When Lenovo acquired IBM’s PC division to transition out of being China’s largest PC maker to the third largest in the world, they were confronted with the challenge of four different brand strategies. Lenovo desired to clearly communicate an authentic value proposition for the newly combined resources of their firm. With this, we would recommend a Synergy branding strategy in the short term and a Master Brand approach in the long term. We feel this co-branding approach will further align Lenovo’s brand to their mission of “putting more innovation in the hands of more people so they can do more amazing things” by creating broader consumer appeal and greater brand equity. Using a hybrid of the master company in conjunction with sub-brands to create the Synergy approach would be the most beneficial for Lenovo in the short run. The brand extension would give personality to the sub-brands while allowing the master brand to be the “umbrella” image in market. Although Lenovo will have to combine and balance investments for the various brands, it is vital for them to maintain the “Think” brands of IBM.
Throughout the remainder of the contract, Lenovo can benefit from maintaining IBM’s core branding while improving their own products to develop successful strategies that will further promote the Lenovo brand. The synergy would develop positive consumer expectations and facilitate new product acceptance as the company continues to grow. Lenovo should continue market research for data related to conversion rates to determine the consumer’s decision-making process and potential for increasing brand equity and awareness. Lenovo’s competencies for innovation and efficiency can then be combined with the quality and credibility established by IBM. Lenovo should capitalize on the advantages of the acquisition using the instant recognition and current brand awareness to improve perceptions and create loyalty for as long as they can until they move to the Master Brand strategy. A Master Brand would be the most powerful approach for the long run in order to build global brand equity. Once the contract to use IBM branding expires after 5 years, the company should utilize this strategy to focus their full resources on promoting the Lenovo brand. This approach is common in the IT industry and will further communicate the value of the Lenovo name when competing in the global marketplace.
We would not recommend this as the initial strategy in the short term because Lenovo would lose the competitive advantages and benefits of using the sub-brands such as Thinkpad and Thinkcentre. Lenovo does not currently have sufficient credibility to compete with the global market. Once the brand for the PC division is completely merged into one, we believe they will be able to capture and sustain global market share using IBM’s current quality brand in addition to their innovation and efficiencies as a Chinese powerhouse. The House of Brands would not work in this because Lenovo would have to commit to sub-brands and invest less on their overall corporate brand. Although they would be able to keep momentum with the Thinkpad and Thinkcentre, their ability to leverage these strong sub-brands will expire. Lenovo would have a smaller market impact due to the lack of resources needed to build multiple sub-brands at once. This would be the most expensive approach and would present many challenges due to the tight margins in the PC industry. The Multi-Brand or “Lexus/Toyota” approach to separate luxury Think brands from mass market Lenovo offerings would not be a successful strategy for this situation. Even though IBM could serve the premium markets while Lenovo targets the mainstream consumers, this would be difficult to implement. Multiple brands can create a differentiated customer experience and give consumers the perception of a non-cohesive organization. This would not build Lenovo’s brand equity and IBM’s brand would not be sustainable in the long run.
5)Yes, there are challenges for Lenovo to establish itself as a global brand and overcome the general stigma of a poor quality and low service company from China. The fact that no other Chinese company has built a successful global brand in the past makes this task more challenging. The acquisition could present uncertainty to consumers in regards to consistency and reliability since the existing, trusted brand of the Thinkpad series will be impacted by the relatively unknown brand, Lenovo. There is also a general impression among media and press associates of Lenovo’s association in regards to the Chinese government. Lenovo needs to improve this image and overcome stigmas associated with its country of origin. As mentioned above, they should focus on promoting their key competencies of quality and innovation. It is imperative for them to successfully morph into a global brand and distinguish themselves from the IBM brand image.
The first step for Lenovo should be to create a strong brand position and subsequently develop, execute and communicate the brand strategy accordingly. The company needs to establish itself as an international brand capable of carrying the highly trusted Thinkpad brand image while reinforcing its own strengths as a highly efficient and innovative PC brand. Lenovo can accomplish this by positioning itself as a company that combines the efficiency of the East (with the expertise of supply chain operations in China) along with the innovation and high product quality from the West (IBM). Given the strong IBM brand, it is crucial for Lenovo to make great strides within the US market. To achieve this Lenovo should build strong customer relations and maintain high-quality service in both domestic and international markets. Lenovo should advertise it’s past growth history, hardware sturdiness and ability to innovate while focusing on how the acquisition would add to their brand value. This will help in building a strong brand association and can be leveraged in the future with a Master brand and additional products. IBM’s biggest strength was the corporate segment with the Thinkpad computers being the gold standard. In order to infiltrate the US market, Lenovo should focus on new segments such as the government and education sectors, the enterprise market and personal-use consumer market. By strategically targeting the household PC market segment in the US where there is a low level of loyalty to US brands and there is a high sensitivity for price and efficient features, Lenovo could be very successful in conquering a large market share. Through a unique, user-friendly interface, Lenovo would be able to differentiate itself from other competitors.
With brand positioning and image being a crucial part of Lenovo’s success in the US market, the company needs to carefully consider low-price product introductions. For example, Lenovo was planning to launch the Lenovo-branded PC 3000 series post-merger as a low-cost PC to compete directly with other low-cost vendors such as Dell, Acer, Gateway etc. This move could potentially send a contradictory message to the end consumer about the Lenovo brand image. Thus, Lenovo should be wary about sending conflicting messages to consumers since perceptions of China based companies selling cheap computers could pose risks to the brand equity. Lenovo needs to become known as a high-quality, competitively-priced and reliable brand to improve and maintain a positive consumer perception. Thus, Lenovo must position its products carefully to maintain its brand image so that the premium IBM brand
is not negatively impacted.
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