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Lenovo: Building a Global Brand

Case Analysis

Dr. Diane Badame


Fall 2015

Case Agenda

Issues

Situation Analysis

Alternatives

Recommendations

Postscript

Case Takeaways

Learning Outcomes for the Lenovo: Building a Global


Brand Case

Explore the marketing benefits and challenges of


a cross-border acquisition.
Understand the issues associated with a brand
transition and discuss how equity can be
transferred from one brand to another.
Review a range of brand architecture options for a
recently merged company.
Explain how to apply the prerequisites for
successful employer branding.
Discuss the role of Olympics sponsorship in
building a global brand positioning.

Analysis of the Lenovo: Building a Global


Brand Case
1.
2.
3.
4.
5.
6.

Issues
Company or Business Units
Strategic Direction
Customer Analysis
Industry Analysis
Competitive Analysis
Current Brand Strategy
A. Brand Image and Strategy
B. Brand Building Assessment
C. Brand Growth Assessment

7. Recommended Brand Strategy


A.
B.
C.
D.
E.
F.
G.
H.

Vision
Purpose
Big Idea
Five Sources of Connectivity
Values
Goals
Strategies
Tactics

8. Risks Associated with


Recommendations
9. Additional Questions to Enhance
Comprehension of Case Analysis
10. Projected Profit-and-Loss
Statement
11. Case Summary
12. Lessons Learned

20

Lenovo: Building a Global Brand Case


Questions
1. How are the issues in the case?
2. Why did IBM want to sell its PC business? Why did IBM sell to
Lenovo?
3. What explains Lenovos success prior to the acquisition?
4. What challenges did Lenovo face after the acquisition?
5. How should Lenovo handle the brand management challenges
associated with the acquisition?
6. How is Lenovo utilizing prerequisites for successful employer
branding or are they? Please explain.
7. Where is Lenovo on the brand relationship spectrum? Should
it be in a different place? Why or why not?
8. Does Lenovo have in place what is needed for global branding
success? What marketing strategies do you recommend going
forward?
9. What were the lessons learned from the case?

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Issues

What are the most appropriate strategic roles and positioning of


the Lenovo and Think brands and whether and how to continue to
leverage the IBM logo?
Short-term challenges include retaining the best IBM employees
(especially top salespeople and designers) and the IBM customers
Lenovo has inherited.
Cultural integration between IBM and Lenovo.
Negative perception of Chinese Lenovo products and how
customers feel knowing that Lenovo, not IBM, now owns the
brand.
To what extent will Lenovos Chinese heritage impede its ability to
become a global brand?
Branding

How rapidly should Lenovo drop the IBM name from its products?
How much of the budget would you put behind the Lenovo brand versus
the Think brand?
What should the positioning be of these two brands and how can each
support the other?

Need for new Think products to show more value while respecting
the essence of the Think brand.
How to set the stage for Lenovos sponsorship of the 2008 Beijing
Olympics realizing a clear global positioning is needed along with
a powerful product line to support it.

Four Brand Architecture Proposals


1. Master brand solution Lenovo would be the master brand and
Think would become a subbrand of Lenovo.

Think is closer to being a global brand, Lenovo is only known in


China.

Think is currently a more premium brand than Lenovo. How easy


is it to have a mainstream master brand with a premium
subbrand (compare Ford plus Lincoln or Loblaws plus Presidents
Choice)?

Resource constraints also suggest that Lenovo needs to move


quickly to put all its limited marketing dollars behind a single
brand.
2. House of brands solution This approach implies equal resources
behind the Lenovo and Think brands (with ThinkPad and ThinkCentre
possibly being treated as two separate brands).

Lenovo lacks the resources needed to develop more than one


global brand.

That global brand has to be Lenovo because of the upcoming


Bejing Olympics.
3. Hybrid solution Think could be a hero subbrand to Lenovo,
analogous to Sony Playstation and Apple iPod. Over time, the strong
subbrand (in this case Think) would hopefully transfer some of its
equity (premiumness, innovativeness) to elevate the Lenovo
masterbrand.

Lenovo Positioning: Efficiency Plus Innovation


Is this East Meets West Positioning Feasible?
Commodity

Innovation

DELL
Everyone

A Few

HP

LENOVO

SONY
APPLE

Two Lenovos?
Relationship
marketing
Corporate customers
Think
Ultimate business
tool
Rock solid,
thoughtful design
Innovation/Efficiency
West?

Transaction
marketing
Small businesses
3000
Smart choice
Worry-free,
exciting/stylish,
great value
Efficiency/innovation
East?

Principles to Guide Lenovo Managements Decisionmaking Regarding the Brand Transition

Management needs to establish Lenovo as its preeminent global


brand, and the marketing efforts associated with the 2008
Summer Olympics must focus on a single positioning for the
Lenovo brand.

Given the much larger annual marketing expenditures of HP and


Dell, Lenovo cannot afford to dilute its marketing efforts for long
across more than one global brand.

Lenovos success depends not only on building global brand


awareness for Lenovo but on significant product innovations and
advertising under the Think brand that will, especially in the
short run, reassure and retain former IBM customers and
employees.

