China

China’s anonymous brands

Let’s take a brief look at a highly visible area where China’s world influence comes up short – global brands.

The BrandZ Global Top 100 list came out last week, topped by Google and Apple as number one and two respectively. Several Chinese companies are on the list, which is good. But the problem is most people outside of China have probably never heard of them, since none of them are truly globally renowned. And several of the Chinese companies are giant state-owned firms. This isn’t a new problem nor is it a mystery. China’s government, companies, and its public are mostly aware of this problem, with the government pushing for Chinese brands to go global and firms spending more on research and development. Why does it still exist? Copying and counterfeit goods (not to mention fake stores and hotels) is probably the first thing that a lot of people think of, but a closed business environment, and rigid corporate and educational system are also big factors.

It’s not all bad or surprising because for a lot of Chinese firms, China itself is the world. A home market with the world’s biggest population and a restricted business environment, one that has barriers to foreign companies, make for a hugely profitable climate, especially if one is a state or state-backed firm. Yet is this really the right way to go for Chinese firms? Especially when these firms don’t fare well when going up against foreign competitors, even on home turf.

Banks also favor lending to large firms, which are often state-owned such as mobile telecom operators (China Mobile, China Unicom) and airlines for example, thus allowing them to maintain monopolies. Even the banks themselves (ICBC, Agricultural Bank, Bank of China) are all state-owned (there is one major private bank in the whole country). Benefiting from limited foreign (and perhaps superior) competition and closed business environment at home is actually a hindrance when competing overseas, which is why success in China for Taiwan companies doesn’t equate to global success.

Besides political and business culture, another big factor for weak brands is social culture. This refers to the lack of desire to innovate or be creative, both due to a culture of copying and of doing whatever is profitable rather than take risks.

From the Guardian article (2nd link above):
We get these endless things from the government saying there should be more innovation and brand building,” says Paul French, chief China market strategist at market research firm Mintel. “But there isn’t anything behind it. The problem is that no one really wants to invest in innovative design. It’s very market-led. So if reports come to the stores that red shirts are selling, they’ll tell their in-house designers to design more red shirts. This means the designers don’t get a chance to do anything.”

There are Chinese brands of course. While some, like Lenovo, were obtained through acquisition, others like Huawei (networking equipment and infrastructure), Haier (home appliances), and Xiaomi (smartphones) are truly homegrown. Chinese tech giants Alibaba, Sina and Tencent dominate local Internet fields like social media, search and e-commerce, and in cases like the latter’s Wechat app, are making an attempt to get into overseas markets. Even so, it’ll be a long, hard journey for Chinese brands to become as well known as Japanese or even South Korean ones.

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