Muna Wahome
27 September 2005
Nairobi — A Chinese firm that recently took over IBM's personal computer (PC) business will set up distribution structures in Kenya for its array of products - ranging from mobile phones to PCs.
Significantly, the move by Lenovo, a company with $13 billion in revenue, will push competition to new levels. The firm believes it will narrow the gap between clones and branded computers to a bare minimum.
Founded in a shack by 11 scientists in 1984, with a government injection of $25,000, China's first private firm will soon launch a major media campaign in Kenya, and other forms of promotion, including golf sponsorship.
The Financial Times reported last week that Lenovo, the world's third-largest PC producer, is poised to launch a new series of cheaper and more colourful Thinkcentre desktop computers to reach small business buyers neglected by former owner IBM.
It will retail in the US at just $400 (Sh29,000) - minus a monitor - the new PC it is about Sh7,300 ($100) cheaper than its predecessor.
The move is seen as part of Lenovo's drive to grow its customer base beyond its mainstream buyers in large corporations, and government institutions, the report said.
"We are going to launch a vigorous advertising in the electronic and print media, education, customer care training and compilation of monthly reports," Lenovo (South Africa) sales manager, Yushaa Matthews said.
"We have never made this type of investment in Africa before."
Lenovo, who are preparing to open a regional office in Nairobi, will launch a brand assault with their cocktail of Chinese and IBM brands.
Although it holds 34 per cent of the Chinese market - consolidated through 700 retail shops before the IBM deal - it had never ventured into the international market.
The firm, which employs 19,000 workers in 164 countries, deals in PCs, note-book computers, cell phones, personal digital assistant (PDA) and printers. It is targeting business enterprises employing between one and 99 people. IBM products usually target companies with over 100 people.
Mr Matthews, who was in Nairobi last week, said Kenya is one of seven African countries that the firm was making direct investment in.
He said they were considering setting up assembly plants in Africa, with a study of Nigeria already completed. He said Kenya would be the natural choice were the firm to assemble for the region, that includes Ethiopia and Tanzania. Then there is Nigeria, Botswana, Mozambique and Angola.
Lenovo has done due diligence in the region spanning four months. Besides marketing their products in the area, they will, for the first time allow distributors to hold stock, unlike in the past when IBM would order directly from abroad. This tended to limit their efficacy in the market.
Mr Matthews says innovation is the other name for Lenovo and IBM, and that with the improved supply chain, the would take the continent by storm. Among their authorised dealers are vibrant players like the South African firm Sahara (networked in 11 African countries) Tricontinental, SDAL and Ibis.
Mr Matthews was accompanied on his Nairobi tour by Ms Hanli Wood who is the IBM South Africa channel manager for Central Africa.
China's number one computer firm is ranked third globally after Dell and HP. Last month, it clinched a deal in which it paid the US IBM group $1.25 billion (Sh95 billion) for the division.
This was made up of $650 million in cash and the balance in Lenovo shares at the market price. The deal meant that IBM would own 18.9 per cent of Lenovo.
In the new marketing strategy, Lenovo will roll out a number of products in the first three months of next year. But others like think pads would be promoted as early as next month.
Lenovo's network will offer service and continuous client support in Africa.
Under the agreement with IBM, the Chinese firm will supply IBM products for five years. Manufacturing in China, rather than in the US is projected to bring the costs down drastically. Top IBM executives have been attached to critical Lenovo departments.
The deal with IBM hoisted the Lenovo shares at the Hong Kong Stock Exchange from cents 38 to $2.40 (Hong Kong dollars). In the coming months, Kenyans will be watching to see whether their local performance will be just as bullish.
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