Lenovos Performance in the Middle East - Term Paper Example

Lenovo Goes Global Nowadays, Lenovo is known to be China’s most recognizable brand that has managed to integrate successfully the Chinese and American cultures in one company (Holstein). The success story began to develop in May 2005 when the Chinese computer company Lenovo has acquired an American-based PC division of IBM for US$1.75 billion (Holstein, 3). This acquisition was a great opportunity for the Lenovo brand; however, it also posed significant challenges to the company’s management. The key challenge was associated with differences of the American and Chinese cultures. It took almost five years before the company has managed to resolve the worst of the cultural differences (Holstein, 3). This was a process of learning of a way in which the multinational company should operate in order to succeed. In result of this experience, the company has surpassed such global players on the PC’s market as Dell and Hewlett-Packard Company (Holstein, 4). Lenovo’s sales have almost doubled in 2014 compared to 2008, and reached $39 billion. One of the success factors was attributed to the company’s capability to develop a global network. Lenovo has developed effective HR strategies based on the global approach, adopted global management principles, and created network oriented enterprise. Also, the company has managed to transform its ineffective and costly supply chain into highly integrated, cost-effective, flexible and competitive supply chain system. In order to achieve this, Lenovo’s management has eliminated excessive elements and policies, have developed effective system of performance measurement, and provided extensive training to its top managers. Lenovo has also adopted “out of box” thinking culture and against all the stereotypes have reestablished electronics assembly in the United States (Holstein, 6). Despite the fact that the workforce in the US was more costly than in China, Lenovo has managed to gain a structural cost advantage over its competitors and to offer better price to consumers. Moreover, the company has kept all its “know-how” and other innovative ideas in-house, while other companies were outsourcing their brains to manufacturing firms (Holstein, 7). With the emergence and growing popularity of smartphones, the company has made a strategic decision to expand to PC plus market, and its “in-house” assembly strategy has enabled the company to protect its PC sector and focus on innovations in PC plus sector. Some of these innovations were referred to long-lasting batteries for tablets, rapid-charge batteries, superlight laptop bodies, and convertible devices (Holstein, 7). One more pillar of the Lenovo’s success was its marketing strategy. Lenovo has used several different types of advertising, including: sponsorship of the 2008 Olympic Games in Beijing and of the National Football League, as well as celebrity endorsement. Ashton Kutcher has become a new “face” of the new Yoga tablet advertising as well as product engineer who will help Lenovo in designing new appealing products (Holstein, 9). Also, the company has launched a short film “The Pursuit” shot by Martin Campbell. Lenovo’s success was partially attributed to the company’s Mergers & Acquisition strategy. The company has successfully entered many foreign markets by acquiring local players. Thus, for example, the company bought the PC operations of NEC company in Japan and made it a PC market leader (Holstein, 9). Also, the company has acquired a majority stake of the Medion, a German PC maker, and also has succeeded in reestablishing this brand in Germany. In 2012, Lenovo bought CCE, the leading maker of mobile devices and PCs in Brazil (Holstein, 9). One of the most recent acquisitions was the handset division of Google and IBM’s low-end server business in China (Holstein, 4). It is worth to note that success of Lenovo should be attributed not only to selection of right “victims” for acquisition but also to cultural and managerial experience gained during the integration of the American and Chinese cultures. The company has learned to keep a balance between local focus and global insight. Moreover, Lenovo has developed the whole process of integrating management of each acquired company into a global organization (Holstein, 9). The company has ambitious plans to continue to grow the business and strengthen Lenovo’s brand on the global PC market, taking on such giants as Apple and Samsung. In order to realize these plans Lenovo has introduced a new organizational structure with four main business groups: mobile devices, PCs, enterprise, and cloud computing (Holstein, 10). The experts believe that Lenovo demonstrates a great example for the Chinese companies willing to enter an international arena and to become a truly multinational corporation. Lenovo offers a ready model for the Chinese companies to learn from and to use while going globally. Lenovo in the Middle East Brand Positioning After acquisition of IBM, Lenovo has reestablished its brand and changed the overall course of its strategy. The company has hired a highly qualified marketing team in order to develop effective marketing strategy and to reestablish the brand (Holstein, 9). There was approved a new concept of the company which has set absolutely new and innovative approach to Lenovo’s positioning on the global market. Lenovo’s tagline widely known “For those who Do” helped the company to position its brand as “an enabler of the DOER lifestyle and Do mindset” and helped it to differentiate the brand from its competitors – providers of electronic devices (Partnerinfo.lenovo.com, n.p.). Therefore, the company is positioning its brand not as enabler of users to do more and more with a help of Lenovo’s devices (Partnerinfo.lenovo.com, n.p.). This positioning strategy is pursued globally and is widely recognized in both