The result is economic growth at double digit levels for several decades and a rapidly expanding middle class. This success has also led to new economic challenges as the expectations of China’s citizens for higher wages and quality of life have risen. China may well be approaching a tipping point for an economic transition from being export focused to becoming consumption-driven. After improving the world by manufacturing good basic products, Chinese businesses must now learn how to succeed through marketing and excellence.
Just as American brands like KFC, Coca Cola, Apple, Buick, and Pampers have learned how to successfully win over consumers worldwide, Chinese companies need to compete for brand preference employing more than a low price approach. Already, Chinese products are emerging as leading brands. WPP’s 2013 BrandZ Most Valuable Global Brands research has 12 Chinese brands among the top 100 global brands. However, a closer look at this study reveals that the top Chinese brands are mostly successful in China alone, and in sectors where access by foreign firms such as telecommunications, banking and insurance, Web-based technology, and energy is restricted. Though there are many Chinese consumer brands, such as Haier, Tsingtao, Li-Ning, Lenovo, Baidu, Tencent, and Huiyuan Juice, marketing to consumers outside of China has not been highly successful for Chinese brands thus far.
Marketing guru Philip Kotler defines marketing as both an art and a science. Chinese firms have mainly concentrated on science, via price. Now they must become better at creating higher quality products, placing them in distribution outlets that Western consumers prefer, and promoting them with a direct appeal to Western emotions. The best way to accomplish all this quickly is through the acquisition of Western firms with already established base of consumer preference. Therefore, in addition to the establishment of new brands, we are likely to see a significant expansion of Chinese acquisitions of U.S. and European consumer goods brands in the coming years.
Is this a good thing? Acquisitions by foreigners tend to be accompanied by concerns. When U.S. giant Kraft acquired British Cadbury, there was worry about diminished chocolate quality in the U.K. Now Americans (accompanied with much hamming it up by master comic Jay Leno) state that the Smithfield acquisition could lead to diminished quality and loss of American jobs.
Far from it ! The Chinese are not just obtaining products – imports and exports would have done that. Rather, the acquisition helps integrate China into the global economy, and contributes to its future branding success by delivering new connections, experience, capabilities and trust. The key benefits will be learning of both quality and marketing.
This article is a part of a series written by Michael Czinkota and Charles Skuba. Read part 1 here. Guest writer Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.