Biodigestion

Lenovo: Building a Global Brand

The brand essence of Lenovo is innovation that makes a difference to customers. Branding is not a marketing

issue for us, it is a business issue. We have to deliver on products and services.1

— Deepak Advani, Chief Marketing Officer

Announced in December 2004, the $1.75 billion acquisition of IBM’s personal computer (PC)

division by 20-year-old Lenovo, China’s largest PC maker, made headlines around the world. A

relative upstart in the business, founded with $25,000 of seed capital from the Chinese Academy of

Sciences, Lenovo was acquiring the IBM division that invented the PC in 1981. While Lenovo was

arguably the best known brand in China and had some brand presence in Asia, it was virtually

unknown to the rest of the world. In 2004, over 90% of Lenovo’s revenues came from China (see

Exhibit 1 for financials).2 But with this major deal, Lenovo aimed to become a global technology

giant. Annual revenues would triple to $12 billion, making Lenovo the third-largest PC maker in the

world after Dell and Hewlett-Packard.

As a new multinational with 20,000 employees operating in 138 countries, Lenovo needed a global

marketing and branding strategy to match its new reach. This meant determining what Lenovo stood

for and designing products that supported that claim. In January 2006, 13 months after the deal was

announced and eight months after it closed, Lenovo was preparing for the intense limelight that

would come with its sponsorship of the February 2006 Turin Winter Olympics. There it planned to

introduce a Lenovo-branded product line designed from the bottom up for small and medium

enterprises, a move considered bold and risky by industry observers.

The Global PC Industry

History

Twenty-five years before this landmark deal, IBM introduced its first PC after watching the

growing adoption of microcomputers and home computers in the 1970s. In particular, the

commercial success of the Apple II series, which ran the financial analysis software called VisiCalc,

convinced IBM that there was a role for small computers in its business. IBM relied on key

technological contributions from third parties (such as the 8080 microprocessor from Intel, the DOS

operating system from Microsoft, and VisiCalc from Software Arts) to quickly launch its own desktop

computer. These partnerships were nonexclusive, allowing the vendors to engage with other

companies who might build similar PCs. The IBM brand gave the PC instant credibility in the

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business marketplace. The PC itself was designed using a well-specified, open architecture that

allowed other companies to manufacture modular and compatible peripheral components and write

hundreds of applications that would make the PC useful.

An entire industry of IBM-compatible computers (often referred to as clones) developed, led by

Compaq. Founded in 1982 by three former executives from Texas Instruments who each invested

$1,000, Compaq made $111 million in its first year cloning IBM PCs, and raised $67 million in an IPO

in 1983. That same year saw the launch of the software program Lotus 1-2-3, adding database and

graphing capabilities to a spreadsheet program and greatly increasing the business utility of PCs. For

the next 20 years, this product development interplay between hardware and software companies

such as IBM, Microsoft, Intel, and Lotus drove remarkable worldwide growth in the PC industry.

In 1984, Compaq introduced a PC that included Intel’s new and more powerful 80386 class of

microprocessors, beating IBM to market. That same year,

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