Lenovo Case Analysis Essay
Lenovo Case Analysis
Competing at a global scale requires profound brand equity. Lenovo is a well-known brand in China (as Legend) but it cannot become a global technology giant like Dell or Hewlett-Packard, by merely acquiring the Personal Systems Division of IBM, whose products are popular across the world. Normally, the key challenge in establishing global brands lies in devising the manner in which a company can position its brands in customers’ mindsets, while taking into account global competition that comes from national and international suppliers (Wright, Millman & Martin, 2007, p. 139). Lenovo has to engage in intelligent marketing to attract consumers and make itself a force to reckon with in the global personal computer industry. According to the case study, the global PC industry is highly competitive with the leading performers being Dell, HP, Lenovo and its IBM acquisition, and Acer and Fujistu-Siemens among other corporations and vendors locked in tight competition (Quelch & Knoop, 2006, p. 2-3). Therefore, Lenovo has a daunting task to create brand equity to thrive at a global scale. The Key Issues
The issue that Lenovo is principally dealing with is how it can effectively enter into the global market, where it is not only struggling against the competition, but is also dogged by an incredulous market. On the surface, the deal between Lenovo and IBM seems to give the former a platform for success due to the complementary nature of the operations of the two firms and because the deal facilitates the expansion of Lenovo’s operations from China and Asia to over 138 countries in the world, where IBM is established (Quelch & Knoop, 2006, p. 6). However, in a marketing research that the company conducts among 4,000 IBM customers, the concerns raised are that the innovation, quality, and service and support are going to be negatively impacted by the takeover of IBM brands by Lenovo (Quelch & Knoop, 2006, p. 9). The grievances held by the consumers are a major undoing to Lenovo’s attempts to create strong brand equity.
The criticism shows that the customers harbor negative brand knowledge about Lenovo. Brand knowledge consists of brand awareness and brand image (Wright et al., 2007, p. 140). Normally, brand knowledge determines the directions that the brand takes and, in turn, this influences the decision that marketers take in creating a brand promise, which entails informing the public about the positive essence of the brand and its purpose (Kotler, 2012, p. 115). The competition must be addressed seriously through a brand promise, with strong product dimensions. A brand’s dimensions differentiate an offering from other offerings that are aimed at satisfying the same need by either emphasizing on product performance by introducing functional, rational, or tangible differences or by emphasizing the symbolic, emotional, or intangible factors (Kotler, 2012, p. 114).
Lenovo has the chance to utilize the brand equity creation process that emphasizes on the product performance in the phase of introducing itself into the global market, while intending to rely on the latter dimension in the long run. Brand equity is created by thoroughly satisfying the presence, relevance, performance, advantage, and bonding dimensions, in an increasing order of importance (Kotler, 2012, p. 116). Profound consumer loyalty is achieved after the firm attains a market share. Companies acquire a share of the heart and a share of the mind of customers by being authentic and genuine, aspects, which lead to higher, market share and profitability (Kotler, 2012, p. 135). As much as the chief marketing officer of Lenovo states that branding is a business issue rather than a marketing issue, the brand is a matter of the perception created by product’s substance and marketers’ efforts.
Alternative Courses of Action
The courses of action that can be taken by Lenovo include establishing a master brand, a house of brands, synergy approach, or the strategy referred commonly as Lexus/Toyota. First, the master brand strategy can be useful for creating a brand equity for Lenovo on a worldwide scale, but there are fears that the ThinkPad influence may be lost if this strategy is adopted. Second, the house of brands approach can enable the firm to establish many brands at once, but it is expensive to market the different brands. Third, the synergy approach will let the company have Lenovo as a master brand, while the ThinkPad shall be regarded as a superior sub-brand. Fourth, under the Toyota/Lexus strategy, a premium line of ThinkPad brands are established alongside basic Lenovo brands (Quelch & Knoop, 2006, p. 9). Evaluation of the Alternative Courses of Action
The course of action that the company should choose has to address the global market conditions, while also upholding Lenovo’s desire to compete internationally. To gauge the conditions in this market environment, the company engages in extensive marketing research. The research comes in handy in helping the company to make well-informed decisions, to understand the marketplace, and most importantly, to learn about customer satisfaction and the value of goods on offer. In addition, the advantages of the primary data collected are that the respondents pinpoint their challenges concerning the use of personal computers in business, give voice to current concerns, and enable the firm to gauge the needs in different nations.
