Remaking 'Made in China' (August 2012)

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China’s brands haven’t yet made a notable impact on the global consumer market, but will that change in the near future? Before the country can develop a cohort of strong brands, its marketers will …

China’s brands haven’t yet made a notable impact on the global consumer market, but will that change in the near future? Before the country can develop a cohort of strong brands, its marketers will have to remake what “Made in China” means to consumers. A leading crop of Chinese brands are already chipping away at some of the key factors standing in the way of global success as China actively seeks to export more than just the rest of the world’s manufactured goods.

This report details the external and internal factors hindering the efforts of Chinese brands to take root in developed markets. It also details some of the strategies that prominent brands, from Lenovo and Li-Ning to Haier and Huawei, are deploying to knock down these roadblocks.

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  • 1. RemakingMade in China August 2012 Image credit: Jessica Vaughn
  • 2. WHAT WELL COVERMethodologyRemaking “Made in China” • IntroductionExternal Roadblocks to Expansion • “Made in China” = low quality • Safety is a key concern • Fake products fuel copycat image • Sustainability, labor also key concerns • Little differentiation between “Poorly manufactured in China” and “Branded in China” • Low awareness of Chinese brands • Adversarial political and economic relationshipInternal Roadblocks to Expansion • Corporate structure and management style • Lack of brand-building innovation • Lack of international experience • Failure to conquer home turfOvercoming the Roadblocks • Take back “Made in China” • Compete at a world-class level • Lean into national identity • Tap into the Millennial worldview • Drive innovation and lead categories • Ride on international brand coattails • Become a leader in CSRConclusion
  • 3. METHODOLOGYSONAR™All our trend reports are the result of quantitative, qualitative and desk researchconducted by JWTIntelligence throughout the year. Specifically for this report, weconducted on-the-ground research in Shanghai, Beijing and Hong Kong. We alsofielded a quantitative study in the U.S. and the U.K. using SONAR™, JWTsproprietary online tool, from May 31-June 4, 2012; we surveyed 503 Americans and503 Britons aged 18-plus.This report builds upon “Journey to the West,” a 2011 report researched and writtenby Pete Heskett, Southeast Asia area director for JWT.
  • 4. METHODOLOGY (contd.)INFLUENCERS AND EXPERTSIn addition, we interviewed four relevant experts and influencers.
  • 5. REMAKINGMADE IN CHINADuring much of the 20th century, China served as a manufacturing center forinternational brands, developing few of its own for export markets. Meanwhile,the moniker “Made in China” became synonymous with cheap, mass-produced,low-quality goods. Now, were seeing a new focus on developing strong brands thatcan hold their own both at home and on the world stage. Image credit: Jessica Vaughn
  • 6. REMAKING MADE IN CHINA (contd.)INTRODUCTIONIts a tall order, given that Chinese businesses have little experience developing thetype of brands that dominate on the global stage. Chinese brands have yet to gainenough status to earn a price premium over global counterparts. Not only that, butthey are still tainted by association with shoddy Chinese manufacturing. Consumersin developed markets are skeptical at best of Chinese products.Still, there is tremendous potential. Japan, Korea and Germany are among thenations whose brands have overcome hostile or skeptical consumer perceptions. Itwas once seen as down-market to “buy Japanese,” for example, but today fewshoppers consider “Made in Japan” a negative.And in our hyper-connected, globalized, fast-moving world, the journey fromnegative to positive perceptions can be significantly shorter than it once was.Millennials already have a very different image of China than the outdatedassociations that may linger among older consumers. And the youngest consumers,Gen Z, have only known China as a rapidly modernizing economic giant.
