Christian Rhally reports on Lenovo’s business development model
 
At the end of January, Chinese technology company Lenovo acquired cellphone maker Motorola Mobility from Google for $2.91 billion (U.S.). Two years after Google itself had bought Motorola, Lenovo’s move has made the company the world’s third biggest smartphone maker, just behind Samsung and Apple. Already the largest PC company in the world since July 2013, Lenovo is on its way to achieving its goal of becoming the No. 1 company in smart-connected devices: Today it reaches about 45 percent of the world’s population with its cellphones and sells more smartphones and tablets than PCs. With operations in more than 60 countries and sales in about 160 nations, Lenovo has become a multinational company. Now, as with many Chinese companies, its challenge is to become an international brand.

And for Lenovo this means not being Chinese, as much as possible. “We don’t go anywhere with the idea that we are a Chinese company, but more that we are a global company,” says Brion Tingler, Lenovo’s director of global media relations.
Lenovo doesn’t like to think of itself as a Chinese company, and it strives to avoid appearing like one. The name Lenovo does not sound Chinese but comes from the words legend and novo (Latin for new). And the policy goes beyond marketing. As the company has tried to become recognized as a brand on a global scale, it endeavors to make it difficult to say where it’s come from.

“When you look at the management team, out of the top 10 people at the company, including the CEO, there are six different nationalities,” Tingler says. “We call it the global-local model. In different places around the world, the people that run the markets we are in are from those markets. So Brazilians run Brazil, Europeans run Europe, Indians run India.”

Nor is Lenovo’s leadership based largely in China. Listed in Hong Kong, the company has top executives not only in that location and Beijing but also in Raleigh, N.C., while other senior executives are in Singapore, Tokyo and California’s Silicon Valley.

The result is that there’s very little to identify Lenovo as a Chinese company. And though a pioneer, Lenovo is not alone in this: The construction of its brand and its obscuring of its Chinese origins sheds light on the practices and challenges of many Chinese companies now looking for name recognition that is equal to their business success.

“By saying that they are a global company, [Lenovo] says they are as good as anybody else, not only just as good as anybody else in China,” says James Roy of the China Market Research Group in Shanghai. This is smart on Lenovo’s part, since Chinese brands still do not have a lot of prestige internationally, or even within China. “Chinese consumers want to feel they are buying the best there is to offer in the world,” says Tingler, which means they tend to prefer foreign brands to Chinese brands. In fact, in several parts of China, Lenovo markets itself as a global brand, or at least not as a Chinese brand.

Lenovo acquired Motorola in spite of the latter’s losses of about $380 million (U.S.) in the fourth quarter of 2013. In part, the deal was made with an eye on Motorola’s patents books. Lenovo is now able to use the company’s 8,000 U.S. patents and 15,000 foreign ones on a permanent, royalty-free basis. But beyond the cellphones and patents, the acquisition reflects Lenovo’s larger strategy of buying up foreign names to grow its international presence faster. After the acquisition of IBM’s ThinkPad in 2005, Lenovo acquired German consumer electronics company Medion in 2011 and Brazilian electronics giant CCE in 2013, among others.

It’s a common practice among Chinese firms. Acquisitions of foreign firms by Chinese companies, flush with cash from their operations in China, have multiplied in other industries as well. In the car industry, for example, British car manufacturer Rover was acquired by BMW, Tata and China’s SAIC in 2005, and Volvo was bought by Chinese automaker Geely in 2010. In 2012, Dalian Wanda took over U.S. movie theater chain AMC Entertainment, and in 2013 Chinese meat producer Shuanghui acquired U.S. pork producer Smithfield.

“A lot of [Chinese] companies are using [acquisitions] as a way of learning about how international branding goes on,” says Roy. “Acquisition gives you immediate recognition, and you can learn how it all works as you go, the way Lenovo has.”

Despite its efforts to detach itself from its Chinese origins, Lenovo still finds its international approach has its limits. Although the company markets itself as a “global brand” in China’s larger cities, in smaller cities and the countryside, Lenovo often uses its Chinese name, 联想 (Lianxiang), since many locals cannot read English. Tingler explains that for these cities, “we’re not selling directly as a Chinese brand, but we had to tone down some of the global aspects so people can relate to [the brand] better.” Deliberately rootless in its global presentation of itself, Lenovo is finding it must be careful not to lose its customers at home.

If Chinese brands do in fact get large international recognition, Roy says, they will begin to be seen as more Chinese. “As consumers in other markets get familiar with the brands and products, they take on a lot of associations applied with that country,” he notes.

But in pursuing a strategy of being from everywhere and nowhere, there’s a big question about whether Chinese brands such as Lenovo can ever hope to have the cultural impact of U.S. brands such as Coca-Cola, which have become an inseparable part of America’s image abroad. Lenovo may well become a household name soon. The question is whether people will know that it’s a Chinese one.

Christian Rhally is a junior at Yale University and the Outreach Director for the magazine. Contact him at christian.rhally@yale.edu.

This story was originally published on studentreporter.org on April 15, 2014. It is republished with full permission. The two images we’ve used are uploaded here and here.