The case deals with the acquisition of IBM’S PC
division by Lenovo, the purpose of their acquisition, the challenges they faced
and the strategies they implemented. They wanted to expand their market
globally and not just the Chinese market. Lenovo was a successful brand in
China, where most of the revenue were generated from China alone. Their
ultimate purpose was to become a well-known accepted brand and a technologic
giant globally. The IBM Company was a reputed seller in PC industry. They felt
there was an intense competition in the market and they realised their
potential in PC industry is declining, they find the PC industry not so
attractive. They wanted to focus on IT consulting service providers as well. So
the brand Lenovo got the right opportunity to expand into international market.
ABOUT THE CASE
During 1980’s PC industry has been the most dynamic
electronic industry sector. In 1984, Lenovo was established as Legend Group. It
changed it brand name from Legend to Lenovo in 2003. In 2004, they acquired the
IBM’S PC division and became the world’s largest third PC maker. The Lenovo as
a brand concentrates on innovation that makes a difference towards the
customers. It was on December 2004, Lenovo acquired IBM’S personal computers
(PC) divisions which was a major headline news around the world.
ThinkPad was the introduced by IBM which is a well
reputed brand all over the world. As Lenovo has the right to use the brand
after acquisition, they will enjoy the brand reputation of IBM. But in the eyes
of customers separating IBM and ThinkPad is quite a difficult task and time
consuming as well. As it was famous as an IBM product, rebranding it to a
Lenovo brand will face a lot of challenges in the international market. Lenovo
used a three-phase advertising plan that is ThinkPad, ThinkPad unleashed and
Lenovo for innovation. Being a Chinese company, was a sort of problem for the
brand in the international market but Lenovo could stand it with their
strengths such as innovation, the ability to combine efficiency and innovation,
having an IBM stand approval, international expansion, low cost production,
supply chain efficiency etc. IBM did not modify its offerings regularly, but
Lenovo is dynamic and keep changing according to market demands.
WHY LENOVO ACQUIRED
Ø was not so lucrative
Ø For enhanced brand image
Ø To become a major global player
WHAT HAS LENOVO USED
Innovation was their point of parity. Initially they
were known as legends. The brand has always tried to modify and be innovative
according to market demands and needs.
CHALLENGES THE BRAND FACED
Lenovo was a brand which had no international exposure
before the acquisition of the IBM’s personal computers. They had operations
only in China. Now they are able to target the customers across the world. The
company has to carry its operations globally with proper marketing and
management across the world. Another challenge is to differentiate the products
between Lenovo and IBM. Lenovo cannot lose its ‘exiting customers’, their
master brand has to be maintained. There is a difference in culture among both
these brands because IBM has a global existence and Lenovo was a completely a
Chinese oriented culture. Both the brands integration of culture was a major
challenge after the acquisition. Even the workforce of IBM has to face the
difference in the culture of both the brands.
Under the Lenovo management, the culture difference
has to be maintained separately between both the brands. Lenovo has to focus on
management restructuring. The customers might be concerned about the quality
and also the innovation can get slow. They faced issues such as intense
competition in the international market. There were huge international players.
To bring a better brand image was another issue. There was the problem of new
organisational complexity because 138 different markets has to be served. They
need to respond rapidly to opportunities prevailing. There was a major
challenge in the US market. It was a difficult ask for the brand to sustain in
the US market. They had to overcome the hurdles in building a strong brand in
the US market. Cost cutting was the only solution for profit margin. They had
the supply chain network internationally and the outsourcing trends was based
on contract manufacturing.
Another major challenge was related to brand
management. There also arise an issue of lack of awareness in the global level
regarding the Lenovo brand. Lack of awareness among different customers across
the world. The brand image has to be enhanced. The world need to know the brand
which is a major important aspect as a brand to identified and well-known. The
initiatives taken by the brand regarding the deal was to bring a lot of
publicity. The Lenovo brand had a chance to capitalise IBM’S strategic
relationships. But the deal also had a negative that is Chinese markets receive
much lesser trustworthiness from international markets. Turin Olympics
sponsorship helped with awareness. ‘ThinkPad unleashed’ to expose Lenovo’s
innovation. They also structured the deal to include the worldwide services,
help and support from IBM.
STRATEGIES THAT LENOVO COULD DO
Ø The brand portfolio strategy was to focus more on
product brand rather than corporate brand.
Ø There were involved in lot of PR sponsorship and
other CSR campaigns.
Ø Their major focus was on innovation and quality.
Ø To household PC market in US.
Ø Customised products and services
Ø More investment on Research and Development for
Ø Efficient resource utilisation
Ø Effective distribution channels
Ø Rebranding by providing lifestyle products
Lenovo the brand has taken the right decision about
the acquisition. That was the golden opportunity the brand has taken to move
into an international market. As they are a successful brand in China. Lenovo
should focus more on target market, positioning and segmentation. They will be
able to build a good brand image in the international market after overcoming
the hurdles in the market scenario which keeps on changing. As the brand is
known for the innovation, a dynamic market will not affect the Lenovo as a