  • 7. REMAKING MADE IN CHINA (contd.)INTRODUCTION (contd.)China’s brands have seen an “explosion of value,” as BrandZ recently noted. Whilewe found very low awareness of Chinese brands among American and Britishconsumers, they may well already be customers of the leading crop of Chinese labels.Among them: Lenovo, which is expected to become the worlds largest PC manufacturer this year Huawei, which recently slipped past Ericsson to become the worlds largest telecom-equipment vendor and ranked among the worlds top three patent applicants in 2011 Haier, which currently holds the largest share of the global appliance market (close to 8% of the sector) Image credits: Lenovo; Huawei; Haier
  • 8. REMAKING MADE IN CHINA (contd.)INTRODUCTION (contd.)As China finds its footing as a superpower, some are forecasting that this will be the“Chinese Century,” not only because of political and economic power but alsobecause Chinas worldview and values will influence consumers worldwide (much asAmerican values and culture have). As perceptions of China align with this newstatus quo, and as its marketers find ways to knock down the obstacles to globalexpansion, expect some possibly formidable rivals to todays global consumer brands. Within the next 10 years, we are going to transition to a Chinese century…relative to an American benchmark. That means we are going to have Great Chinese brands, both commercial business Chinese brands as well as cultural brands, because thats what defined the U.S.” —JOSEPH BALADI, CEO of BrandAsian, author of The Brutal Truth About Asian Branding
  • 9. EXTERNAL ROADBLOCKSTO EXPANSION Image credit: Jessica Vaughn
  • 10. EXTERNAL ROADBLOCKS“MADE IN CHINA” = LOW QUALITYThough China is no longer the top spot for cheap manufacturing—its rising laborcosts have pushed many companies to shift their outsourcing to countries such asVietnam and Cambodia—decades of poorly manufactured products from China haveleft a scar on consumer perceptions. Comparing perceptions of “Made in China” with“Made in Japan” or “Made in the USA” points to a wide gap to be crossed by Chinesebrands. I am disappointed with items made in China Chinese are cunning at marketing and sold in the U.S.” products of very low quality but mass —Female, U.S., JWT SONAR™ produced even when they know the products are faulty.” —Male, U.K., JWT SONAR™ Its not really important to me where products I buy are made. Probably I own a lot of things that are made in China without realising it, but my impression, right or wrong, is its not good quality.” —Female, U.K., JWT SONAR™
  • 11. EXTERNAL ROADBLOCKS (contd.)“MADE IN CHINA” = LOW QUALITY (contd.)
  • 12. EXTERNAL ROADBLOCKS (contd.)SAFETY IS A KEY CONCERNWhile perceptions of Chinese-made goods as poor quality have persisted fordecades, questions about their safety have only built in recent years, bothdomestically and internationally.Large-scale recalls have made headlines worldwide. Mattel recalled 9 million toys,including Barbie and Polly Pocket dolls, in 2007 due to lead paint and magnets thatposed choking hazards; countries around the world banned Chinese milk productsafter recalls by several Chinese dairy companies in 2008; 54 high-speed trains,meant to symbolize Chinas sweeping modernization push, were recalled last year. I know not all Chinese products are bad, but in general I think China has very poor quality regulatory standards for products. Im not keen to try Chinese products until this improves.” —Male, U.K., JWT SONAR™ Image credit: Mattel
  • 13. EXTERNAL ROADBLOCKS (contd.)SAFETY IS A KEY CONCERN (contd.)Around 4 in 10 consumers (and morethan half of Americans) said theyhave low opinions of Chinese brandsbecause of recalls. And half ofrespondents agreed with thestatement “Chinese brands aren’tportrayed very well in thenews/media,” citing this as a keyreason for their low opinion ofChinese brands.
  • 14. EXTERNAL ROADBLOCKS (contd.)FAKE PRODUCTS FUEL COPYCAT IMAGEDistrust is also driven by news aboutan abundance of fakes: not simplycounterfeit handbags and watchesbut everything from plastic rice andchemically made eggs to forgeduniversity acceptance letters,imitation medicines and even achain of faux Apple stores soauthentic that even employeesbelieved they worked for theCalifornia company. Image credit: Jessica Vaughn
  • 15. EXTERNAL ROADBLOCKS (contd.)FAKE PRODUCTS FUEL COPYCAT IMAGE (contd.)
  • 16. EXTERNAL ROADBLOCKS (contd.)SUSTAINABILITY, LABOR ALSO KEY CONCERNS
  • 17. EXTERNAL ROADBLOCKS (contd.)LITTLE DIFFERENTIATION BETWEEN POORLY MANUFACTUREDIN CHINA AND BRANDED IN CHINAConsumers, most of whom haventpersonally had negative experienceswith Chinese brands, are simplycarrying over their negativeperceptions of Chinese-made ontoChinese-branded. When respondentswere asked to choose which phrasesthey associate with Chinese brands,the top three responses were “massproduced,” “cheap” and “poorsafety standards”—echoingconsumer sentiment around “Madein China.”
  • 18. EXTERNAL ROADBLOCKS (contd.)LITTLE DIFFERENTIATION BETWEEN POORLY MANUFACTUREDIN CHINA AND BRANDED IN CHINA (contd.)When respondents with poorperceptions of Chinese brands wereasked why they had such lowopinions, just over half agreed withthe statement, “I am not impressedwith products that are Made inChina and feel Chinese brandswould be a similar quality.”Only 28% of consumers with lowopinions of Chinese brands hadpersonally had bad experiences witha Chinese label.
