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China 2015: THOUGHT LEADERSHIP | Chinese Dream

David Roth

CEO
The Store WPP EMEA and Asia 

david.roth@wpp.com 

Chinese culture shapes brand building approaches


The BrandZTM Top 100 Most Valuable Global Brands 2015 increased 22 percent in value to $464.3 billion.

Tencent, the Internet portal, almost doubled in brand value year-on-year and achieved the number one rank, displacing China Mobile, which had held that position since the inception of the BrandZTM China ranking in 2011.

On the strength of its Initial Public Offering (IPO), which raised a record $25 billion, Alibaba entered the BrandZTM China ranking for the first time, at the number two spot just below Tencent. 

While demonstrating the power of these two particular brands, Tencent and Alibaba, these achievements also reflect several larger trends: the shift in brand value growth to market-driven brands and away from SOEs (State Owned Enterprises); the emerging presence of China brands in the global marketplace; and the influence of technology, a category that by itself accounted for almost a quarter of the Top 100 brand value.

These trends unfolded in a rebalancing China where the economic growth rate of around 7.4 percent remains robust relative to most other national economies, but half of what it was during years when China’s economic expansion was at its peak.

Of the 21 product and service categories examined in this report, 12 rose in value, seven declined and two remained the same, in part because economic reforms from the Third Plenary at the end of 2013 propelled some sectors and slowed others.

Retail and technology, categories comprised primarily of market- driven brands, grew sharply. Banks and alcohol declined as government regulatory changes impacted both categories, which are predominately driven by SOEs.

The BrandZTM China 2015 ranking marks the fifth anniversary of this report, which started by tracking the Top 50 brands, expanding to the Top 100 in 2014 to keep pace with rapid brand development in China. 

The five-year history puts current results into a meaningful context. The conclusion is unequivocal: Even as China’s growth slowed and economic policies evolved, brand value appreciated steadily.

Between 2011 and 2015, the overall brand value of the BrandZTM China Top 50 improved 59 percent, surpassing the

brand value growth rate for the BrandZTM Top 100 Most Valuable Global Brands, and far exceeding the performance of BrandZTM Top 50 Brazil and Latam rankings.

THE ROLE OF BRANDS

The role brands in China evolved over time. Deng Xiaoping’s market “opening up” in 1978 unleashed 35 years of dramatic economic growth driven primarily by powerful SOEs. The Third Plenary Session under President Xi Jinping created conditions for more market competition among all brands, even SOEs, in virtually every category.

President Xi framed the possibilities as the Chinese Dream, the notion that the nation collectively, and individual citizens, can achieve equitable, sustained prosperity in a modern China informed by the values and teachings of its 5,000-year-old civilization.

Both Chinese and multinational brands can play a role helping China, and its people, realize the Chinese Dream, by providing quality and safe products and services that improve the lives of individual consumers and help drive economic growth. Brand success requires understanding the historical context that shapes China today.

The past 35 years of economic growth, when Chinese brands acted as the world’s factory, reenergized the nation. China is now experiencing a period of national rejuvenation, reclaiming a heritage of product innovation and cultural originality that prevailed before the onslaught of western imperialism and the decline of the Manchu Dynasty in the nineteenth century.

Today’s China, both proud of its past and also willing to look outward for ideas, recalls the period of the silk road when China was a vast and well organized society engaged with the world as a valued trading partner. 

CHINESE BRAND BUILDING CHARACTERISTICS

In this contemporary context, China is open for building valuable brands. And brand building in China is influenced both by western practices and the characteristics of Chinese business operations and management. (See the WPP book, The Thoughts of Chairmen Now, www. thethoughtsofchairmennow.com)

Managing on the run Chinese companies adapt rapidly and take risks. Their flexibility may be shaped in part by a worldview. The western conception of time is linear. The world begins with creation. In eastern thought

time moves circularly without beginning or end. Chinese companies look at year-on-year growth with an underlying sense of pragmatism, a willingness to take risks to find approaches that work. Brand extensions and other market adaptation can happen swiftly.

Entrepreneurial and collaborative

In the conventional wisdom, Chinese companies are labyrinths of holding companies and subsidiaries where complication and bureaucracy impede action. The important counterpoint to this perception is that China is fundamentally entrepreneurial, a nation of family businesses. The collaboration necessary for brand building happens more organically in China than in the hierarchical and siloed organizational structures that have characterized western businesses.

