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Abu Dhabi, UAEMonday 17 December 2018

Will Chinese brands ever be able to compete with America's?

Some Chinese firms are taking the initiative - the smartphone brands Oppo and Vivo are spending significant amounts on advertising and marketing abroad

A screen at the DJI booth during CES 2018 at the Las Vegas Convention Center.  The Chinese company dominates the global market for commercial drones. Alex Wong/Getty
A screen at the DJI booth during CES 2018 at the Las Vegas Convention Center. The Chinese company dominates the global market for commercial drones. Alex Wong/Getty

China is an economic superpower, the world's second-largest economy that is projected to overtake the leading United States by 2032, according to the World Economic League Table 2018 report from London-based Centre for Economics and Business Research.

"[If] reform speeds up and economic structure is rebalanced through measures including deleveraging, improving income distribution to revitalise consumption, lowering government administrative costs and enhancing market mechanisms via government reforms ... it is forecast that the GDP growth rate could be maintained at 6.2 per cent per annum between [to] 2020 and lift to 7.5 per cent between 2021 and 2030," said Xiaolu Wang of the National Economic Research Institute, China Reform Foundation in Beijing, and Yixiao Zhou, an economics professor at Curtin Business School, Curtin University, Perth, who co-authored a 2017 report titled Forecasting China’s Economic Growth by 2020 and 2030.

"China becomes a high-income country before 2030," they said. "This indicates that the economy is on a development path that is sustainable."

But by one metric America is likely to dominate for a while longer.

Think of brands that are universally recognised and storied names such as Coca-Cola, Apple, Nike, McDonald's and Ford, to name a few, might come up. Ecommerce juggernaut Amazon has replaced Google as the most valuable brand in the world, according to Brand Finance, a brand consultancy firm. In its 2018 top 10, only Samsung at number 4 and Industrial and Commercial Bank of China at number 10 was not an American company.

As China increases its economic clout, are we seeing a similar story for its brands? Where do they come in? Will Chinese brands have the power to compete with the heavyweights?

Technology companies Amazon, Apple and Google take the top three spots on Brand Finance's most valuable brands list, respectively. To illustrate the US tech firms' brand power consider how people say "let's google this" when they mean to search for something online. Google's brand has become synonymous with the service it provides. Apple, meanwhile, is able to charge high prices due to its customers' brand loyalty and association with a premium status.

Among the most valuable Chinese tech brands the best placed is the networking and telecommunications equipment giant Huawei at number 25, although most consumers will know the name as a maker of smartphones.

Why is cultivating a brand so important? Mark Tungate, a journalist specialising in brands and lifestyle trends, and author of Adland: A Global History of Advertising, tells The National: "A brand stands for an idea, an image or a lifestyle that goes far beyond the basic goods and services it represents. It encourages consumers to choose that brand over another because it projects an image that appeals to them, or is in tune with their values."

However, a source who has worked closely with Chinese brands, but who wishes to remain anonymous, says many Chinese bosses still do not value branding and consider it "very abstract" and are not willing to spend money on it.

This devaluing of longterm strategic branding is reflected by comments made by Doreen Wang, global head of BrandZ, a unit of the market research firm Millward Brown, and author of the BrandZ Top 30 Chinese Global Brand Builders report published by advertising juggernaut WPP. In an interview with CKGSB Knowledge, a business publication, Ms Wang said, "[Chinese brands] are still selling products, but they are not selling the brand. [Yet] only branded products bring better margins."

But she did note that Huawei has invested heavily into advertising in Latin America, Europe, and middle eastern countries, which contributes to its global brand position. "If you go on Huawei's European or US website, the landing page says Huawei's purpose: 'Building a better connected world'. That's Huawei's purpose, its brand ideal. But a lot of Chinese companies have no brand purpose - their goal is to increase sales by 25 per cent next year", she said.

