News Column

Innovation key to Lenovo's branding success

June 16, 2014

Mike Bastin

Giant of China's computer industry, Lenovo Group Ltd, is once again in the news with United States government approval of its IBM Corp server takeover rumored to be less than a given.

Let's hope that the US government sees through its parochial protectionist eyes and Lenovo's most recent and ambitious acquisition to date sails through the red tape.

But is this current media attention misplaced? Surely with Lenovo's latest corporate takeover it is time to evaluate its international brand-building strategy and suggest necessary modifications?

Lenovo's managers have often said publicly that it's the company's goal to be the first Chinese company to reach genuine global brand status.

Telecommunications industry players Huawei Technologies Co Ltd and ZTE Corp share that ambition.

But unlike its major competitors, Lenovo has adopted an international brand-building strategy characterized by acquisition of established international corporate brands. But it's far from easy. Six out of 10 takeovers fail to meet expectations.

And those takeovers considered a success are often assessed purely on financial performance measures and not brand-building effectiveness.

So there should be much more media attention paid to Lenovo's brand architecture and brand development as a result of its international takeovers.

Lenovo first hit the international acquisition trail in 2005 with the takeover of IBM's personal computer division. This deal, then valued at $1.75 billion, propelled the Chinese computer giant into third place in the global PC industry, behind Dell Inc and Hewlett-Packard Co.

Far more importantly, it also led to the ownership of possibly IBM's biggest PC brand, ThinkPad.

Despite minor takeovers and considerable care with the post-purchase integration of the IBM PC business, it was not until 2011 that Lenovo announced its next major cross-border acquisition.

In June 2011. Lenovo announced an agreement to buy Medion AG, an established German computer company, and with this takeover immediately strengthened its presence in the ultra-competitive European market. The deal valued Medion at $906 million, and it was easily Lenovo's most ambitious venture on the international acquisition trail since the IBM PC business takeover.

The deal took Lenovo's market share in Germany, Europe's largest and most lucrative market, to 14 percent.

But crucially, Lenovo's brand-building did not appear to have grown with the addition of the German company's corporate brand only.

Distribution network and market share gains do not translate automatically into brand-building progress.

The next item on Lenovo's corporate shopping list followed fairly soon, with the takeover from Google Inc of the Motorola brand, announced publicly in January this year. This time Lenovo parted with almost $3 billion, but more importantly it took over ownership of Motorola's Moto X and Moto G brands.

This year has also witnessed Lenovo's planned purchase of IBM's low-end server business. A mere $2.3 billion is the agreed sum in this case. No doubt this latest deal will strengthen further Lenovo's already impressive global presence.

But once again there is no clear advance in Lenovo's brand-building hopes.

Indeed, it is the ThinkPad brand, an IBM brand innovation, that still stands out as Lenovo's "flagship" product/service brand.

It is pivotal to any global brand aspirations that Lenovo invest just as heavily in corporate brand takeovers with investment in product/service brand building. An excessive reliance on the Lenovo corporate brand will not only inhibit global brand achievement but will also stifle much-needed product brand innovation.

The limitations of corporate branding also explain the less than spectacular international brand-building progress of Lenovo's major Chinese competitors, Huawei and ZTE. Those limitations also affect much of Chinese industry.

Lenovo, and many of China's internationally acquisitive industry players, need to move quickly to demonstrate real brand-building progress with the establishment of a new, innovative product/service brand.

Then and only then can it be said that global brand-building at Lenovo has really begun.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer on marketing at Southampton Solent University'sSchool of Business. The views do not necessarily reflect those of China Daily.

(China Daily06/17/2014 page17)

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Source: China Daily: Hong Kong Edition

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