Case Study:
Lenovo In 2005, China’s Lenovo Group acquired IBM’s personal computer (PC) business for $1.25 billion. The acquisition vaulted China’s top computer company into third place among the world’s PC marketers, behind Dell and Hewlett-Packard. With annual revenues of $15 billion generated by sales in more than 60 countries, Lenovo now has almost an 8 percent share of the world’s PC market. The crown jewel in the acquisition was the popular ThinkPad, a laptop that features an exceptionally well-designed keyboard. President and CEO William J. Amelio was tasked with gradually eliminating the IBM logo as Lenovo built a global brand identity. Amelio and his marketing team decided to use the Olympics as a vehicle for building awareness about the corporate name and its products. Lenovo paid more than $60 million to become China’s first Olympic sponsor; it provided several thousand PCs and servers at various competition venues during the 2006 Winter Olympics in Turin, Italy. The computers were clearly visible during television broadcasts of Olympic events and were used by Visa, Coca-Cola, and other sponsors. Lenovo also sponsored 11 athletes. Lenovo’s status as a sponsor entitled it to invite preferred customers to the games to meet company executives, get hands-on time with some of the company’s products, and, of course, view the sporting events. Lenovo was also the computer provider for the 2008 Beijing Summer Olympics. Speaking about the Olympics, CEO Amelio said, “It’s a great opportunity. It’s a coming-out party to say, ‘Here’s Lenovo, we’re a global brand and we’re here to stay.’” Lenovo is also using other sports to raise its profile. For example, Lenovo has joined forces with the National Basketball Association (NBA) by becoming the “Official PC Partner of the NBA.” The opportunity arose when Dell, which had a previous agreement with the NBA, chose not to renew it. Also, Brazilian soccer star Ronaldinho signed a 1-year contract to serve as Lenovo’s global brand ambassador. Some observers have suggested that Lenovo is moving too quickly to distance itself from the IBM brand name. For example, University of Pennsylvania Professor David Reibstein says, “What Lenovo is trying to do is get itself established with credibility in this market, but it feels like a premature transition. Lenovo may be strong in China, but it is a non-name in the West.” Deepak Advani, Lenovo’s chief marketing officer, responds by noting, “The IBM brand is a double-edged sword for us. It gives customers a sense of comfort and safety and provides some instant credibility. But the longer we hold on to a well-established brand like IBM, the more difficult it becomes for us to be known as Lenovo.” At least one industry analyst applauds the rebranding effort. Simon Yates, an analyst with technology consultancy Forrester Research, says, “The IBM brand says ’third place finisher, high-priced.’ Lenovo needs to get rid of the IBM brand quickly because it came with a lot of baggage. It’s not appealing to the market they want to grab in the future: small business. The ThinkPad has a reputation for industrial strength and being IT friendly, but as an IBM product it was expensive. Now people can get it at close to Dell prices.” Today, Lenovo’s headquarters are in the United States, although most of its employees are in China. While the rebranding effort is ongoing, Amelio faces additional challenges, such as bridging cultural differences among the company’s far-flung employees and maintaining profitability despite a worldwide slowdown in PC sales. In a recent interview with the Financial Times, a reporter asked Amelio, “How hard has it been to bring together the Chinese and U.S. parts of the company?” Amelio responded as follows: I’ll give you an example. We had two design teams from the east and west . . . and they were working well together but all of a sudden the meetings stopped dead, they weren’t communicating effectively. Finally someone said, “Let’s look at this one word that somebody used when it seemed like it stopped the meeting. That one word was, we needed to have a ‘common’ design element across our two different design languages. Well, when it’s translated into Mandarin, ‘common’ means ‘uninteresting’ and ‘boring.’” Amelio also embarked on a $100 million restructuring program that resulted in an 11 percent workforce reduction. Substantial investment is also being made in sales and distribution channels. Will the result be market success? As one observer noted, “If you look at HP and Compaq, they took 4 or 5 years to integrate a Texas culture and a California culture. When you try to merge a U.S. company and a Chinese company, it is going to take a lot longer to make it successful.”
Q1. In the third quarter of 2008, Lenovo posted a loss of nearly $100 million. Do you think that Olympic sponsorships pay off for companies such as Lenovo?
Q2. What is the biggest global marketing challenge facing Lenovo today?
Q3. In 2009, as his 3-year contract came to an end, Bill Amelio resigned as president and CEO of Lenovo. What nationality do you the new chief executive is?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.