Introduction Lenovo: A Closer Look

 Incorporated in Hong Kong  Net Profit- 2005- 1.5%,

in 1988 by Liu Chuanzhi 2006- 1.7%, 2007- 1.6%
 China’s largest PC company  Increase in sales by almost
with 30% market share 5X post acquisition in
(2001) FY06, along with high
 Competitive advantage finance cost
based on local
competencies

 Major Product Category-

Desktops (85%)
 Client Base- 80% small
businesses and consumers
 Market presence majorly in
China, low brand awareness
outside China
 Introduction Evolution of Global PC Industry

1970 1982
s
IBM introduces its first line of Marked the era of IBM compatible
PCs due to increase in computers, led by Compaq Dell started building IBM
demand of computers and 1984 compatible computers after
success of Apple Compaq started working with
Intel

Microsoft and Intel set basic 1980

standard for PC processors, s
internet boom, outsourcing, 1990 Major Contributing Factors
offshoring s HP entered PC market, later on expanded to include
printers, medical and computational devices

Change Drivers

Increase in adoption of PCs

2004- Internet boom
2001
05
Change Enablers
Consolidation and Acquisitions: HP The market matured with
acquired compact, Gateway emergence of 5 major
Success of smart softwares
acquired eMachines market leaders- HP, Dell,
Consolidation
Lenovo, Acer, Siemens
 Introduction Evolution and Expansion of Lenovo

1987
1984

11 scientists form NTD using NTD launches legend card- language

NTD was renamed Legend
seed funding of $25000 operating system for Chinese 1989- Computer Company and
provided by Chinese Translation 90 launched its first PC in China
Academy of Sciences

1995
Renamed Legend as 2003-
Lenovo for use outside 04
China Legend became world’s fifth largest manufacturer of
motherboards

2004 2004

Acquired PC division of IBM for Joined International

$1.75bn Olympic Committee’s
worldwide marketing
program
3. What challenges did Lenovo face after the acquisition?

Uncertainty regarding the reaction of IBM’s customers to the new ownership arrangement

Lenovo’s association with China and the Chinese government was seen as a potentially negative connotation that competitors were eager to
cultivate

Complementary selling channels: In China 70% sales through business partners and 30% through consulting whereas IBM did the other way
round

Lenovo focused on small business while IBM targeted corporates and large enterprises

Working via conference calls around the clock was very different from Lenovo’s existing tradition of meeting together to solve problems

Calls were scheduled very early in the morning or late at night- executives working round the clock

English as a working language is a challenge in China

4. How should Lenovo handle the brand management challenges associated with the acquisition?

Challenges Steps to create a Brand value

proposition
• Lack of awareness for Lenovo • Turin Olympics sponsorship
• Media perception - Chinese improved the brand reputation
company • “ThinkPad unleashed”-
• Customer’s concerns: Innovation under Lenovo
• Innovation will slow down • Deals like funding to financially
• Quality will suffer deprived students brought
• Service and support would positive publicity
be outsourced

“ Unlike the competition we have the ability to combine efficiency and innovation. This is what Lenovo is all about and it’s what we have set
in our mission statement: We put more innovation in the hands of more people so they can do more amazing things”
- Deepak Advani
Chief Marketing Officer
4. How should Lenovo handle the brand management challenges associated with the acquisition?

Master brand House of brands

• Focus on building Lenovo Brand
worldwide
• Brand equity
Strategies
Synergy approach
• A hybrid model focusing on
master brand plus sub brand
• Required a balanced
investments on both Lenovo
and ThinkPad
• Committing resources on each
sub brand
• Expensive and challenging in PC
market (thin margins)
• Doubts on its market impact
Lexus/Toyota strategy
• Luxury + mass market offering
• Twining different consumer
experiences
• ThinkPad-Premium line
• Lenovo- Standard Products

Implemented: One-two punch Suggested: Master Branding

1 • Long term strategy : focus on master brand
Build up Lenovo as a strong master brand
name
• ThinkPad brand on other products can
2 Strengthen the ThinkPad product brand dilute the value for which it stands
5. In trying to become a global brand, did Lenovo face a problem coming from China?

Yes, The perception of Chinese firms and government structure was the key reason.

The trustworthiness It may be It may depreciate

associated with considered as a cheap the value of the
Chinese and Asian provider of laptops ThinkPad brand due to
firms was low with not great quality association with
Lenovo
 Why do Acquisitions Fail? What Lenovo did better
Lenovo didn’t force IBM to adapt

Acquired forced to Conflicting goals Cultural Integration

accept the culture of among newly
the acquirer emerged department

Excessive
Concept of Integration
competition for
not detailed enough
leading positions
Focus on Master
Winning Brand
Disregard for the Strategy
Resistance to Change
need of employees

Company culture and conflicting

goals are the major causes Management
Restructuring
 Performance of
Attributes Lenovo-IBM Reasons
integration
Research Good  Complementary products and client bases before integration meant higher synergy
opportunities of 200 Million ($)
 Intel had a global brand equity which Lenovo could use as a platform to launch globally
 Extensive market research to identify local concern regarding brand confusion and dilution
after acquisition
Standardization Not overly standardized  They made a global team constituting persons from various countries rather than just operating
from headquarters
 Although 3 pronged strategy had common global components still flexibility to experiment
locally (India they advertised uniquely through a TV show)
Follow Up Extensive  Tracking 10 countries customers to gain insights into adoption ,awareness and conversion
 Partnering up with Olympics association so that Lenovo becomes a household name
 Teams situated across the globe communicated despite Time zone differences to identify
common problems, discuss innovative local solutions and build consensus
Vision Clear and Broad  They were clear on building a Lenovo master brand using Thinkpad as a product brand
 Approach was a balance of both headquarters (USA) and lead market (China) mechanism thus
giving them Global brand with local responsiveness
Implementation Good  Successful in their endeavor with “Thinkpad Unleashed”
 Planning to introduce PC series 3000 would reduce brand confusion with Thinkpad and
Lenovo can still use IBM logo to its advantage. So not using a name was brilliant
implementation