Made in China: Branding a New Image
By Patrick Tucker
From manufacturer to major marketer, "brand China" is set to boom.
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economy of China is growing faster than that of any other nation on earth. Chinese
manufacturers currently produce more than 70% of the world's toys, 60% of its bicycles,
half its shoes, one-third of its television sets and air conditioners, and half of its
microwave ovens. Despite the accomplishments of Chinese manufacturing firms on behalf of
such recognizable Western brands as Boeing, efforts to market uniquely Chinese brands have
thus far stalled. However, that may soon change, according to a new book, The Chinese
Century (Wharton 2005).
"China has been a major beneficiary of (as well as a reason for) the decline of
the brand in the retail market," writes the author Oded Shenkar, business scholar.
"With the exception of super-luxury brands whose identity is intrinsically linked to
European manufacturing, all others are either manufacturing in Asia or are thinking about
it. Asia, increasingly, means China."
American firms have outsourced so much of their production to Chinese manufacturing
companies that they have actually groomed their future competitors, according to Shenkar.
Case in point: A Chinese firm named Lenovo was first established in 1984 to sell computer
parts manufactured under the IBM label. By 1990, Lenovo was selling PCs under its own
brand name. In May 2005, Lenovo purchased IBM's computer division for $1.7 billion. Lenovo
holds more than 25% of the Chinese personal computer market, which is four times the
market share held by Dell in China.
Other Chinese brands to watch for include:
- Nice, a consumer product and detergent maker.
- Changhong Electric, a supplier of TVs to retailer Wal-Mart under the name Apex Digital.
- Xi'an Aircraft Company, a Boeing subcontractor.
- Haier, which recently considered a multibillion-dollar bid for the American home
appliance maker Maytag.
- Huawei Technologies and UTStarcom in telecommunications.
The sheer size and scope of the Chinese production model indicates that consumers may
soon encounter Chinese brands in all the areas where Chinese firms are now doing
production work for other nations' companies, including those in furniture, motorcycles,
and both low and high-end clothing. Italian clothiers may soon lose more than $1.2 billion
in U.S. export revenue to China, Shenkar says, adding, "Even [Europe's] top of the
line firms that have been in business for centuries are now threatened."
China may unleash not only new brands, but also entirely new product categories. For
instance, a device called an Enhanced Versatile Disc—with high-definition,
high-capacity optical storage—may soon replace DVDs.
Consumers, however, aren't throwing out their Armanis for Ding Hows just yet. Chinese
firms still face considerable challenges in establishing name recognition among Western
consumers.
Chinese Acquisition of U.S. Firms.
"The buzz right now is about China's recent and probable purchase of American
companies and its investing of resources in new companies to create international brand
forces," says Jay Wang, an assistant professor of marketing communication at Purdue
University. "Buying or creating such companies is just a small step compared to
establishing the brand with consumers around the world."
According to Wang, the largest obstacle to China's international corporate development
is the nation's communist political system, in which the government serves as a major
stakeholder in all Chinese companies. Investor wariness over China's chaotic banking
system is also slowing the country's rate of growth, as well as frustration over its
currency model. China's yuan had been pegged to the dollar, which worked to ensure Chinese
goods were cheaper than American goods, regardless of the dollar's performance. The
Chinese government recently allowed the yen to be traded, but only within a narrow range.
Another obstacle facing Chinese firms looking to establish brand-name recognition might
be negative perceptions of either Chinese products or Chinese politics. Many consumers in
the West regard the Chinese Government as oppressive, environmentally reckless, and an
egregious violator of human rights. Concerns about outsourcing and domestic job loss also
color many Western consumers' perceptions of China. Despite highly competitive pricing of
Chinese manufactured goods, only 17% of Americans polled expressed a high degree of
interest in buying products they knew were imported from China, according to a 2002 survey
conducted by Leo. J. Shapiro and Associates. Among those who responded that they were not
interested, poor quality was the primary reason, followed directly by social concerns such
as the treatment of labor in Chinese factories, the politics of the Chinese government,
etc.
"Most Americans are comfortable buying U.S. brand clothing made in China, but
strategic international branding is a different game," Wang says. "If Chinese
companies manage to brand strategically with consumers in countries with completely
different political systems, this will prove we have entered a new frontier for branding
and advertising."
Sources: The Chinese Century: The Rising Chinese Economy and Its Impact on the
Global Economy, the Balance of Power and Your Job, by Oded Shenkar. Wharton School
Publishing. 2005. 191 pages. $25.95. Purdue University News Service, 400 Centennial Mall
Drive, Room 324. West Lafayette, Indiana 47907. Telephone 1-765-494-2096. Web site www.purdue.edu.
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