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

1. BUILDING A GLOBAL BRAND Revised Date: October 19, 2006 HBS Case Studied by JOHN QUELCH CARIN ISABEL KNOOP Case Analysed by BALAJI.K SANTOSH ANAND.M

2. Global PC Industry

4. About… Started as New Technology Developer (NTD) Inc. Small distributor of Imported PCs in Beijing Investment : $ 25,000 1987: First Original product: LEGEND CHINESE CHARACTER CARD – translated English operated machines into Chinese Accounted for 38% of First year sales and 46% of profits Got contracts from HP and IBM to distribute PCs in China Renamed to Legend Computer Company in 1989

5. 1990 – Launched it’s own brand PCs 1993 – Pioneered Home and Small business PCs concept 1996 – Introduced first laptop with Intel’s chip China’s PC market leader with 7% Market share Grew to 9.1% in 1999 with introduction of new model PCs

6. Beyond China.. Brand Name LENOVO evolved LE – Legend, NOVO – New, Innovative 2004 – 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 Olympics Admission Cost - $ 80 million Sales - $ 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 Legacy Introduced in 1992 Received 1000 Industry awards 1994 – First notebook to offer built-in CD-ROM 1997 – First integrated DVD Drive More than 20% of sales in 2004 Major Question after Acquisition? Whether Lenovo can sustain the Thinkpad Brand Equity? Doubts of Loyal IBM users and their future?

10. Opportunities and Challenges Acquisition 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 Raleigh Yang announced management restructuring in 2005, integrating Original IBM and Lenovo organizations Problems Language difference 12 hour time difference between Beijing and New York

17. Brand Strategy Turin Olympics sponsorship gave visibility Right to use IBM and Thinkpad brand name for 5 years. Used IBMs name to gain trustworthiness globally

19. Getting to know the Market Market Research by Lenovo surfaced three main concerns Innovation would slow down Quality would suffer Service and support would be outsourced overseas Lenovo’s Answer “Sole focus only on PCs”

20. Branding Alternatives Use of Master Brand House of Brands Strategy Synergy Approach Lexus/Toyota strategy

21. Building Lenovo Master Brand Used ‘one-two punch’ strategy Build Lenovo as a strong brand Continue to strengthen Thinkpad product brand that leveraged support for Lenovo Had two types of business models for PC providers Focus on Supply Chain efficiency Focus on Innovation How Lenovo differentiated itself from Apple and Sony that focused on Innovation 5% 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 phases From September 2005, every ad signed of as Thinkpad instead of Lenovo Objective – Maintain the strong Thinkpad name and sales momentum Second Campaign, ‘Thinkpad Unleashed’ during the Turin Olympics showcased on NBC Message – 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 worldwide Number 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 Risks Unable to use the IBM logo for Olympics Falling PC Hardware prices and increasing component prices Spent $250 million in advertisements in 2005 80% on print and visual media, rest to internet 20 times lesser than Dell in US 10 times less than Dell in Japan Olympics were not a key buying motivator Planned a $100 million campaign for olympics Decreased Market share of 5% in the first quarter of 2005, 8.9% in second quarter