f remaking made in china 08.14.2012
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REMAKINGMADE IN CHINA
August 2012
Image credit: Jessica Va
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Executive Summary........................................................................................................3
Remaking Made in China ..............................................................................................4
Introduction ...............................................................................................................5
External Roadblocks to Expansion ....................................................................................6
Made in China = low quality.......................................................................................7
Safety is a key concern ..................................................................................................8
Fake products fuel copycat image .....................................................................................8
Sustainability, labor also key concerns ................................................................................9
Little differentiation between Poorly manufactured in China and Branded in China................. 10
Low awareness of Chinese brands ...................................................................................10
Adversarial political and economic relationship.................................................................. 11
Internal Roadblocks to Expansion .................................................................................. 12
Corporate structure and management style ................................................................... 13
Lack of brand-building innovation ...................................................................................13
Lack of international experience ....................................................................................14
Failure to conquer home turf........................................................................................ 15
Overcoming the Roadblocks........................................................................................... 16
Take back Made in China .........................................................................................17
Compete at a world-class level ...................................................................................... 18
Lean into national identity ........................................................................................... 20
Tap into the Millennial worldview ................................................................................... 23
Drive innovation and lead categories ...............................................................................25
Ride on international brand coattails ...............................................................................27
Become a leader in CSR ...............................................................................................28
Conclusion ..................................................................................................................30
Appendix ....................................................................................................................32
More About Our Experts/Inuencers ................................................................................32
Additional Charts ....................................................................................................... 34
A note to readers:To make the report easy to navigate, weve added hyperlinks to the Table of Contents, so you can
jump immediately to the items that most interest you (or, alternatively, you can read the material straight through).
This is a report from JWTIntelligence. Go to JWTIntelligence.comto download this and other trend research.
WHAT WELL COVER (contd.)TABLE OF CONTENTS
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WHAT WELL COVER (contd.)
*See Appendixto learn more about these experts and inuencers
JOSEPH BALADI,CEO of BrandAsian, author of
The Brutal Truth About Asian Branding
TOM DOCTOROFF,
JWT North Asia area director and
Greater China CEO, author of
What Chinese Want
HOWIE LAU,VP of marketing and communications for
Asia Pacic and Latin America, Lenovo
DOUGLAS YOUNG,
co-founder of Hong Kong-based lifestyle
brand Goods of Desire
China is the globes most populous country and its second biggest economy (one thats forecast to move ahead of the
U.S. in another 15 years). But by and large, its brands havent yet made a notable impact on the global consumer
market. That may well change in the near future: China is actively seeking to export more than just the rest of the
worlds manufactured goods and to develop strong brands that can hold their own both at home and on the world stage.
Chinese brands face an uphill battle, with an array of external and internal forces currently hindering their efforts to
take root internationally. This report details those roadblocks, spotlighting the array of negative perceptions among
Western consumersstarting with their low regard for the Made in China labelas well as key reasons why many
Chinese rms arent yet innovative, at and exible enough to compete with global brands.
Remaking Made in China also takes a look at some of the strategies that leading Chinese brands, from Lenovo and
Li-Ning to Haier and Huawei, are deploying to knock down these roadblocks. As we move into what many forecast will be
a Chinese Century, there is tremendous potential for Chinas savviest marketers to break through.
Methodology
All our trend reports are the result of quantitative, qualitative and desk research conducted by JWTIntelligencethroughout the year. Specically for this report, we conducted on-the-ground research in Shanghai, Beijing and Hong
Kong. We also elded a quantitative study in the U.S. and the U.K. using SONAR, JWTs proprietary online tool, from
May 31-June 4, 2012; we surveyed 503 Americans and 503 Britons aged 18-plus. In addition, we interviewed four relevant
experts and inuencers.
This report builds upon Journey to the West, a 2011 report researched and written by Pete Heskett, Southeast Asia area
director for JWT. Special thanks to Pete, along with Tom Doctoroff, Eva Zhang and colleagues at JWT Shanghai, for their
assistance and insights.
EXPERTS AND INFLUENCERS*
EXECUTIVE SUMMARY
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As China starts to export more than just the worlds manufactured goods, well see a push to change
perceptions around what it means to be Made in China. Already a leading crop of businesses are
chipping away at some of the key issues standing between Chinese brands and global success.
Image credit: Jessica Vaughn
The shift from China as the worlds factory to China as a
brand creator and marketer is well underway.
DAVID ROTH, CEO, EMEA and Asia, The Store, WPP,BrandZ Top 50 Most Valuable Chinese Brands, 2012
REMAKING MADE IN CHINA
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WHAT WELL COVER (contd.)
Introduction:China is the globes most populous countryhome to 1.34 billion peopleand the worlds second biggest economy
(it unseated Japan from the No. 2 spot last year). Its forecast to move ahead of the U.S. in another 15 years. But by and large,
China brands havent yet made a notable impact on the global consumer market.
During much of the 20th century, China served as a manufacturing center for international brands, developing few of its own for
export markets. Meanwhile, Made in China became synonymous with cheap, mass-produced, low-quality goods. But now, three
decades after the Communist country opened up and instituted market reforms, China is looking to export more than just the
rest of the worlds manufactured goods. Were seeing a new focus on developing strong brands that can hold their own both at
home and on the world stage.
Its a tall order, given that Chinese businesses have little experience developing the type of brands that dominate on the global
stage. The result is that Chinese brands tend to lack equity in the domestic market. They have yet to gain enough status to earn
a price premium over global counterparts. Not only that, but Chinese labels are still tainted by association with shoddy Chinese
manufacturing. Consumers in developed markets are skeptical at best of Chinese products.
Still, there is tremendous potential. Japan, Korea and Germany are among the nations whose brands have overcome hostileor skeptical consumer perceptions. It was once seen as down-market to buy Japanese, for example, but today few shoppers
consider Made in Japan a negative. And in our hyper-connected, globalized, fast-moving world, the journey from negative to
positive perceptions can be signicantly shorter than it once was. Millennials already have a very different image of China than
the outdated associations that may linger among older consumers. And the youngest consumers, Gen Z, have only known China as
a rapidly modernizing economic giant.
Chinas brands have seen an explosion of value, as BrandZ recently noted, due to factors including a booming and increasingly
discerning middle class, product commoditization, efforts to drive homegrown business and heated domestic competition (from
both local and international companies). While we found very low awareness of Chinese brands among American and British
consumers, they may already be customers of the leading crop of Chinese labels. Among them:
REMAKING MADE IN CHINA (contd.)
Lenovo, expected to become the worlds largest PC
manufacturer this year. The company, which launched its
rst global branding campaign last year, garnered global
attention when it bought IBMs PC division for $1.75
billion in 2005.
Huawei, which recently slipped past Ericsson to become
the worlds largest telecom-equipment vendor and
ranked among the worlds top three patent applicants in
2011 (fellow Chinese rm ZTE took the top spot).
Haier, which currently holds the largest share of theglobal appliance market (close to 8% of the sector).
As China nds its footing as a superpower, some are forecasting that this will be the Chinese Century, not only because of
Chinas political and economic power but also because its worldview and values will inuence consumers everywhere (much as
American values and culture have). As perceptions of China align with this new status quo, and as its marketers nd ways to
knock down the obstacles to global expansion, expect some new, possibly formidable rivals to todays global consumer brands.
Within the next 10 years, we are
going to transition to a Chinese
Century relative to an American
benchmark. That means we are
going to have great Chinese brands,
both commercial business Chinese brands as well
as cultural brands, because thats what dened
the U.S. JOSEPH BALADI, CEO of BrandAsian,author of The Brutal Truth About Asian Branding
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In recent years, some Chinese brands have been venturing outside Chinas borders, nding great success
in emerging marketsfor instance, Chinese car exports were up 43% year-over-year in May, with the
majority of demand coming from Algeria, Brazil, Iran, Russia, Saudi Arabia and South Africa. Now, a few
Chinese companies are looking beyond the developing world in a bid to build global brands. But in moredeveloped, Western economies, they face an uphill battle.
Image credit: Jessica Vaughn
EXTERNAL ROADBLOCKSTO EXPANSION
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WHAT WELL COVER (contd.)
Made in China = low quality: Though China is no longer the top spot for cheap manufacturingits rising labor costs
have pushed many companies to shift their outsourcing to countries such as Vietnam and Cambodiadecades of poorly
manufactured products from China have left a scar on consumer perceptions. Comparing perceptions of Made in China
with Made in Japan or Made in the USA points to a wide gap to be crossed by Chinese brands.