QC Liang, president and chief executive of the public relations firm Hill+Knowlton Strategies China, says that Chinese companies and their brands are ready to compete globally, especially in the fields of ICT, gaming, e-commerce and financial services. "Chinese companies can do good storytelling if they can be more transparent and engaging with global audiences", he tells The National, pointing out that while many companies have set up Facebook, Twitter, LinkedIn, and Instagram accounts very few of their top management get personally involved. "A good storyteller should present a clear-cut character with emotions, and willingness to communicate beyond just facts and figures," he says.

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For many brands emerging today one of the biggest challenges will be overcoming the lack of history and heritage that engender trust and loyalty among consumers, says Mr Tungate. "Storytelling is an important part of branding, and if your story is familiar and engaging, it strengthens your brand". He cites Italian and French luxury brands (a market where adding value is crucial) such as Chanel who are more than just brands: "They are legends, with an entire history of allure and glamour."

Lacking heritage and history new brands can triumph however by providing excellent and consistent service in an untapped market. Examples include Uber and Airbnb, which revolutionised their respective sectors.

Mr Tungate says that in the past customer service was perhaps an overlooked element of branding but today it has become vital as consumers share their opinions of brands via social media platforms. "Having a great brand image is desirable, but you also have to deliver on your promises," he says.

One Chinese brand that has succeeded in delivering on its promises and scoring highly on social media is the drone-maker DJI. Although many people might not be aware of the name, DJI is a Chinese company based in the country's southern metropolis of Shenzhen. The maker of drones such as the Phantom 4 Pro nevertheless has managed to completely dominate the global consumer drone market with a share some analysts believe is as high as 85 per cent. And that's big; according to Gartner the global drone market is forecast to surpass $11 billion by 2020. There is little surprise, therefore, that according to CNBC, the firm has a reported value of $10bn.

Jim Fields, founder of Relay, a creative agency based in Beijing, believes that other Chinese companies should follow DJI in being humble and empowering their marketing employees. "When Chinese brands launch overseas they might have a really cool product, but western audiences care more about the story," he says. Mr Fields believes hiring the right talent to do that is crucial, and that understanding cultural subtleties can pay off.

"Chinese leaders of domestic companies like [bike-sharing company] Mobike and [technology giant] Tencent recognise that they don’t necessarily understand overseas markets but they do a good job of hiring local talent in target markets to optimise their branding and marketing efforts," he says.

Ms Wang believes the key message is that brand building takes time, investment, and commitment: "Brand building won't happen overnight. Even DJI, they were really fast in terms of globalisation, but still it took them the past five to 10 years to build their initial presence."

But for any upstart brand competition is fierce and increasing, she says. "Not just against established brands like IBM, Amazon and Google, but you are also facing increasing competition from Israel, from India - they are also becoming innovation hubs."

Some Chinese firms are taking the initiative. The smartphone brands Oppo and Vivo are spending significant amounts on advertising and marketing in places such as Thailand, while mobile apps and games developers Cheetah and Elex were highlighted as doing well in foreign markets but not so well domestically. This, however, can be turned to advantage as overseas recognition - a "global DNA" - can be leveraged for brand building domestically, says Ms Wang.

She singles out the Indian market: "It's the third-largest start-up nation, and I'm very impressed by Indian start-ups", she says, pointing out that Indian brands are very willing to invest in marketing and communication. "I go to India every year to launch BrandZ Top 50 Most Valuable Indian Brands report and we always organise a top 20 brands CEO panel. When I listen and talk to them, I realise that their strategic thinking is way in advance compared to Chinese business leaders' strategic thinking."

As many Chinese companies seek to enter overseas markets, especially in the tech sector, more opportunities will crop up for agencies that specialise in marketing and storytelling. For now Chinese brands compete well in certain niches and in emerging markets such as South America, Southeast Asia, and India, although they face stiff competition from domestic brands, especially in e-commerce, from the latter.

But whether we will see Chinese brands that can eventually compete in recognition and value with American ones only time will tell - and maybe a good deal more time than they would wish.