Chinese firms work to build global brands.
In the midst of the Cultural Revolution a generation ago, a love of Western piano music might have made one a target for criticism. Now, Pearl River, a Chinese company, is the world’s largest piano manufacturer, with an annual production capacity of more than 100,000 units, helping China reach a new lead in worldwide piano production.
Manufacturing on a massive scale is nothing new to Chinese industry, but more Chinese companies are now selling their products overseas under their own brands, rather than simply manufacturing them for sale under another label. Pearl River is one such company that moved beyond being an “original equipment manufacturer” (OEM), producing under contract for a foreign company—it is a brand of its own. Pearl River is just one of many Chinese companies developing their own brands, effectively freeing themselves of dependence on foreign labels to market their products.
Anyone who has “Googled” rather than “searched” the Internet, made a “Xerox” instead of a “photocopy” or gone for a run in their “Nikes” rather than in their “shoes” understands implicitly the power of branding. A brand is, most simply put, a company’s reputation among the consumers in its market. All companies that offer a good or service with their label on it (as opposed to generic products labeled as their specific contents—”acetaminophen,” for example, instead of Tylenol) have a “brand” of sorts. A strong brand stands out to consumers as they pass through the aisles, encourages loyalty to a particular product and, as in the earlier examples, can become so powerful that the product itself is known as the brand.
Companies worldwide, including Chinese ones looking to expand globally, invest significant funds in the marketing campaigns that define and shape their brands. For many Chinese companies looking to compete in the United States, this has meant partnering with established brands. Haier, a Chinese manufacturer of household appliances which opened a plant in South Carolina in 2000, entered into a partnership with the NBA to build brand recognition for Haier in the U.S. while helping the NBA develop its presence in China. Thomas Lin, a professor at the USC Leventhal School of Accounting, suspects the 2008 Beijing Olympics will bring similar agreements, as Fortune 500 companies and still-nascent Chinese brands recognize a “special opportunity for them to be competing.”
Chinese firms are following Dell, Sony, Samsung and other firms in sharing advertising costs with retailers. Lin notes that when the Chinese computer giant Lenovo begins its advertising campaign in the United States, it may pair with Best Buy to purchase an advertisement encouraging consumers to buy a Lenovo product at Best Buy, and split the cost of the ad between the two companies. Lenovo and Best Buy are also engaged in a partnership to sell personal computers and technology to small business owners, promising greater market share and brand development for Lenovo and sales commissions as well as future technical support revenues for Best Buy.
Chinese companies in particular are trending toward great “localization” to develop their brands, Lin said. Those looking to develop their brands in the U.S. find some sort of foothold in America, through purchasing local brands to better position the company, partnering with established retailers or setting up plants and factories stateside to produce their goods.
Nanjing Automobile Corporation, for instance, purchased the MG Rover company, a British brand, in hopes of eventually marketing the cars in the United States. Furthermore, they have announced the creation of an assembly plant in Ardmore, Oklahoma, so many of the vehicles will be able to be marketed as “Made in the USA,” while still being sold under Chinese brands.
The drive for Chinese companies to develop their own brands has come in no small part from the central government. In 2005, the Chinese Ministry of Commerce published a list of brand names in exports “to be fostered and developed with priority,” acknowledging branding’s importance in foreign trade. Lin suggests that the increasing emphasis on brands reflects China’s growing economy, and a sense that moving forward will require investing in brand development.
Of course, the highest test of a brand’s success is whether consumers readily associate it with a particular product or product line and instantly think of it when they think of products it turns out. No Chinese brand meets these criteria yet, but their chances of doing so should not be overlooked—-many thought it impossible for Japanese brands such as Sony, Toyota and Nintendo to rise to such prominence in their respective markets of home entertainment, automobile and video games. Chinese brands like Haier, which nearly outbid Whirlpool Corporation to buy the Maytag Corporation, and Lenovo, which purchased IBM’s personal computer business in 2004, are growing their brands by trying to increase their market share through rigorous advertising campaigns. Haier is now the world’s fourth-largest appliance maker, and Lenovo is the world’s fourth-largest personal computer maker.
Whether they are working through established local retailers or purchasing existing brands, Chinese companies are aiming to more than merely manufacture for foreign markets, but to sell their own branded products there. As Lin notes, the consumers these companies aspire to please change preferences quickly, resulting in greater challenges for foreign companies looking to develop brand loyalty, but perhaps greater potential to insert a new brand in the competition. Future generations of Americans, these Chinese companies hope, will not be shopping for air conditioners on their computer, but shopping for “Haiers” on their “Lenovo.”
Jinglei Zhang is studying for a Master’s in communication management at the University of Southern California. Connor Gants is a political science major at the University of Southern California.