Before coming to India, what we knew about Lenovo was from our communications professor Cory Grenier. He was stationed in Beijing, where this Chinese multinational was founded and he was able to speak to us a lot about how business was conducted in China. We were unsure however, how this Chinese technology business model was transitioned into the Indian economy.
From our initial research we knew that Lenovo was in the business of personal computers, laptops, workstations, servers, and electronic storage devices and was even gaining foothold into the tablet and smart-phone market. In 2012, Lenovo was the world’s second largest personal computer vendor by unit sales and had operations in 60 countries and sold in 160 countries. In India, we knew it made up 15.8% market share in PC Sales in India and was on its way to being the number one brand in its market. However, it was recognizing the threat that the demand for smart-phones and tablets would have on its personal computer sales as customers were now torn on how to spend their precious rupees.
We were greeted at Lenovo very warmly and were first given some demographic statistics about the Indian market economy. We found that there are 158 million Internet users, 46 million Facebook users, and even 30 million YouTube users. Although in terms of real numbers that seems quite large, as a percentage of the entire Indian population of over a billion, there lies a large opportunity for computer technology companies. One of the biggest challenges we were told, was that even by the year 2030, unlike its developing nation counterparts, India will only be 40% urban. Thus as a tech company, it will be the most profitable for the company that figures out how to market to the rural economy. With 35 states, and 22 languages, that will prove to be a difficult feat, but Lenovo seemed optimistic about its prospects.
Lenovo took us through the history of Lenovo in India and we were very impressed with its growth in such a short amount of time. It was launched in India in 2005 and over the next few years it struggled, operating at a loss for many consecutive years. However, talking to an employee that had been at Lenovo from its start, we found that they created a culture of discipline, cutting costs wherever they could in order to stay afloat. Since then they have been thriving in the Indian economy and was just recognized as a top brand in its market.
We learned that there was even a Global Marketing Headquarters in India, its location chosen because of the innovative highly skilled workforce that had demonstrated strong international marketing capabilities. Working in an economy with so many different people and cultures primed India for being an international hub in many different fields because of its ability to adapt to many different cultures and take each and every challenge as it comes.
Similarly to many of the other Indian companies we visited, Lenovo talked about the difficulties of business with such strict governmental regulations. In China, businesses that are approved of by the Chinese government have many doors open to them in order to keep their success alive. India often has to wait for governmental policies to be decided upon before it can move forward. For example, Foreign Direct Investment in a specific brand has finally been allowed in India after much political debate. Although there are still strict regulations on this FDI, Lenovo is excited for its new prospects in getting international partners who can invest in the company and help further its success in India. We also found that many politicians who wanted to get elected would often promise technology products to its constituents upon election. For example, one politician promised all college students in his state a laptop computer if he was elected, and when he was elected there was a price undercutting war between tech companies on who would get that large bid. Lenovo got a respectable percentage of that bid, but learned it had to operate at very low margins in order to increase its market share in that region. Thus a tradeoff exists for tech companies like Lenovo between margins and market share, as there is an intense competition for all the market opportunity in India.
Overall we learned a lot about how business is run in India and it was a great opportunity to spend time in India’s version of our “Silicon Valley”. It was evident that India is a prime location for business and it was very inspiring to hear the success story of Lenovo India.