Lenovo has makings of a global brand
Updated: 2015-02-06 07:34
By Laura Davis(China Daily Europe)
Company founded in Beijing three decades ago has become a high-tech powerhouse with growing consumer acceptance in Europe
It is just under a decade since Lenovo entered the European computer market, and the brand is already grabbing significant market share with continuous innovation, cutting edge technology and smart acquisitions.
The company's European entry dates to 2005 when it acquired the personal computer business of IBM, the US high-tech company. At that time, Lenovo's European operation focused on corporate markets, but in 2009 it expanded into the consumer business and boosted the personal computer division into a global leader.
Lenovo's new product, the Yoga tablet. The company's investment in innovations continues to drive growth. Photos provided to China Daily
In the third quarter of last year, Lenovo overtook US-based Hewlett-Packard Corp to become the largest seller of personal computers in the world measured by shipments, said IT research company Gartner Inc. Its tablets and personal computers are used by a wide group of consumers all over Europe. According to company data, Lenovo is the top computer brand in 15 countries including Russia, Denmark, Germany and Ukraine.
Stefan Engel, vice-president and general manager of Lenovo Germany, Austria and Switzerland, says the decision to move into the consumer business was to give Lenovo's products a wider customer base.
"First of all we wanted expansion, economies of scale. If you are only in the commercial field, you address only half of the market. Also, if you notice, Lenovo's area in China is largely in televisions and smartphones, and this is also the consumer side," Engel says.
Founded in Beijing in 1984 by entrepreneur Liu Chuanzhi, Lenovo made a significant international move by acquiring IBM's personal computer business for $1.25 billion, plus shouldering $500 million of debt.
The company also entered the smartphone market in 2012, and it has become one of the top vendors of smartphones in Chinese mainland.
In a bid to continue diversifying its business beyond PCs, Lenovo also said last year it had completed a $2.91 billion buyout of Motorola Mobility from Google Inc. The company hopes that Motorola Mobility will help its smartphones unlock developed markets in Western Europe and North America, as well as allowing it to go after the high-end market in China.
Lenovo is listed on the Hong Kong Stock Exchange and is a constituent of the Hang Seng China-Affiliated Corporations Index, often referred to as "Red Chips".
Today Lenovo's largest markets in terms of revenue generation in the area of Europe, the Middle East and Africa are from Eastern Europe (Russia, Ukraine) and Central Europe (Germany, Austria and Switzerland). Lenovo has already grabbed 30-plus percent of the PC market share in Denmark, Bahrain and Slovenia.
"The purchase of IBM's PC Division has given Lenovo an existing customer base and good reputation for its products," says Engel.
In 2009-2010, after only six months of selling three consumer products, Lenovo became a success on the German market, enjoying the buzz behind their netbooks, which today puts them at number two in the area of Europe, the Middle East and Africa, and boosting Lenovo to number four on the sales charts in Europe.
Building on IBM's success, Engel says Lenovo champions a company culture that takes the best of Chinese and Western creativity and work ethic.
"Corporate culture is a competitive advantage for Lenovo and a must have with such a global and diverse group of 54,000 employees located in more than 60 countries worldwide. Culture and talent diversity is a core Lenovo strength. To be the most innovative, you must leverage the best talent everywhere. Lenovo is truly global, with a balanced and diverse leadership team," Engel says.
"Lenovo's investments in innovations continue to drive growth through differentiation. For example, the new Yoga tablets drove Lenovo's substantial share gains in tablets," he says.
Lenovo's European sales are a rough 50-50 split between commercial and retail customers, Engel says. In the commercial market its main competitors are US firms like HP and Dell, whereas in the retail market it competes against other Asian brands like Acer, Asus and Toshiba.
Given that, Engel says Lenovo does not need to undercut competitors on price, citing the recently launched Lenovo Ultrabook, which retails from $1,186, as an example.
Ultrabook, which is a concept coined by Intel, has fast storage, connectivity and file transfers, although the laptop itself is rather small. It is a category that would include the Apple MacBook Pro.
Lenovo Ultrabooks are thinner than most other ultrabooks, and its adaptive keys allow many functions to fit within a limited amount of space.
Engel says Lenovo's products are sold through both brick-and-mortar shops and online retailers, with partnerships with all European major retailers.
"With the online channel we can offer anything. It is for the customer to decide," Engel says. "For us, getting into the (physical) retail stores was through the success of the notebooks. They really showed the value of our product," says Engel.
"We are investing in building a global consumer brand that deeply resonates with our target youth audience and elevates our profile around the world. Although very well known in China, we aspire to build one of the world's most recognizable power brands - a brand that is instantly recognizable and identifies Lenovo as a company that is known, admired, respected and desired around the world for years to come.
"If you go out and say, 'I am a Chinese brand,' then people would expect that you will be cheap. But we never said anything. We are not seen as a Chinese brand. People don't care anymore, as this is a global brand now."
In its move to become an increasingly global business, Lenovo has recently boosted its European research and development presence through its acquisition of part of IBM's server business for $2.3 billion.
Lenovo shares jumped 5 percent on Feb 4 after the company announced better-than-expected net profits for the quarter ended Dec 31. The company cited strong PC business and "fast traction in the integration of its Motorola Mobility and former IBM system X ... investments".
Yet company executives earlier had warned that the expense of the purchases would weigh temporarily on the firm's bottom line. Quarterly pre-tax income before items including the expense was up 8 percent year-over-year. Including the expense and other charges, pre-tax income was $274 million, down 15 percent.
However, the acquisitions were anticipated to greatly strengthen Lenovo's portfolio as they were digested.
The server acquisition, for example, is expected to give Lenovo a more comprehensive product line, since it would provide IBM System X and Flex products to complement Lenovo's low-end ThinkServer products, making Lenovo number three in the global server market, according to CIO.com, a technology news provider.
This also will bring Lenovo more than 6,000 highly skilled staffers. They have created more than 1,100 patents that will become part of Lenovo's IP portfolio. And they will join the company from a network of 34 research and development and seven manufacturing facilities.
"While we are proud of our Chinese heritage, we are truly a 'think global, act local' company, strongly embracing the heritage of all the countries where we have major investments, including IBM in the US, NEC in Japan, CCE in Brazil, our marketing hub in India, our social media hub in Singapore and Medion in Germany.
"We have R&D not only in China, but also in Japan, Brazil, Chinese Tapei and the US. We are investing around $625 million in R&D globally and have around 3,500 R&D engineers."
Looking into the future, Engel is optimistic about Lenovo's European market growth. "What makes Lenovo stand out is the support from the parent company, the best technology and innovation, a great team effort within the company and careful consideration of what the consumers want," he says.
For China Daily
( China Daily European Weekly 02/06/2015 page8)