While around half of respondents to our survey said American- or Japanese-made goods are reliable and high-quality, fewer
than a fth said the same of Made in China brands. Rather, most people associate negative product attributes with Chinese-
made goods, including mass-produced (65%) and cheap (56%).
By contrast, a far smaller percentage view Made in the USA as mass-produced (31%) and cheap (8%). Instead, many
consumers see American and Japanese goods as well-designed and as stylish (especially in the case of USA brands). (See Figure
1A; for country and generation breakdowns, see Appendix, Figures 1E-1M.)
EXTERNAL ROADBLOCKS TO EXPANSION (contd.)
80%
70%
60%
50%
40%
30%
20%
10%
0%
FIGURE 1A:
Country manufacturer impressions (U.S. and U.K.)Percentage of American and British adults who associate the following traits with products made inChina, Japan and America
Made in China Made in Japan Made in the USA
High qualityReliable
Built/madewith pride
Impressive
Interesting
New anddifferent
Trendsetting
Cutting-edge
Stylish
Well-designedEthical
Environmentallysound
Poor safetystandards
Poorly made
Cheap
Mass-produced
Unreliable
Low-class
Ordinary
Boring
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WHAT WELL COVER (contd.)
Safety is a key concern:While perceptions of Chinese-made
goods as poor quality have persisted for decades, questions
about their safety have only built in recent years, both
domestically and internationally. Large-scale recalls havemade headlines worldwide. Mattel recalled 9 million toys,
including Barbie and Polly Pocket dolls, in 2007 due to lead
paint and magnets that posed choking hazards; countries
around the world banned Chinese milk products after recalls
by several Chinese dairy companies in 2008; 54 high-speed
trains, meant to symbolize Chinas sweeping modernization
push, were recalled last year.
In our survey, 46% of respondents cited poor safety standards
as an attribute of Chinese products, compared with only 9%
who said the same of American-made goods. (See Figure 1A.)Around 4 in 10 consumers in our survey (and more than half
of Americans) said they have low opinions of Chinese brands
because of recalls. And half of respondents agreed with the
statement, Chinese brands arent portrayed very well in the
news/media, citing this as a key reason for their low opinion
of Chinese brands. (See Figure 1C; for country breakdowns,
see Appendix, Figures 1P-1Q.)
EXTERNAL ROADBLOCKS TO EXPANSION (contd.)
Fake products fuel copycat image:Distrust is also driven by news about
an abundance of fakes: not simply counterfeit handbags and watches but
everything from plastic rice and chemically made eggs to forged university
acceptance letters, imitation medicines and even a chain of faux Apple
stores so authentic that even employees believed they worked for the
California company.
Such reports not only drive skepticism but help to perpetuate the notion that
Chinese products are copycats, lacking good design, style and originality. While
nearly half our survey respondents felt that American- and Japanese-made goods
are well-designed, only 18% said the same of Chinese goods. Similarly, just 12% agreed Chinese goods are stylish, compared to
45% for American goods and 36% for Japanese products. And while more than a third of consumers felt American and Japanese
manufacturers create products that are new and different, only 15% of respondents said the same about Chinese products. ( See
Figure 1A; for country and generation breakdowns, see Appendix, Figures 1E-1M.)
Perhaps this is why 34% of respondents agreed that Im not very impressed with Chinese companies in general. ( See Figure 1C;
for country breakdowns, see Appendix, Figures 1P-1Q.)
Image credit: Jessica Vaughn
Chinese are cunning at marketing
products of very low quality but mass-
produced even when they know the
products are faulty. Male, U.K., JWT SONAR
I know not all Chinese products are bad,
but in general I think China has very
poor quality regulatory standards for
products. Im not keen to try Chinese products until
this improves. Male, U.S., JWT SONAR
Its not really important to me where
products I buy are made. Probably I
own a lot of things that are made in
China without realising it, but my impression, right
or wrong, is its not good quality.
Female, U.K., JWT SONAR
I am disappointed with items made inChina and sold in the U.S.
Female, U.S., JWT SONAR
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Sustainability, labor also key concerns:With consumers hearing much about things like the heavy smog hovering over Beijing
and conditions at Apples China-based Foxconn factory, concerns about environmental and labor practices have been further
degrading perceptions of Chinese products.
In our survey, Chinese manufacturers scored by far the lowest in terms of environmentally sound practices. ( See Figure 1A;
for country and generation breakdowns, see Appendix, Figures 1E-1M.) And environmental practices and workers rights,
when measured for inuence, all have a signicant negative effect on consumer opinion of China. (See Figure 1B; for country
breakdowns, see Appendix, Figures 1N-1O.)
EXTERNAL ROADBLOCKS TO EXPANSION (contd.)
FIGURE 1B:
Factors that inuence consumer opinion of China (U.S. and U.K.)Extent to which each of the following impact American and British opinions of China
POSITIVEOPINION
BIG IMPACT
SMALL IMPACT
NEGATIVEOPINION
Chinese workers rights
Chinese government
Chinese environmentalpractices
Traditional Chinese/herbal medicine
Chinese restaurants
Average Chinese citizen
Chinesecelebrities
Chinese Olympic athletes
Chinese-American athletes
Chinese-American celebrities
Chinesemartial arts
Chinese philosophy
Beijing Olympicsopening ceremony
Chinas global inuenceon the economy
Chinese brands
Chinese lms
Chinese manufacturers(Made in China)
News/media coverageabout China
Chinese humanrights policies
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Little differentiation between Poorly manufactured in
China and Branded in China:Consumers, most of whom
havent personally had negative experiences with Chinese
brands, are simply carrying over their negative perceptionsof Chinese-made onto Chinese-branded. When respondents
were asked to choose which phrases they associate with
Chinese brands, the top three responses were mass-
produced, cheap and poor safety standardsechoing
consumer sentiment around Made in China. (See page
23, Figure 2C; for full list and country breakdowns, see
Appendix, Figures 2I-2K.)
When respondents with poor perceptions of Chinese brands
were asked why they had such low opinions, just over
half agreed with the statement, I am not impressed withproducts that are Made in China and feel Chinese brands
would be a similar quality. Only 28% of consumers with
low opinions of Chinese brands had personally had bad
experiences with a Chinese label. (See Figure 1C; for country
breakdowns, see Appendix, Figures 1P-1Q.)
Low awareness of Chinese brands:Despite the heft of some
Chinese companies, our research found relatively low awareness
of Chinese brands in both the U.S. and the U.K. When presented
with a list of 40 heavyweight Chinese brands, a plurality of
respondents (36%) had never heard of any of them. Only a
quarter were familiar with Lenovo, currently the worlds second
largest computer manufacturer after HP. (See Appendix, Figures
1T-1V.) The most recognized brand, Air China, didnt fare much
better, with 28% of respondents recognizing the name.
EXTERNAL ROADBLOCKS TO EXPANSION (contd.)
Image credit: twicepix
FIGURE 1C:
Reasons for low opinion of Chinesebrands (U.S. and U.K.)
47
Percentage of American and British adultswho agree with each of the following
Millennials (18-34) Gen X (35-47) Boomers (48-67)
Chinese brands arentportrayed very well in
the news/media51%
52
48
54
I am not impressedwith products that
are made in Chinaand feel Chinese
brands would be asimilar quality
51%
46
51
55
Items made in Chinatend to get recalled
38%
37
37
40
I have personally hada bad experience with
Chinese brands28%
35
22
26
Im not veryimpressed with
Chinese companiesin general
34%30
34
39
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EXTERNAL ROADBLOCKS TO EXPANSION (contd.)
Adversarial political and economic relationship:Further
hampering the landing of Chinese brands on Western shores is
a legacy of complicated Sino-Western relations, coupled with
an escalating sense of economic rivalry as China booms whilemuch of the West grapples with scal woes. There are even
fears of economic espionage, with reports of Chinese hackers
attempting to steal information from companies such as
DuPont, Nortel and Google.
While Chinas government has opened up to elements of
capitalism, anti-Communist sentiment remains strong, with 70%
of American and 64% of British respondents stating they are wary
of China because it is Communist. A majority of consumers also
said the rise of Chinas economy makes them anxious (62%), as
does increased Chinese investment in their country (57%). (SeeFigure 1D; for country breakdowns, see Appendix, Figures 1R-1S.
When measured for inuence, these factors have a signicant
negative impact on consumer perceptions of China. (See Figure
1B; for country breakdowns, see Appendix, Figures 1N-1O.)
And in the U.S., its likely that anti-China sentiment will only
escalate in the run-up to the presidential election.
