Global Economics

Lenovo's Olympic-Scale Ambitions


China's top computer maker is hoping to raise its international profile with its sponsorship of the torch relay leading up to the Games

Next June, the Olympic torch will make its way to the summit of Mount Everest for the very first time. The publicity generated will be good for the 2008 Beijing Olympics. It will also be good for Lenovo.

China's leading computer maker is one of the official sponsors of the Olympic torch relay and is also responsible for the design of the torch itself. The company has even signed up the Chinese mountaineering team that will carry the torch up Mount Everest.

This is just one component of a far-reaching Olympic marketing strategy drawn up by Lenovo.

"They have upped the ante more than any other Chinese company," said Greg Paull, principal at marketing consultancy R3, which is conducting tracking research on companies that have aligned themselves with the Olympics.

Lenovo is the only local firm to be one of the 12 global level Olympic sponsors. Analysts say this honor has a US$60 million price tag, with another three or four times that in additional ad spend to get full leverage from the event.

"The main objective of doing the sponsorship is to build the Lenovo brand globally," said Alice Li, a vice-president in Lenovo's Greater China brand communications department who is responsible for Olympic marketing. "We have exclusive rights in the computer category to do Olympic-related marketing."

Lenovo is already a leader among Chinese enterprises looking to expand overseas. To a large extent, this position is due to the company's US$1.75 billion acquisition of IBM's PC division in 2005, which boosted its reputation and international market share overnight.

The acquisition adds a twist to Lenovo's Olympic marketing efforts. Its rights to the IBM name expire within three years so the pressure is on to establish Lenovo as a recognized replacement.

As part of the global sponsorship deal, not only can Lenovo display Olympic symbols on all its products and advertisements across the globe, it will also serve as official IT supplier to the games. A network comprising 20,000 Lenovo computers will be responsible for managing everything from scoring to staffing and in 56 venues across the seven host cities.

"The system we will put in place is equivalent to the IT requirements of a Fortune 500 company," said Li.

CORPORATE KUDOS

Running a large-scale system for such a high-profile event could do wonders for Lenovo in the corporate sector, which accounts for two-thirds of the US market.

"When it bought IBM a lot of the corporate clients were not convinced by Lenovo and its competitors exploited this. Now Lenovo has the chance to show off its IT capabilities," said Kirk Yang, managing director and head of Asia computer hardware research at Citigroup.

However, it is in the international consumer market where Lenovo really has to make up ground.

In the first quarter of 2007, Acer passed Lenovo to become the world's third-largest PC maker by market share, according to IDC. Lenovo did see its slice of the US market rise to 3.7% from 3.5% last year but it is still trailing global leaders Dell and HP by a significant amount.

The Olympics will prove useful in reaching more consumers. Winning them over is not going to be easy, though.

"They want to turn Lenovo and ThinkPad into Apple and iPod," said Charles Guo, technology analyst at investment bank JPMorgan. "But even when Apple was in its difficult period, it was still quite well known internationally. The Lenovo brand is very weak."

Li believes that getting rid of the IBM logo will not be a problem, provided customers have confidence in the brand.

For Shanghai-based Gartner Group analyst Simon Ye, however, this battle of consumer perceptions can only be won if Lenovo releases more products. He points out that since the IBM acquisition, the Lenovo 3000 is the only own-brand machine to debut in foreign markets.

"All the rest are related to ThinkPad and most international consumers still think these are IBM products," Ye said.

The company does plan on unveiling new models to coincide with Beijing 2008 but precise details remain under wraps. Given that the designers inherited from IBM are still on the payroll, these new products will probably be of acceptable quality. But it remains to be seen how well Lenovo can do in persuading consumers to pay a premium for them.

"The Olympics will help improve brand awareness but this will not translate into increased sales immediately," said Guo. "Olympic sponsorship will not just suddenly change everything."


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