Lenovo acquired IBM's PC division in 2004 for $1.75 billion, gaining the ThinkPad brand. It aimed to build its Lenovo master brand while leveraging ThinkPad's brand equity. Lenovo planned a three-phase advertising campaign using ThinkPad initially to maintain sales momentum before promoting Lenovo and innovation. It also launched new 3000 series PCs targeted at small businesses. However, Lenovo faced challenges including an inability to use the IBM logo, falling PC prices, and smaller advertising budgets than competitors that impacted its market share.

1. BUILDING A GLOBAL BRAND Revised Date: October 19, 2006HBS Case Studied byJOHN QUELCHCARIN ISABEL KNOOPCase Analysed byBALAJI.KSANTOSH ANAND.M

2. Global PC Industry

4. About… Started as New Technology Developer (NTD) Inc. Small distributor of Imported PCs in BeijingInvestment : $ 25,0001987: First Original product: LEGEND CHINESE CHARACTER CARD – translated English operated machines into ChineseAccounted for 38% of First year sales and 46% of profitsGot contracts from HP and IBM to distribute PCs in ChinaRenamed to Legend Computer Company in 1989

5. 1990 – Launched it’s own brand PCs 1993 – Pioneered Home and Small business PCs concept1996 – Introduced first laptop with Intel’s chipChina’s PC market leader with 7% Market shareGrew to 9.1% in 1999 with introduction of new model PCs

6. Beyond China.. Brand Name LENOVO evolvedLE – Legend, NOVO – New, Innovative2004 – Joined Olympic Partner Program of International Olympic Committee Use of Tagline “Engaging the World”Exclusive provider of Computing equipments for Turin Winter Olympics and Beijing Summer OlympicsAdmission Cost - $ 80 millionSales - $ 3.2 Billion

7. and here is the deal.. Lenovo acquired IBMs PC division in December 2004 for $ 1.75 billion. Major Share holders: Public – 34.7%China Academy of Sciences – 27.3%Founders – 14%IBM – 13.2%

8. Did the “quick brown fox jump over the lazy dog” or “the fish ate up the whale”

9. Thinkpad LegacyIntroduced in 1992Received 1000 Industry awards 1994 – First notebook to offer built-in CD-ROM1997 – First integrated DVD DriveMore than 20% of sales in 2004Major Question after Acquisition? Whether Lenovo can sustain the Thinkpad Brand Equity? Doubts of Loyal IBM users and their future?

10. Opportunities and ChallengesAcquisition allowed Lenovo to have a quick international move to expand business over 138 countries Sales – 70% Transactional and 30% Relationship in China, exactly opposite globally

16. Bringing Heaven to Earth… Headquartered in New York Research Centers in Beijing, Shanghai, Shenzhen, Yamato and RaleighYang announced management restructuring in 2005, integrating Original IBM and Lenovo organizationsProblemsLanguage difference12 hour time difference between Beijing and New York

17. Brand StrategyTurin Olympics sponsorship gave visibilityRight to use IBM and Thinkpad brand name for 5 years. Used IBMs name to gain trustworthiness globally

19. Getting to know the MarketMarket Research by Lenovo surfaced three main concerns Innovation would slow downQuality would sufferService and support would be outsourced overseasLenovo’s Answer “Sole focus only on PCs”

20. Branding Alternatives Use of Master BrandHouse of Brands StrategySynergy ApproachLexus/Toyota strategy

21. Building Lenovo Master BrandUsed ‘one-two punch’ strategyBuild Lenovo as a strong brandContinue to strengthen Thinkpad product brand that leveraged support for LenovoHad two types of business models for PC providersFocus on Supply Chain efficiencyFocus on InnovationHow Lenovo differentiated itself from Apple and Sony that focused on Innovation5% After profit tax and global infrastructure

22. The three phase Advertising plan…Lenovo planned a new product launch and a three phase advertising plan to address above strategy: The plan phasesFrom September 2005, every ad signed of as Thinkpad instead of LenovoObjective – Maintain the strong Thinkpad name and sales momentumSecond Campaign, ‘Thinkpad Unleashed’ during the Turin Olympics showcased on NBCMessage – Making Thinkpad even better, did what IBM could have done or did not do at all.Third phase, Lenovo Masterbrand stood for Innovation.

23. The 3000 family… Planned to launch the 3000 PC series worldwideNumber was chosen no to distract from the Brand Name ‘Lenovo’Targeted Small Business Units who expect great value in use.Ensured unique, distinctive and attractive design

27. Problems and RisksUnable to use the IBM logo for OlympicsFalling PC Hardware prices and increasing component pricesSpent $250 million in advertisements in 200580% on print and visual media, rest to internet 20 times lesser than Dell in US10 times less than Dell in JapanOlympics were not a key buying motivatorPlanned a $100 million campaign for olympicsDecreased Market share of 5% in the first quarter of 2005, 8.9% in second quarter