  • 19. EXTERNAL ROADBLOCKS (contd.)LOW AWARENESS OF CHINESE BRANDSOur research found relatively low awareness of Chinese brands in both the U.S. andthe U.K. • When presented with a list of 40 heavyweight Chinese brands, a plurality of respondents (36%) had never heard of any of them. • Only a quarter were familiar with Lenovo, currently the worlds second largest computer manufacturer after HP. • The most recognized brand, Air China, didnt fare much better, with 28% of respondents recognizing the name. Image credit: twicepix
  • 20. EXTERNAL ROADBLOCKS (contd.)ADVERSARIAL POLITICAL AND ECONOMIC RELATIONSHIP With so much China-bashing going on, it seems hard for Chinese brands to deliver the message that they are not threatening, and come in profit-orientated goodwill.” —JENNY CHAN, “Chinas brands head West,” Campaign, April 2012 Image credit: Jessica Vaughn
  • 21. INTERNAL ROADBLOCKSTO EXPANSION Image credit: Jessica Vaughn
  • 22. INTERNAL ROADBLOCKS (contd.)CORPORATE STRUCTURE AND MANAGEMENT STYLEChief among the internal roadblocks to expansion is the hierarchical structure ofChinas companies, even among midsize, relatively new and innovative companies.The CEO reigns supreme, his or her authority and judgment never challenged orquestioned in Chinas corporate culture. Yang Yuanqing, CEO of Lenovo Ren Zhengfei, CEO of Huawei Image credits: Lenovo; Huawei
  • 23. INTERNAL ROADBLOCKS (contd.)CORPORATE STRUCTURE AND MANAGEMENT STYLE (contd.)This leads to a stifling of ideas and Whether its a family company or acommunication, especially from the multinational, the CEO is themost junior employees—who may be predominant voice in the company.the ones with experience working or Nobody questions the CEO. He isstudying in the West, where they omnipresent, omni-seeing; hes omni- powerful. So that creates an issue in terms ofpick up soft skills such as decision- internal communication… Right now in meetings youmaking and working in team have a silent group of Asians who arent willing to askenvironments. questions, arent willing to express themselves, because theyre not willing to expose themselves or take a risk in being wrong. So nobody talks.” —JOSEPH BALADI, CEO of BrandAsian, author of The Brutal Truth About Asian Branding
  • 24. INTERNAL ROADBLOCKS (contd.)CORPORATE STRUCTURE AND MANAGEMENT STYLE (contd.)A rigid corporate structure alsomeans that projects face manylayers of navigation before they canbe executed. Jenny Chan explainedin Campaign, “The culture of redtape and bureaucracy associatedwith the Middle Kingdom ispermeating through to how Chinesebrands behave.”By contrast, todays fast-moving,hyper-competitive world requirescompanies to operate as lean andnimble machines. Image credit: Jessica Vaughn
  • 25. INTERNAL ROADBLOCKS (contd.)LACK OF BRAND-BUILDING INNOVATIONThough China has seen a sharp increase in research and development spending,as well as an uptick in patent filings—two indicators typically used to measureinnovation efforts—most Chinese companies have yet to foster a culture ofinnovation that helps to build brand equity. One way of defining [innovation] would be as fresh thinking that creates value people will pay for. By that measure, China is no world-beater. Though its sweat produces many of the worlds goods, it is designers in Scandinavia and marketers in California who create and capture most of the value from those products.” —“From Brawn to Brain,” The Economist, March 10, 2012 Image credit: James Bowe
  • 26. INTERNAL ROADBLOCKS (contd.)LACK OF BRAND-BUILDING INNOVATION (contd.)Marketers put their innovation Competition in developed internationalefforts toward product and markets requires a price premium, rootedpackage design, and tend to in both value-added—not parity—productsexcel at development: creating or services and strong brand equity. Theincremental improvements to last can be acquired only gradually over time. In these respects, Chinese brands are stillexisting products and services disadvantaged, in many cases grievously so, and notand driving scale. just by a generic fear of anything Made in China.” —TOM DOCTOROFF, JWT North Asia area director and Greater China CEO, author of What Chinese Want Image credit: dcmaster
