Case Analysis - Lenovo: Building a Global Brand
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Case Analysis - Lenovo: Building a Global Brand
Lenovo grew from a small distributor of imported computers into a leading computer firm and became well known in Asian-Pacific region in 20 years. It was successful in China. However, with China's entry into the WTO, the company surely would lose its advantage of government protection and intervention (such as imposed quotas and tariffs on imports), which used to help it keep its leading position in Chinese market. Meanwhile, foreign competitors started to enter Chinese market and domestic giant manufactures also started to introduce their 'own-brand affordable PCs' (Quelch and Knoop, 2006). Confronting with a mature market in China, Lenovo's globalization is compulsory. Therefore, Lenovo catch the opportunity of acquiring IBM's PC division to expand its market outside Asian.
The deal between IBM and Lenovo seems 'a match made in heaven' (Quelch and Knoop, 2006). For IBM, PC division is an unprofitable part compared to the company's other business divisions. The company also wants to concentrate on consulting services and middleware solutions. The two companies' way of selling PCs and customer base are complementary. On supply chain side, components for IBM PCs are sourced in China as well. On the other hand, Lenovo's leading position in Chinese market can help IBM's PCs perform better in that market.
After the acquisition, the first challenge Lenovo should deal with is branding. In short term, the company should prevent IBM's ThinkPad brand image from changing in customers' mind. In customers' perception, Chinese companies tend to 'get low marks for trustworthiness' (Quelch and Knoop, 2006). Lenovo's acquisition of IBM's PC division may lead a decline in product quality. In long term, Lenovo also should build itself into a globally recognized brand. Though Lenovo enjoys high brand awareness in Asian, it is little known in US market and other countries. The customers' perception of Lenovo brand is important to...
Lenovo grew from a small distributor of imported computers into a leading computer firm and became well known in Asian-Pacific region in 20 years. It was successful in China. However, with China's entry into the WTO, the company surely would lose its advantage of government protection and intervention (such as imposed quotas and tariffs on imports), which used to help it keep its leading position in Chinese market. Meanwhile, foreign competitors started to enter Chinese market and domestic giant manufactures also started to introduce their 'own-brand affordable PCs' (Quelch and Knoop, 2006). Confronting with a mature market in China, Lenovo's globalization is compulsory. Therefore, Lenovo catch the opportunity of acquiring IBM's PC division to expand its market outside Asian.
The deal between IBM and Lenovo seems 'a match made in heaven' (Quelch and Knoop, 2006). For IBM, PC division is an unprofitable part compared to the company's other business divisions. The company also wants to concentrate on consulting services and middleware solutions. The two companies' way of selling PCs and customer base are complementary. On supply chain side, components for IBM PCs are sourced in China as well. On the other hand, Lenovo's leading position in Chinese market can help IBM's PCs perform better in that market.
After the acquisition, the first challenge Lenovo should deal with is branding. In short term, the company should prevent IBM's ThinkPad brand image from changing in customers' mind. In customers' perception, Chinese companies tend to 'get low marks for trustworthiness' (Quelch and Knoop, 2006). Lenovo's acquisition of IBM's PC division may lead a decline in product quality. In long term, Lenovo also should build itself into a globally recognized brand. Though Lenovo enjoys high brand awareness in Asian, it is little known in US market and other countries. The customers' perception of Lenovo brand is important to...