C A S E S T U DY 9

LENOVO’S BRAND BUILDING STRATEGIE:TAKING THE COMPETITION TO COMPETITORSWITH “TRANSACTIONAL MODEL”

Agenda• Brief Summary about the case• Global PC Industry• Lenovo: From Emerging to Surging

• Key Challenges of Lenovo from the case

• Recommendations

Agenda• Brief Summary about the case• Global PC Industry• Lenovo: From Emerging to Surging

• Key Challenges of Lenovo from the case

• Recommendations

Overview of

Global PC Industry

• Since early 1980s, PC industry has been the most dynamic electronic industry sector

• The global PC industry reached mature level by mid-1990s

• Dell and Gateway starts their build-to-order strategies, resulted to the total supply chain respond swiftly to change

• Emerge of e-commerce (online sales) hastened PC industry’s clock speed

Overview of

Global PC Industry

Overview of

Global PC Industry• PC-makers enjoys high profits 1990, however, they

experiences an extreme downfall in early of 2000

• In 2004, in order to maintain PC vendor’s market position, vendor consolidation can develop economies of scale in order to go into a global presence

• Global PC industry currently affected by two major trends; commoditization which is about mass-produced and the absence of mid-market, which separate to the customers that demand cheapest products and that of exclusive products

Agenda• Brief Summary about the case• Global PC Industry• Lenovo: From Emerging to Surging

• Key Challenges of Lenovo from the case

• Recommendations

About Lenovo:From Emerging to Surging

1984 Established as Legend Group in Beijing Had product and distribution facilities in US, UK, Mexico, Malaysia, Hungry, China, and Brazil

2003 Changed its brand from Legend to Lenovo

2005 Acquired IBM’s PC division and became the world’s third biggest PC-maker

2006 Lenovo started becoming a partner sponsor in sports events and sigh the contract to become the sponsor of Beijing Olympic 2008

2007 Started implementing a worldwide expansion plan by building the second plant in India. Lenovo tried to solidify its presence in US by selling both brand Lenovo and ThinkPad (a brand of IBM) In August announced the taking over Packard Bell BV, the 5th biggest PC-maker in Western Europe

About Lenovo:From Emerging to Surging

2008 Lenovo enters the Worldwide consumer PC market with the new "Idea" Brand.

2009 Launched the new strategy “ Protect and Attack”

2010 Lenovo introduced over 20 new devices at the consumer Electronic show in Las Vegas

2011 In January Lenovo formed a PC joint venture with Japanese IT company NEC, In quarter 3 Lenovo acquired Medion, a German electronics manufacturing company .

2012 Lenovo took the 2nd place in global PC market share with the share around 15%

LENOVO’S GLOBAL BRAND BUILDING STRATEGIES

“TRANSACTIONAL MODEL”

ChinaRelationship model: bulk orders from big enterprises

Transactional model: serving customers with common requirements and who need lesser customization. Target small- to mid-size companies and individual customers

LENOVO’S GLOBAL BRAND BUILDING STRATEGIES

LENOVO’S GLOBAL BRAND BUILDING STRATEGIES

GlobalRelationship model: acquire IBM PC division

Transactional model: become tech-sponsor for Turin & Beijing Olympic games, partner with NBA, offer both ThinkPad and Lenovo brand complement the product offering

China-based supply chain model: fulfills every order on time with better IT system

Agenda• Brief Summary about the case• Global PC Industry• Lenovo: From Emerging to Surging

• Key Challenges of Lenovo from the case

• Recommendations

Key Challenges of LENOVO raise from the case

Key Challenge #1Brand Building Challenges

Building a global brand inhighly commoditizedPC industry

Hurdles in buildingstrong brandin the US market

Key Challenge #2The Backyard Counterfeits

Chinese counterfeits of IT products & components

Key Challenge #3Intense Competition

Growing competitionfrom international

players

At home competition with local PC producers &companies with lower prices

Key Challenge #4Cost-Cutting is the only solutionto profit margin

Supply chain networkinternationally

Outsourcing Trends (CMs: Contract manufacturers)

Key Challenge #5Proliferation of technologies

Dual Multiple All in One Functionsand Interconnected digital technologies

Agenda• Brief Summary about the case• Global PC Industry• Lenovo: From Emerging to Surging

• Key Challenges of Lenovo from the case

• Recommendations

How Lenovo, as a state-owned Chinesecompany, could prevent the negative

viewpoint as endanger to US national security?

How Lenovo, as a state-owned Chinese company, could prevent the negative viewpoint as endanger to US national security?

• Brand Portfolio Strategy - Focusing more on “Product brand”

rather than “Corporate Brand”

• PR & Sponsorship/CSR Campaign - Marketing and Partnership with world-class

events and exhibition i.e. Olympic Games,World Cup, or even NBA in US

- Donations, Social Responsibilities Programin US to gain good corporate image

How Lenovo, as a state-owned Chinese company, could prevent the negative viewpoint as endanger to US national security?

• Focus on “Quality” and “Innovation” - Build key competencies on quality and innovation to

to overcome state owned Chinese company imageand narrow the gap of country of origin effect

• Household PC market in US - Better penetrate to household PC market

segment in US where low loyalty to US origin brand and concern more for affordable price and efficient features

How to build a “global brand”in a highly commoditized PC industry?

• Customized products and serviceshigher value added, unique product design,new product category

• Continuous R&D for new innovation

• Efficient resource utilization

• Effective distribution channels

How to build a “global brand”in a highly commoditized PC industry?

• Create strong brand loyalty such as excellent customer service, after sales service

• Rebranding – Lifestyle products not discounted products

• Advertising and sponsorship for global event- Olympic games- National Basketball Association

How to build a “global brand”in a highly commoditized PC industry?

How to cope with Counterfeits?

• Continuously deliver new innovation to its products– R&D investment

• Building Brand loyalty– Trust in quality

• Secure intellectual property when outsourcing more operations to suppliers partners– Transition of technology and

know-how to suppliers should be done appropriately

How to cope with Counterfeits?

How to improve SUPPLY CHAIN internationally?

• Why is supply chain important? IT product: depreciate and become outdated easily

• Past: 30-day shipping from China to USA

• Present: Fully integrated global supply chain

How to improve SUPPLY CHAIN internationally?

Global Supply Chain

Current Supply Chain Management

• Lean Six Sigma: To eliminate 7 kinds of waste: Defects, Overproduction, Transportation, Waiting, Inventory, Motion and Over-Processing

• SAP Software: To deal with wide range of customers

• Key KPIs: Cost, On-time delivery, Cash conversion, Quality

Lean Six Sigma

How to sustain in Global Competition?

• Maintaining competitive advantage on low cost

• Continue with global brand image

• Make use of the strong B2B market to expand to B2C market

• Quickly adapt to any customer change

How to sustain in Global Competition?

Other Recommendations

• Forecasting System

• Risk Management: Sensing and Responding Known-Unknown Risk

• Commitment Review by Executive Management

• Be Prepare• Collaborators turning to competitors

• Foreign governments• Exchange rate fluctuation

C A S E S T U D Y 9LENOVO’S BRAND BUILDING STRATEGIE:TAKING THE COMPETITION TO COMPETITORSWITH “TRANSACTIONAL MODEL”

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