Lenovo, the world's third largest PC maker, will still rely heavily on the Chinese market, despite its recent acquisition of US giant IBM's PC business.

Ravi Marwaha, senior vice-president of Lenovo Group in charge of global sales, said the Chinese market is the company's primary concern and will act as a growth engine driving Lenovo's expansion in global markets.

"The most important thing is to make sure that Lenovo continues to grow in China," said Marwaha.

According to Liu Jun, newly-appointed chief operating officer of Lenovo China, this year the Chinese market will account for more than one fourth of Lenovo's global revenue, projected to be around US$13 billion.

"Domestic sales will be about 40 billion yuan (US$4.83 billion)," said Liu, who is also senior vice-president of the group. Lenovo is the No 1 player in China's PC sector, securing a one third market share.

Lenovo's PC export business stood at 4.15 million units last year, compared with sales of 15.5 million units in China.

Despite being a leading player in the domestic market, Lenovo is increasingly being challenged by leading foreign rivals, such as HP and Dell, who are the top two players worldwide with 16.9 percent and 13.9 percent market shares against Lenovo's 7 percent.

According to Liu, China's market will not only be a cash cow supporting Lenovo's expansion overseas, but will also provide a major base for manufacturing and research and development.

Liu says the company has come up with a three-tier strategy focussing on three segments, including institutional customers, segmented customers in smaller cities and townships and the laptop market, as its key targets for 2005.

"Backed by the merger with IBM's PC business, the combination of IBM's technologies and our low costs in China will greatly strengthen our competitiveness in the global arena," said Liu, adding that cost-competitiveness and efficiency will be two major strategies for fighting rivals in the domestic market.

At its partners' conference yesterday the company vowed to form a closer alliance with its 8,000 distributors in a move to outperform its rivals and further cement its leading position in the home market.

The move is the latest policy adopted by Lenovo to compete with Dell's direct-selling model, which is gaining increasing popularity in China thanks to its cheaper prices to end users.

Marwaha said that integration with partners will become central to Lenovo's growth in the future.

"China has demonstrated that a good partnership mode with great partners can compete successfully against Dell's direct model," said Marwaha, an IT veteran with 36 years experience at IBM.

Lenovo has a total of more than 13,000 partners in the international market, contributing 72 percent of its revenue, and in China, over 90 percent of Lenovo's revenue is generated by its 4,000 partners, said Marwaha.

However, according to Li Lan, vice-president of the group, Lenovo is making some preparations for future expansion overseas.

The company will spend a total of US$260 million on brand building,Li said, with US$200 million of that to be spent overseas in 2005.

(China Daily May 20, 2005)