  • 27. INTERNAL ROADBLOCKS (contd.)LACK OF BRAND-BUILDING INNOVATION (contd.)As with big firms, the research community is characterized by respect for thecommand chain and senior-level positions; this tends to squelch those withnonconformist ideas, and theres not much funding for merit-based research. Image credit: DeclanTM
  • 28. INTERNAL ROADBLOCKS (contd.)LACK OF BRAND-BUILDING INNOVATION (contd.)Privately funded research may not face some of these issues, but companies thatarent state-run still have to battle poorly enforced IP and antitrust legislation.Plus, state-run banks favor “national champions” over lesser-known companies.Still, small to midsize private businesses have done a better job of fostering aculture of innovation, according to Doctoroff, but they lack the capabilities tomanage global expansion. It is a catch-22: Companies big enough to go global are the most encumbered by commoditized products and services. Companies that grasp advantages inherent in value-added products and services—that is, the ability to charge a premium—lack the critical mass to become global power brands.” —TOM DOCTOROFF, JWT North Asia area director and Greater China CEO, author of What Chinese Want
  • 29. INTERNAL ROADBLOCKS (contd.)LACK OF INTERNATIONAL EXPERIENCEAs with most novices, another issue is simply lack of experience—doing businessin China is typically very different from doing business in most other markets. Chinese companies, when they first go abroad, expect it to be a lot like expanding in China—they go talk to the party secretary or mayor first, make sure they are happy, and that paves the way for everything else. Americans and [others] typically dont roll out the official red carpet, and Chinese are not prepared for that.” —SCOTT KENNEDY, director of the Research Center for Chinese Politics & Business at Indiana University Bloomington, “A club in China to help entrepreneurs go overseas,” Reuters, June 29, 2012
  • 30. INTERNAL ROADBLOCKS (contd.)FAILURE TO CONQUER HOME TURFMiddle-class Chinese consumers distrust many local labels, and internationalbrands still carry aspirational attributes, as well as quality reassurance andreliable service. Image credit: Jessica Vaughn
  • 31. INTERNAL ROADBLOCKS (contd.) FAILURE TO CONQUER HOME TURF (contd.) If [international brands] can charge a 20% price premium here—where Chinese people When Western media report that should know the quality of Chinas middle class is snapping up Chinese brands—simply because theyre not Western goods, what they mean is Chinese, the battle abroad is prettythat the Chinese consumers who can afford to serious.”are spending extra to avoid counterfeits. That —TOM DOCTOROFF, JWT North Asia area director andis not consumers acting as brand advocates, or Greater China CEO, author of What Chinese Wantout of affinity—its fear purchasing. It says lessabout Western brands than about Chinaslandscape.” —ABE SAUER, “Chinese Are Fear-Buying, Not in Love With Western Brands,” Brandchannel, June 8, 2012
  • 32. INTERNAL ROADBLOCKS (contd.)FAILURE TO CONQUER HOME TURF (contd.) Hong Kong people have often looked to Western culture for inspiration, we emulate their lifestyle yet we can never convincingly pull it off as true Westerners. If there were more locally inspired alternatives that appeal to our young generations, they may adopt these choices without denying their true identity. Ownership of our culture endows us with a sense of authenticity. It is only in being confident of who we are that we can hold our heads up high on an international level.” —DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle brand Goods of Desire Image credit: Jessica Vaughn
  • 33. OVERCOMINGTHE ROADBLOCKS Image credit: Jessica Vaughn
  • 34. OVERCOMING THE ROADBLOCKS (contd.)TAKE BACK “MADE IN CHINA”Rather than be constrained by “Made in China,” some brands are working to takeback the label.These companies are tackling the negative stereotypes head-on rather thanskating around the fact that consumers may assume the Chinese-made productsare unoriginal or poorly constructed.Prominent sportswear brand Li-Ning welcomes visitors to its English-languagewebsite with the greeting, “Straight Out of New China. Be Unexpected. DoDifferent. Make the Change.”
