chinese marketing a view from the trenches by jehangir s. pocha china correspondent businessworld
TRANSCRIPT
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Chinese Marketing A View From the Trenches
By Jehangir S. PochaChina Correspondent
Businessworld
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A Google search for “China brands” returned: “China brands Taiwanese PM Chen Shui Bian a ‘troublemaker’”.
– How has a country with such a negative world image acquired such a positive economic image?
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• By thinking big – and succeeding
– While India has been debating how to attract buyers from Wal-Mart, China Entrepreneur magazine recently devoted a cover story to the question, "Should China Buy Wal-Mart?"
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• India leads China in terms of having a real private sector.
• But India’s private sector has been inwardly focused, while China’s has been outwardly oriented.
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• China’s reforms aimed at attracting FDI • The entire country has a Western, modern
orientation.
• For Chinese companies the primary customer was always overseas:– Domestic consumption is low (35% of total
consumption)– Export oriented incentives (export rebates are
biggest expenditure item in budget)– Cheap capital allowed rapid creation and large-
scale enterprises
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The Result (Domestically)
• In 1980, there were really no brands in China, domestic or foreign.
• In 2000, the top-10 brands in China were American.
• In 2005, of China’s top five brands only one was American – Coke.
• Now, almost all these brands have their eyes set on the overseas markets.
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Best Brands
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• CIMC – China International Marine Containers (state-owned)• China Ocean shipping - COSCO - (state-owned)• Geely Cars • Wangxiang Qianchao – automotive parts – Sundaram Fasteners• FAW cars (state-owned)• Broad - Air conditioners• Bird Mobile phones• Li-Ning clothing/shoes• YongHe fast food• Wahaha• GOME – electronic sales/retail• Tong Ren Tang Technologies – Medicines (Tiger Balm type)• Beijing Yanjing brewery• Peal River pianos• Shanghai Zhenhua Port machinery Group – cranes (state-owned)• North China Pharma Group - 25 % rev. from exports to US, Japan.
(Penicillin, vitamins)
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• Massive FDI factories and suppliers quickly taught Chinese companies how to create world-class products, with world-class finishing.
• China’s workmanship is superior to India’s because of– primary education – work ethic– language
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• Active participation of Taiwanese, Hong Kong, SE Asian and Western Chinese diaspora, who were already plugged into foreign markets.
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• THINKING BIG – Soviet-era gigantism still infects official thinking and has diffused throughout the country.
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• Yet China, which is an industrial behemoth, functions like a “start-up country”, while India which functions on a “start-up” scale functions like an old-school conglomerate
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China’s adage
• Don’t be afraid or too proud to bootstrap. • Learn to deal with “Status Deprivation”
– Tatas may be big boys at home with a culture of comfort and dignity etc. But that might be an impediment to succeeding in new markets where you need to be scrappy and/or innovate. How do you nurture both cultures? (Employees, delegation, etc.)
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• Leave aside textbook stuff. To win a game the minimum requirement is to play it. – The minimum requirement of marketing is:
• To know what customer wants.• To be able to deliver that in good time in a good way.
• Start with what you have got. – If you have scale, start with it (Haier, TCL).– If you have cheap capital, use it (Lenovo/IBM
and TCL/Thomson & RCA.
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• But you must learn to continually adapt and innovate and move up the value chain.
• Those who do will survive, others will die.
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• In the 1990s China’s lumbering State Owned Enterprises were an “unsolvable” problem
– Haier was one of those enterprises.
– Haier is now the largest home-appliances manufacturer in China- and its most valuable brand.
– $380 million of its $9 billion in sales comes from the U.S. where it claims a 50% market share in compact refrigerators and an 11% share in freezers.
– Moral of the story: There is no “right way”; there is only the way that is right for you.
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• China has incredibly low learning curves – The country has become so sophisticated so
quickly. • Chinese names used to be very culture specific,
Flying Fish typewriters, and Double Happiness Bedding.
• Even restaurants such as Southern Beauty win design awards.
– The advantage of not speaking English• Language issue improves social mobility.
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Activist government
• Pride should not prejudice our judgment of China– The biggest difference between China and India is not
systemic, its attitudinal
• Govt. engaged in building businesses & providing social services
– education, skills, policies, etc. – providing cheap capital.– Invisible support (contracts etc.)– Engaging with thought leaders.
• For example, the One Club, the international organization of advertising professionals, has been holding advertising seminars in China for the past four years.
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Free-market Fundamentalism
• 1997 : “One country, Two Systems” – Hong Kong – China
• 2006 : “One country, Three Systems”– Hong Kong– Capitalist industry and services– Socialist agriculture
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• All is not well. Like in India, local Chinese brands are losing out to foreign brands
– In 2003, in a Sinomonitor monitor of 27 product categories, Chinese brands led in 16 (incl. Lenovo, Huiyuan juice, Peony bank cards).
– In 2004, several domestic brands were replaced by foreign brands.
– For example, Liushen shower gel and Dabao skin care products were ousted by P&G's Olay brand in both segments.
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Why?
• Foreign companies have deeper systems and see value in “soft’ expenditures.– Last year, CCTV auctioned its prime time ad slots for a
record sum of 5.3 billion yuan (US$634 million). – P&G spent more than 385 million yuan (US$46.5 million)
at the auction and was the biggest bidder.
• Foreign products enjoy much greater brand loyalty than their domestic rivals.
• Consumption patterns are moving upscale. (Lancôme and Revlon reported sales growth rates of more than 90 percent).
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"The country's economic growth in the next 20 years will depend on
domestic brand building."- Li Guangdou, general manager of Beijing
Huasheng Shidai Advertisement Co.
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• And China still has a long way to go
– The country currently has 2 million registered trademarks- just one brand for every six registered companies.
– And foreign-funded companies own fully a quarter of those 2 million.
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• Biggest problem: Increasing professionalism and adjusting marketing strategies.
– Often, successes in the domestic market are mainly based on the sheer size of the market and relatively low labor costs. E.g. Nokia.
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Can Indian and Chinese companies really develop the culture of creativity, innovation, calculated risk and professionalism that Western and Japanese companies enjoy?
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The Choice
• The next US or EU or the next Brazil and Argentina.
– Infusion of capital and cheap labor will assure a middle rate of development
– But to transcend that China’s and India’s economies will need real efficiencies, and innovations.
– To do that requires real social change and emancipation, and far-reaching political improvements.
– As Alvin Toffler writes in his new book Revolutionary Wealth, advanced economies need advanced societies.