Lenovo
Problem: Lenovo worked on the strategy to build a master brand while leveraging the ThinkPad product brand name, thereby implying an immediate challenge of maintaining the loyalty of existing customers, specifically the ThinkPad, while sustaining innovation at the same time. Moreover, the much thought out first innovation in the form of the X41 Tablet series from Lenovo after the acquisition, led to IBM being given all the credit owing to the less popularity of Lenovo. The association of Lenovo with China and the Chinese Government was a potential downside for it to compete in price competitive products with the fear of being recognized as the company from China providing cheap products. This not only had the potential to devalue the Lenovo master brand, but could also damage the premium ThinkPad brand. While a relatively low budget on worldwide marketing as compared to its competitors also proved to be a reason for its market share to that of the PC market leader being as low as 1:3.

Competition: Dell was Lenovo’s greatest competitor, being the market share leader with a strong global footprint. The direct sales approach rather than the retail store distribution model led to its rapid growth in China. Similar to Dell, HP, another competitor of Lenovo, also focused on providing standardized products while maintaining a low cost and supply chain. Moreover, Apple and Sony concentrated their energies on innovation and providing premium products. Other competitors were upstarts and grey-market clones which challenged Lenovo’s positioning in China for providing affordable PCs. The PC market was further getting increasingly saturated with other players such as Acer, Fujitsu, Gateway, NCR and Toshiba.

Product Offerings/Customer Needs
Lenovo focused on price- competitive small business computers, of which 3000 series was the latest product, and hence valued simplicity and ease-to-use. Through the design, look and feel of their machines, Lenovo signified innovation. Quality, reliability and durability were also highly valued with Lenovo products. Lenovo leveraged the premium ThinkPad and ThinkCentre products which targeted corporate and enterprise customers. Their niche at understanding the customer needs was demonstrated by their introduction of the Internet in China and the addition of security features in their products. .

SWOT Analysis
Strengths: The key strengths of Lenovo are Innovation, Commitment to quality, ThinkPad brand and Supply chain efficiencies. Having its manufacturing facilities in China, it has access to low cost labor and can procure computer components at short notice since its suppliers are also based in Asia. Even though the cultural backgrounds of people working at IBM and Lenovo are different, they both share the same value of winning. Further helping Lenovo are IBM’s sales, support and distribution network.
Weaknesses: The brand awareness about Lenovo’s products is still low in USA. As a result, IBM got credit for the X41 Tablet Series but not Lenovo. Further as Lenovo tries to integrate the IBM workforce, it will encounter cultural and operational issues (different time zones). As Lenovo grapples with these issues, its competitors might lure away its enterprise customers. Lenovo’s association with the Chinese government could be another hurdle to expand business in the western countries. When compared to its competitors such as Dell, its marketing budget is less.
Opportunities: The upcoming Olympics (winter and summer) provide an excellent opportunity for Lenovo to leap frog as a global player. It can use the Olympics to show case its upcoming product line(3000 series) and show the world that it has something to offer for each customer segment.
Threats: Few threats exist to Lenovo’s growth plans. It will be facing stiff competition on its home turf in the form of Dell. It would also need to plan for its own support division once the contract with IBM ends. This issue might prevent some customers from buying Lenovo’s products. Finally, the macro economic conditions and changes in consumer preferences do impact Lenovo’s bottom-line.

Alternatives:
Alternative 1-Lenovo ‘Support Strategy’ for Small Business: This strategy for the 3000 Lenovo Series targets small businesses and has a two pronged approach. First, the strategy uses the reputation and size of IBM support services to add credibility to the Lenovo brand. Second, this strategy will use IBM’s extensive sales team to demonstrate that Lenovo can add value through support.
Justification: A key need in this segment is that PCs be “worry free”. To address this, Lenovo will market their use of IBM’s support services which have a great reputation and a global infrastructure. In addition, the competitors in this segment (Dell and HP) are competing on price point. Lenovo can use IBM’s sales team to convince small businesses that even though Lenovo is at a similar price point, the support services provide a value-add.
Risks: This strategy depends on the effective delivery of services from IBM. There are implementation risks from this arrangement with IBM since Lenovo does not have direct control over IBM’s support services. Also, after 5 years this arrangement with IBM will end; Lenovo will need to ensure customers that they have an adequate transition plan in place.

Alternative 3: Phased approach (Recommendation) Lenovo should continue promoting ThinkPad as a separate brand with an understated association with Lenovo and a plan to gradually phase out IBM logo from ThinkPad series before the end of 5 years. There should be a dedicated “IBM” sales support team for ThinkPad customers and a plan to transition support to Lenovo over 5 years (or buy out IBM’s support team, if possible, per contract). The 3000 series should be launched at the Olympics as is without a change in name and should be offered with extended IBM support. The message should connote – built by Lenovo, supported by IBM. Lenovo has built innovative features such as “Lenovo Care” in its 3000 series and has IBM support. It should use these as springboard to market itself as a global company driven by innovation and quality service. It should also leverage its already produced home computers and introduce a new series targeted at “home customers” globally in a later phase.
Justification: A major concern for existing ThinkPad customers would be after sales support and having a dedicated IBM support would allay customers’ concerns. Since the IBM support contract gets over in 5 years, Lenovo would need its own support team. Olympics offer a great opportunity to Lenovo to get its name out to the rest of the world and this opportunity should not be missed by promoting a “series” as opposed to Lenovo brand, especially in light of the fact that Lenovo has already generated publicity due to the acquisition. Extended “IBM” support on the series would generate more confidence amongst customers and the increased cost of extended service can be offset by improved operational efficiencies due to acquisition. Globally, customers perceive Chinese companies as providers of cheap and low quality products, so projecting Lenovo as a global company is imperative. Introducing new series for home customers would not only increase Lenovo’s brand awareness but would be in line with Lenovo’s strategy to compete globally with other brands and penetrate new segments.
Risks: ThinkPad brand can become disassociated with Lenovo, not giving Lenovo the required push. Integration of IBM and Lenovo support could be a challenge though this risk should be less given a 5 year timeframe. There could be delayed returns from the marketing at Olympics as customers walk slowly out of “wait and watch” attitude. Also introduction of new series for home customers is contingent on Lenovo’s success of 3000 series.