IDC: Lenovo needs to rethink strategy

The hardware company wants to become the No. 1 PC vendor in Australia and New Zealand, but the research analyst says Lenovo has got to work harder on retail.

Cashed-up PC manufacturer Lenovo has more work to do to reach pole position in Australia and New Zealand despite strong global growth, particularly in developing economies.

"There’s a lot of growth in the developing economies, but it is still the established economies which account for the bulk of our sales, a third of which are generated in the Asia-Pacific region," Lenovo's Worldwide Competitive Analyst, Matthew Kohut, said.

Heather Jones, Lenovo ANZ communications director, said recent worldwide financial results--US$14.6 billion profit for the last financial year--indicate the company has "hit its stride" locally, and is on the way to becoming number one PC vendor in ANZ in the next five years.

However, according to Liam Gunson, IDC senior analyst hardware research in ANZ, Lenovo may need to spread itself a little wider if it wants to capture growth markets and climb to pole position in the market.

Gunson said Lenovo largely managed to maintain the markets in which IBM's Personal Systems Group had been successful prior to the December 2004 takeover. Nonetheless, he believes the company needs to pay more attention to the mass merchant and dealer channel if it is to outpace its rivals.

"IBM tended to stay in the medium to large business space, as well as government," Gunson says. "Now the strongest areas of growth are the SMB (small and midsize business) and consumer space, and Lenovo will need to target these markets if it wants to harness this growth."

In terms of overall PC sales locally Lenovo is currently in fifth position behind Hewlett-Packard, Dell, Acer and Toshiba. Although the company's market share increased from 5 percent in 2005 to 6.9 percent in the first quarter of this year, it has a long way to go before it nears HP's market share of 20.5 percent.

"They have essentially taken over from IBM, maintaining the success that IBM has had in the enterprise, and they are starting to build out in the other areas of commercial business," Gunson said. "Following that they will need to consider a potential movement into retail as they will need to cover all of those markets if they are looking to be number one in the ANZ market."

Proof is in the brand
Strategically Lenovo is currently half-way through a rebranding process, which will see the Big Blue tag all but disappear over the next 12 months, and is working to promote itself as a global company, so as not to be associated with cheap and poor manufacturing often associated with the Chinese market.

"The perception that we really had to counteract was that the quality of the product which came out of China would be substandard," Kohut said. "I believe we've demonstrated that by investing heavily in research and development, and continuing to ship quality products."

The company is also focusing squarely on the mobile space, standardizing on a semi-ruggedized version of its commercially-focused ThinkPad range, with spill proofing, and shock resistance features.