David Aaker thinks that it will be decades before Chinese companies are ready to develop strong brands capable of competing on the global stage. While I do not agree with his blanket assessment, I can personally vouch for one of the reasons he cites for his point of view. Unless senior managers at Chinese companies value the power of branding, then investment in brand and advertising will likely be wasted.
One thing that interests me about Aaker’s assessment is that it apparently ignores the fact that Chinese brands do not need to go global in order to scale.
China is a big market now, and McKinsey estimates that the number of households with an income over US$16,000 will increase by a factor of five in the next 10 years. However, many Chinese brands do aspire to go global, so let’s have a look at Aaker’s rationale for why they are unlikely to succeed.
First, Aaker asserts, existing multinationals have a set of brand management systems and tools that are lacking in Chinese firms. This may be true, but in high growth markets like China, even multinationals are struggling to attract people who can utilize those tools effectively. Another important point is that working from a Western playbook does not always work in China, and it would be wrong to assume that Chinese companies lack creativity when it comes to marketing.
Second, Aaker suggests there has been little motivation for Chinese firms to develop branding capability because current or ex state-owned enterprises owe their success to government support. Funnily enough, I was in China a few weeks ago working with one of these companies and let me tell you, there was plenty of motivation to develop a strong brand. Even if it is like re-engineering a Boeing 777 in mid-flight, people are working hard to strengthen bonds with their consumers because they recognize that if they do not, someone else will.
It is when we turn to Aaker’s third point that he and I are in agreement. He suggests that Chinese firms lack not only talent to develop and implement brand strategy, but also the will to do so at the top. In my experience, I would suggest that many Chinese companies have employed smart senior marketers who gained experience abroad with the very multinationals against which they now need to compete, but the same is not necessarily true of senior management. Aaker suggests most top managers have a purely functional and trading mindset with little understanding of what it takes to develop a strong brand. If so, that is a huge stumbling block.
So what are your thoughts on the likely global success of Chinese brands? Please share them below.
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November 28, 2013 at 5:34 am
Nigel – at the risk of being overly-simplistic in my interpretation, Chinese companies have gotten traction through the application of scale, lower operating costs and ravenous demand for cheap(er) goods in the West. They’ve been comfortable being white-labelled while that’s gotten them self space at Wal-Mart, Target and Sears.
That’s okay. For now.
Having experienced companies in several Asian countries (India, Japan and China) it is hard to convince them that white-labeled price-driven manufacturing is a long term sustainable model. As their cost-structures inevitably rise, the low cost provider model will atrophy. However, the rigour and discipline of creating a viable value proposition that offers more than low price is often lacking. The precept of “service” as a core function of any modern brand is also alien to many of those companies – they just have less experience of educated and entitled customers who are merciless in demanding better service from brands. Lastly, the marketing and advertising of brands on emotional levers versus rational ones like price, is also different to them. Many of their managers come from a mindset and communist history that believes this to be true of marketing – “you’ve no choice so I merely need to tell you I exist”
It can be done but there is too much recent SUCCESSFUL history that suggests building a brand isn’t important. YET.
I believe the Chinese are completely capable to evolving their business thinking to create world-class brands. Japan, India and Korea, with examples like Toyota, Hyundai and Tata, show us that you can evolve from low-cost penetrative brands to world-class ones.
November 29, 2013 at 9:54 am
David Aaker was kind enough to respond to my comments on his ‘The Real Reasons Chinese Firms Have Weak Branding’ post here:
The key points for me are:
1. China is different, not ‘behind’. Whilst China does not have a recent history of ‘brand management’ in the Anglo-Saxon sense, it is the home of the oldest recorded brand in the world and has had a sophisticated approach to branding for centuries: for example, branding could indicate an affiliation with the Imperial Palace or the worth of a family name as well as ‘product’ marketing.
2. Many western companies are just catching up with the fact that linguistic characteristics of brands build meaning. They have powerful emotional and cultural connotations. Chinese brand management is imbued with these ideas
3.The ‘P&G’ brand management model pioneered 75 years ago is no longer the dominant model – even in P&G.
4.Global brand success is now more dependent on succeeding in China than succeeding in America. Perhaps the real question is: what can western marketers to learn from Chinese marketers?
So, here’s my challenge: does the western marketer have enough humility to learn from China?
(There is an excellent review of many of these issues in: “A Brief History of Branding in China” Giana M. Eckhardt and Anders Bengtsson, Journal of Macromarketing 30(3))
Ricky de Werk
June 11, 2019 at 10:11 am
Although I do agree with some of the arguments brought forward by the above writers, after many years of teaching marketing and branding in China I feel that there are more arguments explaining the perceived gap in the global ranking of brands.
First, branding is supposedly done to promote sales. So how can market researchers explain that a large number of Chinese products have the number one, two or third position in terms of global market share? Part of the explanation in my eyes is the lack of real global surveys (yes, China by now is one of the largest consumer markets). I suspect that surveys are largely limited to western markets. But also that publishers are having problems in recognizing the superiority of global success of Chinese products.
Secondly, Chinese consumers, more so than western consumers, use e-commerce. It is apparent that the use of this new technology reduces emotional purchasing behavior because: 1) it is so easy and quick to compare functional and quality ranking that loyalty looses strength. Secondly, c-2-c communication also emphazises functional aspects of products and services, rather than the emotional ones used in advertising.
The third reason is often confirmed by the reaction of my students. Advertising requires showing off about the superiority of your product. The western culture is based on “doing good and talking about it”, the chinese are hesitant to brag. They are a very modest people. Notice sports champions talking to reporters about their achievements: western champions tend to talk about all the effort and energy they put into their achievements, while chinese sports champions talk about being proud to represent their country. This cultural difference results in both reluctance of companies to invest in advertising and consumers falling for it.
Finally, yes, wealthy Chinese are fond of showing their wealth by buying expensive western brands. But they are not brand loyal. They very easily switch from one to another. My feeling is that Chinese products are still less reliable in terms of quality (although this is changing fast) and consumers are seeking reliability in western brands. Proof of this is perhaps that the most well known Chinese brands are very large, very old, often state owned companies that warrant a certain quality consistency.
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