Not that it’s unusual to discuss work with a colleague over a beer – but both Rana and I found it curious to that an Indian and an Anglo-American should be sitting in a Thai restaurant in Shanghai and listening to fusion music while discussing the future of brands in China.  There are still plenty of restaurants in Shanghai that serve authentic Chinese cuisine, but China is following hard on the heels of Japan, Taiwan and Korea in terms of adopting global tastes and brands. So when will the rest of the world add Chinese brands to its menu?

Of course, the West buys plenty of Chinese products. Where do you think the beads we throw around at Mardi Gras come from? But real Chinese brands, ones for which we have true emotional affinity, are virtually non-existent, both in the West and even in China, where many Chinese whom are still skeptical about locally produced goods, suspecting that the best is kept for foreigners elsewhere in the world.

BRANDZ, the brand equity program developed by Millward Brown for WPP companies, suggests that many Chinese reject local brands on the grounds of poor product performance, and only bond to them on the grounds of price. This picture, however, is changing, as Chinese companies work to throw off the perception of poor quality and build trust with local consumers. Since 1998 the degree to which price factored as a reason for locals to attitudinally bond with brands has declined by half, with popularity, leadership and product quality taking over.

The quality of many Chinese produced goods is improving rapidly. For instance, Lenovo (formerly Legend), the company that bought IBM’s Thinkpad brand, produces a line of well-designed, pocket PC phones which not only run run Windows Mobile 5.0 but also incorporate 4MB cameras and MP3 players.  These smart phones are among the best products available, holding their own against products from Samsung, Sony or Nokia. But negative perceptions of Chinese products still remain.  To address these, some Chinese companies are copying a leaf out of the MNC play book and are attempting to build brands. Their efforts to date have yielded a barrage of poorly executed TV ads proclaiming the brand name and nothing else, but the sophistication of these marketing efforts is increasing, and I think they may get an unexpected boost from outside China.

I’m referring to the fact that the Chinese government is now actively seeking to gain global esteem for Chinese products.  The official Beijing policy “Go Global” encourages Chinese managers to build leading global brands, and has the backing of a government-sponsored Brands Promotion Committee.

History suggests that Chinese brands could make it big in the west, where consumers love to find a bargain.  The “quality at a good price” positioning has succeeded for many brands, including Hyundai automobiles in North America and the UK, and the domestic U.S. airline Southwest.  This positioning also seems to be succeeding for Chinese appliance giant Haier in the United States.  Just six years after entering the U.S. market, Haier has a 50% share of the compact refrigerators segment, and is growing sales of their larger appliances.

As brands like Lenovo and Haier shake off the cheap, low quality stereoptype of Chinese brands, and discerning Western shoppers learn to take a second look at imports from China, the label “Made in China” may come to connote the same level of quality and value as “Made in Japan.”  In a country that is intensely proud and eager for world recognition, the growth for Chinese brands abroad could feed increased respect and status for Chinese brands at home, further diminishing the status of some MNC brands.

A few years ago I attended a presentation in New York where Sir Martin Sorrell observed that at that time we were not experiencing globalization, but rather the Americanization of business, with much of the world’s business being controlled by U.S.-based companies. Last week, delivering the keynote speech at the CEO Summit in Beijing hosted by GroupM and CCTV, Martin suggested that the period of real globalization has begun.  He cited Chinese companies like Lenovo and LG, and Indian companies like Tartar Tata and Infosys as ones which were beginning to redress the American domination of business.

If Martin’s observation is accurate, we can expect to see increasing numbers of Chinese brands distributed abroad …so maybe the next time Rana and I get together, we’ll be raising our glasses of Tsingdao in a Brazilian restaurant in Moscow.  It could happen.

This entry was posted on Friday, May 26th, 2006 at 2:57 pm and is filed under Brands. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Print this Page