Lenovo re-adopts dual brand strategy to revive smartphone sales in India

Chinese consumer electronics major Lenovo has adopted a revival plan for India’s fast-growing smartphone market. Once the dominant player, the company is shifting its focus back to two models — Lenovo and Motorola — two years after it deviated from the tested formula.

In the financial year 2018-19 (FY19), the group turned profitable globally — for the first time since acquiring Motorola from Google in 2014. The Beijing-headquartered company had almost withdrawn the Lenovo brand in early 2017 from India, but is now again pushing the low- to mid-range smartphone.

“We have decided to re-adopt the dual-brand strategy and have already launched devices under the Lenovo brand,” said Prashant Mani, managing director, Motorola Mobility India.

The plan is to pitch Lenovo to consumers in the low- to mid-segment, while Motorola will cater to the mid- to premium-end of the market.

According to Mani, who spearheads the group’s mobile business in India, the move to the dual-brand plan is part of a strategy change in $45-billion Lenovo. Since turning profitable, the company has shifted focus to Asian markets such as India.

Earlier most of its products were developed based on needs of consumers in North and Latin America and Europe. But given the growing size and faster rate of growth of the Asian markets, now insights from India and neighbouring markets have become more significant.

“We now believe that if a product can survive the competition here and satisfy the high demands of Indian consumers, then it can do well anywhere in the world,” he said.

To streamline its businesses, Lenovo has demarcated its three main business divisions — personal computers (PCs), mobile, and cloud solutions. The mobile business has been spun off into a separate entity.

Further, unlike earlier, the firm is now looking to generate sales equally from online and offline channels. While, Flipkart, the group’s long-term partner, will continue to play an important role, offline stores will get half of its sales now.

After posting profits for three consecutive quarters — Q2, Q3, and Q4 of FY19 — the future plans of Lenovo’s mobile business depends on future markets.

The local business in India has also faced headwinds since withdrawing the Lenovo brand in 2017. In 2016, it used to hold close to 10 per cent share in the local smartphone market and was the third-largest player by volume. It slipped to the fourth spot in 2017 and its share fell to less than 8 per cent. In 2018, it went out of the top five spots — for the first time in years — and its market share fell to a little below 5 per cent.

While its financial records for 2018-19 is not available yet, in 2017-18 the group had sales to the tune of Rs 6,881 crore from its handsets business in India, with net profit of Rs 51.9 crore.

The previous year’s numbers are not comparable though, since it used to report its mobile and PC business together. 

It had reported Rs 12,004 crore of sales in 2016-17, compared to its cumulative sales from two division at Rs 13,599 crore in 2017-18.

In line with global strategy, Mani said, while Lenovo was looking to regain lost ground, it would not go for heavy discounting at the expense of its profitability.

Analysts pointed out that with Lenovo back in the field, the group’s initial growth may come easily. In 2017, after Lenovo withdrew, its absence had been the primary reason for the group’s sliding fortunes.