IBM positioning itself for the long term gain. Lenovo

            IBM gave permission to Lenovo to use
its logo for its Laptop and Desktop for a period of 5 years. Lenovo, but used
the IBM logo only on its Thinkpad series. In order to gain loyalty from its
current consumers was to gain loyalty from its current consumers as well as the
potential buyers by contracting with IBM for service of the PCs and attaching
the IBM logo to ThinkPad to make certain to the customers that their ThinkPad
is in good care. Apart from this effort, Lenovo distanced itself from IBM for establishing
its own master brand with the help of its sub-brand, the Thinkpad. This was a
good decision for Lenovo to act and take a fast move with IBM. Without using
IBM’s logo or brand name more, Lenovo lost the opportunities to keep IBM’s
current customers and potential buyers. Lenovo was taking the risk of short
term lose but was positioning itself for the long term gain. Lenovo believed it
could use the combination of marketing and branding efforts to create an
impression of a better new master brand which is innovative and efficient at
the same time, with the help of the Thinkpad sub-brand.

IBM logo and ThinkPad

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            Lenovo followed a simple strategy whereby
the company focused on building up its Lenovo brand and continue to strengthen
its ThinkPad product brand. This brand strategy as considered by Lenovo has
been extremely effective from the point of view of catering to the needs and
expectations of the brand. This is because IBM already has its own distinctive
brand image globally, and at the same time Lenovo has created a unique identity
in the Chinese market and is also building up its image in the global market. Also,
combining innovation and efficiency in their brand helped Lenovo in addressing
the higher level of competition they faced. The reason for Lenovo’s acquisition
of IBM PC division was not only for the IBM brand but for the global PC
channels as well as its flagship Thinkpad notebook computer. It is very clear that
Lenovo was trying to build its own master brand. Therefore the strategy of
building both brands individually has been highly efficient for Lenovo.

Lenovo’s Strategy

            Before acquiring IBM, Lenovo
operated in a very small level, in the Chinese markets. To become a successful
brand globally, Lenovo had to make significant changes in it’s business model.
The first challenge Lenovo faced after the acquisition is that that the company
has to perform the marketing and management of its business at the global
level. The second challenge was that they had to make necessary changes between
the IBM products and Lenovo products. Lenovo wanted to maintain the two brands
separately. This has been a major challenge to Lenovo since the core principle
of innovation and efficiency are integrated across the business principles of
both IBM and Lenovo. Another major challenge faced by Lenovo after the
acquisition was the integration of two different cultures (Lenovo being a
Chinese company and IBM being an American company). It is quite evident that
there has been cultural clashes within the employees after the acquisition. The
managerial challenges such as cultural differences across the two businesses
and the need for maintaining separate business profile for both Lenovo and IBM
has been the most difficult challenge to the Lenovo’s management after the
acquisition.

Challenges after the acquisition

            The primary reason that drives IBM
in selling its PC business is mainly the change in the focus of the company.
They have changed their focus from selling PCs to providing IT consulting
services to its customers. IBM realised about the declining potential of PC
industry and the level of competition has also been rising. IBM’s main focus
was on long term growth strategy and it realised that by selling PC’s, it won’t
be able to achieve or maintain its growth position in the industry. Therefore
they diversified their focus towards IT consulting services and selling off its
PC business to Lenovo

IBM selling their PC business

            Before the Acquisition of IBM’s PC
division, Lenovo was a very successful localised PC brand in China. It was recognised
as an innovative PC company through its customization and understanding of its
main Chinese market by introducing Chinese specific needs for PC like legend
cards for Chinese characters processing, sales channels for PC instead of
direct sales, etc. To survive and succeed in the global business environment,
Lenovo had no choice but to become an international firm in the PC business.
Lenovo’s market share of 30% in 2001 was number one in the Chinese market, but
Dell computer as well as PC clones also posted strong challenges to its leading
market share. For the company to grow, Lenovo would have to expand to the
worldwide market. With the acquisition of IBM PC division which it announced in
December 2004 gave Lenovo a big opportunity to expand beyond its territory
outside Asia.

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