Chinese Marketing
A View From the Trenches
By Jehangir S. Pocha
China Correspondent
Businessworld
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?
• 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?"
• 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.
• 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 largescale enterprises
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.
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)
• 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
• Active participation of Taiwanese,
Hong Kong, SE Asian and Western
Chinese diaspora, who were already
plugged into foreign markets.
• THINKING BIG – Soviet-era gigantism still
infects official thinking and has
diffused throughout the country.
• 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
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.)
• 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.
• But you must learn to continually
adapt and innovate and move up the
value chain.
• Those who do will survive, others will
die.
• 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.
• 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.
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
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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.
Free-market Fundamentalism
• 1997 : “One country, Two Systems”
– Hong Kong
– China
• 2006 : “One country, Three Systems”
– Hong Kong
– Capitalist industry and services
– Socialist agriculture
• 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.
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).
"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.
• 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.
• 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.
Can Indian and Chinese companies
really develop the culture of creativity,
innovation, calculated risk and
professionalism that Western and
Japanese companies enjoy?
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.