Connecting with consumers

Chinese brands often originate and develop in lower tier markets before expanding to major cities. In contrast, multinational brands typically first establish in Beijing, Shanghai or Guangzhou before venturing more deeply intoChina. Therefore, Chinese brands are more likely to spend their formative years serving customers who are more concerned with product efficacy than image. Chinese brands understand how to meet the aspirations of this large group of consumers. At the same time, Chinese brands remain less adept at building emotional connections with customers.

BRANDS AND SOCIETY

Even more fundamental than the brand building practices of Chinese brands, the definition of brand success differs somewhat in China. Like western brands, Chinese brands aim to make a profit and reward shareholders. But success in China also has a communal aspect. A successful Chinese brand wants to be seen by consumers as helping the Chinese people and contributing to the welfare of nation. 

This notion is similar to CSR (Corporate Social Responsibility) but different and deeper. In the West, even brands where CSR is most evolved, so that it’s connected to a brand’s essence and not simply a marketing tactic, the object of the social responsibility varies. A brand might affiliate with a particular charity or cause, for example. In China, the brand commitment is more likely to be about in some way making China better.

As Chinese consumers gain more experience with brands, attitudes are changing. With more brands to choose from, choosing is not only about status. Brand is also a marker of quality or safety. Younger people look to brands as an aspect of identity, which involves inward reflection, not just outward display.

Brand has become a symbol of lifestyle as well, especially in tier one markets. Similar to the West, there’s a desire to realize personal aspirations quickly, and not postpone gratification.

Government policies in a rebalancing China encourage these aspirations, but attempt to shape them in ways that are consistent with the values of Chinese culture derived from Confucius and other Chinese philosophers. Honestly gained wealth is fine. Corruption is not. This approach aims for both sustained economic growth and social stability. 

THE CHINESE DREAM AND BRAND CHINA 

The unique characteristics of the Chinese market helped drive the growth of brand value leaders such as Baidu, Alibaba and Tencent. The incubation period these brands enjoyed without exposure to western competitors – Google, Amazon, Facebook and Twitter – provided undeniable advantage. But it doesn’t completely explain their extraordinary development. Other factors were at work.

Reasons that help explain the success of these Chinese brands include native talent, vision, and operational skill. Even in the 1980s, Chinese individuals studied abroad to become IT experts and to develop their entrepreneurial instincts. And the Chinese technology leaders bring vision, speed and the ability to create collaborative work environments.

In addition, sociological factors and ironies drove faster adoption of the Internet. Chinese youth, like young people everywhere, search for identity. But in the family-centered culture of China, most conducted a search without the benefit of siblings, because of the country’s one-child policy. Brands in a country with limits on self-expression built the world’s largest networks of interpersonal communications.

The government enabled this Internet expansion to happen with the speed and coordination possible in state-directed economy. This interdependence of what’s good for the individual with what also serves the welfare of the country is consistent with the Chinese Dream.

The dreams of the Chinese people, like the dreams of people everywhere, are about health and prosperity for self and family. The national dream includes some of these aspirations but also other goals. While personal and national priorities are not always aligned, they are achieved collaboratively. (See the BrandZTM report, The ower and Potential of the Chinese Dream, www.brandz.com)

The fulfillment of the Chinese Dream influences the evolution of Brand China, the public perception of Chinese products and services. And the strengthening of Brand China will help accelerate fulfillment of the Chinese Dream.

Brands like Gree and Haier, well-known home appliance manufacturers in China, enjoy worldwide presence as suppliers to western brand marketers and are marketing more aggressively abroad under their own brands.

Still, the most famous Chinese brand outside of China, Alibaba,

is best known to international consumers more for its record IPO than its products and services. As that changes, Alibaba, and brands that follow its example, will help fulfill the Chinese Dream and lift the perception of Brand China. 

For more about the Chinese Dream and Brand China, refer to these WPP publications:

The Thoughts of Chairmen Now
Written by David Roth, WPP and
Jon Geldart, Grant Thornton International Book available on Amazon www.thethoughtsofchairmennow.com App for iOS and Android

The Power and Potential of the Chinese Dream

Available here www.brandz.com/china