Amid a sharp downturn for the global electronics sector, it has seen its global expansion plans thrown into reverse. It has even slipped behind Acer to become the fourth-largest computer brand in the world.
Lenovo was hailed as the poster boy for Chinese brands going global when it purchased IBM’s personal computing business four years ago. However, it has struggled to grow its PC shipments worldwide, with market share dipping from 7.5 to 7.2 per cent in 2008. That led to a major restructuring early this year, accompanied by 2,500 job losses in an effort to cut spending by US$300 million before March 2010.
The computer brand will further reorganise its regional operations, merging its businesses in Asia-Pacific, where it has offices in 16 markets, with its operations in China and Russia.
A new CEO was installed in February, with former chairman Yang Yuanqing taking over as CEO from American William Amelio. Then, in the same month, 450 further jobs were cut in China relating to global operations.
Lenovo has run into real problems overseas. In the US, it has struggled to build a consumer brand to compete with the likes of Hewlett-Packard and Dell, relying instead on corporate accounts.
Although denied by Lenovo’s executives, reports have suggested that the PC firm’s recent overhaul is a sign it is looking back at its home market. China certainly remains a stronghold: Lenovo’s market share lead over HP in the country has grown from 28.7 to 30.5 per cent. However, growth in the market has slowed.
During the restructuring, Lenovo refused to rule out marketing layoffs, though a spokeswoman at its Singapore office admitted that its marketing department would be operating “more leanly”.
The challenge the brand now faces is determining where its priorities lie, and what it can do with its brand on fewer resources.
Lenovo was hailed as the poster boy for Chinese brands going global when it purchased IBM’s personal computing business four years ago. However, it has struggled to grow its PC shipments worldwide, with market share dipping from 7.5 to 7.2 per cent in 2008. That led to a major restructuring early this year, accompanied by 2,500 job losses in an effort to cut spending by US$300 million before March 2010.
The computer brand will further reorganise its regional operations, merging its businesses in Asia-Pacific, where it has offices in 16 markets, with its operations in China and Russia.
A new CEO was installed in February, with former chairman Yang Yuanqing taking over as CEO from American William Amelio. Then, in the same month, 450 further jobs were cut in China relating to global operations.
Lenovo has run into real problems overseas. In the US, it has struggled to build a consumer brand to compete with the likes of Hewlett-Packard and Dell, relying instead on corporate accounts.
Although denied by Lenovo’s executives, reports have suggested that the PC firm’s recent overhaul is a sign it is looking back at its home market. China certainly remains a stronghold: Lenovo’s market share lead over HP in the country has grown from 28.7 to 30.5 per cent. However, growth in the market has slowed.
During the restructuring, Lenovo refused to rule out marketing layoffs, though a spokeswoman at its Singapore office admitted that its marketing department would be operating “more leanly”.
The challenge the brand now faces is determining where its priorities lie, and what it can do with its brand on fewer resources.
| FACT BOX |
| - Lenovo announced a US$97 million loss in December, compared with a $172 million profit during the same period in 2007. Sales had also fallen by 20 per cent from $4.5 billion to $3.6 billion. - Lenovo is cutting 2,500 jobs in an effort to cut spending by US$300 million before its fiscal year ending in March 2010. - In January, the company refused to rule out marketing layoffs. - Amid reports of Lenovo scaling back its global focus to concentrate on China, its share price dropped 2.7 per cent. |
Robert Campbell, managing partner/creative brand strategist, Sunshine/ M&C Saatchi
Dreams are lovely things. Without them we wouldn’t try to progress.
We would dress, eat and think the same... hang on, lots of us do that already. And that’s where I think Lenovo went wrong. I like Lenovo. I like that it dreamed big - but nothing exceptional happens if you follow the ‘rules’, especially if those rules are no longer relevant.
Lenovo’s problem is it bought a category it thought was impervious to change and when it realised the world had gone cheap-geek it was slow to react and offered niche alternatives (Winnie The Pooh laptop, anyone?).
Some say increased outsourcing would help, but a price war is the last thing it needs. Some say focusing on China is smart, but that market moves quickly so Lenovo may always be playing catch-up. And while making its brand less ‘suit and tie’ has potential, that subset is cluttered and fickle.
That leaves innovation. If Lenovo wants to fulfil its global aspirations, it has to let go of focusing on the category and start looking at culture. If it can embrace something that affects people’s lives rather than their computer habits, it could become a brand with energy rather than one with dreams.
Jim Goh, executive director, business development, Asia-Pacific,Omnicom Media Group
The recession has hurt PC companies, and with corporations cutting back on IT spending, Lenovo has been especially vulnerable outside its home market due to its reliance on corporate sales.
For Lenovo to compete, it needs to develop a more diversified portfolio of services, software and peripherals to stimulate revenue growth and boost margins, as software and services are higher-margin products.
Lenovo has an advantage in terms of gaining more brand equity from its acquisition of IBM. However, it will need to find ways to solidify its brand personality and find what is unique about its brand DNA. It could start by identifying new or niche segments and changing consumer needs.
Aesthetics play a significant role and packaging matters to style-conscious consumers.
Products by brands such as Sony and Acer are feature-packed, yet have premium emphasis in the looks category. Lenovo will need to think hard about how it can be more appealing and relevant to consumers.
Lenovo’s products are known for their dependability - this remains an area of consumer relevance to capitalise on.
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