Lenovo’s India Takeaway
China and India both operate with channel partners comprising distributors and retail stores. In China, Lenovo has a six-tier structure. For India, the company has instituted a three-tier model consisting of four national distributors at the top who serve the seven regions India is split into. To address conflict of interest among distributors, as a rule not more than three Tier 1 distributors are allotted to a specified region. “We have done this so that distributors can have a larger overall share of the market and it builds a sustained interest among them in selling Lenovo products,” says Yathindra Nath, Director – consumer & SMB sales & distribution, Lenovo India. “Earlier the distribution was too fragmented and no one had a sizeable share of the market,” he adds.
Just like China, even in India Lenovo is getting its large channel partners to be almost a part of the company. “We have identified 25 large retailers, and have started engaging them early and discuss campaigns. We have already got some great feedback and [are] using it to research our products,” says Babu.
Using China to Go Upcountry
The biggest challenge for the model is reaching the upcountry markets — a strong growth area — and this is where a strongly hierarchical system helps with bigger retailers feeding the smaller retailers. The company sells its products to national distributors who sell it down further to exclusive outlets, multi-brand outlets, large retailers and regional distributors. The regional distributors (RD) hold the key to unlocking the upcountry markets for Lenovo.
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Image: Vikas Khot
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CLOSE INTEGRATION: All function now report to the India MD, Amar Babu, including Alex Li | |
The problem with RDs in the past has been duplication of inventory. Previously, the company had no clarity on how much stock an RD had and RDs would keep rotating the credit by buying from a different national distributor each time. Lenovo itself did not help matters because its sales culture was driven by volume growth and meeting stiff targets, and that resulted in dumping of stocks. Written documentation of each policy and a strong information system that tracks each sale will take care of the problem.
Since large channel partners are more clued into Lenovo’s needs, there is better understanding between the company and the channel. “Sometimes the cultural integration has indeed been painful in the past, but we now have a new Lenovo culture. Earlier it was IBM culture. Now we focus more on people, how to succeed together,” Li says.
Another similarity between the two countries that lends credence to the China model’s applicability here is the product range in emerging markets — the entry-level product mix is more or less the same in both nations, allowing India to choose the inventory available with their Chinese counterparts. Though, they are open to innovation customised for Indian needs.
Lenovo India also plans to ape the Chinese integrated operations model where all functions from product development to marketing, sales, supply chain and services are closely linked for speed and efficiency. Similarly in India, all functions now report to the India MD, Amar Babu, including Alex Li. Babu holds the entire P&L responsibility and has the liberty to plug and play resources at his disposal.
The earlier focus on volume growth has been done away with and every sale is tracked till the last mile. All discounts or special sanctions now need a written approval and documentation because unfulfilled verbal commitments by the sales team had created distrust amongst distributors and channel partners.
Tightening Costs
Pre-planning and forecasting is the norm in China and the same is now being practiced in India. Products like a notebook are perishable commodities — so you can’t have a long supply chain, hence tight planning is mandatory. This helps saving transportation cost and products can be shipped instead of flying them in. Thus, margins that are wafer thin in the business can be saved and competitive pressures built in the market.
If Li moved to India some months ago to head the transaction business and build the channel structure akin to the China model, a few Indian team members are being sent to China for a few months to baptise them on the sacred model.
Additionally, a few of Lenovo’s China-based employees await visa clearances, and will soon base themselves here. What might also be attracting them to India is Li’s infectious passion for Indian food and travel. They know how patiently he awaits his Indian driver’s license to hit the road and explore India. Thanks to his India sojourn, he now nurtures a dream to open an Indian restaurant back home someday.
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