the benefits of
30

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.

31

2.2 Literature review

Performance appraisal is the assessment of an individual's performance in an performance
in a systematic way, the performance being measured against such factors as job
knowledge, quality and quantity of output, initiative, leadership abilities, supervision,
dependability, co-operation, judgment, versatility etc. assessment should not be confined
to the past performance alone. Potentials of the employee for the future performance must
also be assessed. Performance appraisal can be defined as "the systematic evaluation of
the individual with respect to his or her performance on the job and his or her potential
for development". A more comprehensive definition is, Performance appraisal is a
formal structured system of measuring and evaluating an employee's job and how the
employee can perform effectively in future so that the employee, organization all be
benefited."Performance appraisal, to common understanding, is the formal and informal
assessment of the performance of the employee at work. In an informal system we are
aware that superior is continually making judgments about their subordinates'
performance on a subjective basis. By contrast, superiors could resort to using formalized
appraisal techniques when assessing the performance of subordinate, and these judgments
are considered to be more objective. In formalized systems the terms 'performance
appraisal and 'performance management' are used. Both refer to a process whereby
mangers and their subordinates share understanding about what has to be accomplished,
and the manager will naturally be concerned about how best bring about those
accomplishments by adept management and development of people in short and long
terms. Also, performance would be measured using the techniques discussed in this
chapter and it will be subsequently related to targets or plans. In this way the subordinate
receives

feedback on

his

or

her

progress.

distinguished feature

of

performance management is its integrating strength in aligning various processes with

corporate objectives: for example, the introduction of performance-related payment
system and mobilization for training and development resources to achieve corporate
objectives.
In a performance management system, feedback remains integral to successful practice.
The feedback, however, is a discussion. Both the staff person and his manager have an
equivalent opportunity to bring information to the dialogue. Feedback is often obtained
from peers, direct reporting staff, and customers to enhance mutual understanding of an
32

individuals contribution and developmental needs. (This is commonly known as 360

degree feedback.) The developmental plan establishes the organizations commitment to
help each person continue to expand his knowledge and skills. This is the foundation
upon which a continuously improving organization builds.
Leading the adoption and implementation of a performance management system is a
wonderful opportunity for the HR professional. It challenges your creativity, improves
your ability to influence, and allows you to foster real change in your organization.
Performance management starts with how a position is defined and ends when it is
determined why an excellent employee left the organization for another opportunity.
Within such a system, feedback to each staff member occurs regularly. Individual
performance objectives are measurable and based on prioritized goals that support the
accomplishment of the overall goals of the total organization. The vibrancy and
performance of the organization is ensured because there is focus on developmental plans
and opportunities for each staff member.

33

CHAPTER 3
RESEARCH METHODOLOGY

34

Title of the study:

The project is titled as A Study on the Effectiveness of the Performance Management
System at Lenovo (India) Pvt. Ltd.
Purpose 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.
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.

Research Methodology:
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.

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.
35

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.

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.
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.
Limitations of the Study
In the project, non-random sampling has been used which is a non probability

sampling method; it therefore does not provide estimates of precision.

The sample size is restricted to only those employees of Lenovo (India) Pvt. Ltd.

who have at least undergone one appraisal cycle.

The study was done for a short period of time, which might not hold true over a
long period of time.

36

CHAPTER 4
ANALYSIS & INTERPRETATION

37

A
f
o
r
m
a
l
P
M
S
1
0
8
6
0
4

Q.1. Are you familiar with the process of Performance Management System?

Valid Yes
No
Up to some

6.7

6.7

30

100.0

100.0

Percnt

extent
Total
Table 4.1

Frequency Percent Valid Percent

26
86.7
86.7
2
6.7
6.7

2
0Y
e
sA
N
o
U
p
t
o
s
m
e
x
t
e
n
fo
rm
a
lP
M
S

Graph 4.1

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

Q.2 Do you find PMS simple?

38

Valid
Valid Yes
No
Up to some

Frequency Percent
21
70.0
4
13.3

Cumulative

Percent
70.0
13.3

Percent
70.0
83.3

6
0
4
2
0Y
e
sIs
N
o
U
p
t
o
s
m
e
C
a
n
'
t
s
a
y
e
x
n
t
P
M
S
s
im
p
le
?

Percnt

extent
Can't say
Total
Table 4.2

13.3

13.3

96.7

1
30

3.3
100.0

3.3
100.0

100.0

Graph 4.2

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.

Q.3. Are you satisfied with the current PMS?

