To avoid price wars, firms move to offer differentiated brands abroad
Updated: 2012-12-28 13:48
While flashy TV commercials about Chinese brands are impossible to find outside China, the drumbeat exhorting Chinese companies to go global has been heard around the world for a long time.
In developing markets, Chinese brands such as Lenovo, ZTE, Huawei, Haier, Yutong Bus and Great Wall Motors are gaining traction and posing a direct threat to Western incumbents. In developed markets, a steady stream of Chinese brands is flowing onto the shelves of Costcos, Walmarts and other stores.
It is worth noting, though, that as Chinese brands export more overseas, they aren't placing their top priority on brand building. They are instead laying the foundation for sustained growth, sometimes by establishing sales channels or, more frequently, by acquiring well-developed but struggling global brands.
Not surprisingly, much of their advantage continues to come from their ability to offer lower prices, although they are at pains to avoid being labeled as cheap. Driven by pragmatism, most Chinese companies harbor little ambitions to challenge the top brands in their industry, but rather hope to become second-tier leaders.
In doing so, they are trying to avoid becoming embroiled in cutthroat price wars and are instead attempting to differentiate their brands from those of their close competitors - which also usually hail from China.
Meanwhile, another crop of Chinese companies has become the pet of international and Chinese media of late. Cash-rich, State-owned enterprises and leading private companies have been making headlines with cross-border mergers and acquisitions. But a noteworthy new trend in this game is that many Chinese players, having learned from previous well-known debacles, are now putting branding and public relations on their to-do lists.
We see progress. Emerging Chinese brands are showing a healthy and strong momentum. Yet, in the infancy of global brand building, Chinese companies still have much to learn and a long and winding road to travel if they are to achieve success.
Some advice for Chinese companies trying to go global:
Give people a reason to buy
Don't use the "Made in China" label as an excuse to avoid expanding overseas or to explain away overseas failures. More than 65 percent of overseas consumers are willing to consider Chinese brands, according to Millward Brown research. They may ask where a product is made, but what they really want to know is: "What benefits does the product offer? How will it enrich my life?"
Make use of online experience
Because of the size and prominence of e-commerce and social media in China, Chinese brands often have a lot of experience in communicating with consumers online. Overseas audiences will bring their own difficulties, but Chinese knowledge of online brand building should help them establish a presence in new markets.
Invest for the long term
Going global requires commitment and investment. Once you make the decision to expand overseas, don't be tentative. International expansion is a strategic decision, not a tactical step for topping up profits.
The author is the director of the China Practice at Ogilvy & Mather Worldwide.