FIGURE 1D:
Attitudes toward Chinas economyand government (U.S. and U.K.)
47
Percentage of American and British adultswho agree with each of the following
Millennials (18-34) Gen X (35-47) Boomers (48-67)
The rise of theChinese economy incomparison to oursmakes me anxious
62%
57
64
66
I am anxious aboutincreased Chinese
investmentin my country
57%
53
54
63
I am wary that Chinais a Communist nation
67%
66
69
67
I support political/government
deals in China44%
50
47
36
China is takingaway all of the
jobs in my country53%
51
52
57
I would work for aChinese company that
opened up an ofcein my country
60%
61
63
56
Image credit: Jessica Vaughn
With so much China-bashing going
on, it seems hard for Chinese
brands to deliver the message that
they are not threatening, and come in prot-
orientated goodwill. JENNY CHAN, Chinasbrands head West, Campaign, April 2012
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Roadblocks to expansion for Chinese brands are not solely external. More of Chinas state-run and
privately owned enterprises alike will need to learn how to innovate if theyre to compete in global
marketsindeed, even if theyre to compete against multinationals at home. Rigid corporate structures
and a reluctance to try different ways of doing business prevent new ideas from emerging and ourishing,and the focus is on narrow, short-term goals rather than a longer-term view. The result is weak brand
equity, one reason why domestic consumers tend to prefer Western labels.
Plus, Chinese rms tend to make the leap overseas before developing a long-term global strategy and
expansion plans, according to the Brooking Institution. Instead, the decision is based on government
mandates to go global (or face penalties) and a desire to chase prots and invest pent-up cash.
Image credit: Jessica Vaughn
INTERNAL ROADBLOCKSTO EXPANSION
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WHAT WELL COVER (contd.)
Corporate structure and management style:Chief among
the internal roadblocks to expansion is the hierarchical
structure of Chinas companies, even among midsize,
relatively new and innovative companies. The CEOreigns supreme, his or her authority and judgment never
challenged or questioned in Chinas corporate culture.
(Plus, many of Chinas state-owned enterprises have ties to
the Communist Party, with CEOs appointed by a party body.)
This leads to a stiing of ideas and communication,
especially from the most junior employeeswho may be
the ones with experience working or studying in the West,
where they pick up soft skills such as decision-making
and working in team environments. The decision-making
apparatuses of these companies are very rigid, explainsJWTs Tom Doctoroff, JWT North Asia area director and
Greater China CEO, in his recent book, What Chinese Want.
They are traditional in outlook and management structures,
and frown upon entrepreneurial thinking and the risk-taking
required that generates innovation.
A rigid corporate structure also means that projects face
many layers of navigation before they can be executed. Jenny
Chan explained in Campaign, The culture of red tape and
bureaucracy associated with the Middle Kingdom is permeating
through to how Chinese brands behave. By contrast, todays
fast-moving, hyper-competitive world requires companies to
operate as lean and nimble machines.
To complicate matters further, Chinese managers tend
to ip-op, constantly changing course, which fosters
employee anxiety; theres limited interaction among
departments; and marketing units fall lower on the totem
pole than sales teams, which tend to control budgets.
Lack of brand-building innovation:Though China has seen
a sharp increase in research and development spending,
as well as an uptick in patent lingstwo indicatorstypically used to measure innovation effortsmost Chinese
companies have yet to foster a culture of innovation that
helps to build brand equity.
Instead, marketers put their innovation efforts toward product and package design, and tend to excel at development:
creating incremental improvements to existing products and services and driving scale. Companies focus on tweaks that can
be easily measured and tied to tangible resultsa logical emphasis in a hierarchical business culture that fears instability. But
its unlikely businesses will be able to create products and services that command higher price points without broadening the
focus of their R&D.
INTERNAL ROADBLOCKS TO EXPANSION (contd.)
Whether its a family company or
a multinational, the CEO is the
predominant voice in the company.
Nobody questions the CEO. He is
omnipresent, omni-seeing; hes omni-
powerful. So that creates an issue in terms of internal
communication. Right now in meetings you have
a silent group of Asians who arent willing to ask
questions, arent willing to express themselves,
because theyre not willing to expose themselves or
take a risk in being wrong. So nobody talks.
JOSEPH BALADI, CEO of BrandAsian, author oThe Brutal Truth About Asian Branding
Competition in developed
international markets requires a
price premium, rooted in both
value-addednot parityproducts
or services and strong brand equity.
The last can be acquired only gradually over
time. In these respects, Chinese brands are still
disadvantaged, in many cases grievously so, and not
just by a generic fear of anything Made in China.TOM DOCTOROFF, JWT North Asia area director and
Greater China CEO, author of What Chinese Want
One way of dening [innovation] would
be as fresh thinking that creates value
people will pay for. By that measure,
China is no world-beater. Though its sweat produces
many of the worlds goods, it is designers in
Scandinavia and marketers in California who create
and capture most of the value from those products.
From Brawn to Brain,The Economist, March 10, 2012
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WHAT WELL COVER (contd.)
Chinas current ve-year plan aims to
foster innovation in seven strategic
industries, and the government has
instituted incentives to lure scientistsand researchers home after they earn
degrees overseas. But ofcials tend to
dole out research grants for projects that
have a similar timeline as the tenure of
bureaucrats, thus sacricing long-term
horizons for short-term gains, as Mike
Chao, former senior principal at Boston
Consulting Group, told Knowledge@-
Wharton. By contrast, research that
leads to innovation requires a long-
range commitment and vision, makingallowances for dead ends and circuitous
paths to success.
A number of other issues prevent a culture of provocative research from taking hold. As with big rms, the research community
is characterized by respect for the command chain and senior-level positions; this tends to squelch those with nonconformist
ideas, and theres not much funding for merit-based research. And researchers say that government-issued funds come with rigid
guidelines that severely limit their ability to change course in accordance with new developments in their eld, according to
R&D Magazine. Issues of loose IP protection, plagiarism and phony research also plague the profession.
Privately funded research may not face some of these issues, but companies that arent state-run still have to battle poorly
enforced IP and antitrust legislation. Plus, state-run banks favor national champions over lesser-known companies. Still,
smaller private businesses, usually in fashion or food and beverage, have done a better job of fostering a culture of innovation,
according to Doctoroff, but they lack the capabilities to manage global expansion.
Lack of international experience:As with most novices, another issue is simply lack of experiencedoing business in China is
typically very different from doing business in most other markets. Scott Kennedy, director of the Research Center for Chinese
Politics & Business at Indiana University Bloomington, explained to Reuters: Chinese companies, when they rst go abroad,
expect it to be a lot like expanding in Chinathey go talk to the party secretary or mayor rst, make sure they are happy, and
that paves the way for everything else. Americans and [others] typically dont roll out the ofcial red carpet, and Chinese are
not prepared for that.
Expansion is especially challenging for private
enterprises, as state-run companies typically receivegovernment assistance when venturing overseas, in
terms of navigating unfamiliar languages, as well as
labor laws and various other regulations. Chinese
companies have seen mergers and acquisitions as a
solution to their inexperience overseas, but these
rarely prove successful (90% of Chinas 300 foreign M&A
transactions between 2008 and 2010 failed, according
to one report cited by the Brookings Institution).
INTERNAL ROADBLOCKS TO EXPANSION (contd.)
Image credit: dcmaster
It is a catch-22: Companies big enough
to go global are the most encumberedby commoditized products and services.
Companies that grasp advantages
inherent in value-added products and
servicesthat is, the ability to charge a premiumlack
the critical mass to become global power brands.
TOM DOCTOROFF, JWT North Asia area director andGreater China CEO, author of What Chinese Want
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WHAT WELL COVER (contd.)
Failure to conquer home turf:Middle-class Chinese
consumers distrust many local labels, and international
brands still come with aspirational attributes, as well as
quality reassurance and reliable service. According toDoctoroff, There are few Chinese labels actively preferred
by mainland consumers. Plus, theres little brand loyalty
among shoppers. Most Chinese companies will need to win
the domestic war before tackling the international market.
Leading Chinese athletic-wear companyLi-Ningstumbled
when it tried to move upmarketbecause even in lower-
tier cities, shoppers will trade up to foreign labels like Nike
and Adidas when they can afford to spend more. Former
Li-Ning chief executive Zhang Zhiyong admitted to The
Financial Timesin 2011, I think we have to learn how tobalance the price-driven and quality-driven. When domestic
brands get that balance down, theyll be more attractive to
international consumers as well.
