He knew his strategy was working, but when International Data Corporation (IDC)’s latest global shipment numbers reached Amar Babu’s inbox on a late evening last week, he was convinced he had taken a smart call. Despite a relatively weak consumer market in India, and the ongoing inflation denting the buying power of consumers, the IDC numbers revealed Lenovo India has emerged as the fastest growing PC seller in the country.
In the latest quarter (Q3 2011), it beat Acer, its nearest rival, to become the third largest PC seller in India.
Four years ago, when Babu was appointed the managing director of Lenovo’s India operations, he took an unusual decision. Instead of a country-focused strategy that most MNCs adopt in emerging markets, he chose to replicate what the parent Lenovo does in China.
“I realized that although the Indian PC market is about one-seventh the size of China, it is a replica of what China’s PC market was about 8 to 10 years ago,” says Babu.
“And that is good news for us because Lenovo has already built a very successful business in China. It is an undisputed market leader with a market share of around 32 percent,” he says.
Babu firmly believes that Lenovo’s China model (with “necessary adaptations”) will provide the recipe for success in India.
Worldwide, he says, Lenovo follows a strategy called “protect and attack” which is all about protecting market share and seizing opportunities, especially in emerging markets.
India with its very low penetration level, of just three million PCs, as against China’s 20 million, offers a “huge opportunity for us and thus became a part of our attack strategy,” explains Babu. “We attacked the Indian market with vigor,” and the results are encouraging.
Over the past two years, Lenovo India has not only ramped up its market share from 7 percent to 12.3 percent, it has also built a strong connection with its customers to become No 1 PC retailing brand in the country.
“These are critical milestones." he adds. According to IDC, the most powerful brand in India, Dell, lost much of its grip on the Indian market during the quarter and the two other competitors, Hewlett Packard and Acer, struggled to maintain their positions.
“Both China and India are very large markets. But that is just a start; its consumers too are very similar,” Babu explains why Lenovo’s China success story made sense to him. Chinese and Indian PC buyers are almost like siblings, he adds.
Education, Babu says, is a priority in both countries where the young generation is ambitious and hugely achievement-oriented.
“They have similar dreams and similar expectations,” he explains why they need computers as an essential tool.
But has the Indian market been so easy for a simple transplant of Lenovo’s success strategy in China?
“No, it hasn’t”, Babu says. “India is still a difficult market to penetrate and the biggest problem is low purchasing power. While a large section of Indians realize that a computer is important, it still does not feature very high in their must-have list.”
“Even as a middle-class Indian knows that he needs a computer, he would prefer to buy a smart phone, perhaps a second mobile phone,” says Babu.
That’s the reason why Babu had to be aggressive “and needed to bring in some of Lenovo China’s strength directly to India”.
“We started with broad-basing our products portfolio and went on an aggressive channel building exercise,” he says.
Today Lenovo India sells most of its parent’s product line starting from enterprise computers to notebooks, netbooks, desktops and even tablet PCs covering multiple price points. “We have a competitive product at every level and segment,” says Babu.
Like in China, Babu is also creating a “formidable” distribution channel. “We have set up 700 special stores. This number has gone up from 150 stores a year ago, and by the year-end, it will be 1,000,” says Babu.
The expansion has yielded another benefit. According to TAM Media Research, Lenovo currently enjoys the second position in terms of brand consideration. “Encouraged by this we have also coined a new brand positioning exercise that we call ‘For Those Who Do’,” he says.
“The key target of this strategy is the youth who see technology as an integral part of themselves, and their lives. For them, technology is not a badge, but a tool that helps them achieve something, and we want them to achieve their goals,” Babu says.
Addressing small- and medium-sized business as well as large enterprises is also Babu’s priority. Lenovo inherited its global dominance in these segments following its acquisition of IBM’s PC business in 2004, and Babu thinks he can take advantage of that to gain more institutional customers in India.
To maximize that strength Babu says he carved the enterprise market into two – large enterprises including the government, and the small- and medium-sized business segment – and “attacked these markets with as much vengeance as the consumer segment; we are still spending a lot of our resources and energy for these two,” he says.
“We are now at the top in the enterprise space with a 25.1 percent market share as well as No 1 in both notebooks and desktops for (this market segment).”
“Following Lenovo’s policy of taking advantage of a country’s strengths, we have identified India as a global marketing hub for providing backend marketing services including marketing support to all the operations of Lenovo’s global businesses.”
Babu says the India marketing team has already proved its ability in delivering marketing successes and “is now a hub for functions like market research and alliance relationships (both of which were shifted from the US)”.
Recently, this hub started offering other knowledge process functions like analytics that help measure campaign performance and segmentation studies. It also handles online and e-commerce research like shopping cart studies, traffic-spend analysis and the likes.
“We call it outsourcing with a different twist,” he says. “It is a high-level of knowledge process outsourcing.”
His target is to make Lenovo the No 1 brand in India in all product categories and market segments, and for that Babu counts on 4Ps (product, price, place and promotion).
Babu believes a technology company is only as good or as bad as its products. “Lenovo has always innovated, and since Lenovo thrives on innovation it has great products. We have been able to take advantage of that innovation and bring its successful products to India,” he says.
“Our robust, cutting edge, feature-rich product portfolio is one of the best in the business and is witnessing rapid acceptance. We believe in bringing the right products at the right time and ensure that we understand consumer requirements and address them in the best possible manner,” he adds.
What are the next moves?
“Over the next six months, we will introduce a range of newer products in varying sizes and platforms. Thus building a range catering to the needs of not only consumers but (also) all sections of the market,” he says.