39

Percen
Valid Yes
No
Up to some
extent
Can't say
Total

Valid

Cumulative

Frequency
15
6

t
50.0
20.0

Percent
50.0
20.0

Percent
50.0
70.0

26.7

26.7

96.7

1
30

3.3
100.0

3.3
100.0

100.0

5
0
4
0
3
0
2
0
1
0
0Y
e
sS
N
o
U
p
t
o
s
m
e
x
t
e
n
C
a
n
'
t
s
a
y
a
tis
fe
d
w
ith
e
c
u
re
n
tP
M
S

Percnt

Table 4.3

Graph 4.3

Inference:
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.
Q.4. Are you satisfied with rating system?

Frequency Percent
40

Valid

Cumulative

Percent

Percent

Valid Yes
No
Up to some
extent
Can't say
Total

17
6

56.7
20.0

56.7
20.0

56.7
76.7

16.7

16.7

93.3

2
30

6.7
100.0

6.7
100.0

100.0

6
0
5
0
4
0
3
0
2
0
1
0
0Y
e
sS
o
p
o
sm
e
x
e
n
C
a
n
'ts
a
y
a
tis
fN
e
d
w
ith
e
rU
a
titn
g
s
y
tte
m

Percnt

Table 4.4

Graph 4.4

Inference:
Majority of the respondents are satisfied with the rating system and some of them are
satisfied up to some extent only a few (20%) are not satisfied and have given some
suggestions to improve the rating system.
Q.5 Do you get motivated from the recognition given to high performers?
Valid
Valid

Yes
No
Up to some
extent

Frequency Percent
23
76.7
4
13.3
2

6.7
41

Cumulative

Percent
79.3
13.8

Percent
79.3
93.1

6.9

100.0

Total
Missing

29
1
30

96.7
3.3
100.0

100.0

8
0
6
0
4
0
2
0
0Y
e
sN
oU
p
to
s
m
e
x
te
n

Percnt

Total
Table 4.5

Graph 4.5

R
e
c
o
g
n
ito
n
g
iv
e
n
to
h
ig
p
e
rfo
m
e
rs
m
o
tiv
a
te
s

Inference:
Majority of the respondents gets motivated when the recognition is given to the high
performers.

42

Q.6 Is it biased?
Valid
Valid Yes
No
Up to some
extent
Can't say
Total
Table 4.6

Frequency Percent
4
13.3
16
53.3

Cumulative

Percent
13.3
53.3

Percent
13.3
66.7

6.7

6.7

73.3

8
30

26.7
100.0

26.7
100.0

100.0

7o

Percnt

6
0
5
0
4
0
3
0
2
0
1
0
0Y
e
sN
o
U
p
t
o
s
m
e
x
t
e
n
C
a
n
'
t
s
a
y
Is
itB
a
s
e
d
?

Graph 4.6

43

Inference:
Majority of respondents feel that PMS is not biased and some of them (13%) feel that it is
biased.
Q.7 Do you get sufficient opportunity to take part in goal setting?
Valid
Valid Yes
No
Up to some
extent
Total
Table 4.7

Frequency Percent
19
63.3
5
16.7

Cumulative

Percent
63.3
16.7

Percent
63.3
80.0
100.0

20.0

20.0

30

100.0

100.0

Percnt

6
0
4
0
2
0
0Y
e
s
N
o
U
p
t
o
s
m
e
x
t
e
n
S
u
fic
e
n
to
p
o
rtu
n
ity
o
ta
k
e
p
a
rtin
g
o
a
ls
e
tin
g

Graph 4.7

Inference:

44

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 dont
get sufficient opportunity to take part in goal setting.

Q.8. Are the career paths are laid down with opportunities and limitations clearly
specified?
Career paths are laid down with
opportunities and limitations clearly
specified
Partly

Very
true
Level

Employees
Managers

Total
Table 4.8

4
0
4

True
13
0
13

true

Total
Not true
5
8
3
1
8
9

30
4
34

C
a
rn
e
ts
p
a
h
s
a
r
e
l
a
i
d
d
o
w
ilm
o
p
t
u
n
e
s
n
c
y
fN
iP
e
c
d
rT
V
y
e
u
a
tle
ru
o

Count

.1
1
2
5
.7
0
.5
5
.2
0
.0
5
.E
m
p
lo
y
e
sL
M
a
n
g
e
r
s
e
v
l

Graph 4.8
Inference

45

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.
Q.9. Are goal setting exercises are used to stretch capabilities to the limit?
Goal setting exercises are used to stretch
capabilities to the limit
Partly