INTERNAL ROADBLOCKS TO EXPANSION (contd.)
Image credits: Jessica Vaughn
If [international brands] can charge
a 20% price premium herewhere
Chinese people should know the
quality of Chinese brandssimply
because theyre not Chinese, the
battle abroad is pretty serious.
TOM DOCTOROFF, JWT North Asia area director anGreater China CEO, author of What Chinese Wan
Hong Kong people have often looked
to Western culture for inspiration,
we emulate their lifestyle yet we can
never convincingly pull it off as true
Westerners. If there were more locally
inspired alternatives that appeal to our young
generations, they may adopt these choices without
denying their true identity. Ownership of our culture
endows us with a sense of authenticity. It is only in
being condent of who we are that we can hold our
heads up high on an international level.DOUGLAS YOUNG, co-founder ofHong Kong-based lifestyle
brand Goods of Desire
When Western media report that Chinas
middle class is snapping up Western
goods, what they mean is that the
Chinese consumers who can afford to are spending
extra to avoid counterfeits. That is not consumers
acting as brand advocates, or out of afnityits fear
purchasing. It says less about Western brands than
about Chinas landscape.
ABE SAUER, Chinese Are Fear-Buying, Not in LoveWith Western Brands, Brandchannel, June 8, 2012
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Its key to remember that China was once known worldwide for producing expensive, quality products
from silks and paper to ceramicsthat awed European and American travelers, a far cry from its current
global perceptions. Today, 30-plus years after the start of economic reforms that opened up the market,
Chinese goods are moving back up the value chain.
Domestic manufacturers are producing a range of quality products for Chinas increasingly discerning
middle-class consumers and Western shoppers alike. Haier, for instance, is working on developing higher-
end products for the European market, where the appliance manufacturer has doubled its market share
over the past ve years. In some sectors theres simply no choice but to focus on brand-building, given
an increasingly competitive domestic market in which weak brand value makes a label easy prey for
commoditization.
Image credit: Jessica Vaughn
OVERCOMINGTHE ROADBLOCKS
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The push to build quality homegrown products is being fueled from above. According to Reuters, The government is
encouraging its companies to move up the value chain and develop margin-producing brands, partly as a matter of national
pride but also to shift the worlds second-biggest economy away from gritty, low-prot manufacturing. Beijing is also trying
to pump up local demand: For instance, the Ministry of Industry and Information Technology recently issued a mandate thatofcials buy only domestic cars, forcing a shift away from the German luxury brands that are currently favored.
While critics argue this method of protecting domestic brands wont help them to scale globally, the government hopes to
prove them wrong. Going beyond a boost from the state, there are several key ways that brands can begin to knock down the
roadblocks to overseas success.
Take back Made in China:Rather than be constrained by Made in China, some brands are working to take back the label.
These companies are tackling the negative stereotypes head-on rather than skating around the fact that consumers may
assume the Chinese-made products are unoriginal or poorly constructed.
Luxury apparel label Shanghai Tangonce traded on the tagline Made by Chinese, which helped the brand go global.
Prominent sportswear brand Li-Ningwelcomes visitors to its English-language website with the greeting Straight Out of New
China. Be Unexpected. Do Different. Make the Change. As Abe Sauer wrote in Brandchannel, The new China can be dened
by each consumer, and maybe thats their point.
OVERCOMING THE ROADBLOCKS (contd.)
Image credit: Li-Ning
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One of the worlds largest air conditioning manufacturers, GREEtouts that its Created in China, focusing its branding
activities around the idea of being a leader in tech innovation. And the brand deliversits an industry leader in energy-
saving technology.
Proudly Made in China is
the slogan for One Small Point
of Pride, or OSPOP, a budding
footwear line dreamed up by
an American entrepreneur
living in Shanghai. The brand highlights that China is a
nation of industrious, optimistic people creating great
opportunities for themselves and for their future.
Interestingly, OSPOP initially targeted its shoesinspired
by the kicks Chinese construction workers wearat young,
trendy Westerners (with some success) before starting tofocus on Chinese consumers last year. (Judging by reports
of knockoff versions throughout China, Chinese shoppers
seem to have embraced the product.)
The Chinese government itself has been working to counter
negative perceptions around Made in China. Back in 2009,
the Ministry of Commerce kicked off an ad campaign that
aimed to illustrate that Chinese-made products represent
global collaborations, with various partners co-creating
something of value for consumers everywhere. Among other
scenes, a jogger laces up running shoes that carry the label
Made in China with American sports technology, and a
garment featured in a fashion shoot bears the tag Made in
China with French designers. The spot, which started airing
in Asian markets and then expanded to the U.S. and Europe,
closes with the tagline, When it says Made in China, it
really means Made in China, made with the world.
Compete at a world-class level:Until the Made in China
burden is shed, brands emerging out of China will need to
offer superior products that more than hold their own
against global benchmarks of quality and design. The
standards will be those of old Chinese culture, when
only the best would do.
A few brands are elevating Chinese goods to the world-class level by focusing on high-end craftsmanship and design. Flipping
the prevailing model on its headChinese companies manufacturing on their home turf, then adopting European-sounding
names to avoid negative associationsthe new luxury menswear line Sheji/Sorgeredesigns its wares in China but off-shores
its manufacturing to Italy, taking advantage of the nations legacy of quality craftsmanship. (As yet the line is focused on the
domestic market.)
OVERCOMING THE ROADBLOCKS (contd.)
Image credits: OSPOP; Jessica Vaughn
Its true that unscrupulous people have
tainted Chinas image. But as Chinese
ourselves, we cannot deny who we are
by pretending to be somebody else. We
must bravely face the challenges.
Im a believer in making a feature of our disadvantages
instead of hiding our roots (which a lot of local brands
do). We emphasize the fact that we are Chinese.
DOUGLAS YOUNG, co-founder oHong Kong-based lifestylebrand Goods of Desire
People are working hard, education levels
are rising, people are traveling more and
enjoying more leisure time. Why shouldn
Chinas development story be the foundation of a
fashion brand? BEN WALTERS, founder of OSPOPOSPOP: The shoe inspired by Chinas labore
comes home, CNNGo.com, Feb. 24, 201
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Chinese retailer Bosideng, which operates nearly 11,000 mainland-China outlets, is taking a similar route for its rst European
outpost. Known in China primarily for its midmarket down coats, the company is debuting near Londons central Oxford Street
shopping area as a luxury label, with most of the garments made in Europe. The retailer will trade on exclusivity by limiting
production to 50 pieces per garment.
The concept is not entirely new: Since 1993, upscale clothing
label Marisfrolghas been designing its goods domestically
and sourcing most of its fabrics from markets such as Italy,
Japan and France. The company is making headway into
foreign markets, with recent expansions into South Korea
and Singapore.
Hangzhou-based fashion label JNBY, founded by a collective
of art and design students in 1994, has also made international
inroadsthe company boasts 600 stores globallyby focusing
on design and innovation.
ChangYuChinas rst winery,
established 120 years agohas
emerged as one of the top 10 wine
producers in the world. ChangYus
Jiebaina dry red ranked as one of the worlds top 30 wine
brands during the 2008 Salon International de lAlimentation,
a food and drink expo in France. Today ChangYus product has received a seal of approval in important wine-producing
regions such as France, Germany and Italy and is sold in almost 30 countries.
Superior quality, design and craftsmanship directly counters some of the biggest challenges facing Chinese brands withoutexplicitly addressing the Made in China stigma; instead, the products speak for themselves.
OVERCOMING THE ROADBLOCKS (contd.)
Image credits: ChangYu; Bosideng
[JNBY is] an example of how good
Chinese fabrication can be. The design is
quite simple, yet avant garde. Theyve
made an excellent transition from manufacturer to
brand builder. LIN LIN, co-founder of design groupJellymon, Made in China is nally cool,
CNNGo.com, Feb. 8, 201
Glad to see that ChangYu can produce
great white wines, red wines, sweet
wines and brandiesall different
products but all at a very high level. They compete
very well with the French wines.
PIERRE BARTHE, French sommelier, Changyu holds wine tastingto mark 120th anniversary, China Daily, June 29, 2012
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Lean into national identity:While Made in China is a negative, Chineseness itself is in many ways a positive in the eyes
of international consumers. When asked to personify China in comparison with the U.S., the U.K. and Japan, respondents
generally perceived the Middle Kingdom as successful, traditional and diligent. (See Figure 2A; for country breakdowns, see
Appendix, Figures 2E-2F.) And Chinas citizens are considered the smartest people around, laden with leadership potential.(See Appendix, Figures 2L-2N.)
