Lenovo faces higher marketing costs overseas

Written by Reuters | Beijing, July 31: | Updated: Jul 31 2008, 20:43pm hrs
Lenovo Group Ltd is betting its sponsorship of the Olympics will help it build brand recognition overseas, where the world's fourth-largest PC maker must spend more to win over customers, it said on Thursday.

While overseas markets account for 60 per cent of the world's fourth-largest PC maker's global business -- boosted by its purchase of IBM's PC arm in 2004 -- Lenovo has an uphill climb to expand market share.

"The largest obstacle is that we come from China, an emerging market," Chairman Yang Yuanqing, told reporters at an event showcasing its Olympic sponsorship.

"It may cost us more than competitors from mature markets to make customers outside of China recognize and trust our brand," he said.

"The cost could be two or three times greater, or even higher," said Yang.

Beijing officials said in January that Chinese exporters should expect to face more barriers overseas as other countries impose higher quality standards after a series of scandals over sub-standard products ranging from toys to toothpaste.

Despite the difficulties, China's largest PC maker doubled net profit to $120.5 million in the January-March period, results which slightly lagged expectations.

The European, Middle East and African region made up a quarter of Lenovo's total revenue in the last quarter, posting 30 per cent growth.

In Asia ex-China, Lenovo expanded shipments 18 per cent, but shipments in the Americas, its largest market after China, climbed just 9 per cent due to a slowing economy.

In an indication that the Lenovo brand was gaining global recognition, it was ranked 499th by the Fortune magazine in its world's top 500 companies' list in July.

Lenovo is the first private Chinese firm to crack the US magazine's coveted list.