How will Chinese brands conquer the world? – The WTO-column

(later also at Chinabiz)

One of the disadvantages of working for foreign media is that sometimes colleagues, sitting at their editorial desks in Amsterdam or New York, have a story idea for China. Since I have some quirky viewpoints on this country and tend to be rather stubborn too, that develops sometimes into heated exchanges.

What Chinese brands are going to conquer the market in Europe, was a question I got this week from Amsterdam. When you think about Chinese consumer brands going abroad you mostly think about Haier, eh Haier, and yes, Haier. In terms of brand names there is not that much more to talk about, I explained.

Brands and branding belong to the bread and butter of the Western business schools, where the new generation of managers learn the latest tricks to conquer markets by building up names, and by adding emotional values to soaps, shampoos, cars and medical devices.

The silent assumption then is that when China is moving upwards in the global market, its companies will start developing global brands too. A large number of Chinese has joined business schools in Europe, Australia and the US to learn all those tricks. But then, in case they do get a job, most of them do not end up at Chinese companies, but mostly join American or European enterprises. Maybe in the long run the Chinese companies have to comply with the bible of brands and branding as it is taught in those business schools, but for the time being they take the backdoor to conquer the European market.

The editor who called me was most likely wearing clothes, bags, watches and shoes with western brand names, western quality, and western prices and made in China. At night she would watch Big Brother on a Philips-TV set, made in China, make her last calls on a Motorola mobile from Tianjin, use an expensive vibrator, made in Wenzhou, and go to bed with her giant teddy bear from Guangdong.

China has already conquered much of Europe, although disguised as expensive Western brand names.

In China itself the combination of price and quality still dominates the sales strategy of almost any consumer product, despite eager PR-firms that try to teach the Chinese their fried air is worth money. Even in products like cosmetics, brand name has a value, as long as it is not too much out of line with pricing strategy of the competition. But for most products, the lowest price guarantees highest sales. Not necessarily the highest profits, we see during the fierce price wars on the Chinese markets. As logistics has improved over the years, physical barriers less and less stop those price wars to restricted areas.

For a Dutch editor it would make sense to expect Chinese brands to start investing in their brands and expand branding also to the global markets. But with some exceptions that is not happening and it might not happen altogether.

The effects of globalization and the success of Wal-Mart suggest even that prices are becoming more important on the American market too. As price pressure on suppliers increases, margins will get thinner and spending on brands and branding might become tougher than ever. In that way China could rewrite the current business bible.

Fons Tuinstra