IBM not only for the IBM brand

            IBM allowed Lenovo to use its logo
for its PC products (Laptop and Desktop) for 5 years. However, Lenovo used the
IBM logo only on its Thinkpad series. Lenovo’s strategy was to gain loyalty
from the current users of Thinkpad as well as the potential buyers by
contracting IBM for service of the PCs and attaching the IBM logo to ThinkPad
to ensure the customers that their ThinkPad is in good care. Besides this effort,
Lenovo distanced itself from IBM for the purpose of establishing its own master
brand with the help from the Thinkpad sub-brand. This is a good decision for
Lenovo to act and move quickly part with IBM. Without using IBM’s logo or brand
name more, Lenovo lost the opportunities to keep IBM’s current customers and
potential buyers. Lenovo was taking the risk of short term lose but was
positioning itself for the long term gain. Lenovo believed it could use the
combination of marketing and branding efforts to create an impression of a
better new master brand which is innovative and efficient at the same time,
with the help of the Thinkpad sub-brand.

IBM logo and ThinkPad


            Lenovo followed a simple strategy whereby
the company focused on building up its Lenovo brand and continue to strengthen
its ThinkPad product brand. This brand strategy as considered by Lenovo has
been extremely effective from the point of view of catering to the needs and
expectations of the brand. This is because IBM already has its own distinctive
brand image globally, and at the same time Lenovo has created a unique identity
in the Chinese market and is also building up its image in the global market. Also,
combining innovation and efficiency in their brand helped Lenovo in addressing
the higher level of competition they faced. The reason for Lenovo’s acquisition
of IBM PC division was not only for the IBM brand but for the global PC
channels as well as its flagship Thinkpad notebook computer. It is very clear that
Lenovo was trying to build its own master brand. Therefore the strategy of
building both brands individually has been highly efficient for Lenovo.

Lenovo’s Strategy

            Before acquiring IBM, Lenovo
operated in a very small level, in the Chinese markets. To become a successful
brand globally, Lenovo had to make significant changes in it’s business model.
The first challenge Lenovo faced after the acquisition is that that the company
has to perform the marketing and management of its business at the global
level. The second challenge was that they had to make necessary changes between
the IBM products and Lenovo products. Lenovo wanted to maintain the two brands
separately. This has been a major challenge to Lenovo since the core principle
of innovation and efficiency are integrated across the business principles of
both IBM and Lenovo. Another major challenge faced by Lenovo after the
acquisition was the integration of two different cultures (Lenovo being a
Chinese company and IBM being an American company). It is quite evident that
there has been cultural clashes within the employees after the acquisition. The
managerial challenges such as cultural differences across the two businesses
and the need for maintaining separate business profile for both Lenovo and IBM
has been the most difficult challenge to the Lenovo’s management after the

Challenges after the acquisition

            The main reason that drives IBM in
selling its PC business is mainly the change in the focus of the company. They
have changed their focus from selling PCs to providing IT consulting services to
its customers. IBM realised about the declining potential of PC industry and
the level of competition has also been rising. IBM’s main focus was on long
term growth strategy and it realised that by selling PC’s, it won’t be able to
achieve or maintain its growth position in the industry. Therefore they
diversified their focus towards IT consulting services and selling off its PC
business to Lenovo

IBM selling their PC business

            Before the Acquisition of IBM PC
division, Lenovo was a highly successful local PC brand of China. It was
perceived as an innovative PC company through its customization and
understanding of its main base of Chinese market by introducing Chinese
specific needs for PC like legend cards for Chinese characters processing,
sales channels for PC instead of direct sales, etc. To survive and succeed in
the global business environment, Lenovo has no choice but to become an
international firm in the PC business. Lenovo’s market share of 30% in 2001 was
number one in the Chinese market, but Dell computer, upstarts, as well as PC clones
also posted strong challenges to its leading market share. To grow the company,
Lenovo would have to expand to the worldwide market that it didn’t have. With
the acquisition of IBM PC division announced in December 2004 gave Lenovo a
great opportunity to expand its territory outside Asia.