Can China's Lenovo brand in the land of Dell?

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Can a brand with "no" smack in the middle of its name succeed in a world where English is increasingly the dominant language?

That's one of the many branding and marketing questions facing Lenovo, the Chinese company that acquired IBM Corp.'s personal computer division earlier this year in a deal valued at $1.75 billion.

"Obviously, we have a pretty intriguing situation," said Craig Merrigan, VP-strategy, market intelligence and design at the 21-year old Lenovo.

Lenovo purchased IBM's PC unit for a number of reasons:

  • To gain a foothold in the U.S., the largest technology market in the world.
  • To improve its b-to-b marketing position by bringing aboard the ThinkPad laptop brand, which is strong among corporate buyers.
  • To boost its international presence, particularly outside of the Asia-Pacific region.

"It's a bold move," said Loren

Loverde, an IDC Corp. analyst. With the acquisition, Lenovo jumped to third place in worldwide PC shipments in the second quarter of this year, achieving a 7.6% market share, up from a 2.4% market share last year, according to IDC figures.

Umbrella brand `lenovo'?

But analysts agree that Lenovo has a challenging branding task ahead of it, especially as it ultimately plans to use Lenovo as the company's umbrella brand around the world. Merrigan said the plan is to use ThinkPad as a notebook product brand beneath that umbrella and to use ThinkCentre as the likely product brand for desktop computers. Under the terms of the acquisition, Lenovo has the use of the IBM name and brand for five years.

Other aspirations for the Lenovo brand, Merrigan said, are to be known for innovation, quality and service. Additionally, the company wants to be recognized as a global brand, not simply a Chinese brand.

The structure of the company in the wake of the acquisition goes a long way toward establishing Lenovo's international character. The chairman of the company, Yuanqing Yang, is Chinese; the CEO, Steve Ward, is American. Much of the management team from IBM's PC unit has been retained, and the corporate headquarters is in Purchase, N.Y. There are major offices around the world and manufacturing facilities in China.

Merrigan acknowledged that some have wondered about the capacity of a Chinese company to break through in the U.S. and elsewhere. "In our conversations with customers it has come up as a question," Merrigan said. "But there is a great deal of understanding and acceptance that China is in the economy of the world and will continue to move in that direction."

He pointed out that the company's origins in China may provide an advantage in some parts of the world. "Some countries, like India, actually have a tremendous amount of affinity for China," he said.

Analysts compared a Chinese company's entry to the U.S. market to the penetration of American shores by Japanese manufacturers in the 1970s. Indeed, many observers believe that Chinese companies will have an easier path to gaining an economic foothold in the U.S. now that globalization has become a fact of life and that Chinese manufacturing already has a burgeoning reputation for quality, something that was hard-earned for Japanese manufacturers 30 years ago.

"I think that in the same way we got used to Samsung and Toyota and Honda [we'll get used to Lenovo]," said Jim Gregory, CEO of branding consultancy CoreBrand.

While Japanese companies had to struggle initially with quality issues, manufactured goods from China already enjoy a relatively strong quality reputation. Rob Enderle, principal analyst at the Enderle Group, said that he had little doubt about Lenovo's quality: "From what I saw while in China, I found Lenovo to be only slightly below IBM in quality and generally rated more highly than most of the PC firms selling in China. ... Given how ex-IBM executives would be driving the corporate side, I expect the related products to continue to meet the IBM standard."

In China, Lenovo is known primarily as a consumer brand. The company said that it is the market share leader in China and is three times larger than its nearest competitor. If Lenovo does establish a reputation for producing quality products, that perception will go a long way toward helping the company enter the corporate market in the U.S. and globally.

The fact that ThinkPad has a presence in about 160 countries worldwide also helps establish Lenovo as a global player well beyond the Asia-Pacific region. With the IBM PC division acquisition, Lenovo's worldwide market share (7.6%) trails only Dell (19.3%) and Hewlett-Packard (15.6%). When it comes to U.S. PC shipments, IDC's tabulations show Lenovo occupying fifth place with a 4.1% market share, behind Dell (34.7%), HP (18.7%), Gateway, (6.0%) and Apple (4.5%).

So far Lenovo has treaded gingerly in the U.S. Print ads created by Lenovo's agency, Ogilvy & Mather (which is also IBM's long-time advertising agency partner) this summer introduced the ThinkPad X41 Tablet PC. The ThinkPad brand dominated the execution, which appeared in The New York Times and The Wall Street Journal. IBM's logo appeared on the product, and Lenovo appeared in the body copy almost as an afterthought.

The Lenovo name itself will probably step into the spotlight during the 2006 Winter Olympics, in Torino, Italy, and the 2008 Summer Olympics in Beijing. Lenovo is the "worldwide technology equipment sponsor" of the next two Olympics, providing notebook and desktop PCs, servers, storage devices and other computing equipment.

Observers expect Lenovo to spend significantly more advertising dollars trumpeting its brand than the $35.3 million IBM's PC unit spent in 2004 and the $47.4 million it spent in 2003, according to TNS Media Intelligence. From January to June 2005, Lenovo's ad expenditures totaled only $6.0 million.

In the meantime, Lenovo is doing what it can in the U.S. to emphasize what makes it different from Dell in the b-to-b arena-its presence in the channel. Some industry observers, however, don't believe that Lenovo has done enough to define a channel strategy for its partners.

"They realize the U.S. and the Western European countries are markets where PCs are fairly commoditized," said Larry Walsh, editor of CMP Media's VARBusiness magazine. "They've talked about leveraging the channel, particularly in North America to expand its market share in the North American market, but how it's going to do that isn't clear."

Caution may be wise

For now, Lenovo seems content to be known primarily as the company that acquired IBM's PC division. This cautious approach may not be a bad thing, according to some observers.

"I think Lenovo is an emerging global brand name for their bold move in acquiring [IBM's PC unit]," said CoreBrand's Gregory, who called Lenovo a "good name."

But Al Ries, chairman of branding consultancy Ries & Ries, disagreed. "Lenovo, I think, has a lot of opportunities," he said. "Unfortunately, Lenovo is a lousy name for a brand." Ries said that Lenovo, at three syllables, was too long for a brand name and was simply not a euphonious word.

Criticism aside, Lenovo plans to move forward with both its brand architecture strategy and with building the brand in every customer interaction. "The way we're going to compete is to earn a great brand reputation one customer at a time....You can't have a great brand unless it's true," Merrigan said. 

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