//
you're reading...
U.S. Exports

Branding: Where China falls short.

By Ray Hays, www.rayhays.com

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:

    1. Name one brand of American automobile.
    2. Name one brand of American computer.
    3. Name one brand of American aircraft.
    4. Name one brand of American software.
    5. Name one brand of American clothing.

Easy, right? Now let’s try the same quiz… again, in 20 seconds:

    1. Name one brand of Chinese automobile.
    2. Name one brand of Chinese computer.
    3. Name one brand of Chinese aircraft.
    4. Name one brand of Chinese software.
    5. 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.

Copyright 2011, Ray Hays. All rights reserved
www.rayhays.com 
For more information on Ray Hays’ professional background and international business consulting services, click here.
Advertisements

About rayhays

Ray Hays is an international executive and Member of the District Export Council of Arizona. Ray has over 20 years experience in franchising management, international business development and small business growth. He has field experience in over 50 countries, working for global market leaders in the service sector. He holds an MBA from the Thunderbird School of Global Management and a BS from Georgetown University.

Discussion

5 thoughts on “Branding: Where China falls short.

  1. Excellent article. If Chinese companies were to distance themselves from the need to use Chinese (Pinyin) names in branding, they could be much more successful in the short term. There is an implied quality issue with products associated with China. The exception to this is with foreign brands, I think that most consumers (right or wrong) believe there are stricter standards in the manufacture of foreign branded products in China. So the implied association of poor quality with China managed companies will take some years to overcome. In 20 years, it may look quite different, however that is the reality now. The flip side: with potentially the largest domestic market in the world, do they really care?

    Posted by Anonymous | September 22, 2011, 11:31 am
    • Very good point of Pinyin names in branding. This is key issue, which merits deeper analysis by more knowledgeable people in this field. Admittedly, the niche of linguistics within branding is not one of my areas of expertise.

      I believe that the perception of poor quality is a myth that will change over time. China makes good products as the norm, (despite some highly publicized exceptions), and without good quality products, China’s exports would not have grown to current levels. In the 1960s and 70s, average U.S. consumers considered Japanese products be inexpensive and low quality. This has changed, as it will in China.

      The point about the Chinese domestic market is very interesting. Hypothetically, without exports to fuel domestic spending, would China be as big of a market? Good food for thought. Thanks for the comment.

      Posted by rayhays | September 23, 2011, 12:49 pm
  2. Ray, your views are so typically “western”, i.e. self-centered and short-sighted. You forget that China has only re-emerged onto the global scene in the early 80’s after over decades of self-exile from the world community and wrenching internal turmoil. That it now commands a dominant position in global manufacturing is a testament to its tenacity and potential. You are wrong – branding is NOT just a matter of marketing; it is first and foremost, a matter of quality – quality of design and quality of manufacturing. China has mastered the latter and is well on its way to master the former. Marketing is last on the value chain involving research, positioning and promotion – soft sciences and arguably the easiest to master. Ask yourself, can U.S. make half of what China makes today? And despite their branding prowess, how well do American-made cars sell in Germany, Japan, or anywhere else for that matter? As for global brand recognition, I’m sure even you have heard of Sinopec, Bank of China, and Suntech (the largest solar panel manufacturer in the world.) Give China another 10 years and the Jili’s, Haier’s and whatyoumightcallit’s will be household names. Not all of them will roll off western tongues as well as Dell and Cisco. But then again, maybe by then the lingua-franca will be Chinese, not English.

    Posted by Anonymous | September 23, 2011, 9:34 am
    • Some valid criticism here. No, I am not Chinese. I am American, so yes, my views could be simply labeled as “typically Western”, however you may define it. I agree that western business can be described as comparatively “short-sighted” versus China or Japan.

      I found your use of the word “self-centered” to be ironic… What’s the meaning of this symbol? 中

      Note that I did not say that brand is JUST a matter of marketing. [I wrote, “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.”] All of these things — and more — play a part in branding.

      I agree that quality can be an important element of branding. In the U.S., a perfect example would be Firestone Tires, whose brand was literally destroyed by poor quality design and manufacturing that killed dozens of people.

      However, quality is only part of a brand, and in some cases, it is not a central part of the brand.

      Examples:
      Quality — Mercedes, Rolex, Ritz Carlton, Gillette, Pirelli
      Lifestyle — Starbucks, Harley Davidson, Gucci, iPad
      Convenience — McDonald’s, 7-11, KFC, Kinko’s
      Low Price — Walmart, IKEA, Bic pens, Dial soap, Ryan Air

      All of these brands will claim to provide “good quality” products and services. However, what they REALLY represent to the consumer (“the brand”) does not always need to scream “quality” to be successful. Is Kinko’s successful because they offer the best quality photocopies in the world? How did Ryan Air become successful? Cheap flights. Oh, yes, when I want to dazzle a client with high quality, I sport a Bic pen in the pocket of my shirt that I bought at Walmart.

      Yes, China has more manufacturing capacity… Great for exporting foreign-branded products.
      Yes, American cars are not the best selling in the world… Japan is way ahead. I’m still waiting to see a Chinese car on the road in the U.S. or Europe.
      Yes, marketing is a soft science… but if it is “the easiest to master”, then why doesn’t China just build their own export brands, instead of selling under foreign brands?
      Yes, I’ve heard of Sinopec, Bank of China, and Suntech… but the average American, Italian or Brazilian consumers would not recognize these brands.

      Coca-Cola, BMW, Sony, Microsoft, Nike — Mega-brands that are recognized worldwide. Until China adds a name to this list, it will continue to fall short on global branding.

      By the way, I have extended Chinese family, business ties many good friends in China, so please do not assume that I am “anti-Chinese.” You may continue to see me as short-sighted, perhaps even ignorant… and I appreciate your taking the time to open my eyes to your differing opinions.

      Posted by rayhays | September 23, 2011, 2:34 pm
      • Thanks a lot for sharing the wonderful insights on this article. I love it! What a thought-provoking article! I had mixed feelings after reading it.

        I love my home country China dearly, but have mixed feeling of love and compassion. However, born and raised in China, educated in the US, I considered myself an international Chinese, a global citizen. I don’t wanna be a self-centered and narrow-minded Chinese Chinese, so I have to say that I agreed a lot of things you said. It’s sad but so true sometimes. There is a Chinese saying that “a foreign moon is always rounder”. Even alots Chinese much prefer American brands over Chinese brands too.

        Hence, it is really important for Chinese to replace the words “make in China” with “designed in China”. I truly believe that it will happen in the near further. Japan went through the same issue. Decades ago, Americans thought that Japanese brands represent very low quality, but this perception changes nowadays. China has a long way to go.

        Again thank you so much for sharing your wonderful insights and assisting me in job searching in the US. It might be too late to call you today but I’m really looking forward to talk to you soon.

        Posted by Ashley | October 7, 2011, 4:31 pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: