Lenovo to concentrate on SMB, emerging markets

Hardware vendor Lenovo Group Ltd. Tuesday said it plans to increase its business outside of China by targeting small to midsize businesses (SMBs) in mature markets like the U.S. and Western Europe, while going after consumer and corporate customers in emerging markets.

Lenovo has enjoyed much success in China where it not only sells PCs and notebooks, but also servers and printers as well as operating a separate cell phone business. Outside of China, the company has traditionally had very few sales, until it closed its US$1.75 billion purchase of IBM Corp.’s PC business in May.

Yuanqing Yang, Lenovo’s chairman, believes his company’s success in China has largely been due to its business model which, rather than categorizing customers based on direct or indirect sales, considers whether the sale involves a “transaction” or a “relationship,” he said during a webcast of a company briefing in New York Tuesday.

A transaction customer is one who is purely interested in purchasing the latest hardware on an infrequent basis while a relationship customer is looking to establish a connection to the vendor and purchase hardware regularly that’s tailored to their specific requirements. Lenovo has become adept at balancing the needs of both kinds of customers, according to Yang.

For future growth, Lenovo will continue to rely on sales in China and hopes to increase its presence among SMBs in mature markets while looking to replicate its Chinese business model in emerging markets, notably Brazil, India and Russia, Yang said.

“In five years, you’ll see a new Lenovo, the most competitive PC company [in the world],” Yang said. “We’re hoping to grow twice as fast as the industry,” Deepak Advani, senior vice president and chief marketing officer at Lenovo, added.

Lenovo hopes to boost that growth through a “maniacal focus” on customer satisfaction as well as innovative products and a worldwide marketing campaign centered around the company’s technology support of the next Winter and Summer Olympics, according to Advani. “Our internal mantra is ‘Innovation that matters,'” he said. “That’s our brand promise that all Lenovo employees will internalize.”

The company refused to be drawn on how many of its existing Chinese products it plans to sell outside of China, but its consumer devices are more likely to debut in emerging markets first rather than in the U.S. and Western Europe, Lenovo executives said. In mature markets, Lenovo expects to rely more on its business partners to drive indirect sales, according to Advani.

Lenovo did show off its new Z Series Widescreen ThinkPad notebooks.

The laptops feature 14-inch or 15-inch screens and integrated broadband wireless, according to Peter Hortensius, Lenovo’s senior vice president of worldwide product development. The company didn’t release any pricing or shipping date for the notebooks.

Hortensius also talked about a new protection technology for Lenovo’s T Series ThinkPad notebooks, an internal magnesium alloy casing that covers the sensitive inner workings of the device should it be dropped. The casing functions much as a “roll cage” does in a racing car, he said, cushioning what’s inside the laptop against any damage sustained in a fall.

Lenovo expects close to 90 percent of its growth in mature markets will come from sales of its notebooks, according to Advani.

Under an agreement with IBM, Lenovo has to keep the IBM logo on its ThinkPad notebooks and ThinkCenter PCs for a five-year period. However, after 18 months, Lenovo can start changing the size of the Big Blue logo, shrinking it while increasing the size of the Lenovo logo, he said.

“The IBM ThinkPad brand will give way to the ThinkPad brand,” he said. “For all other products coming from IBM, we’ll place more emphasis on the Lenovo brand going forward.”

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