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What Lenovo’s Acquisition of Motorola Mobility Says About Its Growth Strategy
At the end of January, it was announced that Lenovo bought Motorola Mobility from Google. Much of the reporting in the United States centered on the financial loss made by Google, which bought the company in 2012, for $12.5 billion and sold it for less than a quarter of that amount. But, also interesting is what the acquisition says about Lenovo’s strategy for growth and becoming a global powerhouse.
When Lenovo bought IBM’s PC business in 2005, it was known by few customers outside of China and was hardly known for leading products in China. By gradually managing the transition of “IBM ThinkPad” to “ThinkPad” to “Lenovo ThinkPad” and “Think,” Lenovo succeeded in positioning itself as a provider of high-quality PC products. By positioning the business “Think” brand side-by-side with the consumer “Lenovo” brand, it now carries its excellent reputation into the broad range of the U.S.-consumer PC market as well as globally.
Prior to this recent handset acquisition, Lenovo ranked as the fifth largest handset supplier in the world, largely from sales of mid-range handsets in China and service-provider-branded handsets in other geographies. To compete in a China market rapidly becoming dominated by smart phones requires both technology and customer acceptance. By gaining the Moto brand, which is highly respected in China, Lenovo acquires both the technology needed to produce competitive smartphones and the reputation to sell alongside Apple and Samsung. Outside of China, Lenovo will again have acquired a brand name that, even though perceived to have lost its edge in recent years, it can use to go from an OEM supplier of T-Mobile or AT&T branded handsets to producing, advertising, and selling its own products virtually overnight.
Since the ThinkPad experience is seen as so successful, we would expect the company to repeat that success, starting first with identifying itself as Moto, then gradually bringing its own brand into recognition by linking the two together, allowing it to achieve success in both the high-end and the price-driven markets outside of China as well.
Lenovo is one of the most aggressive of the “Second Mouse” Chinese companies that we have studied over the years. The model for competing in China’s mid-market–selling “almost as good” products at a dramatically lower price point than the global brands–describes Lenovo perfectly. They are the “Second Mouse that gets the cheese” rather than the “Early Bird that gets the worm.” Lenovo has taken the model a step futher by actually going out and acquiring the “former Early Bird” companies when the market and their innovation leadership have combined to reduce the premium to dramatic innovation. Its timing was perfect in the PC market, with consumers having come to regard the different brands as complete substitutes. Whether there are still dramatic breakthroughs ahead in cell phones remains to be seen, but if not, watch out for Lenovo to thrive in that global market.