LENOVO

TEAM MEMBERS
• Sumeet Bhattacharjee07
• Pallavi Das 16
• Krutika Desai 18
• Batul Fatakdawala 22
• Shalaka Kulkarni 41
• Viral Mehta 52
• Vishal Panchal 58
• Gauri Jadhav 14 (MMS)
• Abhiruchi Singh 50 (MMS)
 THE
GLOBAL
PC
INDUSTRY
 Global pc industry
• IBM introduced first PC in 1970s with open
architecture
• Hence gave birth to many h/w and s/w
companies
Eg. Microsoft, Intel, Lotus, etc.
• Compaq started manufacturing PCs using Intel
chips
• Dell began building IBM compatible
computers
 Global pc industry
• HP establishing a joint venture in China in
1985

• Increasing demand of internet based PCs

• IBM, HP, Gateway, Dell moving their

manufacturing units offshore

• Dell becoming Lenovo’s greatest competitor

 The legend behind lenovo
NEW TECHNOLOGY ●
Chinese academy of science – capital of $25K
●
Generated revenues by distributing imported computers to government agencies
DEVELOPER
LEGEND – CHINESE ●

●
Translated English language OS in Chinese
Competitive advantage: hard drive so saved valuable space

CHARACTER CARD (1987) 46% profit

●

LEGEND COMPUTER ●
Launched its own brand PC in 1990
●
Pioneered home PC’s & Retail network - 1993
COMPANY (1989)

1995 onwards
●
Listing on HK stock exchange
●
5th largest manufacturer of other board
●
1996: introduced 1st laptop with Intel's Pentium chip

1999
China’s PC market leader (21.5% share)
●

Positioning: competitors provided new technology but Lenovo provided technology that average Chinese could
●

use
 Lenovo heritage
Pre acquisition:
• #1 IT company in China
• #1 PC unit market share in Asia
Pacific
• #1 IT brand in China & #3
Overall
• FY04: Revenue: $3Bn,
 Value proposition: Best
Engineered PC’s
Think Pad Roll cage

Best
Keyboard

Biometrics with a security chip

Active
protection
System

Shock mounted
hard drive
 Outside China, Lenovo has little
Recognition…

Value Personal Design Low price ???

Customiza Innovatio Easy to
tion n Use
Easy to
Buy

Clear Brand Positioning, helps customer choose

 Beyond China…
• Government protection: tariffs on imports,
restriction on foreign companies, ownership rights
etc.

• Competition: Dell, Chinese manufacturing giant Haier

• Grey market clones

• Distribution barriers
 the choices
• LOCALIZATION: increasing the range of
product categories & adding services for local
market

• GLOBALIZATION: specialize in few product

categories to develop a global IT brand
 Comparison (in 2004)
•Founded 1984
•FY 04 Revenue: $3B, Net profit:
$135M
•10,000 employees
•#1 Market share in China for 7
years
•#1 IT company in China
•Small Business & consumer market
strength
•Established in 1984, created PC
•2003 Revenue: $9B
•9500 employees
•#2 in world wide commercial
notebooks
•Leader in enterprise PC design and
business productivity
•Enterprise & mid market strength
•ThinkPad notebooks have won more
than 1000 awards
•100 million PC shipped
Revenue distribution before acquisition
 THE DEAL
• December 2004: acquired IBM’s personal
system division for $1.75 bn
• Forecasted annual operating synergies of $200
Mn
• Gained rights to use IBM logo for upto 5 years
 A perfect fit between complimentary
organizations

#1 IT brand in China Premium Global PC brand

•Most recognized technology brand
in china
Consumer/Small Business
Expertise
•Differentiated consumer/small
business & extensive retail network
Efficient operational platform
•Low cost infrastructure and
manufacturing scale
•Most recognized technology brand
globally
Enterprise/Mid market expertise
Leader in business productivity & low
total cost of ownership
Notebook Leadership
Leading technology enhanced
notebook product offering
Distribution & SCM

Global sales,
Financing, Fulfillment
& Service Network
Brand Attributes, Company & Products
Innovative
Service
LENOVO’S Excellence
COMMON
ATTRIBUTES

THINK FAMILY 3000 FAMILY

Prestige Worry free
Highest quality, Great value
Reliability Stylish

VALUE PROPOSITION VALUE PROPOSITION

We help customers succeed by We help customers achieve their personal
providing a smarter way to be & work goals by providing them exciting,
more productive affordable & worry free PC’s
 Competitive advantage
Combine efficiency & innovation