A paradox has thus emerged in the Western mindset: Some of the brainiest and most hardworking people are producing some
of the cheapest, lowest-quality products available.
Our research also found that the traditional elements of its culture are the aspects of China that both American and British
consumers feel favorably about. When asked about Chinese history and heritage, 72% of respondents said they would be
interested in learning more about Chinas cultural history; three-quarters of respondents said they admire the way Chinese
people have been able to maintain their sense of tradition in the modern world. And 6 in 10 felt that their culture could learn
a lot from the Chinese way of life. (See Figure 2B; for country breakdowns, see Appendix, Figures 2G-2H.)
OVERCOMING THE ROADBLOCKS (contd.)
FIGURE 2A:
Country personality (U.S. and U.K.)Imagined personality characteristics of the following countries by American and British adults
TRADITION/DILIGENCE
SUCCESSFUL
RELIABLE
CAREFREE
Lives for themoment
Could probablyhotwire a car
Doesnt sweat the small stuff
Always makes agrand entrance whenwalking into a room Knows the best
restaurants in town
Treats themselves very well
USA
UK
Japan
China
Would give up seat for an elderly person
Enjoys the simple pleasures in life
You know what to expect from them
Has a goodsense ofhumor
Would follow to get outof a burning building Would jump
out of a boat
to save you
You could tell a secret to
Would leave your kidswith for two weeks
Would alwayshave a good time
Respectfulof nature/theenvironment
Always shows up when they say they will
Would have a well-organized closet
Could win aNobel Prize Family stories passed
down through generations
Would spend days working inorder to make sure it is perfect
Would be a successfulentrepreneur
Usually getstheir way
Always thinkingoutside the box
Loves to take things apartto see how they work
Believes in tough parentingto ensure child succeeds
More spiritually evolved
Doesnt question authority
Puts in whatever hours areneeded to get the job done right
Would sell everything to puttheir child through college
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These spheres of positive perception have been largely
overshadowed in recent decades by the legacy of Made
in China and the nations rocky relationship with the West.
For Chinese brands, theres an opportunity to trade onnational identity and drive a new conversation about
brand China, focusing on culture, history and widespread
perceptions of Chineseness.
At the same time, theres a nascent preservationist spirit in
Chinaa desire to protect its heritage and culture, which a
growing number of people see as being sacriced in the drive
toward modernization and development. (No other country
has tried to cut off its history more radically, argued artist
Johnson Chang in a Wall Street Journalfeature describing
his heritage-preservation efforts.) This recalibration ofvalues after a period of relentless, rapid change comes as
no surprise, given that Chinese society fears uncertainty and
instability above all. Bursts of growth are often followed by
periods of stabilization.
Perhaps this new mindset will give rise to Chinese brands that
lean into national identity and leverage that focus to nd
traction abroad. A few smaller companies are already trying
that tack or reviving Chinese heritage brands.
The mission of Hong Kong-based Goods of Desire, which
sells everything from furniture to apparel and accessories,is to be quintessentially Hong Kong and promote a new
Asian lifestyle brand by revitalizing local heritage. Over
the course of its 16-year history, G.O.D. (as its known
locally) has won a number of design and retail awards and
found a home in international boutiques; this year G.O.D.
opened its rst overseas retail location, in Singapore. The
companys products are inspired by Hong Kongs complex
history of Eastern and Western culture clashing up against
one another, with the brand making a conscious effort
not to perpetuate the clichs that come to mind for many
international consumers but rather to introduce shoppers to
an authentic, richer culture.
OVERCOMING THE ROADBLOCKS (contd.)
Image credit: Goods of Desire
FIGURE 2B:
Attitudes toward Chinese culture(U.S. and U.K.)Percentage of American and British adults whoagree with each of the following
Millennials (18-34) Gen X (35-47) Boomers (48-67)
China has such a longcultural history; Id
be interested to learnmore about it
72%
73
71
71
I think our culturecan learn a lot
from the Chineseway of life
62%
62
63
60
I admire how Chinesepeople have been
able to maintain theirsense of tradition in
the modern world
76%
74
77
77
There are someamazing things inChina that I think
would provokea lot of interest
here in the West
72%
69
71
76
Chinese companies only make products, and none of them
link their products to culture. XIA YANG, president of BeijingSunny Times Polo Sports Co. Ltd., High-end
Chinese brands coming soon, China Daily, May 1, 2012
https://www.facebook.com/photo.php?fbid=10151066794544311&set=a.321619894310.147087.289037724310&type=3&theaterhttps://www.facebook.com/photo.php?fbid=10151066794544311&set=a.321619894310.147087.289037724310&type=3&theater -
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Meanwhile, spurred by both Western and domestic businesses, theres been a
revival of traditional Chinese labels, many of which all but disappeared after
multinationals started entering China in the late 1970s. In 2009, for example,
a limited-run redesign of heritage brand Shanghai Watch Co.sold out not onlydomestically but in trendy boutiques such as Colette in Paris and Kidrobot
in New York. Chinese-born labels Feiyueand Huili(or Warrior) sneakers,
established in the 1920s and 30s, respectively, have undergone design updates
albeit by European companiesand found favor among hip international
audiences, who buy into the brands heritage. Theres also been buzz about a revival of the Hongqi, or Chairman Maos Red
Flag limousine, which was originally manufactured from the 1950s to the 1980s.
Blending the old with the new in a way thats relevant for a modern consumer is one
potential route to success for Chinese brands. And as Chinese companies become more
savvy marketers, they will be able to better tell the story of Chinese culture and heritage
through their products.
Li-Ningtapped into this idea with the U.S. release of its Year of the Dragon Collection earlier this year. (2012 coincides with
the year of the dragon in the Chinese zodiac.) The company produced four limited-edition new designs of its Turningpoint shoe
that evoked visions of old China and carried symbolic associations. For instance, one design used the same shade of yellow
that Tang dynasty rulers wore. The names (e.g., Porcelain, Emperors Robe) reinforced the theme. Sneakerheads across
the U.S. went nuts for the shoes and the line.
Just as nations such as Japan, Korea and even Germany have done, Chinese brands looking to compete in international
markets will need to turn Chineseness into a conceptual advantage rather than a perceptional weaknessa turnaround that
will rely on clever branding campaigns that play on consumers more positive ideas about China.
OVERCOMING THE ROADBLOCKS (contd.)
Image credits: Huili; Feiyue; Li-Ning
I believe that globalidentity, national
identity and individual
identity can all
coexist. Due to the big
trend of globalization nowadays,
there is a lot less focus in Asia
on building regional identity.
I hope G.O.D. can re-emphasize
the importance of identity to our
consumers. I think it is our unique
identity that makes interaction on
the global level a lot more
interesting. DOUGLAS YOUNG,co-founder of Hong Kong-basedlifestyle brand Goods of Desire
http://www.warriorfootwear.com/http://www.feiyue-shoes.com/blog_en/https://www.facebook.com/photo.php?fbid=10150603839881152&set=a.152959566151.123662.103853416151&type=3&theaterhttps://www.facebook.com/photo.php?fbid=10150603839881152&set=a.152959566151.123662.103853416151&type=3&theaterhttp://www.feiyue-shoes.com/blog_en/http://www.warriorfootwear.com/ -
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Tap into the Millennial worldview:Chinese brands will
likely nd Millennials to be more receptive than older
generations. Compared with their predecessors, these
consumers have grown up in a much smaller, moreconnected world and have been exposed to a wider array
of worldviews at a younger age. And they know China as
a modernizing, rapidly emerging marketa very different
country from the one that older consumers remember.
Our research found that Millennials are slightly less biased
against the Made in China label. Compared with older
generations (especially Boomers), Millennials were the least
likely to identify Chinese brands as mass-produced, cheap
and constructed using poor safety standards. (See Figure 2C;
for full list and country breakdowns, see Appendix, Figures2I-2K.) American Millennials stand out in their openness to
trying Chinese brands, especially when it comes to video
games, appliances, clothing, alcohol and even cultural
exports such as music. (See Appendix, Figures 2O-2Q.) And
Millennials are the most likely to purchase and be impressed
by products made in China (seeFigure 2D), though its
important to note that these still fell well below American-
and Japanese-made goods.
For todays youth, China doesnt live only in textbooks
or on the History Channel. They are gaining a better
understanding of China through direct exposure, which
is likely to make for a generation thats more hospitable
toward Chinese brands.
