Lenovo reveals plans to sell smartphones where Apple's iPhone is seen as too expensive
Lenovo's smartphone strategy is so heavily influenced by the iPhone that the company plans to continue targeting markets where Apple's smartphone is viewed by consumers as too expensive, its CEO revealed.
Lenovo Chief Executive Yang Yuanqing said in an interview with Bloomberg this week that his company has found success by concentrating its smartphone efforts on countries in Asia where the iPhone is too too costly. Given its initial successes, Lenovo plans to continue on that path as it expands globally.
"We provide affordable products for emerging markets. That's very important," Yang said. "For those markets, the iPhone is probably not the best selling product, (and) Lenovo can be much more competitive."
For its next wave, Lenovo plans to begin pushing its smartphones in the Middle East, Africa and Latin America. The company will then be selling its handsets in a total of 30 markets, up significantly from the 10 where it currently competes.
As it has done in other product categories, Apple has kept its focus on high-margin, high-profit sales with the iPhone. The company's current iPhone lineup comes with three distinct models in varying price categories, but even the entry-level iPhone 4S, available for free with a two-year service contract in many markets, is still considered to have premium pricing.
Market watchers speculated that Apple would address the entry-level smartphone market this year with a new iPhone model targeted the types of emerging markets where Lenovo has found success. But that device ended up being the plastic-backed iPhone 5c, a mid-range phone which carries an unsubsidized price of $549 U.S., or an on-contract price of $99.
When some criticized Apple for charging too much for the iPhone 5c, company CEO Tim Cook responded by saying he sees plenty of room to grow in the high-end handset market. Cook noted that market trends toward cheaper electronics are not new, having occurred in the past with VCRs, DVD players, cameras and PCs, though he doesn't feel inclined to take the iPhone or iPad down that same path.
"There's always a large junk part of the market," he said. "We're not in the junk business."
Lenovo Chief Executive Yang Yuanqing said in an interview with Bloomberg this week that his company has found success by concentrating its smartphone efforts on countries in Asia where the iPhone is too too costly. Given its initial successes, Lenovo plans to continue on that path as it expands globally.
"We provide affordable products for emerging markets. That's very important," Yang said. "For those markets, the iPhone is probably not the best selling product, (and) Lenovo can be much more competitive."
For its next wave, Lenovo plans to begin pushing its smartphones in the Middle East, Africa and Latin America. The company will then be selling its handsets in a total of 30 markets, up significantly from the 10 where it currently competes.
As it has done in other product categories, Apple has kept its focus on high-margin, high-profit sales with the iPhone. The company's current iPhone lineup comes with three distinct models in varying price categories, but even the entry-level iPhone 4S, available for free with a two-year service contract in many markets, is still considered to have premium pricing.
Market watchers speculated that Apple would address the entry-level smartphone market this year with a new iPhone model targeted the types of emerging markets where Lenovo has found success. But that device ended up being the plastic-backed iPhone 5c, a mid-range phone which carries an unsubsidized price of $549 U.S., or an on-contract price of $99.
When some criticized Apple for charging too much for the iPhone 5c, company CEO Tim Cook responded by saying he sees plenty of room to grow in the high-end handset market. Cook noted that market trends toward cheaper electronics are not new, having occurred in the past with VCRs, DVD players, cameras and PCs, though he doesn't feel inclined to take the iPhone or iPad down that same path.
"There's always a large junk part of the market," he said. "We're not in the junk business."
Comments
By expanding beyond it's China smartphone products Lonovo claims to already be seeing increased profits in those new markets compared to it's home country.
Lenovo's smartphone strategy is so heavily influenced by the iPhone that the company plans to continue targeting markets where Apple's smartphone is viewed by consumers as too expensive, its CEO revealed.
It seems to me that would be everywhere there are people buying mobile phones... Good luck with that.
Lenovo's smartphone strategy is so heavily influenced by the iPhone that the company plans to continue targeting markets where Apple's smartphone is viewed by consumers as too expensive, its CEO revealed.
Wait, this is not the sole raison d'être of the Android platform? To offer a lower cost smartphone alternative of iOS and M$ phones? I fail to see how Lenovo can compete with other low margin phones mfg like HTC, Samsung, LG and all nameless Chinese copycats.
Yet another company in the race to the bottom. Would common sense say that you would want some of apple's pie verse running way to another neighborhood which everyone lives in shacks and can not afford a pie in the first place.
What really gets me is all the people concerned about the environment but perfectly fine with all these companies releasing cheap android phones and tablets. Do we really need 10 different flavors of Android phones when they all basically do the same thing? It seems like rather than the cream rising to the top and pushing out the crap we're just getting more and more companies pushing out low end junk. I don't get it.
