IMI, New Delhi

Written Analysis of Cases

Assignment 2

Case: “Doing” the act: Lenovo and corporate reputation

Submitted to: Submitted by:

Prof. Manaswini Acharya Shivangi

Roll No: 14PGDM050

Section: A

Submitted on: 7th August 2014

Executive Summary

The number one PC maker in China, Lenovo, faces a challenge in growing in India. This is because it

cannot cut the prices of its products as is done by the competitors, primarily Dell, to gain more market

share and grow, due to the negative perceptions of its Chinese origin in peoples’ minds. Instead it focuses

on technology and innovations as differentiating factors for marketing its products. But, the company has

reached a growth-stagnation. To overcome this, upon analysis, it is found that the best strategy would be to

offer mid-spectrum corporate products, which are the primary source of income for Dell.

Situational Analysis

The case at hand gives us an insight into the background, growth and challenges faced in India by Lenovo

India and a look into its corporate reputation. Lenovo was started as New Technology Developer Inc. in

China in 1984 and became the market leader for PCs in China by 1999 with a market share of 21.5 per

cent. The core values of the company lied in innovations. Major worldwide publicity came for Lenovo

when it acquired IBM’s PC and notebook manufacturing division, including the “Think” brand, in 2004.

This move gave Lenovo a foothold in the emerging markets like India and propelled it to the third position

among the global PC makers. Also, Lenovo started targeting consumer markets too, along with the

enterprise market.

Lenovo India was formed in 2005 with a manufacturing plant at Pondicherry. Lenovo India had the major

challenge, that not many people knew Lenovo, those who did, connected it with IBM and had a positive

perception, or with China and had a negative perception. Three phase approach for growth was adopted,

where in the first phase continuity of association with IBM was assured to the customer, in the second

phase product line expansion was to take place and the third phase was to be about focussing on

widespread advertising and branding. Lenovo India had to stick to the policy of “getting close” to the

customer through technology and not price because competing on price could prove hazardous to them

because of their Chinese origin.

Lenovo India faced various challenges in the initial stages: high rate of attrition after the end of the lock in

period with IBM, adverse effects of recession in 2008 leading to employee insecurity and dismay and a

specific issue with the Indian government over an erroneous display of the geographical boundaries of

India in the wallpapers uploaded on its ThinkPad. But, Lenovo overcame all the challenges effectively.

Lenovo came up with the new vision of, “Unstoppable Lenovo India” and defined five specific goals. The

focus of Lenovo on innovation was built on a two-tier approach- first, in developing ideas that can be

brought to the market in 48 months and second, investing in “game-changing technologies.”

Major competitors in the segment were HP, Dell, and Acer. In fourth quarter of 2010-11, HP lost 4.3 per

cent of its market share to Dell, while Lenovo maintained its fourth position (Exhibit 1) in the consumer

segment as opposed to its goal of being one of the top two. To gain headway in the enterprise segment it

introduced a “stock and sale” business model which ensured availability of the products before the orders

are placed. Lenovo India went for various promotion techniques, including celebrity endorsements,

placement of their products in TV shows and movies, and online brand building via blogs. In 2011, Lenovo

India had entered the third phase of their establishing their presence in the Indian market. The only problem

in the way of Lenovo is to change the perception and mindsets of the stakeholders. And the question is

whether it could be done following the current managing model.

Problem Statement

The difficulties faced by Lenovo in entering and growing in the Indian market, dominated by well-settled

international players, due to the negative perceptions of its Chinese origin.

Options

1. Bring changes in the prices, backed up by other differentiating factors, in order to reach a larger consumer

segment.

2. Product diversification.

3. Focus on attacking Dell’s main source of corporate income by providing a more desirable mid-spectrum

product.

4. Continue with their present strategy of “getting close” to the customer through technology and not price.

Criteria

1. Perception of Lenovo in the minds of the people.

2. Growth and market share.

3. Brand awareness and recall.

Evaluation of options

Option 1

While launching low priced products can go against their reputation building, but this effect could be

substantially decreased by backing the fall in price with changes in technologies and design to appeal to the

Indian customers. Still, the outcome could not be adequately predicted upon the corporate reputation of the

company in India.

Bringing out lower priced products will help in increasing the market share and also in the overall growth

of the company.

As the lower priced products will reach wider groups of people, the brand awareness and recall will

increase.

Option 2

If Lenovo works on its handset segment, employing aggressive marketing and sales strategy for the same in

India, like many other Asian companies have done, the perception of the company will not be hampered.

Instead, this move can even go on to improve its reputation.

Successful launching and marketing of other products like mobile handsets will help the company grow in

India and gain a larger market share. The effect on market share remains slightly ambiguous as it solely

depends on the success of the new product.

As the market for mobile phones is larger, the brand recognition will increase.

Option 3

The perception of the company will not be hindered; it will get better among the small and medium level

corporate consumers.

Lenovo’s primary competitor in India being Dell, if it comes out with a more desirable mid-spectrum

product, it could target the mid and small-level corporate customers which are Dells main source of

income. The market share will certainly increase.

The brand recognition and recall will be higher.

Option 4

The perception will remain the same if the same strategies are followed.

The problem of stagnation of growth in terms of market share will continue if changes are not brought in.

The brand recognition will remain more or less the same.

Recommendation

Evaluating the options against the criteria, it is found that Option 3 is the best suited option for the given

case as it is tested right for all the criteria.

Action Plan

Lenovo should focus on introducing middle spectrum products in the Indian markets, targeting the small

and mid-level corporate customers, as these consumers are the major source of income for Dell, Lenovo’s

primary competitor. Doing so will help Lenovo increase its market share and grow in the Indian markets.

At the same time, the negative perception of its Chinese origins will not come into the picture hampering

its reputation.

Contingency Plan

In case the launch of mid-spectrum corporate products does not work very well, Option 2 can be adopted.