Does Lenovo still have a chance to join Huawei in the top three in the world?

In early November, Lenovo just made minor adjustments to its mobile phone business. In addition to Yang Yuanqing’s statement that "Moto will be our only brand of smartphones in the future", the mobile business was also "transferred" from Chen Xudong to Qiao Jian.

Considering that Yang Yuanqing mentioned that China was the "only" region with a year-on-year decline in performance, the outside world speculated that Lenovo was trying to restructure its mobile phone business and improve the performance of its mobile phone products in the domestic market. Of course, some analysts also believed that Lenovo would adopt a "curve-saving" strategy and took Yang Yuanqing's brief description of the brand route as a signal.

Now it seems that the latter speculation is more reasonable. In an interview during this year's World Internet Conference, Yang Yuanqing said that "we will strive for the three companies (referring to Lenovo, Huawei, and Xiaomi) to become the top three in the world in the future" and "then compete for who is first, who is second, and who is third." However, can Lenovo achieve this goal smoothly?

Can the Chinese market be “given up”?

In the interview mentioned above, Yang Yuanqing said, "To be frank, Lenovo is doing better in the overseas smartphone market than in China. More than 90% of our smartphone business now comes from overseas. We are probably the best Chinese company in developing overseas markets, especially in emerging markets overseas."

Is this a kind of "splendour" or a kind of "helplessness"? Perhaps only Yang Yuanqing and the management team of Lenovo's mobile phone business can experience it firsthand. But first of all, more than 90% of the business is maintained overseas, which may not be considered a success for Lenovo, which once said it would "rely on the local market".

At the Denver International Management Science Conference in 2002, Liu Chuanzhi, then president of Lenovo Group, talked about the need for Lenovo to establish a foothold in the local market in order to achieve its internationalization strategy: "Since Lenovo has such a vast local market as China, we must make good use of it, accumulate strength, and enter the international market when conditions are ripe... Lenovo's strategic focus is the Chinese market, and its advantage is that the Chinese are most familiar with the Chinese market."

In 2009, when Liu Chuanzhi returned to the company, he said: "Lenovo will never waver in its internationalization path." But he also pointed out: "The most basic thing is the domestic market, which is extremely important."

Ding Technology believes that Liu Chuanzhi's judgment is calm and rational. As a country with a population of more than one billion, China is a market that no international company can ignore, especially companies of local "origin".

Take the Japanese company Sony as an example. Its 2015/16 financial report shows that Sony's operating income in China fell by 1.1% year-on-year to 540.497 billion yen, ranking last among Sony's six major global market regions, with a revenue share of 6.7%. Some media previously said that this had put Sony's overall business in an embarrassing situation. It also caused Sony and other Japanese companies to "counterattack" the Chinese market for a period of time afterwards. The status of the Chinese market is evident.

Yang Yuanqing mentioned that China is the "only" region where performance has declined year-on-year. Qiao Jian, whose main business is "brand building and marketing promotion", must be planning to revitalize the domestic market. So, by emphasizing overseas and global markets at the World Internet Conference, is Lenovo really planning to temporarily avoid the "hundred-regiment war" in the domestic mobile phone market and prepare to "save the country in a roundabout way"?

Trying to save the country by taking a roundabout way?

Based on observations over a period of time, Ding Technology believes that there are generally three reasons why domestic mobile phone brands enter overseas markets:

First, they seek a larger market size through internationalization. Taking this reason as the starting point, it is common for companies that have already achieved a certain market position in China to begin to show their ambition to dominate the world after basically stabilizing their "base camp", which is also a way to break through the growth bottleneck.

Second, feed back to the domestic market through overseas business. Such enterprises are generally not very popular in China and are not well-known. Some of them even started out as OEMs. The broader overseas market can provide them with the necessary reproduction funds for survival and help them increase their visibility. At the same time, they can temporarily avoid the melee of many domestic brands and return to the world at the appropriate time.

Third, they are unwilling to accept failure even though they are close to “dying” in China. Such enterprises usually cannot make a living in China, and some are sub-brands of big brands, trying to open up the market with the help of the existing channels of the parent brand.

