lenovo
TRANSCRIPT
History of the Global PC Industry1970s - IBM introduced its first PC.1982 – Compaq made $111 million in its 1st year cloning IBM PCs1983 – Compaq raised $67 million in an IPO.
launch of software program LOTUS 1-2-31984 – Dell entered the market by offering customized PCs at a lower price.1990s – Internet boom, Microsoft and Intel set the standard for the PCs
Consolidation 2001 – HP acquired Compaq for $20 billion.2004 – Gateway acquired eMachines for nearly $290 million,
creating a company with 7% market share in US.2004 – Lenovo acquired IBM’s PC division for $1.75 billion.
Market Share2004
Dell Hewlett Packard LenovoAcerFujitsu-SiemensOthers
50.8% 17.9%
15.9%
8%
3.6%3.8%
2005
49.8%
18%
16%
7.7%
3.8%4.7%
The Rise of LEGENDDuring its 1st 20 years it evolved from a small distributor of imported computers into China’s leading
computer firm
In 1984, Chinese Academy of Science provided $25000 for 11 of its computer scientist to form the NEW TECHNOLOGY DEVELOPER, Inc(NTD)
In 1987, company introduced its first original product named the LEGEND character card.
NTD was renamed LEGEND computer company in 1989 and launched its own brand PCs in 1990
Pioneer in home PCs concept in China and a retail network in 1993.
Brought out its first laptop model in 1996.
Came with pre loaded one year Internet Connection in 1999 along with chinese voice recognition software and a graphic pad for writing chinese.
By 1999, had a market share of 21.5% in china
Problems in Maturity Methods stage Adopted
China’s entry into WTO.
Dell’s introduction of Direct Sales Model in China.
Haier, an appliance maker, introduced its own brand of PCs.
Brought famous chinese personalities as brand spokespersons.
In 2002, they spend $6.6 million on advertising for the home PC segment, half the Dell’s advertising budget for China.
Here comes LENEVOIncreased domestic competition forced LEGEND to explore new
markets outside China.
Brand name problem
Word Lenevo was derived from “LE” for Legend and “novo” signifying new or innovative.
Bacame the exclusive provider of computer equipment and services for the Turin Olympics Winter Games in 2006 and the Beijing Summer Olympic Games in 2008.
THE DEALOpportunity to shed an unprofitable operation and concentrate on consulting services.
Right to use the IBM on products for 5 yrs.
Product Offerings : Well established IBM ThinkPad laptop and ThinkCentre desktop brands.
Lenovo promised not to compete with IBM’s services and consulting groups.
The Think Pad Legacy
• IBM and ThinkPad brands were hard to separate• ThinkPad i series was the first notebook
introduced in 2000, which set new standards for its balance of power and portability.
• But at the time of the acquisition many questioned whether Lenovo could sustain the ThinkPad brand equity ?
Lenovo IBM
Product 85% desktop 60% laptop
Client base 80% small business & consumer
57% large enterprise/ mid markets
Coverage Mostly China Strong around the world but relatively weak in China
The opportunity and challenges for the deal
• Quick International market.• Global distribution.• Innovative products and broader product
portfolio of IBM.• Major overlap was in company cultures.• Reactions of IBMs existing customers ---who
demanded the highest quality products & services, towards the new ownership mgt.
Bringing heaven to earthSuccess could be achieved through coordination and integration throughout the combined organization.
Message spread throughout the organization was to trust and respect each others position.
Yang’s decision of restructuring management integrated Lenovo and IBM organization.
Focus on winning helped both the organizations to integrate successfully.
Brand Strategy
The new company had the challenge and opportunity of making Lenovo a successful brand outside Asia.
IBM helped Lenovo in earning $10 billion as revenues around the world.
Turin Olympics sponsorship gave Lenovo a solid platform to showcase its capabilities to the world.
Chinese and some other Asian firms score low in trustworthiness in comparison to firms of other countries..
GETTING TO KNOW THE MARKETDecision makers in China, Japan and India have greater awareness of LENOVO acquisition than those in the US and Germany.
US Germany Japan India China0%
10%20%30%40%50%60%70%80%
Series 1
The team of Lenovo looked for 4 branding alternatives:
A •Use of MASTER BRAND
B •HOUSE OF BRANDS Strategy
C •SYNERGY APPROACH
D •LEXUS/TOYOTA Strategy
One-two punch
• Lenovo followed fairly simple strategy with 2 elements:
1)Build up Lenovo as a strong master brand 2)Continue to strengthen ThinkPad product
brand
Differentiation from Competitors
Strong efficient base in china
5% after-tax profit
Global infrastructure
Product Lines
III phase advertising plan
Ran world wide advertising campaign from may to September2005 where each ad signed off with “Thinkpad” instead of Lenovo
Ran campaign “Thinkpad unleashed” during opening ceremony of olympics 2006.
Ran campaign during olympics 2008 at Beijing stressing on its innovation
Telling the story1) Taking the risk
Making the new Z60 appealing and innovative.
Introducing the new titanium cover.
Innovating with a well established brand might threat it’s very reputation.
Lenovo received credit for making the thinkpad even better.
2) Raising awareness
Biggest challenge to create brand awareness.
Conducted quaterly field brand tracking studies.
Sponsorship of turin winter olympics brought recongnition.
Exploring unconventional ways of positioning.
The 3000 family
Lenovo launched it’s branded pc series 3000.
Targeted the small business enterprises.
Conducted in depth market research.
Laid emphasis on distinctive and attractive designs.
Questions for Discussion
• What is lenovo’s point of differentiation? Innovation? Efficiency? Both? Something else?
• Why did Lenovo choose to name its first non thinkpad product a number(3000) versus a name?
• How would lenovo be positioned: as a new type of chinese company? A unique combination of east and west? An international firm?
Mayank Basra
Ruby Jhangra
Vidit Goyal
Aahna Khatri
Srilaxmi
Siddharth Singh Tanwar