Lesson 10 | Growth: GOING GLOBAL
Chinese brand builders
pursue global growth
Opportunities cross categories and brand size
Although long active overseas, Chinese brands had been mostly the behind-the-scenes OEM suppliers of merchandise for Western brands in apparel, electrical devices, home appliances, and other product categories. Only one Chinese brand, China Mobile, appeared in the BrandZ™ Top 100 Most Valuable Global Brands in 2006. Fifteen Chinese brands appear in the current ranking.
The notion of “Made in China,” implying low price and quality, has evolved. More overseas consumers are open to the possibility of quality products being “Created in China.” Home electronics and other large technology-related brands drove the changing overseas perception of Chinese brands. This development, along with slower domestic growth has made overseas expansion a higher strategic imperative, even for mid-size Chinese companies.
The five Chinese brands most recognized overseas are Lenovo, Huawei, Alibaba, Xiaomi, and Hisense, according to a study Kantar conducted with the Chinese government. Other brands building overseas presence include: DJI (drones), ECOVACS and UBTECH (robotics), Haier (IoT ecosystem) and Midea (home appliances).
More recently, the Douyin short-video site operated by ByteDance gained popularity outside of China, branded as TikTok. The massive overseas expansion of TikTok reflects acceptance by young people whose interests in entertainment and gaming are similar across nationalities. This group also drove the popularity of online games from Tencent and other Chinese brands.
The experience of these brands indicates that overseas expansion through acquisition or organic growth are both viable, and the preferred alternative varies according to product category and target. Haier has expanded in North America and Europe with acquisitions. Xiaomi and other brands have grown organically across many country markets.
Among the critical requirements for overseas expansion are deep insight into the local market matched with nimble organizations staffed with local people, according to Ogilvy China. Clever marketing is also vital. To become the world-leading drone supplier, DJI created an affinity community by featuring user-created drone videos on the DJI Instagram site.
In addition, going abroad does not necessarily mean going global, as many brands establish their presence in Southeast Asia or other markets that are closer to China geographically and culturally. The presence of more Chinese brands abroad is improving the consumer perception of Chinese product quality, which will create new challenges for local and global competitors.
Brand Building for Future Growth
Takeaways | Going Global
- Assert a purpose
Know not only why going abroad serves the brand, but also how the brand will serve the new communities it enters. Achieving this goal requires first understanding how the brand adds value to the lives of consumers in China, and then transferring that understanding in ways that are meaningfully different in each of the brand’s new country markets. The Chinese style of growth-on-the-run is poorly suited for this task. Trial and error can work, but it would be much more costly in time and money than preliminary planning with reliable research and analysis based on global knowledge.
- Tell the best story
The basic brand story, like the basic brand purpose, will not change from market to market. But it must become inflected in ways that meet the expectations and sensibilities of people in each new market. In some categories, such as gaming and sometimes technology, Chinese provenance will add appeal, especially among young consumers who increasingly equate Chinese origin with innovation. In other categories the term “Made in China” may still linger with negative connotations, particularly among older consumers. In these instances, it could be better to emphasize the brand’s global stature. Transparency rules. The story must be honest. It must connect with consumers emotionally and convey why, given the range of options that already exist in the market, this new entry is worthy of consideration.
- Invest in the brand
Brands going abroad have two choices: either invest in sales activation, market-by-market, introducing the brand as an unknown entity, again and again building business from scratch; or invest in brand building and develop business on a sturdy platform of growing brand recognition and equity. Either way, brands need to invest, but the ROI will be greater when money is spent on a balance of brand building and activation activities. One way to optimize ROI is to work with communication partners that can create both strategies that align across countries and tactics that are customized for each market.
- Leverage Chinese strengths
Some of the traditional strengths of Chinese brands can work abroad. These strengths include being innovative and entrepreneurial in ways that exhibit both vision and practicality. Speed and flexibility can also be useful, especially in markets where local competitors introduce new product iterations at a slower pace. When these strengths are adapted for local market conditions and executed well, they can yield competitive advantage.
- Seek media expertise
Chinese brands enjoy a potential advantage going abroad. Every media market in the world is simpler than China’s. But every media market in the world is different from China’s. For Chinese brands, the key to success with overseas media is finding the best way to match the brand’s Chinese media program with the most effective mix of Western media. Again, trial and error may work. If the goal is to reach new customers and sell them new products and services as quickly as possible, however, the most effective approach is to rely on experts with experience across multiple country markets.