Lenovo's mobile phone business is in a relatively special situation. It once joined the "China Cool Alliance" and entered overseas markets, obviously seeking a larger market space. However, as its domestic business has fallen into a larger "bottleneck", expanding overseas business seems to have become "inevitable". According to Canalys data, in the first half of the year, Lenovo ranked only 11th in China with sales of nearly 6 million units, while the overall sales of domestic mobile phones exceeded 250 million units in the first half of the year. Yang Yuanqing mentioned at the Internet Conference that "the Chinese smartphone market is large, but it is only 30% of the global market. The world market is even larger, and the other 70% is overseas." I wonder if there is a sense of helplessness hidden in this.

Data source: Sino

As if to prove that Lenovo's mobile phone business can achieve the goal of "saving the country by taking a detour", Yang Yuanqing talked about some achievements in markets outside of China: "For example, in Brazil, we have nearly 20% market share, ranking second, in India, we have nearly 10% market share, ranking second only to Samsung, and in Russia, we also have nearly 10%.

We have basically occupied all the BRICS countries. As for other emerging markets such as Eastern Europe, Asia-Pacific, Indonesia, etc., we not only have a good reputation, but also a very good market position. My colleague just told me today that we are ranked in the top five in about 30 or 40 countries. "

However, Lenovo, which is trying to become one of the top three in the world, has not said how it is performing in China, which accounts for "30% of the global market."

Is it easy to achieve the top three in the world?

For Lenovo, being among the top three in the world involves two parts: one is to effectively boost domestic business, and the other is to "go further" in overseas markets.

Some analysts said that Lenovo's performance in the Chinese market will ultimately be the key to whether it can become one of the top three in the world. Given Lenovo's current performance in the domestic market, it seems difficult to successfully complete this part.

Even if Qiao Jian takes over, Lenovo is already at a disadvantage in the domestic market in terms of channel construction, marketing investment, localized design, etc., and is no longer in the same league as leading companies such as Huawei, OPPO, and vivo.

Even in the overseas market, which accounts for 90% of Lenovo's business, it is not easy for Lenovo to achieve the other part of its global top three goal:

First of all, as Lenovo's only brand in the future, Moto needs to get rid of the practice of low-price rush to sell in large quantities, establish a mid-to-high-end brand image as soon as possible, and build a reasonable "high-low matching" product line; the merged brand also needs to change the inherent concept of the Lenovo brand that has been left to some consumers, which is equivalent to re-acquiring users, which is somewhat difficult.

Secondly, as the global smartphone market begins to show signs of slowing growth (according to Gartner data, mobile phone sales in the third quarter of this year increased by only 5% year-on-year), Lenovo's unstable position in its "home base" is a hidden worry.

Data source: Gartner

Again, according to Gartner's latest data on mobile phone sales in the third quarter of 2016, the top 5 are Samsung, Apple, Huawei, OPPO, and vivo (BBK). Samsung and Apple still have a greater advantage. If Lenovo wants to enter the top 3 in the world with Huawei, it must surpass one of the two. For now, if Samsung and Apple do not make fatal mistakes, Lenovo's chances are relatively slim. From a more practical perspective (entering the top 5 first), as domestic brands are entering overseas markets one after another, OPPO and vivo have achieved a status almost equal to that in China. Even if Lenovo wants to break through the "blockade" of these two brands, it will be difficult both in China and overseas.

Although Yang Yuanqing's "Top Three in the World" declaration is not easy to achieve, it does give some hints:

First, although Lenovo's mobile phone business has encountered a relatively "bottleneck period" in China, it still needs to maintain its brand tone and "stand" with Huawei and Xiaomi;

Second, Lenovo is trying to "get rid of" the chaos in China, take a further step in internationalization, and wait for the opportunity to "return" to China;

3. Through the “Top Three” declaration, where possible, enhance domestic consumers’ confidence in Lenovo’s mobile phone products and brand;

4. Make the process of brand concentration from decentralization to Moto more logical (Moto has overseas influence).

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.