P R E S E N T

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Building a Global Brand

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Haidir Afesina Wirania Swasty Chairunnisa M. F X Kresna Paska Aqsa Adhiperwira Fajar Liem

HISTORY OF GLOBAL PC
Compaq raised USD 67 million in an IPO, launched software program LOTUS 1-2-3

introduced its first PC . 1970s 1982

Internet boom, Microsoft and Intel set the standard for the PCs 1984 1990s

Gateway acquired eMachines for nearly USD 290 million, have 7% market share in US. Lenovo acquired IBMs PC division for USD 1.75 billion

2001 HP acquired Compaq for $20 billion

1983 Compaq made USD 111 million in its 1st year cloning IBM PCs

2004

entered the market, offered customized PCs at a lower price.

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THE RISE OF THE LEGEND

New Technology Developer, Inc

Engaging the World

Move into international marketplace

2003 1984 March 2004

Le (Legend ) novo (new/ innovative)

Dec 2004 2005

Right to use logo for 5years

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FACING MATURE MARKET

WTO Develop global brand

Globalization/ localization?
Market Penetration Desktop Gain new customer outside China Grow share market Product Development Notebook Service center Hard disk Smartphone Tablet Diversification n/a

Market Development International Strategy! USA, Europe Acquisition ! IBM International Channel

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THE DEAL
Lenovo IBM
Giving Lenovo a global market reach and global Bring IBM`s enterprise class PC technologies brand recognition beyond China & Asia to the consumer market (powerful worldwide distribution channel) The preferred supplier of PCs to IBM Lenovo will benefit from R&D, expertise in product differentiation Be the world`s third largest PC business The preferred service and customer financing provider to Lenovo Offer several computing products to its enterprise, small and medium business clients Become Lenovo`s second largest shareholder with 18,9% interest Play an important role in by creating the advanced microprocessor and open software technology for the next-generation computing platform.

Right to use the IBM logo on products for 5 years & promised not to compete with IBMs services and consulting groups

MARKET SHARE

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Customer Value Propositions

Lenovo (% Sales) Product Client Base Coverage 85% desktop 80% small business and consumers Mostly China

IBM (% Sales) 60% laptop 57% large enterprise/midmarket Strong around the world but relatively weak in China

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Lenovo ThinkPad CBBE Pyramid

! customer satisfaction ! Customer experience ! World class service& support

! Market leader ! Technology advanced

! Quality ! Reliability ! Durability

Resonance

Everyday computer
Judgment Feelings

Performance

Imaginary

Design, look, feel of machines

Salience

medium awareness

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BRINGING HEAVEN TO EARTH

! Success could be achieved through coordination and integration throughout the combined organization. ! Message spread throughout the organization was to trust and respect each others position. ! Yangs decision of restructuring management integrated Lenovo and IBM organization. ! Focus on winning helped both the organizations to integrate successfully

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Get to Know the Market

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1. Use of MASTER BRAND

Four branding alternatives

2. House of Brand Strategy The most expensive option

Focus almost all marketing resources

3. Synergy Approach

4. Lexus/ Toyota strategy

Require combined & balanced investments

Differentiated customer

Product Lines

"! Build Lenovo as a Master brand "! Strengthen its Thinkpad laptop & Thinkcentre desktop products

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Two product lines to meet customers needs & enable to compete more widely

LENOVO CARE PROVIDING WORRY-FREE COMPUTING

WHY DID IBM WANT TO SELL ITS PC BUSINESS ? WHY DID IBM SELL TO LENOVO ?

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THE REASON

WHY IBM WANTED TO SELL ITS PC BUSINESS "!IBM was not the key player in PC as it was dominated by HP & Dell "!Opportunity to shed an unprofitable operation and concentrate on consulting services (including outsourcing of enterprise IT operations) and middleware solutions (software often
bundled with server hardware)

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THE REASON

WHY IBM SOLD TO LENOVO

"! Lenovo was a highly successful

local PC brand of China "!Lenovo perceived as an innovative PC company through

its customization and understanding of its main base of Chinese market "! A potential acquisition by Lenovo was an option, as was spinning out the division to a private equity firm.

WHAT EXPLAINS LENOVOS SUCCESS PRIOR TO THE ACQUISITION ?

SUCCESS PRIOR ACQUISITION

! Designed PC that average Chinese consumer could use ! functionality

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! Produce Chinese-character card ! Preloaded one-year internet connection ! Chinese voice-recognition software & graphics pad for writing Chinesecharacter with hand ! Relationship marketing to Chinas business sector ! Established & reorganized a PC business division !listed on the Hong Kong Stock Exchange

SUCCESS PRIOR ACQUISITION CONTD

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Worldwide marketing program: Engaging the World campaign

! !
! !

sponsors of Turin Olympics Winter in 2006 & Beijing Summer Olympics in 2008. had access to exclusive worldwide marketing opportunities ! building its own brand beside Olympic logo.
Benefit from using the Olympic logo for marketing & promotions Have access to exclusive worldwide marketing opportunities

WHAT CHALLENGES DID LENOVO FACE AFTER THE ACQUISITION ?

POST ACQUISITION CHALLENGE

dealing with the IBM legacy,

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Thinkpad brand equity

"difficult task of transferring IBM brand image to Lenovo

! potential cultural & operational clashes between the IBM veterans and the Chinese nationals ! Standard quality / service / innovation
! IBMs customer expectations on the same standard prior to its acquisition by Lenovo

! Build international brand from scratch ! Lenovo was

little known outside Asia

HOW SHOULD LENOVO HANDLE THE BRAND MANAGEMENT CHALLENGES ASSOCIATED WITH THE ACQUISITION ?

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BRAND MANAGEMENT

! built the Lenovo as the master brand while continuing strengthening the ThinkPad product brand. ! took a synergy approach to create a global brand and positioned the company on its ability of efficiency and innovation ! Used its sub brand (ThinkPad) for premium products and master brand (lenovo) for price sensitive customers ! cater to the needs of mass market.
! The Thinkpad, a well known reliable innovative premium notebook PC, would be used as a sub-brand to give Lenovo the master brand.

IN TRYING TO BECOME A GLOBAL BRAND, DOES LENOVO HAVE A PROBLEM COMING FROM CHINA ?

PROBLEMS COMING FROM CHINA

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! Perception of Lenovo's association with China and the Chinese government ! as a company from China providing cheap products might devalue the Lenovo master brand. ! Positioned and perceived as low cost PCs with no differentiation ! could damage the premium ThinkPad brand ! were forced to abandon their attempts to purchase American businesses ! Tend to get very low marks for trustworthiness

HOW DO YOU FORESEE MANAGEMENT CONFLICT BEING RESOLVED ? DOES LENOVO HOLD THE PROMISE OF AN EAST MEETS WEST MANAGEMENT DREAM TEAM ?

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EAST MEET WEST ?

Both companies share similar values that focus on meritocracy Both IBM/Lenovo value customer focus, innovation, and trustworthiness Advani key message was to trust the other person.

CHALLENGE OR OPPORTUNITY
12 hour, time different . Business meeting via teleconference Language problem Lack of Chinese top executives
Work around the clock or teleconference. Unusual yet applicable Forces Lenovo to hired quality people who multilingual New international composition means more diversity and more creativity in the team

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MANAGEMENT ISSUES
! Lenovo and IBM combination make them very complimentary in operation, customer base, positioning, target market, and supply chain.

! Positive corporate culture can be

created and formed by top management

! Management conflict should be solve

together by trust ! Chinese nationalist and IBM veteran who cant adapt should be replace by younger generation

BIG

THANKS