Chinese students outnumber any other international cohort
in American universities, according to the American Chamber
of Commerce China. And some 90,000 Chinese students were
attending British universities in October 2011.
The cultural exchange goes both ways. Todays global-minded Western youth are looking to bridge the divide, simply out of
curiosity or to gain an edge in a future likely to be dened by Chinas economic might. One American undergrad studying
in China explained to Channel News Asia, I just have an interest in China and Chinese. ... Its really different, its reallychallenging, and I like that about it. Ive always found the culture fascinating from the rst exposure I had to it. Some
estimates forecast that the number of international students in China, currently at a quarter-million, will double by 2020.
(President Obama introduced an initiative to send 100,000 American students to China in 2009.)
Faced with a tough job market at home, some recent American and European college grads are relocating to Asia. The Chinese
government welcomes this inux and has eased its immigration policieseducated and ambitious young people can help ll
the labor gap this aging nation faces and potentially drive innovation. Last year the government extended an effort to attract
up to 1,000 non-Chinese academics and entrepreneurs over the next decade.
OVERCOMING THE ROADBLOCKS (contd.)
FIGURE 2C:
Impression of Chinese brands (U.S. and U.K.)Top six phrases associated with Chinese brands byAmerican and British adults
Millennials (18-34) Gen X (35-47) Boomers (48-67)
47
62
Mass-produced
35
53
Cheap
26
47
Poor safetystandards
22
31
Poorly made
21
27
Unreliable
21
22
Ordinary
48
44
31
24
22
17
52%
44%
35%
26%
23%
20%
The openness among Millennials and
upper-income levels is a key part of ourstrategy, as it provides an opportunity for
us to tap into these markets and tailor our products
to t their needs. CRAIG HEISNER, VP of sales, marketingand merchandising at Digital Li-Ning,
Study shows Americans view Chinese brandspositively, China Daily, June 15, 2012
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OVERCOMING THE ROADBLOCKS (contd.)
FIGURE 2D:
Country manufacturer strength (U.S. and U.K.)American and British impression and likelihood of purchase for country manufacturers
LIKELY TOPURCHASE
IMPRESSED
NOTIMPRESSED
NOTLIKELY TOPURCHASE Made in Brazil Millennials
Made in the USA Millennials
Made in Japan Millennials
Made in India Gen X
Made in Japan Gen X
Made in India Boomers
Made in Brazil Gen X
Made in the USA Gen X
Made in Brazil Boomers
Made in Thailand Boomers
Made in Japan Boomers
Made in the USA Boomers
Made inThailand Gen X
Made in India Millennials
Made in Thailand Millennials
Made in ChinaBoomers
Made in ChinaGen X
Made in China
Millennials
Its not just that the technology is pulling people together.
Youve got a lot of cross-cultural integration, and youth today
travel a lot more as well, compared to when I was younger. This
has just made these guys a lot more aware, a lot more informed
and a lot more connected. HOWIE LAU, VP of marketing andcommunications for Asia Pacic
and Latin America, Lenovo
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OVERCOMING THE ROADBLOCKS (contd.)
Theres also been worldwide interest in learning Mandarinsome say there are 50
million people of all ages studying the language. The U.K. and Indian governments,
among others, are working to boost the Mandarin curriculum in schools. In the U.S., the
number of high school students taking Advanced Placement exams in Mandarin morethan doubled between 2007 and 2010; and the number of American undergrads studying
Chinese more than doubled between 1998 and 2009. (By the same token, within Chinas
borders there are nearly 300 million people learning English.)
This Millennial interest in China extends to the other BRIC nations. Lenovos Howie Lau says Brazilian youth are positively
inclined towards China, regarding it as the next big growth engine. And studying in China has become a popular option
for Indians, especially medical students, since the country started accepting Chinese university degrees in 2010. The
number of Indian medical students in China is forecast to increase by more than 20% this year.
Lenovosmartly tapped into the global
Millennial mindset with its rst global
campaign, For those who do, which
launched last year, positioning the
products as tools for this go-getter
generation to get things done. In
one ad, reminiscent of the nal
scenes of Fight Club, a team of urban
hackers passes along a Lenovo laptop
theyre using to orchestrate a dazzling
urban light show. In India, Russia and
Indonesia, Lenovo set up The Do
Network, an online forum where
young people could submit community
improvement ideas for a chance to win
access to university research labs (Do
Labs), Lenovo machines, a team of
mentors and $25,000 to turn their idea
into reality.
Drive innovation and lead categories:Developing a culture of innovation remains a
major challenge for many Chinese companies, but China is starting to address this. In
the realm of education, some Chinese are questioning the systems prevailing practice of
textbook memorization and data regurgitation. And wealthy parents are shipping their kids
off to foreign schools, where theyre learning self-expression and creativity.
Various government mandates are focused on spurring innovation. One goal in the current
ve-year plan is for China to create 3.3 patents for every 10,000 of its 1.34 billion citizens.
Overseas patent lings by Chinese companies are already up, rising from around 5,500
in 2007 to an estimated 16,400 last year, according to the World Intellectual Property
Organization.
Image credit: Eric Nishio; Lenovo[1], [2]
http://www.flickr.com/photos/ericnishio/6797015279/http://www.youtube.com/watch?v=KdZNUxPiwMshttp://www.youtube.com/watch?v=KdZNUxPiwMshttp://facebook.com/Lenovohttp://facebook.com/Lenovohttp://www.youtube.com/watch?v=KdZNUxPiwMshttp://www.youtube.com/watch?v=KdZNUxPiwMshttp://www.flickr.com/photos/ericnishio/6797015279/ -
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The most successful Chinese multinationals tend to pour a
great deal into R&D. Huaweirecently announced plans to
boost R&D spending to $4.5 billion this year as it seeks to
move more deeply into the mobile-device and enterprise-network markets; just under half of Huaweis employee
base is engaged in R&D. And Lenovooperates 46 research
labs across the globe.
Realistic or not, executives around the world believe
that China will begin to drive global innovations: 45%
of respondents to a 2012 survey by KPMG believed
China would become the next major innovation center,
and around 30% felt the next disruptive technology
breakthroughs would come from within Chinas borders.
Technology companies are indeed leading the way. This year,
for instance, Lenovo is set to release the IdeaPad Yoga, an
ultra-thin device thats part tablet, part laptop: It features a
keyboard that can be tucked behind the display, emulating an
iPad. Huawei, which makes mobile telecom equipment and
serves more than a third of the worlds mobile phones, was
one of Fast Companys top ve Most Innovative Companies
in 2010. On a mission to become one of the worlds
top three smartphone providers
by 2015, Huawei is pushing its
Ascend D Quad (which it claims is
the worlds fastest smartphone)
in Western markets.
OVERCOMING THE ROADBLOCKS (contd.)
Image credits: Lenovo; Huawe
We invest more than most others on
R&D just to be able to go out there
and consistently demonstrate the
innovations and the quality and the
product to go the extra mile. We
think its necessary, because this will give
the customers the peace of mind that we are
committed to what we say were going to do.
HOWIE LAU, VP of marketing andcommunications for Asia Pacic
and Latin America, Lenovo
We are optimistic
about the future
of the PC, but
we also know that we must
look beyond traditional PCs
for growth, innovation and
new markets.YANG YUANQING, CEO of
Lenovo, speaking at CES 2012
http://shop.lenovo.com/http://www.huaweidevice.com/worldwide/http://www.huaweidevice.com/worldwide/http://shop.lenovo.com/ -
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Appliance manufacturer Haier, dubbed a leader in Chinese innovation by Booz &
Company, has produced a range of innovations, from rat-proof appliances for Chinese
farmers to a refrigerator equipped with a pizza-sized drawer for American buyers. The
company also markets an air conditioner that doubles as a security device thanks to anembedded camera. Haier plans to attract midmarket European consumers with a similar
feature on an upcoming refrigerator, which will monitor the kitchen via an external camera
and touch screen. And it recently unveiled two novel television prototypes: an ultra-thin
transparent TV screen and Brain Wave, a TV that users can control with their mind.
Automaker BYDcreated a buzz at this years Beijing auto show by introducing a remote-controlled car, the F3 Plus,
claiming that its the the rst mass-produced vehicle featuring remote control driving as a standard feature, according to
MITs Technology Review. With a special key, drivers can remotely move the car forward and backward, and turn it.
If a product proves its worth, standing out as a category leader or innovator, consumers ultimately wont care much where
its from. And if potentially breakthrough products like these live up to their hype, they can go a long way toward dispelling
consumer skepticism around Chinese brands, swatting at the perception that Chinese manufacturers are simply copycats.
