Lenovo Marketing Problems

Lenovo (ADR’s trade as LNVGY.pk) reported disappointing results despite a huge market share in China. The shares have climbed 19% from July to Sep. The results are worse than expected and share prices have been retreated. The corporate press release focused almost exclusively on cost cutting and optimizing distribution. No mention was made of any R&D or innovations that an end user might appreciate.

Lenovo acquired IBM’s computer business and became the world’s third ranked PC maker. Management has become much too focused on the factory and close to home markets. Marketing and brand development efforts are anemic. North American shipments dropped by 9%. Asian sales (excluding China) were flat.

Lenovo needs to develop an effective outside of China marketing strategy. This raises an interesting question. While Chinese production is cheap due to low wage rates, is Lenovo truly sufficiently global to solve this business problem. If not than Dell (Dell) and Hewlett Packard (HPQ) may pick up some additional market share with the windfall volume efficiencies. Currently the smart bet would be against Lenovo.