Very
true

Level

True
21
1
22

true

Total
Not true
2
0
2

G
o
a
l
s
e
t
i
n
g
e
x
r
c
i
s
e
2
5
r
u
d
o
s
t
e
h
c
p
b
s
h
l
m
t
V
r
y
u
T
u
e
2
0
P
a
t
l
r
e
N
o
1
5
1
0
5
0E
m
p
lo
y
e
sL
a
n
g
e
rs
e
v
lM
Employees
Managers

6
1
7

30
4
34

Count

Total
Table 4.9

1
2
3

Graph 4.9

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

46

Q.10. Line managers always discuss performances and targets with employees?
Line managers always discuss
performances and targets with you
Very
Partly

L
i
n
e
m
a
n
g
e
r
s
a
l
w
y
s
2
0
d
s
c
u
s
p
f
o
m
n
c
e
a
t
r
t
w
i
t
h
o
u
V
y
u
T
u
e
P
a
r
t
l
r
e
1
5
N
o
1
0
5
0E
m
p
lo
y
e
sM
a
n
g
e
rs
true

Level

Total

Employees
Managers

Count

Total
Table4.10

Graph 4.10

4
2
6

True
16
2
18

true

Not true
8
2
0
0
8
2

30
4
34

L
e
v
l

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.

47

Q.11. Employees are empowered and have the autonomy to plan, organize and do
their work?
Employees are empowered and have the
autonomy to plan, organize and do their
work
Partly

Very

E
m
p
l
o
y
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e
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l
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a
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k
V
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1
5
T
u
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1
0
5
0E
m
p
lo
y
e
sM
a
n
g
e
rs
true

Level

Total

Employees
Managers

Count

Total
Table 4.11

Graph 4.11
Inference:

5
1
6

True
17
3
20

true

Not true
6
2
0
0
6
2

30
4
34

L
e
v
l

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.
Q.12 Does PMS gives an idea what is expected from employees?
48

PMS gives an idea what is expected from

employees
Partly

Very

P
M
S
g
i
v
e
s
a
n
i
d
e
a
1
2
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m
l
o
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V
r
u
1
0
T
u
P
a
t
l
y
r
e
N
o
8
6
4
2
0E
m
p
lo
y
e
sL
M
a
n
g
e
r
s
e
v
l
true

Level

Total

Employees
Managers

true

Not true
8
2
0
0
8
2

28
4
32

Count

Total
Table 4.12

7
1
8

True
11
3
14

Graph 4.12
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.

Q.13 Does PMS allows the employees to express the developmental needs?

49

PMS allows employees to express their

developmental needs
Partly

Very

P
M
S
a
l
o
w
s
e
m
p
l
o
y
e
s
1
2
t
e
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n
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V
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1
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r
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l
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N
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8
6
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0E
m
p
lo
y
e
sL
a
n
g
e
rs
e
v
lM
true

Level

Total

Employees
Managers

true

Not true
7
3
0
0
7
3

27
4
31

Count

Total
Table 4.13

6
1
7

True
11
3
14

Graph 4.13
Inference:

Employee and HR manager both feels that PMS allows employees to express their
developmental needs.

Q.14 Response towards quality of work?

A sense of pride in the quality of work
Very
True
Partly
Not true
50

Total

Level

A
s
e
n
o
f
p
r
i
d
e
n
t
h
e
2
0
q
u
a
l
i
t
y
w
o
r
k
V
e
t
u
T
u
P
a
r
l
y
r
e
1
5
N
o
t
1
0
5
0E
m
p
lo
y
e
sM
a
n
g
e
rs
Employees
Managers

Count

Total
Table 4.14

true
16
0
16

Graph 4.14

true

10
3
13

3
1
4

1
0
1

30
4
34

L
e
v
l

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

51

CHAPTER 5
FINDINGS & SUGGESTIONS

52

. Findings:

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..

Majority of the employees feel that they get sufficient opportunity to take part in

goal setting whereas 15% do not feel so..

Employees believe that PMS does not distract them from the other important

activities whereas only 10% employees do not agree to it..

Recognition given to high performers motivates the employees.
o Employees also have enough courage to discuss all the matters of their
goals with the manager.
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.

Employees consider it to be true that career paths are laid down with

opportunities and limitations clearly specified.

Employees also agree that line managers always discuss performances and targets

with them.
There is absence of 360 degree technique of appraisal. The relationship between

employees and the executives is one sided.

Extra achieved targets are being recognized and awarded at Lenovo (India) Pvt.
Ltd.

Suggestions:
Here are some of the suggestions given by employees

53

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.

54

CHAPTER 6
RECOMMENDATION & CONCLUSION

55

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

56

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

57