The master brand option is challenging to Lenovo since the market regards it as untrustworthy. The high level of dishonesty with which Chinese firms are regarded in the rest of the world is a major detractor to the success of this strategy (Quelch & Knoop, 2006, p. 8). If this approach is chosen, building favorable brand knowledge would not be an easy thing for Lenovo, in spite of having the reputable ThinkPad brand at its disposal. The ThinkPad acquisition doubtlessly makes Lenovo have a comparative advantage in the global scope. The ThinkPad has already won a lot of accolades for design and engineering innovations since it was introduced in 1992, with some of its superior qualities being power, portability, and wireless networking (Quelch & Knoop, 2006, p. 6).
The marketers in Lenovo must therefore create positive brand knowledge if they choose this option. Failure to achieve this means that even the premium ThinkPad brand shall be thought of as an inferior product by consumers. The house of brands option would make the company incur a lot of expenses in the marketing function, without necessarily achieving the desirable sales of any of the brands. The company’s CMO concedes that this strategy cannot succeed since the company had limited resources at the time (Quelch & Knoop, 2006, p. 9). House-of-brands has brands that are independent, which are somewhat endorsed by the organizational brand (Rajagopal & Sanchez, 2004, p. 238). However, the reputation of the Lenovo as an organization in the international market is not favorable at this juncture hence it cannot promote brands effectively.
The synergy approach, which entails a master brand getting recognition partially due to a superior sub-brand, would require investments to jointly build the Lenovo and the ThinkPad brands (Quelch & Knoop, 2006, p. 9). The ThinkPad sub-brand would be expected to be a co-driver in the success of Lenovo. The shortcoming of this approach is that the association might taint the image of the prestigious brand if the brands do not have comparable qualities (Aaker & Joachimsthaler, 2000, p. 15). Clearly, ruining of the ThinkPad brand will certainly end up undoing the entry of Lenovo into the global market. The Toyota/Lexus strategy will force Lenovo to establish luxury and mass market brands separately. This strategy will entail implementation of dissociated brands, with each expected to perform well within its segment. However, under the global environment into which the firm is entering, creation of a mass product is not feasible.
The use of PCs has become ubiquitous and consumers are looking for enhanced innovation, better quality and reliability, tighter security, and better design (Quelch & Knoop, 2006, p. 10). To offer customers the desired product, the firm was supposed to invest in enhancing computer products, rather than producing low quality cheap products. As a result, this strategy can make the company lose its core business. After considering all the branding strategy options, Lenovo managers should appropriately consider the category membership under competitive frame of reference. Category membership refers to the products with which a brand competes and which are close substitutes to it (Kotler, 2012, p. 130).
The managers should to establish points of differences that would make the company have a competitive edge. At the present, Lenovo pursues a legacy of customer focus, innovation, and dependability (Quelch & Knoop, 2006, p. 7). These aspects have a potential of making make the products it offers distinctive and superior in comparison to competitors in the global market. The focus of the company should be on long-term holistic performance of its products. A well established brand value drives brand loyalty among customers, making the company to enjoy security of demand, making it hard for new competitors to enter the market, and making the customers willing to pay a higher prices for the offering (Kotler, 2012, p. 114). The Best Course of Action
According to the facts presented in the case, the adoption of Lenovo as a master brand is the best course of action. Though this alternative is risky, it is worthy because of the ultimate good image it would create for all the brands on offer at a global scale. Making Lenovo a master brand helps to make the core products of the company to the entire world. Master or family branding is where a family brand is associated with several brand extensions. The use of the company’s brand name across the entire products’ range lowers development costs and boosts sales if the corporate image is associated with innovativeness, expertise, and reliability, which are factors that influence consumer evaluations directly (Kotler, 2012, p. 123).
The company actually chooses to use this strategy with great level of ingenuity. The first global advertising campaign is signed off with “ThinkPad,” the second campaign emphasizes that Lenovo is doing better than IBM by improving the ThinkPad, while the third campaign stresses that the Lenovo master brand represents innovation (Quelch & Knoop, 2006, p. 10). Introduction of brand extension is facilitated under the master brand. New products that are introduced as brand extensions often succeed because the customers’ expectations of the new product are based on their knowledge about the parent brand and how relevant they find the information (Kotler, 2012, p. 123).
Any product sold under an umbrella of a brand name develops an identity out of the customers’ perceptions of the product, the marketing activity, word-of-mouth marketing, and the individual psychological set of customers (Wright, et al., 2007, p. 140). In effect, corporate brand endorsement in the international markets reassures consumers and is an integrating force, which unifies different brand identities on a global scale (Rajagopal & Sanchez, 2004, 246). Assurance that consumers benefit from the product is vital for successful marketing. Moreover, brand equity is leveraged in a new context if the master brand makes the product more appealing to customers and its positive associations are relevant and appropriate (Aaker & Joachimsthaler, 2000, p. 18). With the master brand strategy in place, continuous success of the Lenovo brand and its extensions is guaranteed.
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