  • 35. OVERCOMING THE ROADBLOCKS (contd.)TAKE BACK “MADE IN CHINA” (contd.) Image credit: Li-Ning
  • 36. OVERCOMING THE ROADBLOCKS (contd.)TAKE BACK “MADE IN CHINA” (contd.) “Proudly Made in China” is the slogan for One Small Point of Pride, or OSPOP, a budding footwear line dreamed up by an American entrepreneur living in Shanghai. People are working hard, education levels are rising, people are traveling more and enjoying more leisure time. Why shouldnt Chinas development story be the foundation of a fashion brand?” —BEN WALTERS, founder of OSPOP, “OSPOP: The shoe inspired by Chinas laborers comes home,” CNNGo.com, Feb. 24, 2011 Image credits: Jessica Vaughn; Ospop
  • 37. OVERCOMING THE ROADBLOCKS (contd.)TAKE BACK “MADE IN CHINA” (contd.) In 2009, the Ministry of Commerce kicked off an ad campaign that aimed to illustrate that Chinese-made products represent global collaborations, with various partners co- creating something of value for consumers everywhere. Image credit: adamimg
  • 38. OVERCOMING THE ROADBLOCKS (contd.)TAKE BACK “MADE IN CHINA” (contd.) Its true that unscrupulous people have tainted Chinas image. But as Chinese ourselves, we cannot deny who we are by pretending to be somebody else. We must bravely face the challenges. Im a believer in making a feature of our disadvantages instead of hiding our roots (which a lot of local brands do). We emphasize the fact that we are Chinese.” —DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle brand Goods of Desire
  • 39. OVERCOMING THE ROADBLOCKS (contd.)COMPETE AT A WORLD-CLASS LEVELUntil the “Made in China” burden is shed, brands emerging out of China will needto offer superior products that more than hold their own against globalbenchmarks of quality and design. The standards will be those of old Chineseculture, when only the best would do. Image credit: IvanWalsh.com
  • 40. OVERCOMING THE ROADBLOCKS (contd.) COMPETE AT A WORLD-CLASS LEVEL (contd.) Since 1993, upscale clothing label Marisfrolg has been designing its goods domestically and sourcing most of its fabrics from markets such as Italy, Japan and France. Chinese retailer Bosideng, is debuting near Londons central Oxford Street shopping area as a luxury label. [JNBY is] an example of how good JNBY, founded by a Chinese fabrication can be. The collective of art and design design is quite simple, yet avant students in 1994, has also made internationalgarde. Theyve made an excellent transition inroads—the companyfrom manufacturer to brand builder.” boasts 600 stores globally— by focusing on design and —LIN LIN, co-founder of design group innovation. Jellymon, “‘Made in China’ is finally cool,” CNNGo.com, Feb. 8, 2011 Image credits: Bosideng; JNBY; Marisfrolg
  • 41. OVERCOMING THE ROADBLOCKS (contd.) COMPETE AT A WORLD CLASS LEVEL (contd.) Glad to see that ChangYu can produce great white wines, red wines, sweet wines and brandies—all different products but all at a very high level. They compete very well with the French wines.” —PIERRE BARTHE, French sommelier, “Changyu holds wine tasting to mark 120th anniversary,” China Daily, June 29, 2012ChangYu wine—Chinas first winery, established 120 years ago—has emerged as one of the top 10 wine producers in the world.ChangYus Jiebaina dry red ranked as one of the worlds top 30wine brands during the 2008 Salon International delAlimentation, a food and drink expo in France. Image credit: ChangYu
  • 42. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITYWhile “Made in China” is a negative, “Chineseness” itself is in many ways apositive in the eyes of international consumers. Image credit: Dainis Matisons
  • 43. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)
  • 44. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)When asked about Chinese historyand heritage, 72% of respondentssaid they would be interested inlearning more about Chinascultural history; three-quarters ofrespondents said they admire theway Chinese people have beenable to maintain their sense oftradition in the modern world.And 6 in 10 felt that their culturecould learn a lot from the Chineseway of life.
  • 45. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)These spheres of positive perception have been largely overshadowed in recentdecades by the legacy of “Made in China” and the nations rocky relationship withthe West. For Chinese brands, then, theres an opportunity to trade on nationalidentity and drive a new conversation about “brand China,” focusing on culture,history and widespread perceptions of “Chineseness.” Image credit: Scazon
  • 46. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)At the same time, theres a nascent preservationist spirit in China—a desireto protect its heritage and culture, which a growing number of people seeas being sacrificed in the drive toward modernization and development.This recalibration of values after a period of relentless, rapid change comesas no surprise, given that Chinese society fears uncertainty and instabilityabove all. Bursts of growth are often followed by periods of stabilization. Image credit: ShamirFlinkazoid
  • 47. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)The mission of Hong Kong-based Goods of Desire, which sells everything fromfurniture to apparel and accessories, is to be “quintessentially Hong Kong” andpromote “a new Asian lifestyle brand by revitalizing local heritage.” I believe that global identity, national identity and individual identity can all coexist. Due to the big trend of globalization nowadays, there is a lot less focus in Asia on building regional identity. I hope G.O.D. can re-emphasize the importance of identity to our consumers. I think it is our unique identity that makes interaction on the global level a lot more interesting.” —DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle brand Goods of Desire Image credit: Goods of Desire
  • 48. OVERCOMING THE ROADBLOCKS (contd.) LEAN INTO NATIONAL IDENTITY (contd.)Chinese-born labels Huili (or Warrior) sneakers, established in the 1930s,has undergone design updates—albeit by European companies—and found In 2009, a limited-run redesign of heritagefavor among hip international audiences, who buy into the brands heritage. brand Shanghai Watch Co. sold out not only domestically but in trendy boutiques such as Colette in Paris and Kidrobot in New York. Image credits: Huili; Shanghai Watch Co.
