Teaming with the BBC and Campaign Asia, we’re participating in a roundtable in Beijing next Monday (8/18) that takes on the topic of Chinese companies building global brands. Jason Wincuinas, managing editor of Campaign Asia-Pacific will “referee” the session.
As a prelude to the big event, we flipped roles with me peppering Jason with questions.
Here’s the Q&A.
Lou: I’m looking forward to seeing you in Beijing on the 18th for the roundtable on Chinese companies going global. I’d love to hear your perspective on some questions.
Jason: Thanks Lou. This is a topic that really interests me. My first trip to China was in about 1995. I was an importer then, buying traditional porcelains and arts for sale in the US. That experience was fantastic, but the China I saw then is gone. The one I saw about 10 years later when I moved out of that business is also gone. And the one from 2008, just after the Olympics had its impact, that China is hard to find now too. And really, China of last week is already a bit dated. The rate of change is spectacular.
Lou: I hear you. It’s the type of change that leaves your mind out of breath. There was a great line in your LinkedIn profile: “Every consumer touch point is an opportunity for brands to tell their story and sell real value.” Do you think Chinese companies have taken this mentality to heart the same way Western companies have?
Jason: I believe very few companies around the world have truly taken that idea to heart. But for Chinese brands it may be even more important for them as far as building a brand image outside the home turf. Fair or not, there is a low-cost/low-quality perception they have to overcome. Often that means overcompensating.
Most businesses do one thing really well and that one thing is what they are in business for. The rest then just sort of follows—sometimes for the better and sometimes for the worse. Often what a brand does really well is enough to carry the business. But not always, and as soon as real competition comes along, whatever weaknesses were there become far more apparent. Apple is an example of a brand that works on consistency from product to web to physical store and into customer service.
Lou: Is there a Chinese brand that comes to mind that delivers on this Apple-like consistency?
Jason: Xiaomi is showing the world that a local Chinese brand can disrupt everything.
There was just news recently that it pushed Samsung off the top spot in China as far as volume sales. And that’s after Samsung came in as the number one brand in Campaign’s Top 1000 Brands ranking. Xiaomi’s strategy of responding to customer requests with frequent product updates shows a Chinese brand can take this idea to heart and push the envelope for marketing and customer service. The product itself is one thing, but the fact that the product can get better even after you own it and that those improvements can come from your own suggestions—that’s a fantastic brand story—who wouldn’t want to be part of that?
This is a kind of marketing that some might categorize as growth hacking. But that’s the idea when I talk about using touch points other than the traditional advertising message to boost brand image. Marketing isn’t just advertising—it’s selling an idea and standing behind it all the way. Anywhere you can reinforce that brand idea it’s worth doing. But it should be forethought, not an afterthought.
Lou: Can you think of a Chinese company that’s particularly skilled in applying the concepts of storytelling to its communications? Alibaba certainly gets a lot of mileage out of Jack Ma’s personal narrative (i.e., worked as English teacher, first venture called “China Pages” failed, etc.).
Jason: That’s a good question and I’m afraid my lack of language skills will skew my answer here. As far as a brand story in English, I’ve always thought Lenovo’s history makes for a compelling business tale. I like how it has grown from essentially just an assembly line, into a manufacturing giant and then into an international brand name. Now buying Motorola, it’s shown it can look ahead and see where it needs to go to grow.
But maybe the area where Chinese brands do the best “storytelling” is less about narrative and more about engaging consumers on a level they prefer. The way Xiaomi growth-hacks and involves customers in the R&D processes sends a compelling message to people. What Chinese brands seem to be getting adept at is more along the lines of how they talk to consumers, which is through mobile devices. Mobile is the language of the future.
Little things like parking a new car on a busy pedestrian street, painting it with bright attractive colors and putting QR codes on it so people can get pricing and model information on the spot through their phones, that says something to consumers. The MG brand (part of Shanghai Automotive Industry Corporation [SAIC]) did that in China. It’s not exactly storytelling, but there is a narrative there about brands understanding consumer needs for time and trying to give them something useful to make their lives easier. The key word there is give. Give is much better than tell.
Lou: As a general rule of thumb, is it fair to say that private enterprises in China are more ready to build their brands on a global playing field than the SOEs?
Jason: I’d have to agree with that. SOEs still enjoy protections, and sheer size means they have less to worry about commercially. Like any industry, if you have go out every day and win in the market versus getting a paycheck at the end of the week no matter what—who do you think is going to work harder in that situation? It’s just a different dynamic. But going global will change the playing field. Can PetroChina or Sinopec become the next Royal Dutch Shell? Maybe.
Lou: Based on your observations, are there one or two common mistakes that Chinese companies often make when embarking on a global brand-building effort?
Jason: Chinese brands have the same trouble going global as any nation’s brands, and that’s getting the local picture right in any of the markets they want to enter. The history of branding has lots of funny examples of poorly translated slogans or name brands. Ever try selling a Chevy “no go” (Nova) in Mexico?