Ride on international brand
coattails:Whether by acquisitions
or simply via one-time partnerships,
Chinese brands stand to make
valuable strides by aligning with
brands that are already global
sensations or know how to steer
through international waters.
Hong Kong-based Goods of Desirehas collaborated with a number
of global brands. Companies
including Swatch, famous French
paper manufacturer Clairefontaine,
BlackBerry, Hello Kitty, Dr. Martens,
Microsoft Xbox, Sony Vaio and Canon have created products in
partnership with G.O.D.s designers. In 2009, after Starbucks
tasked G.O.D. with designing a store in Central Hong Kong, co-
founder Douglas Young modeled the space after a bing sutt,
a midcentury-style Hong Kong food outpost where Western
foods were rst introduced. The store was such a success thatStarbucks created special avored drinks and Chinese snacks
for the location. G.O.D. also produced a line of souvenirs
for the ocks who came to the unique location. A second
such Starbucks opened this year, themed around locally
produced movies.
OVERCOMING THE ROADBLOCKS (contd.)
Image credits: Haier; BYD; Goods of Desire
Interior of bing sutt-inspired Starbucks outpost iHong Kong designed by G.O.D. co-founder Douglas Youn
http://www.engadget.com/2011/09/04/haiers-transparent-organic-tv-eyes-on-video/https://www.facebook.com/bydcompanyhttp://www.goodsofdesire.com/http://www.goodsofdesire.com/https://www.facebook.com/bydcompanyhttp://www.engadget.com/2011/09/04/haiers-transparent-organic-tv-eyes-on-video/ -
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OVERCOMING THE ROADBLOCKS (contd.)
Image credits: Swatch; Anta; Meters/bonwe
This year, Chinese celebrity clothing designerUma Wang, whose styles have graced the catwalks of
Milan, partnered with Swatch to create two watches for the Swatch Art and Fashion collection.
Chinese brands are also riding on the coattails of various sports teams and athletes across the West, via
sponsorships. This year, Lenovobecame the ofcial tech sponsor of Americas National Football League,
and Peak Sport Productssigned an endorsement deal with the Miami Heat. Peak, which has sponsored
the Heats Shane Battier for six years (among other NBA players), opened its rst U.S. store earlier
this year, in Los Angeles. Haieris the ofcial HDTV sponsor of the National Basketball Association and
sponsors a New Zealand netball team,
the Haier Pulse. Chinese sportswear
maker Antamade headlines in 2010
when it started sponsoring NBA
superstar Kevin Garnett. This year,
Li-Ninghas been making prominent
appearances at a range of sportingevents; for the London Olympics,
its backing a Russian pole vaulter,
a Jamaican sprinter, a Norwegian
javelin thrower and the USAs star triple jumper
Christian Taylor. Li-Ning also served as the gear and
footwear sponsor of the 2012 Red Bull King of the
Rock basketball championship.
A few Chinese brands including Lenovo and TCL
phones have also recently tried their hand at product
placement within American lms and TV shows.
Midrange apparel retailer Meters/bonwe, which
plans to expand internationally in the next three to
ve years, has made two cameos in the Transformers
movie franchise and tested out the gaming space,
collaborating with the producers of World of Warcraft
(which has been more successful for the brand than
the Transformerplacements, according to reports). In another notable placement, Yilimilk brand Shuhua made a brief
appearance on hit sitcom The Big Bang Theoryearlier this year.
A seal of approval from a strong Western brand (whether a product, person or TV program) potentially helps to elevate
the Chinese label at home while bringing it to the attention of international audiences.
Become a leader in CSR:With consumers skeptical about the trustworthiness of Chinese companies and dubious about
their green credentials, substantive corporate social responsibility initiatives would go a long way toward rebranding Made
in China among consumers. And some argue that CSR is an area in which Chinese brands could potentially excel, due to a
number of factors.
Patriarchs by nature, Chinese companies will likely begin to adopt a uniquely Chinese version of CSR, thanks largely
to the governments focus on promoting stability. Beijing is pushing for greater energy efciency, for example, because
runaway pollution in China means wasted lives, air, water, ecosystems and moneyand wasted money means fewer jobs
and more political instability, as The New York Times Thomas Friedman explained in a 2010 column.
http://shop.swatch.com/http://www.anta.com.cn/en/home.phphttp://www.metersbonwe.com/#/app=hothttp://www.metersbonwe.com/#/app=hothttp://www.anta.com.cn/en/home.phphttp://shop.swatch.com/ -
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OVERCOMING THE ROADBLOCKS (contd.)
Image credits: David Barrie; Haier
Currently the worlds top emitter of carbon dioxide,
China has set a range of pollution-reduction and other
environmental goals, including a 40-45% cut in carbon
emissions by 2020 and an 11.4% increase in non-fossil fueluse by 2015 as part of an emphasis on higher quality
growth. Its an ambitious target, though, given that Chinas
CO2 emissions increased in 2011.
While Western companies have gradually come to understand
that measures designed to help the environment can also help
the bottom line, this is something that pragmatic Chinese
leaders in government and business may be quick to understand.
Smart CSR policies are seen less as a matter of generating
warm and fuzzy feelings and more as the right thing to
do, mostly because it will be the thing that provides the bestreturn, according to branding consultant Joseph Baladi.
Due in part to mandates that all state-owned institutions publish CSR reports by 2012, reporting is on the rise. In the six
years leading up to 2005, only 22 CSR reports were published in China, largely by multinationals; in 2010, there were
703 reports, focusing on a diversity of content. Reporting begets more transparency, which increases awareness of CSR
activities among consumers and raises expectations, which in turn helps to drive more impactful CSR efforts.
Perhaps the next generation of leaders will drive more substantive change: In a 2012 survey by Deloitte on Millennial
attitudes toward business, Chinese youth stand out in their concern about the lack of commitment to sustainability among
business leaders. More generally, Chinese citizens rank the highest globally in terms of a desire to be in tune with nature,
according to GfK Roper Consultings Values Factbook. And per a 2010 Datamonitor report, Chinese consumers are deeply
concerned about environmental issues and how their everyday activities are contributing to them, with a high proportionalready taking action to improve the sustainability of their lifestyles.
Since a sense of collective responsibility is an important aspect of Chinese culture, along with conformance to social
norms, environmental concern could well start to drive consumer decisions. Plus, as growing numbers of Chinese see their
basic needs met, theyre beginning to demand more of consumer goods and services, not only in terms of sustainability.
Impatient with substandard product quality, food-safety violations, poor accountability
for major missteps and so on, they are less tolerant of secrecy and lack of transparency.
Haiers global brand building has emphasized its environmental credentials. This year,
for instance, the company helped to promote Earth Hour, staging performances across
North America, Europe and Asia to raise awareness around energy conservation. Haier
also supports a number of environmental organizations, including the U.S.-based
National Parks Conservation Association. The company was named one of Chinas top
global citizens by the World Economic Forum and the Boston Consulting Group, and
received Businessweek Chinas Greener China Business Award in 2009.
As part of its CSR efforts, Lenovohas focused on education in developing nations,
creating products geared for educational institutions. The company also has some of
the best green product ratings among PC manufacturers, receiving seals of approval
from a number of global bodies, and uses recycled materials in packaging.
Haze of pollution over Beijing
http://www.flickr.com/photos/addictive_picasso/274164473/https://www.facebook.com/Haieramericahttps://www.facebook.com/Haieramericahttp://www.flickr.com/photos/addictive_picasso/274164473/ -
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The journey to Western shores will undoubtedly be an arduous one for Chinese brands. Weve seen some notable
stumbles, such as sportswear maker Li-Ning closing its only U.S. retail outlet, a 2-year-old store in Portland,
Ore., in February. JWTs Tom Doctoroff believes that China as a nation will cross the river by feeling the stones
as it ascends to the global stageinching forward, occasionally overreaching but quickly correcting course.Perhaps this metaphor will prove apt for Chinas brands as well. Li-Ning, for one, isnt giving up on America, its
adopting a new tactic (focusing on e-commerce through a partnership with a Chicago marketing rm).
Weve outlined some key strategies that Chinese brands might use to overcome the roadblocks to expansion:
taking back Made in China rather than be constrained by the label; competing at a world-class level, offering
superior products; leaning into national identity and turning Chineseness into an advantage; tapping into
the worldview of Millennials, a more open and globally connected generation; driving innovation and leading
categories; riding on international coattails, aligning with popular global brands; and becoming a leader in CSR.
