Amar Babu is on tenterhooks. The suspense around analyst data on India PC sales for the fourth quarter of calendar 2009—due to come out soon—has made the Lenovo India boss edgy with anticipation. The last two quarters were good, but can he manage a hat-trick? More importantly, will Lenovo succeed in narrowing the gap with rivals Dell and Acer, or will it be a case of one swallow not making a summer? If the third-quarter numbers—Lenovo’s market share stood at 7.3% against Dell’s 11.3% and Acer’s 11.1%—are anything to go by, the odds seem to be stacked against Babu.

The last two quarters were good. We are on the right track—it’ll only get better from here.Amar Babu, Managing Director Lenovo India

But it’s a challenge he wants to take head on. “We are not flirting with the market. Lenovo is a serious player and we want everyone to know that,” notes the man responsible for steering the company out of troubled waters. Babu hopes to accomplish this Herculean task through a strategy that his bosses in Beijing call “defend and attack”. It involves protecting Lenovo’s heritage in the enterprise or commercial PC segment by fortifying the ‘Think’ brand. At the same time, it aims to up market share in the consumer (retail) segment by strengthening the ‘Idea’ brand, and building a strong distribution network.

Helping Babu in this endeavour to revitalise Lenovo in India are Jaivinder Singh Gill, Alex Li and K Ramakrishnan. An ex-Dell hand, Gill was roped in about a year and a half ago to beef up the enterprise part of the business. Li’s expertise lies in building and managing the channel (distribution)—a job he’s done successfully in China and hopes to replicate in India. Ramakrishnan came on board last year to head Lenovo India’s marketing initiatives. He’s credited with the marketing success behind brands like TVS Apache and TVS Star. With him on board, Lenovo is hoping to up the ante in customer-focused branding and communication.

Clawing Back

With a team and strategy in place, Lenovo is looking to reclaim lost ground. In 2006, a year after it acquired IBM’s PC business, Lenovo was ranked third in terms of market share, behind industry leader HP and HCL Infosystems. The company’s out-of-the-box brand-building initiatives, including roping in a Bollywood personality to endorse a PC brand and using television to advertise computers, were the talk of the town. But the euphoria did not last—in just a year, Lenovo had dropped to fifth rank.

One reason for the company’s poor showing was the organisational churn in 2007. Several key executives, who came to Lenovo post-acquisition, quit as soon as their contract periods ended. Among them were the country manager, enterprise business head, marketing head and channel sales head. The absence of strong channel partners (the key to success in the consumer market) and big gaps in the product portfolio added to Lenovo’s cup of woes. With the company struggling, new entrants like Dell and Acer started to consolidate their positions and soon managed to leapfrog ahead of Lenovo.

In 2006, Lenovo was No. 3 in terms of market share in the PC segment. In just a year, it had dropped to No. 5. Now, it’s looking to recoup.

After Babu came on board towards the end of 2007, his first job was to get a new team in place. That accomplished, the task at hand now is to ensure that Lenovo grabs more market share and improves its position in the Indian PC market.

The man also has a point to prove; analysts believe the dramatic improvement in Lenovo’s market share in the last two quarters—from an all-time low of 4.7% in the first quarter of 2009 to 7.3% in the third quarter—is largely due to the economic recovery rather than initiatives taken by the company. A confident Babu, however, insists these numbers are a sign of things to come. “We are on the right track—it’ll only get better from here,” he asserts.

Things should be easier in the enterprise business—the company inherited a strong brand and large corporate accounts from IBM. The challenge is to protect this leadership position. ‘Think’ brand products have a reputation for being stable and reliable. “Post-acquisition, there has been no compromise on the quality front,” says Gill. And by offering features like single-touch retrieval of lost data and a fingerprint reader for added security, Lenovo is continuously adding to ‘the Think’ brand.

Multi-Pronged Strategy

Apart from product innovation, the company’s enterprise strategy is also about knowing where new opportunities lie and picking up those early leads. To do this effectively, Lenovo has not only beefed up its in-house sales team and field force on the ground, but also strengthened alliances with systems integrators (firms who piece together various sub-systems to deliver an IT solution to a client). By being close to customers and innovating on the product front, Gill claims Lenovo has been able to maintain its 20%-plus share in the relatively uncrowded enterprise PC market in India.

It’s the consumer business that’s proving to be Lenovo’s Achilles’ Heel in India. The company is a late entrant—the ‘Idea’ brand was launched in 2008. It’s a market dominated by biggie HP. “There isn’t a single point in the market that HP does not cover. From a plain vanilla computer to a top-end gaming machine, HP has it all,” says Diptarup Chakraborti, Principal Analyst at IT research firm Gartner. An extensive presence backed by high channel loyalty has helped HP protect its turf against onslaughts by competitors.

