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Chinese computer giant Lenovo will use its Chinese transaction model in other markets after successful pilot schemes in Germany and India.

 

So said Deepak Advani, senior vice-president and chief marketing officer of Lenovo.

 

"To go after the market growth we do not only need the right products, but we should also have the transaction model in place," said Advani in an interview in Beijing.

 

Germany and India have become testing grounds for the strategy in both mature and emerging markets.

 

Last week Lenovo's top executives, including its chairman, CEO and Advani, met in Paris to review the use of the transaction model in Germany. It proved to be "very successful," with significantly higher growth over the past few months.

 

The German market is a pilot for Lenovo's strategy in mature markets, so success there will mean faster adoption of the transaction model.

 

"We are quite confident in what we need to do," said Advani.

 

Lenovo's pilot program for emerging markets is India.

 

In the second quarter Lenovo grew its number of resellers in India by one-third, strengthening its ability to reach so-called transaction customers. It also introduced Lenovo-brand products to meet the demands of such customers.

 

Advani said shipments of Lenovo-brand computers had already overtaken those of Think products among transaction customers in India.

 

Lenovo divides its sales system into two models relationship and transaction. The relationship model mainly targets large commercial customers wanting tailored solutions, fast delivery and quick responses to service demands. Meanwhile the transaction model is suitable for small and medium businesses as well as consumers, where large distribution, service and aggressive pricing are paramount.

 

Lenovo's international business is mainly based on its Think brands acquired from IBM in 2004, but the Think products are considered premium while its strength lies mainly in so-called relationship customers.

 

In the second quarter Lenovo's shipments of computers rose by 12 percent year-on-year, but it was mainly driven by growth of almost 30 percent in China.

 

In Europe Lenovo's shipments fell by 12 percent and in the United States its growth was 5.3 percent, below the industry average of 6.7 percent, according to research company International Data Corp (IDC).

 

Advani said the major factor behind this was that Lenovo does not have a strong presence in the fast-growing small and medium business and consumer markets of Europe and the United States.

 

IDC predicts the worldwide growth rate of PCs in the consumer segment will be 12.6 percent this year, while the commercial sector is expected to grow 9.3 percent. In the US market it is 8.5 percent versus 4.9 percent.

 

Thus, one of Lenovo's key strategies to revive its international business is the duplication of its transaction model.

 

The world's third-largest computer maker has more than 2,000 resellers and service facilities in more than 1,000 Chinese cities, which allows Lenovo to reach small and medium businesses and consumers in almost every corner of China.

 

In contrast, competitors like HP and Dell mainly have a presence in big and medium cities.

 

On Thursday Lenovo began its sales promotion for the National Day holiday from October 1 to 7, announcing it would upgrade its mainstream consumer products to independent graphic cards, 19-inch LCD monitors and 160-gigabyte hard disk storage. The holiday is one of the biggest sale seasons of the year in China.

 

(China Daily September 19, 2006)