BUILDING A GLOBAL BRAND

Revised Date: October 19, 2006

HBS Case Studied byJOHN QUELCH

CARIN ISABEL KNOOP

Case Analysed byBALAJI.K

SANTOSH ANAND.M

Global PC Industry

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 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

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

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

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%

Did the

“quick brown fox jump over the lazy dog”

or

“the fish ate up the whale”

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?

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

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

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

Getting to know the MarketMarket 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”

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

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

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.

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

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