In the past we would take up to 12 months to launch a new product. Now, we can do it in less than half that time.Alex Li , V-P, Transactional Business, Lenovo India

Acer and Dell, the two other companies, who, like Lenovo, were late entrants into the Indian consumer PC market, have fared much better than the Chinese company and currently enjoy the second and third position in terms of market share. Chakraborti says these companies have a clear brand positioning in the market: Acer is about best-in-breed products at low price points while Dell’s strategy is to offer the latest products with great after-sales service. “Lenovo’s positioning is confusing—they want to be seen as a consumer brand but somehow the perception in the market is that they are an enterprise brand,” he says. “This confusion has resulted in Lenovo slipping from a strong No. 2 position to a struggling No. 5,” he adds.

It’s not as if Lenovo has a brand awareness problem. In fact, Ramakrishnan says that in terms of brand awareness, Lenovo’s score is a high 92%. But he admits that in the absence of a complete product portfolio spanning various price points and customer needs, consumer perception may have been an issue a couple of years ago. “Today, Lenovo is known in the market for its innovative features—whether it’s a biometric face scanner or hot keys to control applications, it’s unique,” he argues.

By staying close to the customer, we have been able to maintain our 20%-plus share in India’s enterprise PC market.Jaivinder Singh Gill, Exec Director, Commercial Business, Lenovo India

Ramakrishnan’s challenge is to convert Lenovo’s brand awareness into consumer preference. He plans to accomplish this by communicating better with consumers when they walk into a store. Lenovo is also setting up flagship stores (currently there are two—one each in Delhi and Bangalore) in addition to its 150-odd exclusive stores. “Our whole range of products—enterprise, consumer and small and medium businesses—will be available at these stores,” adds Ramakrishnan.

Steady Pipeline

To be successful in the consumer PC market, Lenovo realised it needed to have a continuous flow of new products with a quick go-to-market strategy, rather than tweaked versions of existing ones. “In the past we would take up to 12 months to launch a new product. But now we can do it in less than half that time,” says Li. “A faster go-to-market is necessary because the consumer business demands a continuous flow of products to meet ever-changing customer needs,” says Li. The recent global restructuring of Lenovo’s business along market maturity levels instead of geography is expected to come in handy here. Li explains: “If a product is successful in one emerging market, we can quickly take it to another emerging market that has similar requirements.”

Our brand awareness levels are very high. Lenovo is known in the market for its innovative features.K Ramakrishnan, Country Manager, Marketing, Lenovo India

His bigger challenge in India is to build a strong channel. This is where he hopes to draw inspiration from China. By aligning channel partners—Li calls them “partners in growth”—with its growth strategy, the company has been able to build a strong channel in China. High channel loyalty ensures Lenovo is able to reach a very large audience with a relatively lean cost structure. It’s not about adding more and more distributors to sell products but doing more with less. To do this, however, channel partners and the vendor have to be in sync with each other. “It’s a two-way relationship. Only if a channel partner is able to grow with you will he be motivated to sell your product,” notes Li. In China, most of Lenovo’s channel partners have been with the company for 10 years. The reason Li believes the China model can be replicated in India is because of the similarity between the two markets: low PC penetration and a diverse market.

Unlike the highly fragmented distribution that Lenovo had in India earlier, a new system has been put in place by Li. Apart from its four national distributors, who feed the metros and other tier-I cities, regional distributors have been appointed to target tier-II and -III cities. Li says there will be a limited number of regional distributors per state to ensure less competition and better profit margins for these channel partners. “We want to build long-term partnerships, and that can happen only if they grow and prosper along with us,” adds Li.

It’s early days yet, but feedback from the distributors is good. Unique Infoways’ Vipul Jain, who owns seven retail outlets of which three are exclusive Lenovo stores, says he has seen a three-fold jump in sales in the last two quarters. “If I was selling 500 Lenovo notebooks earlier, I’m doing at least 1,500 today. The way things are going, I should be able to sell 5,000-6,000 in the next two to three quarters.”

Clearly, Lenovo is gearing up for a fight to the finish. It’s made the right noises and is following that up with the right moves. But whether or not this will yield the market share numbers that can impress Babu’s bosses in Beijing is anybody’s guess. Industry analysts are sceptical, but Babu’s ex-colleagues say if there’s anyone who can pull this off, it’s him. “He has always exceeded his targets,” says an ex-director of HCL. And he may well do that again.