Image credit: Dave Morrow
CONCLUSION
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CONCLUSION (contd.)
This list is by no means comprehensive, nor is there a one-size-ts-all equation for successful expansion into
developed markets. For the methodical and cautious Chinese, this need not be the rst order of business
anywaya booming domestic market and lucrative developing markets represent tremendous opportunity. The
lessons learned here will ultimately help brands move beyond those markets. And as rising incomes create morediscerning emerging market consumers, improved quality and safety standards are likely to follow. The question
is whether consumers will follow Chinese products up the value chain or veer toward established brands.
If they can pioneer unique niches for themselves, Chinese companies wont need to go head-to-head with
successful brands. Trickle-up innovation is one area of potential: taking low-cost products designed for
developing markets to penny-pinching consumers in developed markets. After all, the Chinese are masters of
driving down costs.
More generally, products will need to compete at or above a world-class level, given that consumers
are carrying their negative perceptions of Chinese-made onto Chinese-created. A consumer who nds a
shortcoming or defect will quickly attribute the issue to poor Chinese quality and write off the brand, whereasconsumers who encounter similar problems with goods from elsewhere are more likely to give the brand a
pass. And thanks to low awareness of Chinese brands, some consumers will transplant negative perceptions
of one brand onto others, underscoring the need to build brand equity.
That will come over time as Chinese companies hone their advertising and marketing skillskeep in mind
the industry in China is relatively young. Chinese are adept at studying the competitive advantages of other
cultures and putting them into practice in uniquely Chinese ways, a point Doctoroff makes. Savvy executives
will watch and learn from many of todays dominant brands, mastering the best practices of branding.
Chinese brands have an opportunity to tell a fresh story about China, emphasizing everything consumers
like and appreciate (its culture, its people) or easing anxieties tied to the Middle Kingdom. As our researchfound, an array of factors are fueling negative consumer perceptions of China, but at the other end of the
spectrum, there are a number of factors that, while less inuential, drive positive opinions. Largely absent
from the global chatter on China, Chinese brands can start to drive new conversations about the nation (just
as American brands have done for 50-some years).
The next generation of business leaders may help accelerate change in Chinas corporate world. Millennials
have grown up in a booming and interconnected China, and many are Western-educated, trained to think more
creatively. As a result, well likely see a push-pull between the Millennial mindset and prevailing cultural norms.
Tom Doctoroff cautions that while this generation is increasingly worldly and conceptually adventurous,
they may regress to the mean when they are confronted with structure. But at minimum, executives adept
at navigating multicultural environments and foreign languages will be invaluable. On the consumption side,
Millennial consumers will be more welcoming than their elders to the arrival of Chinese brands.
The idea of Chinese brands is new to many consumers, but it wont be for long. From Bosidengs recent
landing in central London to Haiers drive to produce American-targeted goods (via an upcoming U.S.-based
R&D center), more Chinese brands are pushing into Western markets every day. And ultimately it may not
matter to consumers where theyre from: At the end of the day, people are not buying national brands, and
theyre not buying brands that have a certain provenance, says consultant Joseph Baladi. They are buying
great brands, and thats the most important thing.
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APPENDIX:MORE ABOUT OUR EXPERTS/INFLUENCERS
Image credit: Jessica Va
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WHAT WELL COVER (contd.)
JOSEPH BALADI, CEO of BrandAsian, author of The Brutal Truth About Asian Branding
As CEO of BrandAsian, Baladi provides one-on-one business and branding advice and counsel to CEOs
of some of Asias largest companies. He has experience in business communications across multiple
geographies; for the past 10 years, hes been based in Singapore, covering all of Asia. He has helped to
shape and reposition brands including Millennium Hotels (Hong Leong Group), Crocodile International,Eu Yan Sang, National Health Care Group and Macau Grand Prix. Prior to moving to Asia, he held senior
regional and global brand responsibilities at DMB&B and McCann Erickson Worldwide.
He is a frequent speaker on the conference circuit, a regular guest on business television programs, and regularly
contributes to business magazines and newspapers across Asia. His book The Brutal Truth About Asian Brandingwas
published in January 2011.
TOM DOCTOROFF, JWT North Asia area director and Greater China CEO, author of What Chinese Want
Doctoroff started his advertising career at Leo Burnett in Chicago but jumped ship to JWT (Chicago).
In 1994, he moved to Hong Kong as regional business director for clients such as Pepsi, Philip Morris/
Kraft and Citibank. In 1998, he landed in China as managing director of JWT Shanghai. In 2002,
Doctoroff was appointed Northeast Asia area director, covering China, Taiwan, Hong Kong and Korea,
and Greater China CEO. In 2008, he also assumed leadership of JWT Japan. Through diversication
into customer relationship marketing and trade marketing, promotion network management, digital engagement and
brand identity/design, JWT North Asia has emerged as one the most synergistically integrated, creatively dynamic
communications networks.
Doctoroffs book What Chinese Want: Culture, Communism and the Modern Chinese Consumerwas published in May
2012. He previously wrote Billions: Selling to the New Chinese Consumer.
HOWIE LAU, VP of marketing and communications for Asia Pacic and Latin America, Lenovo
Lau oversees branding, demand generation and public relations for markets including ASEAN,
Brazil, HTK (Hong Kong, Taiwan and Korea), India, Japan, Latin America and ANZ (Australia and
New Zealand). In his previous post as general manager of Lenovo ASEAN, Lau oversaw Lenovos
business across 10 countries. He was responsible for business operations, strategy development,
implementation, sales, marketing and relationship management with all stakeholders in the PC
industry for Lenovos commercial and consumer products and services.
Lau graduated from the National University of Singapore with a Bachelor of Business. He serves on the executive
council for Singapore Computer Society and Singapore IT Federation.
DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle brand Goods of Desire
Born in Hong Kong, Young was trained as an architect at Shefeld University and the Architectural
Association in the U.K. and has worked in Hong Kong on projects ranging from residential to
retail interiors. In 1996, Young co-founded Goods of Desire with Benjamin Lau. The shop retailscontemporary furniture, homewares and lifestyle accessories with a contemporary Chinese twist.
Most of the merchandise is designed in-house by a multidisciplinary design team led by Young. The
long-term vision is to build a Hong Kong brand that is both forward-looking and proud to display its cultural origins.
To date, G.O.D. has eight stores in Hong Kong, including a 20,000-square-foot agship store. G.O.D. products are
available in many of the worlds department stores, boutiques and museum shops.
APPENDIX: MORE ABOUT OUR EXPERTS/INFLUENCERS
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APPENDIX:ADDITIONAL CHARTS
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APPENDIX: ADDITIONAL CHARTS (contd.)
80%
70%
60%
50%
40%
30%20%
10%
0%
FIGURE 1E:
Country manufacturer impressions (U.S. and U.K.)Percentage of American and British Millennials aged 18-34 who associate the following traits with products made inChina, Japan and America
Made in China Made in Japan Made in the USA
High qualityReliable
Built/madewith pride
Impressive
Interesting
New anddifferent
Trendsetting
Cutting-edge
Stylish
Well-designedEthical
Environmentallysound
Poor safetystandards
Poorly made
Cheap
Mass-produced
Unreliable
Low-class
Ordinary
Boring
-
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APPENDIX: ADDITIONAL CHARTS (contd.)
80%
70%
60%
50%
40%
30%20%
10%
0%
FIGURE 1F:
Country manufacturer impressions (U.S. and U.K.)Percentage of American and British Gen Xers aged 35-47 who associate the following traits with products made inChina, Japan and America
Made in China Made in Japan Made in the USA
High qualityReliable
Built/madewith pride
Impressive
Interesting
New anddifferent
Trendsetting
Cutting-edge
Stylish
Well-designedEthical
Environmentallysound
Poor safetystandards
Poorly made
Cheap
Mass-produced
Unreliable
Low-class
Ordinary
Boring
-
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APPENDIX: ADDITIONAL CHARTS (contd.)
80%
70%
60%
50%
40%
30%20%
10%
0%
FIGURE 1G:
Country manufacturer impressions (U.S. and U.K.)Percentage of American and British Boomers aged 48-67 who associate the following traits with products made inChina, Japan and America
Made in China Made in Japan Made in the USA
High qualityReliable
Built/madewith pride
Impressive
Interesting
New anddifferent
Trendsetting
Cutting-edge
Stylish
Well-designedEthical
Environmentallysound
Poor safetystandards
Poorly made
Cheap
Mass-produced
Unreliable
Low-class
Ordinary
Boring
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