Yet another clueless marketer. Apple doesn't compete on the low end. You're like someone saying, "Too few people can afford to go to Ruth's Chris Steakhouse here so I'll put up a MacDonald's." Just because junk foods and salads are edible doesn't mean they compete. They're in two different markets. As @jungmark pointed out you're hitting Samsung from the low end where they do compete. (At the high end, the smartphones that Samsung makes barely compete with the iPhone and sales have flattened out while the iPhone continues to increase its percentage of the market where it competes.)
I usually like analogies especially ones which most people can understand. However, I am not sure your analysis fits well, MacDonald make money and lots of it. I used to be invested in them and they did well especially after they realize healthy was going to eat their lunch. Steak and burgers sell to two completely different groups and both make money. In the cell phone market if you're not selling in Apple segment you are loosing money.
I read somewhere that Lenovo's profits increased 35%. Not sure if that was a quarterly increase or YOY. But I still don't get how all these Android OEM's are making it. What really is the differentiating factor? HTC thought they had it with the aluminum unibody One but now we're hearing that they're moving to the low end to try and capture market share.
What really gets me is all the people concerned about the environment but perfectly fine with all these companies releasing cheap android phones and tablets. Do we really need 10 different flavors of Android phones when they all basically do the same thing? It seems like rather than the cream rising to the top and pushing out the crap we're just getting more and more companies pushing out low end junk. I don't get it.
It is simple, most everyone else in the Android market makes money only selling the hardware and then there relationship and revenue stream ends with the customer. Apple has a relationship with the consumer after the hardware sale which helps make up most of the profits.
I always felt Apple was not telling the whole truth when they said itune and the app store does not make money for them. Initially that was probably true, but it was a long term strategy and it definitely making them money and allows them to have continues contact with their customers. All the other companies failed to understand until it was too late. I think the other companies heard and saw apple not make money with it so why do it as well let the google and amazons waste their money which they are doing.
This is the part most analysis may not understand or consider, Apple is the only company making money on the end to end ecosystem, everyone else is barely making a profit
I read somewhere that Lenovo's profits increased 35%. Not sure if that was a quarterly increase or YOY. But I still don't get how all these Android OEM's are making it. What really is the differentiating factor? HTC thought they had it with the aluminum unibody One but now we're hearing that they're moving to the low end to try and capture market share.
What really gets me is all the people concerned about the environment but perfectly fine with all these companies releasing cheap android phones and tablets. Do we really need 10 different flavors of Android phones when they all basically do the same thing? It seems like rather than the cream rising to the top and pushing out the crap we're just getting more and more companies pushing out low end junk. I don't get it.
The race to the bottom is all about leap frog efficiencies in production and undercutting on quality in measured bounds. But in that layer between 'cheap' and 'quality' is where Lenovo plays...
Lenovo is leveraging their corporate brand for the time being (They are the IBM of OEMs, quite literally, taking over IBM's PC line), and this translates for some. So they are targetting those that want a 'quality brand' but not as expensive a brand as Apple or Samsung (remember in most other countries, people affiliate with a brand, not a product... in other words, you have a 'sony house' or a 'samsung house' or an 'LG house....' Lenovo is parlaying their cachet in the Corp PC line to be 'top of the mid tier' phone with strong personal computer roots. Lenovo has very little market costs (compare to Samsung), so you can see where their profits are coming from.
You have Ruth's Cris, you have McDonalds, and you have the hardee's and then you're down into the carnie food wagons. Lenovo is playing in the hardee's level. Low marketing, almost the same quality of McDonalds, and definitely more brand loyalty than carnie foods.
That's a marketing strategy that I would describe as 'accepting and dealing with reality'.
That's why Apple is staying away from the lower priced markets. It erodes the profits and it's hard to recover from that. It's called learning and understanding the basics and not worrying about owning market share, but figuring which market to go after and then own market share in THAT market.
I think the Lenovo CEO is very smart and doing the right thing.
After seeing 30% revenue jump and only selling phones in a fraction of the markets that Samsung sells in, they're obviously on the right track.
He's smart for recognizing that there really is no competing against Apple on the high end/high profit customer base with an Android device (as Samsung's high end sales vs Apple sales trend shows) and to not even bother trying.
Definitely the right move and I think LG will take a significant chunk of Samsung's market share in the next few years.
I think the Lenovo CEO is very smart and doing the right thing.
After seeing 30% revenue jump and only selling phones in a fraction of the markets that Samsung sells in, they're obviously on the right track.
He's smart for recognizing that there really is no competing against Apple on the high end/high profit customer base with an Android device (as Samsung's high end sales vs Apple sales trend shows) and to not even bother trying.
Definitely the right move and I think LG will take a significant chunk of Samsung's market share in the next few years.
I don't find anything smart about Lenovo, starting by getting the actor Ashton Kutcher as a product engineer. BTW where are you getting your numbers from? I don't think phone product got anything about to do in Lenovo's revenue.