Chinese brands command bigger influence

Updated: 2015-06-05 06:01

By Mike Bastin(China Daily Europe)

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Consumers in China are now thinking more rationally - and not automatically western names - as they choose

It is that time of year again, when the annual BrandZ report on the most valuable global brands is published. The highlights this year are not too dissimilar to those of previous years: The rise of Chinese brands globally and the impressive purchasing power of Chinese consumers.

Both of these represent great news for European brands, with whom increasingly competitive Chinese brands are seeking to form alliances to continue to expand internationally. At the same time, alliances with Chinese brands will enable European brands to penetrate the Chinese market and cash in on the purchasing power of Chinese consumers.

Chinese brands command bigger influence

Specifically, BrandZ 2015 places 14 Chinese brands in the world's top 100 most valuable brands. Ten years ago, only one Chinese brand made the top 100.

This international expansion is all the more spectacular for the following BrandZ findings: 25 percent of this year's top risers are Chinese brands, and three of this year's seven new entrants are Chinese brands. The newcomers perhaps exemplify the rapid rise internationally of Chinese brands, as well as the changing nature of the Chinese economy, away from low-cost manufacturing and heavy industry to technology and innovation-focused privately-owned brands.

Highest-ranked of this year's new entrants is Alibaba, which splashes in at 13th, two places behind Tencent, the highest ranked Chinese brand overall. Tencent, whose many offerings include the social messaging app WeChat and a range of e-commerce services and multiplayer online games, and Alibaba, China's e-commerce behemoth that raised $21.8 billion at its New York initial public offering late last year, are prime examples that typify the new, emerging Chinese economy in which private companies with modern, market-oriented business models are increasingly dominant.

Huawei and China Telecom, another two Chinese brands that have entered the top 100 for the first time this year, ranked 70th and 99th respectively, provide further, demonstrable proof of a sizeable shift toward technology and entrepreneurship across Chinese industry.

In particular, Huawei, a leading multinational networking and telecommunications equipment company whose headquarters are in Shenzhen, has expanded most impressively internationally. In 2012, for example, Huawei overtook Ericsson to become the largest telecoms equipment manufacturer in the world, and now sells products and services in more than 140 countries worldwide.

Of particular note to European firms should be Huawei's international expansion strategy, which is based solidly on long-term alliances. Huawei serves 45 of the world's 50 largest telecoms operators.

Huawei is the second highest-ranked newcomer, behind Alibaba.

Chinese brands command bigger influence

Among China's now numerous technology companies that have achieved international success recently is Baidu, the Internet search engine, which has been listed on Nasdaq for several years. BrandZ 2015 ranks Baidu as the 21st most valuable brand in the world, up four places on last year, with a 35 percent increase in brand value year-on-year.

Baidu's international expansion activities appear to be behind its recent brand value increase. European potential partners should be aware of the now global vision at Baidu and many Chinese companies. Baidu's takeover late last year of Brazilian company Peixe Urbano, the Brazilian equivalent of Groupon, exemplifies its global expansion strategy.

Chinese brands are also leading the way compared with other fast-growing regions and countries. Only one of the highest-valued Asian brands is not Chinese, and only seven other Asian brands find themselves in the world's most valuable 100, alongside 14 Chinese brands.

Furthermore, despite China's recent economic slowdown, its brands contribute eight of the top 10 ranked Asian brands, the other two being Samsung (6th) and Toyota (8th).

BrandZ also reports on the growth of brands across emerging nations such as Brazil, Russia, India and China (along with South Africa they make up the BRICS bloc), the four countries often cited as the new engine of global economic growth. China and its brands also shine brightly here. None of the top Brazilian brands have made it into the BrandZ 2015 top 100.

BrandZ 2015 provides a separate section on the BRICS in which it is made clear that Russian brands remain relatively weak compared with Chinese competitors, and even Indian brands have struggled to grow internationally. No Indian or Russian brands appear in the top 100.

This year's BrandZ report cites the robust purchasing power of Chinese consumers as one of the key drivers of brand value growth, despite the relative slowdown in the Chinese economy. Combined with the increased competitiveness of Chinese brands, this provides huge opportunities for European brands and their penetration plans for the Chinese market.

BrandZ 2015 also researched perceptions of "Made in China" and "Brand China", looking at the image associated with China-made products and Chinese brands around the world. It found that North American and Western European consumers' perceptions of Chinese brands have changed markedly in recent years. In particular, technology brands are no longer tainted with the low-cost, low-quality image that had dogged many Chinese companies for many years.

However, it is also important for many British and European brand producers to take note of the BrandZ 2015 findings on changes in the behavior of Chinese consumers. Consistent with my research in recent years, BrandZ reveals that Western brands have lost their mystique and the automatic allure they once commanded in the minds of many Chinese consumers. Improved competitiveness among many Chinese brands has contributed to the typical Chinese consumer now taking longer and thinking more rationally over many brand choices. Western brands such as Chanel and other previously invincible brands are no longer perceived as automatically superior.

BrandZ also reports that Chinese consumers, via careful consideration of the Chinese Dream, now engage and identify more with brands that build an image in the consumers' minds based on Chinese brand associations.

As a result, BrandZ 2015 is perhaps pointing more and more to the need for more Sino-European brand tie-ups, where a symbiotic relationship should help both partners penetrate each other's geographic market.

Above all, BrandZ 2015 forecasts the continued international rise of Chinese brands as well as the growing importance of Chinese consumers' purchasing power.

The message to European brand producers, therefore, is clear: Identify a suitable Chinese brand partner and consider a Chinese image for the Chinese market.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer at Southampton University. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 06/05/2015 page11)