Lenovo's Global Brand Building Strategy

Lenovo: Building a Global Brand
PRESENTED BY GROUP 5:
RADHIKA GUPTA (07346) , IPSHITA VERMA (07325) , SUBHANSHU GUPTA
(07355) , ANKIT GUPTA (07306) , DINESH AGGARWAL (07316) , AND
NANDHAGOPAL MURALITHAR (07335)

Lenovo
acquires
IBM
The Global PC Business Timeline
5 top players
account for 50%
of the market
MS and Intel set
basic PC standards
IBM introduces
first PC
1970 1982 1984 1985 1990s 2001 2004
HP acquires
Compaq
HP
Dell sells directly
to customers
establishes
JV in China
Compaq comes
out with IBM
“Clone”
 Most PC manufacturers followed retail store distribution model
 In the 90’s, outsourcing and offshoring resulted in key PC components being produced outside the US
 Dell sourced components from outside but assembles in US
 Others shifted manufacturing completely offshore
 Dell set up manufacturing in China, ends up as Lenovo’s biggest competitor
 Early 2000s show consolidation trend, eg. Gateway acquired eMachines (new entity had 7% of US market)
Source: Lenovo: Building a Global Brand, HBS Case Study
Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 2

Lenovo
acquires
IBM
Contracted 2006 Winter
Olympics + 2008
Summer Olympics
Lenovo’s Business Timeline
11 Computer
scientists form
NTD
1984 1987 1989 1990s 1999 2004 2004
Legend to
Lenovo
China’s market
leader (21.5%
share)
NTD renamed as
Legend Computer
Launched
own brand PC
and laptops
Company
First original
product launched:
“Legend” Chinese-character
card
 In 96, Legend marketed PCs with Intel’s premium chip
 Increased sales volumes  Operational costs down  Lenovo overtakes IBM in China (7% market share)
 Signed IPA with Microsoft and alliance with IBM to sell PCs with pre-installed OS and IBM software
 In 2000s, China entered WTO, Legend considered marketing efforts and eyed foreign market
 One option, Globalisation with specialisation in few product categories
 Second option, Localisation with increased range of product categories for Chinese market

Lenovo’s Acquisition of IBM
Company's Ownership
Structure
13.2
10
14.7
27.3
34.7
IBM
Private investors
Original founders
Public
Academy of sciences
 For IBM, the deal was a way to shed an unprofitable operation and concentrate on consulting services
 IBM had two options:
 First was a potential acquisition by Lenovo
 Second was to spin out the PC division to a private equity firm
 For Lenovo, the deal was a way to globalize and cater to larger markets
 As part of this deal, Lenovo gained:
 The right to use IBM logo on its products for 5 years
 Two major product offerings – ThinkPad and ThinkCentre desktop brands
 Conditions levied and agreed upon:
Lenovo not to
compete with
IBM services and
consulting group
IBM logo only to
be used on Think
family products Used on products
advertised; not
as separate logo
IBM provide
global support
for 5 years
Access to IBM’s
30,000 strong
enterprise sales
team

Reasons for Globalisation
 Described as a match made in heaven
 Lenovo had competency in SMEs
(transactional model), while IBM had a grip
on the large businesses (relationship model)
 IBM claimed brand value and innovation,
while Lenovo brought in the strengths of
production efficiency
Pressure to
globalize
Resources and Capabilities
Source: Lenovo: Building a Global Brand, HBS Case Study, Journal of Management Studies paper on resource capability model

•Efficiency of Legend
•Innovation of IBM
•Low cost production
•Supply chain efficiency
•Perception towards Chinese Companies
•Involvement of Chinese Government
•Low margins
•Developing the global supply chain
•Fast Global Exposure
•Expertise of PC industry
•Merging innovation with efficiency
•Synergy in values of both companies
•Brand IBM overshadowing LENEVO
•Threat to IBM brand image & existing customer base
•Market movement away from PCs
•Global competition
SWOT Analysis:
LENEVO

