Most Chinese brands, despite having relative successes?in the global arena, are not known by overseas consumers. In fact, Millward Brown’s 2011 Going Global Study revealed that 83 percent of consumers outside of China could not name a Chinese brand. This could soon change drastically. In the first quarter of 2013, the share of overall investment of overseas mergers and acquisitions by Privately Owned Enterprises (POEs) was 55.8 percent, surpassing that of State Owned Enterprises (SOEs) for the first time.
When Chinese SOEs go global, they are often seen as potential national security threats to host countries and are met with political resistance. In comparison, POEs are given more leeway and can avoid some of the political pitfalls. Therefore, when POEs start going global en mass, they will pick up speed a lot faster.
According to the Chinese Ministry of Commerce, outward foreign direct investments by Chinese companies will likely rise by 15 percent annually through 2020.
In order for Chinese brands to succeed in international markets, both “Brand China” and individual Chinese brands have to cultivate stellar images. There is an interaction between the two, with each complementing the other. Overseas consumers, who are not familiar with a country’s brands/ products, tend to infer quality from the country’s image.
Consumers are willing to pay more for products from countries that they perceive favorably or as having the expertise to produce those products. Typical examples are perfume from France and timepieces from Switzerland. The nation brand operates like a halo and can have a powerful effect on how consumers evaluate its brands/ products in foreign markets.?To this end, China is putting in much effort to change the world’s perception. The "Experience China" advertising debut in New York City’s Times Square in 2011, the hosting of the Beijing Olympic Games in 2008 and the Shanghai World Expo in 2010, are all efforts to build up “Brand China” in the international marketplace.
Conversely, corporate/product brands also contribute to and affect the image of the nation brand. The quality of the products and services provided by these brands affects how foreign publics perceive?the nation brand itself and other corporate/product brands from the nation. Once a good number of brands/products from a country are introduced into a foreign market and consumers have repeated interactions with them, consumers will abstract their quality and use this understanding as a summary construct to evaluate other brands/ products from the same country. This was what happened to “Brand Japan” and Japanese brands in?the 1970s and 1980s. When brands such as Sony, Toyota and NEC grew to be reputable international brands, they made consumers worldwide reconsider their stereotype of Japan as a defeated nation after the Second World War and a maker of inexpensive and low quality products.
The changing image of “Brand China” and Chinese brands
The successes of Chinese pillar brands, such as Huawei, Lenovo, Haier and Hisense are slowly changing the image of “Brand China” in the minds of international consumers, a trend that will accelerate as more POEs go global. Furthermore, Chinese brands are no longer just in the low end of the value chain. They are increasingly a force to be reckoned with in high-value sectors that western corporations dominated in the past.
One example is clean energy. China is making steady progress toward becoming become the world’s largest solar power generating country. Chinese luxury brands are also going abroad. Bosideng moved into the premium end of fashion and opened a flagship store in the exclusive Mayfair neighborhood of London right before the opening of the London Olympic Games. ShangXia, albeit a sub-brand of Hermes, is born and bred in China and opened a store in Paris in September 2013.
E-commerce and digital media have opened the floodgate for a new generation of “born global” entrepreneurs. Xiaomi mobile phone was founded in 2011 and?is positioned as the Apple for less developed countries. It sells via its own website and social networking sites. Tyvek Light Wing shoes, made out of paper by UT.LAB, achieved its funding goal 21 hours after launching its concept on kickstarter.com.
The company is at the vanguard of Chinese global start-ups. “Brand China” and Chinese brands are poised to take the global?stage by storm. Whereas in the past, Chinese brands relied on “Brand China” to act as a halo, nowadays individual Chinese brands are building up their own brand awareness and brand image internationally. They were just a cacophony before, but with all the activities building up to a critical mass, they will come together in a symphony sooner or later. If they get more inspired direction by the government, big corporations or trade associations and apply some of the best practices in international branding, we will see more Chinese brands making it into the BrandZ™ Top 100 Most Valuable Global Brands ranking in the near future.
Theresa LooNational Training Director Ogilvy & Mather China
Jane LiuResearch Manager,?Analytics & Insight MEC China
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