Date
21 August 2018
Nirmalya Kumar, professor of marketing at the London Business School
Nirmalya Kumar, professor of marketing at the London Business School

World of recognition a decade away for Chinese brands

Ask anybody outside China to name a Chinese brand and they will struggle to think of one. That’s despite 95 Chinese firms making it into the Fortune Global 500 list of the world’s biggest companies.

But this will change in the next decade, says a professor at one of Britain’s leading business schools.

“Today if I go to Western markets in Europe or the US and ask people … to name a Chinese brand, they can’t. But the names I have said, I promise you, in 10 years, people will know these names,” London Business School marketing professor Nirmalya Kumar told the Hong Kong Economic Journal’s EJ Insight.

The names Kumar sees coming over the global-recognition horizon are home appliance giants Haier Electronics Group Co. Ltd. (01169.HK) and GD Midea (000527.CN), telecommunications equipment supplier Huawei Technologies Co., PC maker Lenovo Group Ltd. (00992.HK) and Bright Food (Group) Co. Ltd.

And those that he thinks will go global in the next 20 years are TV maker TCL Multimedia Technology Holdings Ltd. (01070.HK); Guangzhou Pearl River Piano Group Co. Ltd. (002678.CN), which has 15 percent of the global piano market; and Guangdong Galanz Group Co. Ltd., which makes about 40 percent of the world’s microwave ovens.

Asian Tortoise Route

The Chinese brands are following a growth path taken by companies like Japan’s Toyota Motor Corp. and Sony Corp., and South Korea’s Samsung Group and LG Electronics Inc., Kumar said.

The growth path, known as the Asian Tortoise Route, has five key stages, starting with low-cost products and proceeding to focus on sales volume, research and development, quality improvements and advertising.

“Many of the Chinese companies are following this route. They start with products that are very cheap and of poor quality … and then over time, they invest in research and development and improve the quality. Then once they improve the quality, they increase the price, and then they do marketing,” he said.

Most of the Chinese brands are at the stage of either expanding sales volume or investing in research and development, he added.

Kumar said the route was slow and steady, and it took Japanese and Korean brands about 40 years to become the world-renowned brands they are today.

The problem for Chinese brands, Kumar said, was not just that they did not have name recognition but that “made in China” were bywords for poor quality, unreliability, cheapness, poor safety and a lack of environmental awareness.

But he said that was the same decades ago for products from South Korea and Japan.

When Toyota started selling cars in the United States in the 1960s, they were the cheapest and worst cars in the country. But some people bought them because the price was right. The company then invested in research and development, and today they are the best cars in the US, he said.

People will start to have a good impression of Chinese products if one or two brands become famous and develop a good reputation. Sony and Toyota changed the image of “made in Japan” in the same way that Samsung transformed the reputation for “made in South Korea”.

Easy or hard way

Kumar said that while Haier headed to the US in its first efforts to sell outside China, most Chinese brands have launched their offshore ambitions by selling to emerging markets in Southeast Asia, Africa and the Middle East. Midea and Galanz are among those who sell their goods under their own names in developing countries, but under others for the US and European markets.

“The companies can go the easy way first [through emerging markets] or the hard way first [through developed markets]. Both ways can work,” he said. 

Kumar also said Hong Kong was a good place for Chinese brands to go global, as Chinese companies will need to secure talent that understands both the Western and Chinese mindsets to better market their products.

– Contact the reporter at [email protected]

JH/JP/SK

EJ Insight reporter

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