  • 49. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)Blending the old with the new in away thats relevant for a modernconsumer is one potential route tosuccess for Chinese brands. And asChinese companies become moresavvy marketers, they will be ableto better tell the story of Chineseculture and heritage through theirproducts. Li-Ning tapped into thismindset with the U.S. release of its“Year of the Dragon Collection”earlier this year. Earlier this year Li-Ning produced four limited edition sneakers, dubbed the “Year of the Dragon Collection,” to coincide with the Chinese zodiac year by the same name. Image credit: facebook.com/liningusa
  • 50. OVERCOMING THE ROADBLOCKS (contd.)LEAN INTO NATIONAL IDENTITY (contd.)Just as nations such as Japan, Korea and even Germany have done, Chinesebrands looking to compete in international markets will need to turn“Chineseness” into a conceptual advantage rather than a perceptionalweakness—a turnaround that will rely on clever branding campaigns that play onconsumers more positive ideas about China. Image credits: Gill_Penney; ToGa Wanderings
  • 51. OVERCOMING THE ROADBLOCKS (contd.)TAP INTO THE MILLENNIAL WORLDVIEWChinese brands will likely findMillennials to be more receptivethan older generations. Comparedwith their predecessors, theseconsumers have grown up in amuch smaller, more connectedworld and been exposed to a widerarray of worldviews at a youngerage. And they know China as amodernizing, rapidly emergingmarket—a very different countryfrom the one that older consumersremember. Image credit: Wesley Fryer
  • 52. OVERCOMING THE ROADBLOCKS (contd.)TAP INTO THE MILLENNIAL WORLDVIEW (contd.)Millennials are slightly less biasedagainst the “Made in China” label.Compared with older generations,Millennials were the least likely toidentify Chinese brands as mass-produced, cheap and constructedusing poor safety standards.
  • 53. OVERCOMING THE ROADBLOCKS (contd.)TAP INTO THE MILLENNIAL WORLDVIEW (contd.)
  • 54. OVERCOMING THE ROADBLOCKS (contd.)TAP INTO THE MILLENNIAL WORLDVIEW (contd.) Chinese students outnumber any other international cohort in American universities. And some 90,000 Chinese students were attending British universities in October 2011. The cultural exchange goes both ways. Some estimates forecast that the number of international students in China, currently at a quarter-million, will double by 2020.Faced with a tough job market athome, some recent American and Some say there are 50 million people of all ages studyingEuropean college grads are Mandarin. The U.K. and Indian governments, amongrelocating to Asia. others, are working to boost the Mandarin curriculum in schools Image credits: Eric Nishio; Sewanee: The University of the South; London Permaculture
  • 55. OVERCOMING THE ROADBLOCKS (contd.)TAP INTO THE MILLENNIAL WORLDVIEW (contd.)Lenovos “For those who do” campaign positions the products as tools forthis go-getter generation to get things done. In one ad, reminiscent of the final scenes of Fight Club, a team of urban hackers passes along a Lenovo laptop theyre using to orchestrate a dazzling urban In select emerging markets Lenovo set up “The Do Network,” an light show. online forum where young people could submit community improvement ideas for a chance to win an opportunity to make their ideas reality. Image credit: Lenovo [1]; [2]
  • 56. OVERCOMING THE ROADBLOCKS (contd.)DRIVE INNOVATION AND LEAD CATEGORIESDeveloping a culture of innovation remains a major challenge for many Chinesecompanies, but China is starting to address this. Image credits: Seth1492; Wisegie
  • 57. OVERCOMING THE ROADBLOCKS (contd.)DRIVE INNOVATION AND LEAD CATEGORIES (contd.) DRIVE INNOVATION AND LEAD CATEGORIES We invest more than most others on R&D just to be able to go out there and consistently demonstrate the innovations and the quality 45% of executives believe China will and the product … to go the extra mile. We think its necessary, because become the next this will give the customers the peace of major innovation mind that we are committed to what we say center. were going to do.” —HOWIE LAU, VP of marketing and communications for Asia Pacific and Latin America at Lenovo
  • 58. OVERCOMING THE ROADBLOCKS (contd.) DRIVE INNOVATION AND LEAD CATEGORIES (contd.) On a mission to become one of the worlds top three smartphone providers by 2015, Huawei is pushing its Ascend D Quad (which it claims is “the worlds fastest smartphone”) in Western markets. Lenovo is set to release the IdeaPad Yoga, an ultra-thin device thats part tablet, part laptop: It features a keyboard that can be tucked behind the display, emulating an iPad.Haier recently unveiled two novel television prototypes: an ultra-thintransparent TV screen and Brain Wave, a TV that users can controlwith their mind. Image credits: Haier; Lenovo; Huawei