A separate strategy may be appropriate for China where Lenovo


is the market leader, enjoys high brand awareness and has a
value brand image. In the rest of the world, the Lenovo brand is
relatively unknown and Lenovo has the benefit of a blank slate.

A consistent global positioning must be developed for the Lenovo


brand. Given Lenovos heritage of product innovation (and the
increasing availability of talented Chinese engineers) and its
access to low cost manufacturing, Lenovo might be the brand
that can bring innovation to the marketplace at the lowest
possible cost. (Competitors Dell and Acer focus on cost efficiency
rather than product innovation while Apple and IBM focus on

10

Lenovo Positioning: Keys to Success


1. Exploit China as a cash cow
2. Crack the U.S. channels
3. Clean break with IBM
4. Do not over-invest in Think
5. Hot new products under Lenovo brand
6. Before Beijing Olympics

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Postscript

Lenovo moved to a two product line strategy the Think family of products was
premium positioned and the 3000 family for Lenovos mainstream proposition.

X41 Table Series Launched in April 2005 soon after the acquisition to show former IBM
customers that Lenovo could be trusted to continue the Think tradition of excellence.
Positive trade and media response unfortunately credited IBM rather than Lenovo,
partly on the basis that IBM engineers had to have been behind the product
development. The Lenovo name only appeared on the back of the product as the
manufacturer. The IBM logo remained on the front.

Think Pad Z60 Launched ahead of the Turin Winter Olympics in January 2006, the
objective was to show that Lenovo understood the brand essence of ThinkPad and could
make the ThinkPad product line even better. The new models came with an optional
titanium cover, a wider screen, a built-in broadband card, improved keyboard and other
features. The ThinkPad Unleashed advertising campaign reinforced the spirit of
innovation. While the Lenovo brand name appeared prominently in the ads, the product
remained the hero, still bearing the IBM logo on the front cover.

3000 Family Lenovo launched worldwide in March 2006 the 3000 family of Lenovo PCs,
targeting a different market segment (small business) from the Think family. A number
(rather than a name) was used as a subbrand to minimize distraction from the Lenovo
brand. Sample print ads show the users whom Lenovo is targeting rather than focusing
on the product as hero (as in the ThinkPad ads). The emphasis is on problem solving
and reducing risk by choosing Lenovo. Small businesses depend on one or tow Pcs to
function trouble free so the Lenovocare servie concept is especially likely to be valued
by this segment.

The 3000 launch varied in success from one region to another. In some
markets, like the U.S., the line was viewed partly on competitive pricing as a
low-end product and thus did not help to elevate the Lenovo brand.
However, Amelios emphasis was on penetrating emerging economies,
especially India, where many consumers did not yet have established brand
preferences versus trying to crack the cluttered U.S. market.

12

Postscript (Continued)

Lenovos profitability was enhanced by cost-cutting


(consolidation of computer parts procurement) and supply chain
efficiency measures introduced by Bill Amelio, the CEO who had
previously worked at Dell with many executives from Dell joined
Lenovo.
To reaffirm new product launches at the premium end of the
market, Lenovo introduced the X60 Think Tablet in 2006
promising portability without compromise, which included a
powerful Intel Core Duo processor and built-in wide-area wireless
broadband.
In a 2006 Wall Street Journal Asia reader survey of Chinas most
admired companies, Lenovo ranked third after Haier and China
Merchants Bank.
As part of a public relations strategy to improve reputation of the
brand, Lenovo became a corporate sponsor of the World
Economic Forum and a sponsor of President Clintons Global
Initiative and became an official PC partner of the NBA.
The companys financial performance, however, remained
challenged. Lenovos profits dropped 85% in the period April
2005 to March 2006. Lenovos operating margin was 1.7% in the
quarter ending June 2006 compared to 3.7% in the year after the 13

Postscript (Continued)

Yang Yuanqing was asked to return as CEO of Lenovo and has


turned things around, pursuing a strategy the company calls
protect and attack defending its core market in PCs while
moving into new growth areas such as mobile and the cloud.
In early 2014, Lenovo made two more eye-popping
acquisitions, spending $2.3 billion for IMBs low-end server
business and $2.9 billion for Googles Motorola Mobility unit.
In 2013, Lenovo acquired CCE, a leading Brazilian electronic
company and becomes Number One in global PC sales.
Forecasted revenue in 2015 for Lenovo is $46.296 billion with
net income after tax at $829 million, a 1.8% profit margin.
Lenovo is now the third largest seller of tablets and fifth
largest smartphone brand in the world.

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14

Case Takeaways

Explore the marketing benefits and challenges of


a cross-border acquisition.
Understand the issues associated with a brand
transition and discuss how equity can be
transferred from one brand to another.
Review a range of brand architecture options for a
recently merged company.
Explain how to apply the prerequisites for
successful employer branding.
Discuss the role of Olympics sponsorship in
building a global brand positioning.

15

Lenovo: Building a Global Brand


Case Analysis

Dr. Diane Badame


Fall 2015