Uniqueness, exclusivity: those are selling points with many consumers, but foreignness is often a bridge too far. The difference between exotic and unfamiliar is the same as between desire and caution. European fashion brands seem to get a halo from their foreignness, but those are the “exotic” exception. Everybody else has to tap into the local ethos, and that is not easy. Failure comes when brands aren’t willing to bend. I can’t tell you how many Chinese manufacturers I used to buy handcrafted goods from that had the term “animal byproduct” in the company name. Blaah. Granted that was business-to-business and in an era much different than today, but a name like that has zero chance outside the little world those companies operated in, even if some of them made really beautiful things.
Transparency seems to be another area where Chinese brands have trouble. Not that Microsoft or Facebook don’t obfuscate when it suits them, but there is an element of Chinese society that seems to maybe put a higher value on one’s privacy or the right of authority to brush off questioning. Can you imagine anyone asking Jiang Zemin what kind of underwear he prefers? But Bill Clinton answered that question while campaigning without hesitation.
That’s not what won him the election, but the perceived straightforwardness of the Clinton brand did win it. And therein lies the trouble for Chinese brands. They’ll have to be a lot more open and forthcoming than what they are accustomed to in order to succeed in the West—maybe even more so than their local competitors. That might be a double standard, but it’s one that could trip you up if you go in unaware of it.
Lou: Back to Lenovo, which is a poster child for Chinese companies who have successfully built a global brand. Do you anticipate that we’ll see more Chinese companies acquiring Western brands as a means to accelerate the global brand building?
Jason: From a business perspective that’s inevitable. They may not all be headline-grabbing ones like Smithfield or Motorola, but management consultants and economists I’ve spoken with all expect a great deal of M&A over the next five years. One forecast from The Economist shows China fully passing the U.S. as the world’s largest economy by 2018. It is highly unlikely that kind of power shift would come without companies changing hands. If nothing else, the distribution channels that Western companies own will be low-hanging fruit to empowered Chinese brands looking for overseas expansion. When the Lenovo/Motorola merger came through, at Campaign we looked at that as mainly a brand deal. Lenovo doesn’t really need more manufacturing base; it might want some of the patents, but Google kept all the best ones for itself. However, the readymade market access to North and South America, as well as the built-in brand recognition—that’s only valuable to a growing company like Lenovo. It was definitely a smart strategic move. And the circumstances that led to it can’t help but repeat. Countries will likely cry “national security” at some deals (energy and petrochemical could prove to be sensitive areas), but FMCG, sports goods, finance, automotive, electronics, services, food, earth-moving and building equipment—there’s lots of potential there.
Lou: When I was growing up in the 1960’s, Americans associated cheap and low-quality goods with the “made in Japan” stamp. Yet, today it’s just the opposite. Americans think of Japanese products as high in quality and worthy of a price premium. It was the Japanese carmakers who led this perception turnaround. Can you see one particular industry sector in China leading the way in changing the perception that Chinese companies win based on the lowest price?
Jason: Technology. Lenovo is one example. Xiaomi is another. These firms are proving they can build both reliability and innovation, much like your auto example. Consumers came around to Japanese cars because the manufacturers packed in more features, pushed quality and met consumer needs. Today Chinese brands might still use price for leverage, but I expect that to fade. There’s too much wage pressure within China, raw materiel cost parity globally and other economic pressures. China’s cost advantage has an expiration date. After that, the only way they will win in the market will be based on the better mousetrap. Xiaomi has outmaneuvered global names in its domestic market. It won’t be easy, but replicating that success outside China is not such a stretch.
Lou: Consumer electronics are as vital to modern life as autos were 50 years ago?
Jason: Right. In Hong Kong a car is a nice-to-have, but in most advanced economies it’s a must-have. Even if you work for minimum wage in the States, you typically need a car to get to that job. Digital devices are now just as essential; they are the division between taking part in the modern economy and getting left behind. If you are not online, you barely exist. Taking the internet with you—tablet, laptop, smartphone, phablet, etc.—puts a new definition to your mobility in very much the same way the car did.
China has some scale advantages in making these devices, as well as a better comfort level as far as working in a fast-moving market. You can’t discount a century’s worth of growth in just a 30-year period. That creates a certain mindset, and it’s an environment Chinese engineers are used to tackling; they have become experts at incorporating the latest innovations. And they certainly don’t suffer from the “not invented here” affliction. Charges of copying aside, engineers at some Western firms won’t even use development tools from a third-party vendor—it all has to be done in-house. That attitude can translate into sluggishness. And in the digital era, if you are not creating at a running pace then you’re a dead man walking.
Lou: Any final thoughts not covered in the questions?
Jason: Why do meals in the south of China always start with soup but ones in the north finish with soup? No one has ever been able to answer that for me. I’m looking forward to our lunch.
Lou: See you in Beijing.
I appreciate Jason taking the time to offer his unfiltered perspectives. If this was sports talk radio, he would have just won two tickets to a San Francisco Giants game.
I’m sure the Monday roundtable will look at these areas and others in more detail.
With so many Chinese companies with global aspirations targeting the U.S. as their top overseas market, I’ll be sharing a point of view based on being on the receiving end of these brand-building efforts.
It should be lively discussion.