Chinese entrepreneurs’ next big break is in developing global brands for their products
A new book argues that the challenges of sophisticated marketing and cultural nuance will be met by China
China may rightly be considered to be the world’s factory but to date it has yet to produce significant international brands.
The Interbrand 2012 list of the hundred “best global brands” did not include a single brand from mainland China while in a recent J Walter Thompson study of US and UK consumers, Chinese companies ranked near the bottom in consumer perceptions of quality, ethical behaviour and environmental consciousness.
According to Nirmalya Kumar and Jan-Benedict Steenkamp, the authors of Brand Breakout, all this may be about to change and China and other developing nations are set to become significant global brand players over the next decade.
They argue that China, for one, has little option if it wishes to continue its phenomenal growth trajectory. The financial crisis in the West has deterred China from passing higher costs to customers, and fewer orders are coming from Europe while demographic changes and increasing labour shortages have led to a quintupling of wages in the last decade with diminishing profit margins.
The expectations of Chinese workers are also rising. Witness the case, they say, of Midea, a home appliances manufacturer, that had to build extensive and costly housing and recreational facilities in order to induce workers to come back after their annual leave. The days of being simply the low-cost manufacturing centre of the world are numbered, it appears.
That’s the negative backdrop. On the plus side, China has invested in developing world class manufacturing and engineering capabilities, albeit for foreign brands and has laid a vast foundation to produce global-quality goods. It has vast economies of scale based on a huge domestic market. It just needs to get its head around international marketing.
“What’s more difficult, building engineering and manufacturing excellence or acquiring branding skills?” asks Kumar.
“As a marketing professor, I would suggest that it is easier to get the marketing and branding piece right. Those are skills you can buy. I believe there are some currently under-employed London ad agencies, for example, that might be able to help with that.”
Mind-sets have to change first, however. Up until now, Chinese companies, he notes, happily invest in manufacturing technologies but hesitate to plunge capital into global consumer branding. “They lack experience working with consumers in developed markets and using foreign media to build brands,” he says.
“Chinese entrepreneurs and executives prefer manufacturing, engineering, and finance – the hard sciences – over all the emotional branding stuff that seems fluffy, if not irrelevant to them.