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Chinese firms find new path toward overseas growth
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AS China transitions toward becoming a market economy, it is being propelled by the twin engines of innovation and branding. In the recently released WPP BrandZ report on the 100 most valuable Chinese brands, market-driven brands — those owned by entrepreneurial firms — contributed to more than half of the total value of the top 100.
It was found that innovative and unique brands grew eight times faster that their competitors — 29 percent for the most innovative versus three percent for the least innovative. McKinsey has estimated that the innovation opportunities could contribute between 6.5 and 13 trillion yuan (US$1-2 trillion) per year to the Chinese economy by 2025, or roughly 24 percent of total GDP growth.
The exact same business drivers will spur demand for China’s value-added products overseas as well.
Manufacturers of household appliances such as TVs and refrigerators dominated the first wave of customer-focused innovation at Chinese companies. What was then a trickle is now turning into a flood, particularly in emerging markets where the value-for-money dimension provides the innovativeness of Chinese products an undeniable edge.
It is in markets such as India, Indonesia and Africa where Chinese brands are marching ahead. In India, Chinese smartphone brands such as Xiaomi, Gionee, Oppo, Lenovo, Huawei, LeEco and Vivo have captured 22 percent of the market, up from 12 percent a year ago, while non-Chinese foreign brands including Apple and Samsung saw their shares decline from 44 percent to 37 percent. WeChat is rapidly gaining ground — with 39 percent of the Asia Pacific region’s Internet users using the app, and drawing users away from formidable Facebook.
How have these brands been able to capture the hearts and minds of consumers so quickly? It has been through customer-focused innovation and smart branding.
Chinese firms take advantage of their huge domestic market, which helps them to commercialize new ideas quickly and at scale. Companies like Xiaomi use their massive consumer market to create their new products, refining their features through online feedback.
In India, mobile handset brand Vivo has chosen to ride on two of the most popular cultural vehicles — Bollywood and cricket — to build relationships with customers and increase trade. They signed on actress Kangana Ranaut for the launch of the Vivo X5Pro; and then pulled off a coup by bagging title sponsorship for the professional Indian Premier Twenty20 Cricket League for two years.
Leveraging local consumer insights play a crucial role in building these brands. In Indonesia, people pay a lot of attention to recommendations when they shop for a new smartphone; and the practice of tukar tambah (trade and add) where they trade an old phone and pay a fee to upgrade to the latest model, is very popular. Huawei introduced a scheme called Tukar Untung (lucky trade) to encourage customers to trade their old phone for a Huawei device.
In South Africa, where Bank of China has been operating for 15 years, it has chosen to target an affluent, business-oriented audience through its bold, creative branding at airports. The message: the bank is a friendly, professional facilitator of business between the two markets, a sharp difference from the branding of global banks which try to appeal to all customers everywhere.
Previously, the branding investments made by Chinese firms overseas were designed to impress customers about the value of their brands: by setting up a Bosideng store in London’s iconic Oxford Street, or Yili sponsoring the London Olympics and plastering the city’s double-decker buses with its campaign.
That may no longer be necessary. With Chinese technology and financial service brands showing the way and being embraced by discerning, brand conscious customers around the globe, which industries will be next?
Kunal Sinha has over 25 years of commenting on consumer and cultural trends. Based in Shanghai for nearly a decade, he is the author of two books about creativity in business and has taught at some of the world’s leading business schools.
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