China’s global brand hurdle

There will be a lot more than gold medals at stake when Beijing hosts the Olympic Games later this year. For 16 days in August, the eyes of the world will be focused on the Far East, presenting Chinese brands with the ultimate shop window in which to kick-start the process of becoming global players.

A host of Chinese companies have announced their intentions to expand internationally, buoyed by the success of Japanese and, more recently, Korean brands in Western markets. But following in the footsteps of Sony, Toyota and Samsung will be no easy task, particularly following the spate of “made-in-China” product recalls last summer.

The latest brand to plot an assault on Europe is Landwind, which will be the first Chinese car marque to launch in the UK when it goes on sale later this year. The company is poised to appoint Spirit Advertising and Media Planning Group to handle its pan-European advertising and media planning and buying accounts (MW last week) after a pitch that has lasted almost a year.

China overtook Japan in 2006 to become the second-biggest carmaker in the world, with 7.2 million units, and looks set to trump the US market’s annual 16.5 million sales by 2020, if not before. But, despite Nanjing Automobile Corporation – which is merging with rival Shanghai Automotive Industry Corporation in a bid to become a global force – grabbing the headlines for buying MG in 2005, Chinese car brands have so far failed to make a major impact in Europe.

Landwind tried to launch in Europe in 2005, but failed testing when one of its vehicles decapitated a crash-test dummy. Sources close to the company say its testing has been “meticulous” this time around to allay fears over safety.

Landwind is expected to massively undercut its western rivals with a 4×4 called the X-pedition and a mini MPV called Fashion. While some industry experts point out that even the now-mighty Toyota initially established itself abroad by selling cheap cars, Corporate Edge chairman Chris Wood doubts the relevance of a value proposition in today’s market.

“Back then there were people who wanted cheap new cars, rather than second-hand cars,” he says. “But I’m not sure the old downmarket audience still exists. Landwind cars will be well below the standards of their European rivals and I’m not sure who their market will be in 2008.”

Beyond the automotive sector, China has had more success exporting its brands overseas.

Computer manufacturer Lenovo bought IBM’s PC division in 2005 and is now the third-largest PC manufacturer in the world, while Tsingtao beer has built on its popularity in Chinese restaurants to become the number one branded consumer product exported from China.

However, recent product scandals, which saw Mattel recall millions of toys because of potentially dangerous levels of lead paint in products made in China, continue to have repercussions. Interbrand found, in a recent study, that a significant number of consumers would be put off buying Chinese products as a result.

But Interbrand Asia-Pacific strategy director Jonathan Chajet says: “If there is a real price difference, people will take note. When China’s competitive advantage becomes more prominent, people will overcome the ‘made-in-China’ label. But what will be the competitive advantage that they can charge a premium for? You don’t think of China as being particularly good at innovation [like Japan] or design [ like Korea].”

Chajet believes the reputation of a brand’s home country is important. He points out that France is known for luxury goods, Germany for engineering and Japan for innovation. “People tend to have certain associations with countries,” adds Chajet. “The key thing for Chinese brands to think about is what China is bringing to the world. The Olympics will be the chance for China to tell the world its story and it’s immensely important for Chinese brands.”Spirit founder and managing partner Richard Hammond thinks it is imperative that Chinese companies manage their brands properly. “China has a great history – 5,000 years of philosophy,” he says. “The Chinese are inventors of many things, yet they never talk to the world about them. They have been at the forefront of a lot of innovation – as much as the Japanese. But they need to move out of the shadows and communicate their business values and ethics in the same way brands from the US and Europe do.”

With a domestic market of 1.3 billion people, some question why Chinese brands are so keen to expand overseas. Part of the reason is pride – a desire for international recognition – as well as being able to charge higher prices in western markets. Until now, the cultural differences have proved to be something of a barrier, but, with the Olympics just around the corner, 2008 could be the year that Chinese brands finally go global.

Five Chinese brands to watch
Lenovo was founded as Legend in 1984 and introduced PCs to Chinese homes. It rebranded as Lenovo in 2003, taking the “Le” from its original name and adding “novo”, the Latin word for “new”. Lenovo bought IBM’s personal computing division for $1.75bn (£890m) in May 2005, creating a computing giant with annual revenues of $13bn (£6.64bn). The company, the world’s third-largest PC maker, employs more than 19,000 people worldwide.

Chery Automobile is China’s fourth-largest carmaker and exported 119,800 vehicles in 2007, an increase of 132% on the previous year. The company claims to have been China’s leading car manufacturer by export volume for the past five years, with overseas sales already accounting for one third of its total. Chery predicts it will export more than 200,000 vehicles this year on the back of tie-ups with companies including Chrysler and Fiat.

The Tsingtao Brewery was founded in 1903 by German settlers in Qingdao, China. Tsingtao, which is the 12th largest beer brand in the world, is sold in more than 50 countries and accounts for over 50% of China’s total beer exports. It is the number one branded consumer product exported from China.

Huawei Technologies is a telecoms equipment manufacturer that makes phones for 31 of the world’s top 50 operators. It has more than 65,000 employees worldwide – 48% of whom are dedicated to R&D. Huawei’s products are used by 1 billion people in more than 100 countries. Huawei is in the process of trying to buy a stake in US rival 3Com.

Haier was founded in Qingdao in 1984 and is now the world’s fourth-largest white goods manufacturer. It has 240 subsidiary companies and more than 50,000 employees around the world. Haier, which produces everything from fridges and washing machines to TVs and mobiles, was ranked 86th most influential brand in the world by World Brand Lab in 2006 – the only Chinese brand to be ranked in the top 100 for three consecutive years. It is also the official home appliances sponsor of the 2008 Beijing Olympic Games.

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