Why do acquisitions fail? What did Lenovo do different?
Lenovo took care of all these factors and made a number
of changes in the organisational structure and culture,
keeping in mind the needs, vision, and mission of the
organisation.
Ward succeeds
Yang as CEO
Focus on Winning
Management
Restructuring
Cultural
Integration

BCG Matrix for Lenovo – Countries and Product Line
Stars
?
High Market
Growth
Laptops
Desktops
Mobile Phones
Hard drives
Cash Cows Dogs
High
Market
Share
Low
Market
Share
Low Market
Growth
Stars
?
High Market
Growth
APAC
Europe
USA
Cash Cows Dogs
High
Market
Share
Low
Market
Share
Low Market
Growth
Product Lines Country

Key Issues
“How to position the brand of Lenovo and its products in the global
market to leverage success in the present environment”
KEY ISSUE
Branding of the new
identity
New Organizational Complexity
Intense Competition
Cost Cutting for Profit Margin
Brand Management Challenges
 1 to 138 markets served
 Ability to respond rapidly
to opportunities
 International Players:
Brand image
 Local Players: Price
 International supply
chain network
 Outsourcing Trends
 Lack of awareness
 Image issues

Brand Management
 Lack of awareness of Lenovo on a
global level
 Three major concerns of customers:
 Innovation will slow down
 Quality would suffer
 Service and support would be outsourced
Issues Initiatives
overseas
 Bad image in the US – Chinese
government involvement
 Deal brought a lot of publicity
 Positive: Chance to capitalize on IBM’s
strategic relationships
 Negative: Chinese firms get low marks on
trustworthiness
 Turin Olympics sponsorship helped with
awareness
 “ThinkPad unleashed” to show
innovation under Lenovo
 Structured the deal to include ongoing
worldwide services and support from
IBM
Branding
Alternatives
Master Brand
Unilever Toyota/Lexus
Intel, HP House of Brands
Apple iPod Brand Division
Synergy Approach

Building the Lenovo Master Brand
IBM ThinkPad ThinkPad Unleashed Lenovo 3000 Series

Branding and Communicating
Positioning to choose?
Innovation Efficiency
India USA
Phase 1
 Sign off on Ads with ThinkPad instead of Lenovo
 Objective to maintain ThinkPad sales
momentum
Phase 2
 “ThinkPad Unleashed” campaign for Turin
Olympics
 Message that Lenovo innovates ThinkPad better
than IBM
Phase 3
 Stress that Lenovo Master brand stands for
innovation
 Away from IBM and ThinkPad to Lenovo brand
products
Communication
Strategy
ThinkPad X41
• Tablet series
launched
• Innovation
credit to IBM
ThinkPad Z60
• Titanium
cover
• Stress on
Lenovo
Torino Olympics

Recommendations
Innovation
Efficiency
Branding Alternative Selected
Master Brand
 Using ThinkPad brand on other
products would dilute brand value
of ThinkPad brand
 Focus on master brand name
“LENOVO”
 Number series to avoid
detraction from Lenovo brand
Positioned as a Global Firm
138 countries
English Official
Language
Restructured company to
integrate IBM and Lenovo
Headquartered
at Purchase,
New York
50% top jobs
went to people
across the world

Lenovo
holds 19.2%
of the world
PC business
Present Scenario
Sold off mobile and
laptop business
Acquires IBM’s
PC Division
2004 2005 2008 2009 2011 2014 2014
Yang hands over
CEO role to Ward
and then Amelio
Source: IBM Website; Motorola Blog; Market Share Statistics
Acquires IBM’s
server business
Lenovo NEC joint
venture
Acquires Motorola
from Google
Yang resumes
CEO post
World PC Business
2014 (Q2) Lenovo
19.2
17.7
7.9 13.3
6.9
35
HP
Dell
Acer
Asus
Others

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Lenovo's Global Brand Building Strategy

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