Studies indicate that the percentage of U.S. or European consumers who could spontaneously recall major Chinese brands ranges from 2-7 percent. Yet more than 70 companies from China feature on the Global Fortune 500, a list of the largest global companies by revenue. Is there something about Chinese firms that precludes them from building global brands, or perhaps, Western consumers are resistant to Chinese brands?
Fairly or not, Western consumers associate Chinese products primarily with "low price." Branding is not merely about differentiating products; it is about striking emotional chords with consumers. It is about cultivating identity, attachment, and trust to inspire customer loyalty. Chinese brands score low on attributes such as "sophisticated," "desirable," "innovative," "friendly," and "trustworthy." In addition, none world's leading global brands has come from countries with political systems starkly different from that of the U.S. or from state-owned enterprises. In other words, Chinese brands must overcome the West's negative associations with "communism."
In our research (with Professor Jan-Benedict Steenkamp) we argue that, in the coming decade, Chinese brands will become increasingly global and present in the Western world. Our conviction is based on two fundamental observations. First, because of global sourcing, leading Chinese firms now have world-class manufacturing capabilities. Second, the traditional Chinese model based on low-cost labor is breaking down. Turning products into globally recognized consumer brands, supported by innovation and marketing has become the ultimate goal for many Chinese firms.
Haier, a Chinese brand, exemplifies the trend of emerging market companies building brands that are being accepted, if not recognized, by the Western consumer. Haier has sold more major appliances by retail volume than any other company and had $26 billion in sales in 2012, marketing products such as dishwashers, microwaves and washing machines in 165 countries. Last year, the company had one of the largest exhibition spaces at the Consumer Electronics Show in Las Vegas and has been an official sponsor of the National Basketball Association since 2006. It is an incredible turnaround for a company, which less than twenty years ago was a nearly bankrupt state-owned enterprise, and is now seeking to become one of the first brands that buyers in the developed world think of when purchasing their next fridge or big-screen HDTV.
Joining Haier are other Chinese brands such as Lenovo (the market share leader in personal computers), Pearl River Piano (15% unit share pianos globally), Galanz (world leader in microwaves), Huawei (major player in smartphones), TCL (television sets), Wanli (tires), and ZTE (mobile phones). Many of them have taken, or are taking, the traditional route to building brands out of Asia that was pioneered by the Japanese (e.g., Honda, Toyota) and subsequently followed by the Koreans (e.g., Hyundai, Samsung). This "Asian Tortoise" route starts by entering niche markets at a low price, and then slowly increasing quality and price over time.
In contrast to the Asian Tortoise strategy, other Chinese brands wish to develop as more than being simply cheaper alternatives, but by bringing something special to the market related to their Chinese origins. Expect to hear more from Chinese brands such as Shanghai Vive, Shanghai Tang, Herborist, and Kayersburg who are all pursuing this approach. Then there are some Chinese firms like Bright Foods (Weetabix), Geely (Volvo), and Nanjing Automobile (Rover) who have become impatient with the long process of building global brands and have decided to acquire Western global brands.
The path to becoming a global brand will not be an easy one. Chinese brands will face many obstacles when marketing to Western consumers. Beyond the associations with poor quality and unsound environmental practices, they generally do not have the marketing capabilities or budgets to build powerful global brands. And many do not as yet understand what Western consumers want in the brands they prefer. But consider Japan in the 1980s or South Korea in the 2000s, both have built global automobile and technology brands, much to the surprise of their Western competitors. In fact, to the best of our knowledge, there is no historical precedence of a major country becoming an economic power that has not also developed strong global brands.
Nirmalya Kumar is professor of marketing and director of the Aditya Birla India Centre at London Business School. His latest book is Brand Breakout: How Emerging Market Brands Will Go Global with Jan-Benedict Steenkamp.