Yang Yuanqing was not content to be chairman of Lenovo, the largest computer company in China with over 35 percent of the PC market. He envisioned being a worldwide leader in computers and, almost overnight, Yuanqing transformed Lenovo from a $3 billion Chinese computer company to a $13 billion global technology giant with the acquisition of IBM’s personal computing business in 2005. Now with headquarters in Beijing and Raleigh, North Carolina, he is chairman of the world’s third-largest computer company behind Dell and HP.
Blending an upstart Chinese company that is much smaller than the American business icon (IBM) it acquired has been a challenge. Yang realized the need for Western management skills to help run the company and hired William Amelio, former head of Dell’s Asian markets, as president and CEO. The two have a complex managing relationship with Yang focusing on marketing and distribution while Amelio concentrates on supply chain, a critical area as it targets new markets, including the United States.
The company believes its success in China can be replicated around the world. As Yang states, “We want to extend the business model that was so successful in China out across the world.” Its home market represents its most profitable market, not unlike many other companies with worldwide operations.
However, Lenovo’s strong position in China is under attack by competitors. Over the past several years, Dell has invested $16 billion in China, building factories and creating an efficient supplier network. Dell’s investment in China has been more than Lenovo’s entire revenue over the same period. At the same time, Acer, the No. 4 global computer company based in Taiwan, is aggressively closing in on Lenovo. It has developed an aggressive strategy in emerging markets such as China and India while also targeting the U. S. market using agreements with Wal-Mart, CompUSA, and Circuit City to market its products in the United States.
Lenovo struggles to generate significant profits outside China and, despite the rights to use the IBM brand and “Thinkpad” for five years, sales have actually declined in the U.S. market. Building a global brand takes time, so Lenovo is leveraging the IBM brand while it builds up its own brand and product line. Three years after the IBM purchase, the company is transitioning away from the IBM brand in its advertising. Also, the company has introduced its two lines of notebook computers in the United States, the 3000 and Ideapad series. Targeting business users, the core IBM market for many years, the company is going head-to-head with Dell and HP in the United States. Lenovo believes that a strong global brand is the result of a customer-focused product mix and good customer service. The company’s focus on expanding beyond its home market puts it at the forefront of Chinese companies seeking to turn their local success into a global brand.
Another weakness in the U.S. market is the supply chain. Lenovo’s success with Chinese suppliers has not translated easily in the United States. Amelio wants to make the U.S. supply chain more efficient while maintaining the quality level associated with IBM products.