Lenovo seeks to build its brand

BEIJING: Lenovo, the Chinese electronics group, is emphasising innovation, brand building and bucking the trend towards outsourcing as it seeks to achieve differentiation in the marketplace.

The firm rolled out the K91 Smart TV in China this year, and will launch a smartphone and the IdeaPad Yoga, a thinline laptop with a keyboard that folds away so it acts like a tablet, later in 2012.

"Compared to Samsung, LG and these companies in terms of design, we still have space to improve," Yang Yuanqing, Lenovo's chief executive, told the Wall Street Journal. "Their products are very fashionable, very stylish. This is a challenge for us."

Enhancing its credentials in this area will form part of a much broader effort to boost Lenovo's status among consumers. "To have higher market share, you need to have a brand," said Yang.

In demonstrating the perceived scale of this challenge, David Roman, Lenovo's chief marketing officer, revealed that the firm considered not featuring its name prominently on its ThinkPad laptops in case it would "actually be damaging".

"We had very emotional discussions in the beginning ... [about] actually having 'Lenovo' on the front of the ThinkPad," he said. "When I came in I said, 'Over my dead body do you put our best product out without our company logo on the front.'"

To futher foster brand awareness, Lenovo recently purchased ad slots in the US during breaks from popular TV shows like Glee, as well as matches in the NFL, coupled with the tagline "For those who do".

IDC, the insights provider, reported that Lenovo's share of global PC shipments reached 14% in the last three months of 2012, up from 13.7% in the previous quarter. Hewlett-Packard, the market leader, saw its share slide from 18% to 16.2% in the same period.

Lenovo also became the fourth-largest player in the tablet sector last year, on 2.8% of shipments, having been in eighth position some 12 months earlier. Apple was dominant on 63%.

In contravention to prevailing industry norms, Lenovo directly owns eight factories around the world rather than outsourcing, with three additional plants set to be built in China and Brazil.

"Selling PCs is like selling fresh fruit," Yang said. "The speed of innovation is very fast, so you must know how to keep up with the pace, control inventory, to match supply with demand and handle very fast turnover."

As an example of the benefits this offers, when competition to obtain hard drives intensified after flooding hit key IT manufacturing hubs in Thailand last year, Lenovo could focus on making items with drives available, and which boasted high margins.

"Three years ago the whole industry was saying everyone should outsource, that's the future ... [we] came to the conclusion that even though all our other competitors are going in the other direction," said Gerry Smith, Lenovo's supply chain senior vice president. "We can move faster if we're more vertically integrated."

Data sourced from Wall Street Journal; additional content by Warc staff, 10 July 2012

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