Few would dispute that China is a formidable competitor in the global arena. The growth of the trade deficit between the U.S. and China is a testimony to China’s success.
In the last two decades, the U.S.-China trade deficit ballooned from $10 billion to $273 billion. Toys to televisions, few U.S. or European manufacturers can compete with the economic advantages of Chinese production and labor.
Yet in the global economy, China has a competitive weakness that sits in plain sight: brand equity.
A quick 20-second Quiz:
- Name one brand of American automobile.
- Name one brand of American computer.
- Name one brand of American aircraft.
- Name one brand of American software.
- Name one brand of American clothing.
Easy, right? Now let’s try the same quiz… again, in 20 seconds:
- Name one brand of Chinese automobile.
- Name one brand of Chinese computer.
- Name one brand of Chinese aircraft.
- Name one brand of Chinese software.
- Name one brand of Chinese clothing.
How did you do? Unless you are Chinese, (and maybe even if you are Chinese), the second quiz is much more difficult, correct?
Now, expand this list to most branded products… Unless you’re thinking of martial arts superstars or very long walls, China simply falls short on brand recognition. If you are from Asia, you may know several Chinese brands, but on the global stage, China has failed to become a true brand competitor.
Successful branding is one of the reasons why American brands sell so well. Of course, Japan, Germany, France and other countries have great brands… Sony, BMW, Christian Dior. However, I would argue that in today’s global market United States is still the world’s powerhouse of branded products.
Right now, I’m in my office looking at two computer screens, with the brand names of Dell and Magnavox, a printer branded HP, a wireless router branded Cisco… Yes, I know what you are thinking: Then I look at the little label on the back, and yes, every single one of these items is “Made in China.” All of these products are Chinese-made, but they are American-branded. So are they Chinese products or American products? How much value does the American brand really add to the product?
Ask yourself, as a consumer from the U.S., Europe, Latin America, etc… Would you rather purchase a wireless router branded Huawei or Cisco? Never heard of Huawei? It’s the largest brand of computer router in China… and yes, many tech people might know and trust this brand, but not the average American or European consumer.
Imagine that you are at your local electronics store, and you want to buy a wireless router. The sales person says, “This Huawei router and this Cisco router have the exact same technical specifications and the same price.”
Which router would you buy? I’d guess 95% of you would buy the Cisco router. Okay, the sales person offers to reduce the price of the Huawei router by 10%. Would you buy it now? Okay, 20% off the Huawei router. Would you buy it now? Eventually, a typical American or European consumer might consider the Huawei router… but at what discount?
In short, the difference in selling price represents brand value or brand equity of the competing products. Brand is a matter of marketing. Brand is a matter of perception. Brand is a matter of purchasing decisions. Brand is a matter of global competition. In this regard, China is far behind the U.S., Europe and Japan.
While American and European companies rely on inexpensive Chinese labor to produce our products, China relies on American and European brands to sell the products.
Ponder these questions:
- Where would Chinese manufacturing be today without American or European brands?
- In the future, will Chinese-branded products gain wide acceptance on the global market?
- How can Americans and Europeans leverage their current branding advantage to better compete with China?
To be clear, I believe that China is a very respectable competitor in global trade. I believe that China produces some of the world’s finest products. (My mother only brought out the fine china porcelain plates on special occasions.) For many centuries, the Chinese demonstrated leadership in global commerce, long before the rise of large-scale European or American foreign trade.
That said, if China wishes to truly dominate today’s world economy, it must first win the global battle of the brands. This will be a tough battle indeed.