• Wring out cost by supply chain efficiencies &

inventory returns – china manufacturing base

• Product innovation & customer satisfaction

BRANDING STRATEGY
 MAsTER BRAND
• Build Lenovo into a Strong Master Brand
known for innovation, customer service & high
quality.
 Synergy approach
• Strengthen the THINKPAD “hero” sub brand
• Apple Ipod, Motorola Razr
Lenovo’s Three Phase Business
Strategy
Deliver the promise & commitments of
●

PHASE 1 LENOVO

Increase competitiveness through operational

PHASE 2
●

excellence, innovation & branding

PHASE 3 Drive aggressive and profitable growth

●
Three Phase Brand Building
 Phase 1
Maintain Continuity & Trust

ACTIONS: RESULTS:
•Great products •#1 Customer Satisfaction

•Leverage IBM support & sales •Continued regard for

ThinkPad
•Show IBM logo in product photo
•Maintained sales
•Sign off advertisement with momentum
‘ThinkPad’
•High shares of press
•Extensive PR
Phase 1 Advertising

• Emphasize quality
& innovation

• ThinkPad signoff

• Visible IBM logo

• Lenovo intro
 Phase 2
Strengthen ThinkPad brand &
introduce Lenovo brand

ACTIONS: RESULTS:
•More great think products •Lenovo starting to be
viewed as making ThinkPad
•“ThinkPad Unleash “ better

•Torino Olympic •ThinkPad metrics strong

•Introduce Lenovo branded •Lenovo awareness growing

products

•Viral activities
 Phase 3
Accelerate Lenovo Brand Building

ACTIONS: RESULTS:

•Clear, own able positioning • #1 Customer

•Olympics & formula one Satisfaction
•PR
•Add Lenovo logo to Think •Strong Lenovo Brand
products
•Brand internalization •Increase ThinkPad
•CSR strength
 Why the Olympic games?
• Sports Marketing is a broadband solution for
brand building
a. Innovation & technology are crucial in operations
b. Reach from officers to consumers

• Olympic games are far reaching

a. Estimated 4M viewers

• The Olympic games offer a platform to

showcase technology
 Market share
Sales
Dell

17.9%

Others 15%
50% HP

2 11%
% 3
%
Lenovo

Fujitsu Siemens Acer

Lenovo’s Global Operations
Future Success factor for Lenovo
• Create strong image of quality & innovation outside China

• Build more economies of scale

• Protect & keep developing IBM brands ThinkPad,

ThinkCentre

• Combine 2 culture in a single company

• Reduce structural cost outside China

 New World Culture
FROM WEST TO EAST: FROM EAST TO WEST:
Management savvy Energetic Entrepreneurship
B2B marketing Consumer leadership
Design and engineering SCM
strength

VALUES:
Shared Values
Focus on innovation
People development
 Challenges faced
• Highly lucrative yet a very competitive home
market

• Lack of brand equity

• The China Brand Effect

Why did IBM want to sell its PC business?
Why did IBM sell to Lenovo?
• IBM found itself struggling to maintain margins
• IBM wanted to refocus its efforts on still-growing
sectors (service and business mainframes)
• Lenovo had grown to maximal saturation in a state-
subsidized space
• Lenovo aided by pre-existing IBM business contacts
and relationships
• mutually advantageous repositioning
 What explains Lenovo’s success prior to the acquisition?

• Its first original product, the Legend Chinese-

character card.
• established a strong reputation for first-to-market
status in several disparate areas
• new contracts, including one to distribute HP PCs in
China.
• Pioneered the home computer concept in China.
• Legend introduced its first laptop model and
marketed PCs carrying Intel’s Pentium chip in
China.

• Legend signed an intellectual property agreement

with Microsoft and formed an alliance with IBM.

• Introduced a PC which overcame China’s

complicated Internet access procedures
What challenges did Lenovo face after the acquisition?

• New to the Global Arena

• Culture shock

• Maintaining the Thinkpad legacy

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

• Master Brand

• House of Brands

• Lexus – Toyota strategy

• Synergy approach
In trying to become a global brand, does
Lenovo have a problem coming from China
(being a Chinese company)?
• Global perception of China
• Firms from China and some other Asian
countries tend to get very low marks for
trustworthiness.
• Innovation would slow down
• Quality would suffer
• Service and support would be outsourced
overseas.
Thank you!!!