emerging and developed markets. Segmentation Lenovo’s management has early recognized the great potential of the Middle East countries. In terms of geographic segmentation of the Middle East region, Lenovo’s management has identified Saudi Arabia and the United Arab Emirates as two strategic markets for smartphone penetration (Bond, n.p.). In June 2013, Lenovo’s management has announced about its plans to become “one of the top five smartphone vendors” in both the UAE and Saudi Arabia in the near future (Bond, n.p.). In addition to geographic segmentation, Lenovo’s marketers have defined the different categories of consumers’ segments. Thus, target audience of the users of Lenovo’s new smartphones was very broad as it covered many different categories based on both lifestyle and income characteristics. The major segment was comprised of several categories, including: stylish trendsetters, top-end users, conscious spenders, and professionals (Bond, n.p.). Marketing Mix Product The company has introduced several models of products to the Middle East market: P780, K900, A 706, A 390, S920 and S820 (Bond, n.p.). More specifically, for each product there was identified a specific subset of the target audience based on the product benefits: P780 - for professionals who need long-lasting battery (43 hours of non-stop talk), business apps, and USB- on the go (Nagraj, n.p.; Bond, n.p.). K900 for tech-savvy power users or the so called “tech evangelists” (Nagraj, n.p.). A706 and A390 – affordable but ‘fully loaded’ entry-level smartphones (Nagraj, n.p.; Bond, n.p.). S920 and S820 – for heavy multimedia users (Bond, n.p.). The focus was made on keeping a new phone lightweight, longer battery life, super camera application, display size (ranging from 4” to 5.5”) and other competitive characteristics (Bond, n.p.). Price Initially the company pursued low-pricing emerging market strategy, entering with the low-end price cells (Fletcher, n.p.). Then Lenovo added its netbooks and ultra-portable devices (Fletcher, n.p.). Since 2012, the average price of a smartphone has ranged from $375 to $450 (Campos, n.p.). Lenovo entered the UAE and Saudi Arabian markets offering six new models priced between Dhs499 to Dhs1,999 and targeting various segments of customers (Nagraj, n.p.). Thus, affordability was one of the key elements at the core of Lenovo’s entry strategy. By offering high-quality and comparatively low-priced devices the company was enabled to take on its major competitor Apple, which offers more costly products for the emerging economies (Campos, n.p.). Place The geographic region was identified Middle East with a focus made on the UAE and Saudi Arabia (Bond, n.p.). In order to distribute Lenovo products in Saudi Arabia, the company has found a partner Al-Haddad Group and made it responsible for distributing the smartphones to independent retailers and also sell the products in 120 Kube and Al-Haddad stores across the country (Bond, n.p.). Promotion Lenovo has launched its first set for the Saudi Arabian and the UAE markets in a ceremony in the JW Marriott hotel in Dubai in 2013 (Nagraj, n.p.). The company has set ambitious plans in terms of its business expansion in the Middle East region, specifically in the UAE and Saudi Arabian markets. In order to achieve the goal, the company has focus on promoting its products aggressively through in-store advertising in a partnership with Axiom Telecom and Jumbo in the UAE and Kube and Al-Haddad in Saudi Arabia (Nagraj, n.p.; (Bond, n.p.). Lenovo’s Performance in the Middle East Lenovos smartphone strategy based on selling low-priced, but high-quality devices to emerging markets has helped the company to achieve substantial results within few years. By January 2013, Lenovo has become number-four among PC manufacturers in the Middle East. The brand has shown extremely great success, as its year-on-year growth has exceeded 36.3% (Paye, n.p.). In Lebanon the company has broken its own records and achieved 180.6% of yearly growth. In Oman, Lenovo’s year-on-year growth was under 20%, and in Jordan the yearly growth was over 140%. In the UAE, Lenovo’s market share has grown up to 13,9%, and year-on-year growth was 52,8%. In Qatar, Lenovo’s market share was fixed at 13,5%, and year-on-year growth was 43,2%. In Egypt, Lenovo’s year-to-year growth level was fixed at 36.6% (Paye, n.p.). Executive Director and General Manager of Lenovo Middle East and Africa explained Lenovo’s continued growth in the region “as a result of strong regional operations and commitment to the customers and partners” (Ebel cited by Paye, n.p.). Works Cited: Bond, Steven. Lenovo Fires 6 Shots Into Middle East Smartphone Market. | Kippreport.com. N.p., 2013. Web. 8 Jan. 2015. Available at http://www.kippreport.com/fcs/lenovo-fires-6-shots-into-middle-east-smartphone-market/ Campos, Adrian. How Lenovo Plans To Win The Smartphone Market. Fool.com. N.p., 2014. Web. 8 Jan. 2015. Available at http://www.fool.com/investing/general/2014/01/07/how-lenovo-plans-to-win-the-smartphone-market.aspx Fletcher, Owen. Lenovo Details Low-Price Emerging Market Strategy. PCWorld. N.p., 2009. Web. 8 Jan. 2015. Available at http://www.pcworld.com/article/162461/article.html Holstein W. “Lenovo goes global: China’s most recognizable brand plans to overtake Apple and Samsung” 2014. Strategy+Business, pp.1-12. Nagraj A. Lenovo Launches Smartphones In UAE, Saudi - Gulf Business. N.p., 2013. Web. 8 Jan. 2015. Available at http://gulfbusiness.com/2013/06/lenovo-launches-smartphones-in-uae-saudi/ Paye T. Lenovo Grows Middle East Market Share. Computer News Middle East, N.p., 2013. Web. 8 Jan. 2015. Available at http://www.cnmeonline.com/news/lenovo-grows-middle-east-market-share/ Partnerinfo.lenovo.com,. Marketing Toolkit - Lenovo Partner Network. Web. 8 Jan. 2015. Available at http://www.partnerinfo.lenovo.com/partners/xm/resources/brand.shtml Read More