Can Chinese Firms Build Globally Competitive Brands?
This is the first in a three-part series of posts that summarize key takeaways from my recent trip to Europe where I spoke about topics from my new book, China Goes West: Everything You Need to Know About Chinese Companies Going Global. One of the highlights was the Hamburg Summit, a large-scale China-EU conference held in Germany that brought together 600 senior-level attendees across business, government, and academia. The organizers invited me to speak on a panel about Chinese firms’ ability to build globally competitive brands.
Often times when I speak about this topic, I borrow a joke from China public relations veteran David Wolf to help set the stage:
For many Chinese firms, ‘branding’ means designing a new logo, ‘marketing’ is the equivalent of purchasing ads on China Central Television (CCTV), and ‘P.R.’ does not stand for ‘public relations’ but rather ‘pay the reporter.’
While it is certainly a generalization, the joke does help illustrate how, for many Chinese companies, marketing is still considered to be an expendable expense. Rather than a series of strategic activities that strike the right balance between driving short-term sales today while building a brand that’s a long-term strategic asset for the future, it is all too often focused on the next product launch. This is in part due to the fact that China’s business environment has historically rewarded a singular focus on short-term sales without needing to concentrate on the intangible aspects of branding and marketing. The result is a series of firms that are very large – 95 companies on the Fortune Global 500 ranking originate from China – yet relatively unknown outside of China. But this is changing.
A strong brand is no longer a ‘nice to have’ but a ‘need to have’ in order to remain competitive in the current cutthroat Chinese business environment. In my book, I dedicate an entire chapter to Chinese firms building globally competitive brands, either through their own efforts or by acquiring long-established brand names from the West. Given that building a brand from scratch can take years and millions of dollars in investment, many Chinese firms view brand acquisitions – like ThinkPad, Volvo, Weetabix, and Ferretti – as an ideal path to increasing their competitiveness within China while expanding their business into international markets for the first time.
Over the long term, I am optimistic that Chinese firms will build global brands through their own efforts. The boom in Chinese individuals going West today (explosive growth in outbound tourism and study abroad) will naturally lead to more globally-minded executives at the helm of Chinese firms who understand the value of investing in brands. We are already seeing examples across ‘younger industries’ like biotech, Internet, and consumer electronics. Alibaba’s founder Jack Ma is a great example.
So how was my joke received in Hamburg? First, I was surprised to find that my co-panelist, who runs a large Chinese consumer goods company, remarked that her firm had just purchased advertisements on CCTV last month. Even more interesting, though, was that the attendees who laughed the loudest at the “P.R.” part of the joke were the Chinese journalists who stood in the back of the room covering the event, leading me to think that there could be more truth to the joke than I had originally thought.
Come back next week to find out why Chinese companies want to expand internationally even though the domestic market is so large. Or feel free to leave a comment and share your views on Chinese companies building global brands.