  • 59. OVERCOMING THE ROADBLOCKS (contd.)DRIVE INNOVATION AND LEAD CATEGORIES (contd.) Automaker BYD created a buzz at this years Beijing auto show by introducing a remote- controlled car, the F3 Plus. Image credit: BYD
  • 60. OVERCOMING THE ROADBLOCKS (contd.)RIDE ON INTERNATIONAL BRAND COATTAILS9Whether by acquisitions or simply via onetime partnerships, Chinese brandsstand to make valuable strides by aligning with brands that are already globalsensations or know how to steer through international waters. Image credit: Doug_Wertman
  • 61. OVERCOMING THE ROADBLOCKS (contd.)RIDE ON INTERNATIONAL BRAND COATTAILS (contd.)9 In 2009, after Starbucks tasked G.O.D. with designing a store in Central Hong Kong, co-founder Douglas Young modeled the space after a “bing sutt,” a midcentury-style Hong Kong food outpost where Western foods were first introduced. Image credit: god.com
  • 62. OVERCOMING THE ROADBLOCKS (contd.) RIDE ON INTERNATIONAL BRAND COATTAILS (contd.) 9 Chinese sportswear maker Anta made headlines in 2010 when it started sponsoring NBA superstar Kevin Garnett.This year, Li-Ning has been making prominent appearances at theLondon Olympics, its backing a number of international athletes. +Above, Jamaican sprinter Asafa Powell. Image credits: Miami Heat; anta.com; facebook.com/liningusa ; haieramerica
  • 63. OVERCOMING THE ROADBLOCKS (contd.)RIDE ON INTERNATIONAL BRAND COATTAILS (contd.)9 Meters/bonwe plans to expand internationally in the next three to five years, and has made two cameos in the Transformers movie franchise and tested out the gaming space, collaborating with the producers of World of Warcraft. Image credit: metersbonwe.com
  • 64. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSRWith consumers skeptical about the trustworthiness of Chinese companies anddubious about their green credentials, substantive corporate socialresponsibility initiatives would go a long way toward rebranding “Made inChina” among consumers. Image credit: photologue_np
  • 65. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.)Patriarchs by nature, Chinesecompanies will likely begin toadopt a “uniquely Chinese”version of CSR, thanks largelyto the governments focus onpromoting stability. Beijing ispushing for greater energyefficiency, for example,“because runaway pollution inChina means wasted lives, air,water, ecosystems andmoney—and wasted moneymeans fewer jobs and morepolitical instability,” as TheNew York Times ThomasFriedman explained in a 2010column. Image credit: Janie.Hernandez55
  • 66. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.)Currently the worlds topemitter of carbon dioxide,China has set a range ofpollution-reduction and otherenvironmental goals,including a 40-45% cut incarbon emissions by 2020 andan 11.4% increase in non-fossilfuel use by 2015 as part of anemphasis on “higher qualitygrowth.” Its an ambitioustarget, though, given thatChinas CO2 emissionsincreased in 2011. This is the haze of pollution over Beijing. Image credit: David Barrie
  • 67. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.)While Western companies havegradually come to understand thatmeasures designed to help theenvironment can also help thebottom line, this is something thatpragmatic Chinese leaders ingovernment and business may bequick to understand.Smart CSR policies are seen less asa matter of generating “warm andfuzzy” feelings and more as “theright thing to do, mostly because itwill be the thing that provides thebest return,” according to brandingconsultant Joseph Baladi. Image credit: NASA
  • 68. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.)Due in part to mandates that all state-owned institutions publish CSR reports by2012, reporting is on the rise. In the six years leading up to 2005, only 22 CSRreports were published in China, largely by multinationals; in 2010, there were703 reports, focusing on a diversity of content. Reporting begets moretransparency, which increases awareness of CSR activities among consumersand higher expectations, which in turn helps to drive more impactful CSRefforts. Image credit: Juhansonin
  • 69. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.)Perhaps the next generation of leaderswill drive more substantive change: In a2012 survey by Deloitte on Millennialattitudes toward business, Chinese youthstand out in their concern about the lackof commitment to sustainability amongbusiness leaders. More generally, Chinesecitizens rank the highest globally in termsof a desire to be in tune with nature,according to the GfK Roper ConsultingsValues Factbook. Image credit: state library and archives of Florida
