Lenovo: Building a global brand
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Lenovo acquired IBM's personal computer business in 2005 in order to globalize and expand beyond its success in China. This gave Lenovo the ThinkPad and ThinkCentre brands to leverage. However, it also introduced challenges in merging cultures and establishing Lenovo's brand identity globally against strong competitors like HP and Dell. Lenovo addressed this by focusing on a master Lenovo brand, restructuring to integrate IBM and Lenovo teams, and a phased branding strategy that transitioned awareness from IBM/ThinkPad to the Lenovo brand over time. By 2014, Lenovo had become the largest personal computer manufacturer in the world with 19.2% of the global market.
Lenovo: Building a global brand
- 1. 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)
- 2. 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
- 3. 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 Source: Lenovo: Building a Global Brand, HBS Case Study Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 3
- 4. 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: Source: Lenovo: Building a Global Brand, HBS Case Study 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 4
- 5. 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 5 Pressure to globalize Resources and Capabilities Source: Lenovo: Building a Global Brand, HBS Case Study, Journal of Management Studies paper on resource capability model
- 6. •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 Source: Lenovo: Building a Global Brand, HBS Case Study Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 6
- 7. 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 Source: Lenovo: Building a Global Brand, HBS Case Study Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 7
- 8. BCG Matrix for Lenovo – Countries and Product Line Stars ? High Market Growth Laptops Desktops Mobile Phones Hard drives Cash Cows Dogs High Market Share Source: Lenovo: Building a Global Brand, HBS Case Study 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 8
- 9. 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 Source: Lenovo: Building a Global Brand, HBS Case Study 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 9
- 10. 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 Source: Lenovo: Building a Global Brand, HBS Case Study Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 10
- 11. Building the Lenovo Master Brand IBM ThinkPad ThinkPad Unleashed Lenovo 3000 Series Source: Lenovo: Building a Global Brand, HBS Case Study Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 11
- 12. Branding and Communicating Positioning to choose? Innovation Efficiency India USA Source: Lenovo: Building a Global Brand, HBS Case Study 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 12
- 13. 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 Source: Lenovo: Building a Global Brand, HBS Case Study 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 13
- 14. 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 Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 14 HP Dell Acer Asus Others
- 15. Thank You Questions? Saturday, 01 November 2014 LENOVO: BUILDING A GLOBAL BRAND - HBS CASE STUDY 15