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The analysis of HBS Article titled "Lenovo: Building a global article"

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  1. 1. BUILDING A GLOBAL BRAND <br />Revised Date: October 19, 2006<br />HBS Case Studied by<br />JOHN QUELCH<br />CARIN ISABEL KNOOP<br />Case Analysed by<br />BALAJI.K<br />SANTOSH ANAND.M<br />
  2. 2. Global PC Industry<br />
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  4. 4. About… <br />Started as New Technology Developer (NTD) Inc. <br />Small distributor of Imported PCs in Beijing<br />Investment : $ 25,000<br />1987: First Original product: LEGEND CHINESE CHARACTER CARD – translated English operated machines into Chinese<br />Accounted for 38% of First year sales and 46% of profits<br />Got contracts from HP and IBM to distribute PCs in China<br />Renamed to Legend Computer Company in 1989<br />
  5. 5. 1990 – Launched it’s own brand PCs <br />1993 – Pioneered Home and Small business PCs concept<br />1996 – Introduced first laptop with Intel’s chip<br />China’s PC market leader with 7% Market share<br />Grew to 9.1% in 1999 with introduction of new model PCs<br />
  6. 6. Beyond China.. <br />Brand Name LENOVO evolved<br />LE – Legend, NOVO – New, Innovative<br />2004 – Joined Olympic Partner Program of International Olympic Committee <br />Use of Tagline “Engaging the World”<br />Exclusive provider of Computing equipments for Turin Winter Olympics and Beijing Summer Olympics<br />Admission Cost - $ 80 million<br />Sales - $ 3.2 Billion<br />
  7. 7. and here is the deal.. <br />Lenovo acquired IBMs PC division in December 2004 for $ 1.75 billion. <br />Major Share holders: <br />Public – 34.7%<br />China Academy of Sciences – 27.3%<br />Founders – 14%<br />IBM – 13.2% <br />
  8. 8. Did the <br />“quick brown fox jump over the lazy dog”<br /> or <br />“the fish ate up the whale”<br />
  9. 9. Thinkpad Legacy<br />Introduced in 1992<br />Received 1000 Industry awards <br />1994 – First notebook to offer built-in CD-ROM<br />1997 – First integrated DVD Drive<br />More than 20% of sales in 2004<br />Major Question after Acquisition? <br />Whether Lenovo can sustain the Thinkpad Brand Equity? <br />Doubts of Loyal IBM users and their future? <br />
  10. 10. Opportunities and Challenges<br />Acquisition allowed Lenovo to have a quick international move to expand business over 138 countries <br />Sales – 70% Transactional and 30% Relationship in China, exactly opposite globally <br />
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  16. 16. Bringing Heaven to Earth… <br />Headquartered in New York <br />Research Centers in Beijing, Shanghai, Shenzhen, Yamato and Raleigh<br />Yang announced management restructuring in 2005, integrating Original IBM and Lenovo organizations<br />Problems<br />Language difference<br />12 hour time difference between Beijing and New York<br />
  17. 17. Brand Strategy<br />Turin Olympics sponsorship gave visibility<br />Right to use IBM and Thinkpad brand name for 5 years. <br />Used IBMs name to gain trustworthiness globally<br />
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  19. 19. Getting to know the Market<br />Market Research by Lenovo surfaced three main concerns <br />Innovation would slow down<br />Quality would suffer<br />Service and support would be outsourced overseas<br />Lenovo’s Answer<br /> “Sole focus only on PCs”<br />
  20. 20. Branding Alternatives <br />Use of Master Brand<br />House of Brands Strategy<br />Synergy Approach<br />Lexus/Toyota strategy<br />
  21. 21. Building Lenovo Master Brand<br />Used ‘one-two punch’ strategy<br />Build Lenovo as a strong brand<br />Continue to strengthen Thinkpad product brand that leveraged support for Lenovo<br />Had two types of business models for PC providers<br />Focus on Supply Chain efficiency<br />Focus on Innovation<br />How Lenovo differentiated itself from Apple and Sony that focused on Innovation<br />5% After profit tax and global infrastructure<br />
  22. 22. The three phase Advertising plan…<br />Lenovo planned a new product launch and a three phase advertising plan to address above strategy: <br />The plan phases<br />From September 2005, every ad signed of as Thinkpad instead of Lenovo<br />Objective – Maintain the strong Thinkpad name and sales momentum<br />Second Campaign, ‘Thinkpad Unleashed’ during the Turin Olympics showcased on NBC<br />Message – Making Thinkpad even better, did what IBM could have done or did not do at all.<br />Third phase, Lenovo Masterbrand stood for Innovation. <br />
  23. 23. The 3000 family… <br />Planned to launch the 3000 PC series worldwide<br />Number was chosen no to distract from the Brand Name ‘Lenovo’<br />Targeted Small Business Units who expect great value in use.<br />Ensured unique, distinctive and attractive design <br />
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  27. 27. Problems and Risks<br />Unable to use the IBM logo for Olympics<br />Falling PC Hardware prices and increasing component prices<br />Spent $250 million in advertisements in 2005<br />80% on print and visual media, rest to internet <br />20 times lesser than Dell in US<br />10 times less than Dell in Japan<br />Olympics were not a key buying motivator<br />Planned a $100 million campaign for olympics<br />Decreased Market share of 5% in the first quarter of 2005, 8.9% in second quarter<br />