  • 70. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.)Since a sense of collective responsibilityis an important aspect of Chinese culture,along with conformance to social norms,environmental concern could well start todrive consumer decisions. Plus, asgrowing numbers of Chinese see theirbasic needs met, theyre beginning todemand more of consumer goods andservices, not only in terms ofsustainability. Impatient with substandardproduct quality, food-safety violations,poor accountability for major misstepsand so on, they are less tolerant ofsecrecy and lack of transparency. Image credits: familymwr; Katie Tegtmeyer
  • 71. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.) Haiers global brand building has emphasized its environmental credentials Image credit: Haier
  • 72. OVERCOMING THE ROADBLOCKS (contd.)BECOME A LEADER IN CSR (contd.) Lenovo has some of the best green product ratings among PC manufacturers. Image credit: Lenovo
  • 73. CONCLUSIONThe journey to Western shores will undoubtedly be an arduous one for Chinesebrands. Weve seen some notable stumbles, such as sportswear maker Li-Ningclosing its only U.S. retail outlet, a 2-year-old store in Portland, Ore., in February.JWTs Tom Doctoroff believes that China as a nation will “cross the river byfeeling the stones” as it ascends to the global stage—“inching forward,occasionally overreaching but quickly correcting course.” Image credit: Dave Morrow
  • 74. CONCLUSION (contd.)Weve outlined some key strategies that Chinese brands might use to overcomethe roadblocks to expansion:• taking back “Made in China” rather than be constrained by the label;• competing at a world-class level, offering superior products;• leaning into national identity and turning “Chineseness” into an advantage;• tapping into the worldview of Millennials, a more open and globally connected generation;• driving innovation and leading categories;• riding on international coattails, aligning with popular global brands;• and becoming a leader in CSR.
  • 75. CONCLUSION (contd.)This list is by no means comprehensive, nor is there a one-size-fits-all equationfor successful expansion into developed markets. For the methodical andcautious Chinese, this need not be the first order of business anyway—a boomingdomestic market and lucrative developing markets represent tremendousopportunity. The lessons learned here will ultimately help brands move beyondthose markets. And as rising incomes create more discerning emerging marketconsumers, improved quality and safety standards are likely to follow. Thequestion is whether consumers will follow Chinese products up the value chain orveer toward established brands. Image credit: IvanWalsh.com
  • 76. CONCLUSION (contd.)If they can pioneer unique nichesfor themselves, Chinesecompanies wont need to gohead-to-head with successfulbrands. “Trickle-up innovation”is one area of potential: takinglow-cost products designed fordeveloping markets to penny-pinching consumers in developedmarkets. After all, the Chineseare masters of driving down costs. Image credit: epSos.de
  • 77. CONCLUSION (contd.)More generally, products will need to compete at or above a world-class level,given that consumers are carrying their negative perceptions of Chinese-made ontoChinese-created. Image credits: Angusf; Li-Ning
  • 78. CONCLUSION (contd.)That will come over time as Chinese companies hone their advertising andmarketing skills—keep in mind the industry in China is relatively young. Chinese areadept at studying the competitive advantages of other cultures and putting theminto practice in uniquely Chinese ways, a point Doctoroff makes. Savvy executiveswill watch and learn from many of todays dominant brands, mastering the bestpractices of branding. Image credit: travel2.0
  • 79. CONCLUSION (contd.)Chinese brands have an opportunity to tell a fresh story about China, emphasizingeverything consumers like and appreciate (its culture, its people) or easinganxieties tied to the Middle Kingdom. Image credits: Fransisco Diez; Stevendepolo
  • 80. CONCLUSION (contd.)The next generation of businessleaders may help acceleratechange in Chinas corporateworld. Millennials have grown upin a booming and interconnectedChina, and many are Western-educated, trained to think morecreatively. As a result, welllikely see a push-pull betweenthe Millennial mindset andprevailing cultural norms. Image credit: mobilechina2007
  • 81. CONCLUSION (contd.)The idea of Chinese brands is new to many consumers, but it wont be for long.From Bosidengs recent landing in central London to Haiers drive to produceAmerican-targeted goods (via an upcoming U.S.-based R&D center), more Chinesebrands are pushing into Western markets every day. At the end of the day, people are not buying national brands, and theyre not buying brands that have a certain provenance, they are buying great brands, and thats the most important thing.” —JOSEPH BALADI, CEO of BrandAsian, author of The Brutal Truth About Asian Branding
  • 82. THANK YOU
  • 83. THANK YOU