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Lenovo looks to build brand as it reaches for top PC vendor spot
- — 27 February, 2012 19:29
China's Lenovo, already a top brand in its home country, is focused on becoming a household name in major foreign markets as the company faces the prospect of becoming the world's largest PC vendor for the first time in its history.
Chances are the Chinese company could take the title some time in 2012 after achieving the highest growth rate among the top five companies for the last two years. Now ranked as the second largest, Lenovo's market share is just two percentage points below Hewlett-Packard's 16 percent, according to research firm IDC.
Lenovo's rise coincides with the world's largest PC market moving from the U.S. to China starting last year. Back in 1997, Lenovo for the first time became China's top PC vendor, where it has since gone on to claim a 35.3 percent market share on its home turf, a major factor in driving the company's growth, according to analysts.
Now fifteen years later, the Chinese PC maker wants to popularize the company's consumer brand in markets including the U.S., where Lenovo's sales still lag far behind those of its top competitors.
"We want to be the first big consumer brand to come out of China, which is a big challenge," said Lenovo's chief marketing officer David Roman in an interview. "I think within the next few years, we will become a very well-known brand in the personal electronics space."
Last year, Lenovo launched its first ever global marketing campaign, targeting consumers in North America, Japan, Germany, Russia, Japan and the U.K. This led the company to push ads with its new tagline, "For those who do," and even place its products in the hit movie "Transformers: Dark of the Moon."
The campaign's result has helped double brand awareness among customers aged 18 to 34, according to company surveys, Roman said. "In the U.S., from March 2011 to January 2012, we saw an increase of 204 percent in purchase consideration for Lenovo computers," he said.
"More and more will depend on the consumer space, which is where the technology is going," Roman added. "This has been a crucial priority for us."
It also marks an uphill battle for the Chinese company as it faces off with established consumer brands. Unlike its standing in the world market, Lenovo is the sixth largest PC vendor in the U.S., with a market share of 7.3 percent, according to IDC.
But the Chinese PC maker has managed to grow its business amidst other challenges affecting the market. In the last two years, Apple's iPad cut into the sales of traditional PC desktops and notebooks. "For every ten PCs sold, three to four of them will be iPads," said Michael Kauh, an analyst with research firm Canalys. Weak economic conditions have further dampened sales, bringing negative year-over-year growth to PC vendors HP and Acer in 2011.
Lenovo, however, has managed to weather the storm, benefitting from the Chinese PC market's continued growth. Last year, Lenovo also acquired German PC maker Medion and launched a joint venture with Japan's NEC, key moves that helped expand the company's business in mature markets, according to analysts.
At the same time, Lenovo's rivals have also indirectly contributed to the company's rise, analysts said. Last year, leading vendor HP said it would spin-off its PC business, only to later change its mind. Taiwan's Acer also saw the departure of its then CEO Gianfranco Lanci, along with 300 employee layoffs in Europe after finding problems in its distribution channel.
"When those announcements go out, a lot of enterprise customers don't want to hear that," Kauh said. "I think (Lenovo) took advantage of a lot of disadvantages that happened to competitors."
But brand has also played a role. Eileen He, an analyst with research firm Gartner, said a major turning point for Lenovo came in 2005, when the company acquired the popular commercial PC ThinkPad line from IBM. "Lenovo didn't have a very strong brand, but once they bought the ThinkPad brand, it made their business more stable, and gave them a foundation to build a commercial PC business," she said.
Currently, the company's enterprise products outside China have made up the bulk of its global PC sales, accounting for 65 percent of PC sales, versus 35 percent for consumer, according to research firm IDC.
Building Lenovo's next brand to draw in average consumers won't be easy, said IDC analyst Bryan Ma, noting that Chinese brands are often associated with low quality. "If someone wonders, 'Who is this Lenovo company?' Then it raises questions about product quality," he said. "Lenovo certainly still doesn't have that cool reputation that Apple commands."
Lenovo wants to change that, and is partly focused on building products with a "Wow factor", Roman said. Some of those products were unveiled earlier this year at the Consumer Electronics Show in Las Vegas, including Lenovo's "IdeaPad Yoga" product, an ultrabook laptop that can also turn into a tablet.
Roman also emphasized that his company is not simply a Chinese firm, but a global one with headquarters in both the U.S. and China. "All computers, most cellphones and tablets are all made in China, no matter which brand," he added. "So I think people are used to seeing that a level of high quality is coming from China."