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Why is Lenovo closing an India plant?

Lenovo is shutting down one of its two computer manufacturing plants in India, a country known for its IT sector and low-cost manufacturing. Why?

According to PC World, the Chinese computer giant made the move due to declining market share in India.

The company may expand the capacity at the facility at Pondicherry, which became part of Lenovo through its acquisition of IBM's PC business in 2005.

To say the least, Lenovo overestimated its ability to expand in India.

Although it seems logical that Chinese products would fit the Indian market at bargain prices, Chinese companies haven't found it easy to succeed in India for various reasons.

In Lenovo's case, it has the advantage of local production, which should offer both lower-than-China cost and better responsiveness to the Indian market.

Lenovo's India management also invested heavily on marketing and advertising in India. In 2008, Lenovo achieved its highest brand awareness outside China in India and aimed to become No. 1 in the market.

Two years passed. Lenovo India has slipped from the third place in the market to the fifth. What didn't work?

Some readers' comments from the Times of India, expressing disappointment in the quality of Lenovo laptops and its customer service, might shed some light.

But if quality were a company-wide issue, how would we explain Lenovo's predominant success in the home court -- 30 percent market share, twice as much as the closest follower?

We may need to look deeper into China and India's differences in consumer culture, user expectations and brand nationalism.

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COMMENTS (1)
Nina Ying Sun:

Update: Lenovo announced today that it's market share in China reached a record high of 33.5 percent by Dec 31, 2009. The company also claims 9 percent of the global PC sales.

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