Author: Chris Reitermann, Chief Executive, Asia & Greater China Oglivy
Published: October 2020
This piece was part of the BrandZ Top 100 Most Valuable Chinese Brands report. Access the full report here.
“It’s China’s World” claimed Fortune magazine on the release of its eponymous list of the top 500 companies for 2019. For the first time in the 29-year history of the Fortune Global 500, Chinese companies surpassed their American counterparts, accounting for 129 of the world’s 500 largest corporations by revenue.
Chinese consumers’ appetite for new technology, combined with a fierce entrepreneurial spirit and low barriers to digitization have propelled Chinese tech and e-commerce companies to the forefront of their industries and helped them gain a strong foothold on the global stage.
The shift in economic power is undeniable. But in terms of brand power, the imbalance between China and its foreign peers remains; Chinese brands still punch far below their weight on the global stage. Of the 24 Chinese companies ranked in the Fortune 100, only six made it into the 2019 BrandZ™ Top 100 Most Valuable Global Brands ranking. One major factor for this lag in performance is limited exposure to the fundamentals of branding among Chinese CEOs and CMOs. For decades, Chinese companies have put short-term tactics with a focus on boosting the bottom-line at the core of their strategic agendas. This exclusively sales-oriented mindset is no longer sustainable, especially at a time where Chinese companies are relying on overseas expansion for growth.
What’s holding Chinese brands back on the global scene? What will it take for Chinese brands to become true household names in the next decade? To succeed abroad, Chinese brands need to overcome three urgent challenges: trust, talent, and cultural differences.
Establishing trust is now more than ever a major stumbling block on Chinese companies’ global expansion journey. Research we conducted in late 2019 among 40 high-profile Chinese companies confirms this: 46 percent of surveyed CMOs identified local policy and navigating local regulations as the number one challenge in achieving their global ambitions. In an economic climate underpinned by growing protectionism, fragile trade alliances and slowing growth, concerns surrounding Chinese brands and their rapid cross-border expansion are only intensifying. Add to that some deeply-rooted negative perceptions and skepticism towards “China Inc.” Chinese brands are required to redouble their efforts to be viewed overseas as reliable manufacturers, business partners, or even employers.
There needs to be a fundamental shift in the way Chinese companies perceive branding; more than a set of marketing tactics, branding should be the driving force behind the company’s overall business strategy, affecting everything from the company purpose (why are we in business and why is it good for the world and the consumers who buy our products?) all the way to product innovation (how is this product delivering on the overall company purpose?). A strong brand can lay the foundation for a successful overseas expansion, it can drive familiarity and with it trust that resonates with key stakeholders. Successful brands today all have one thing in common: they meet the needs of all their stakeholders, from investors and governments to media and consumers. The essence of a brand needs to be universal, but the delivery needs to consider local cultures.
Finding multi-talented people
People are the linchpin to
business performance and competitiveness in any market. But with global
comes the need for a new breed of talent, and more specifically employees that master multiple languages, boast extensive industry knowledge and possess strong cross-cultural management skills. Among our China CMO survey participants, 43 percent highlighted “attracting talent” as one of their biggest challenges when expanding overseas.
Finding the right talent at the right time in the right place can already prove difficult for brands in their domestic market. How can they solve the talent equation at a global scale? At Ogilvy, we believe this all boils down to establishing and nurturing a strong employer brand. The ROI on employer brand building can be tremendous: a strong employer brand, supported by a well-articulated vision, results in increased staff motivation, engagement, and retention, all contributing to a better overall image for the brand at a macro level.
Impact of cultural differences
There is no shortcut to global success— brands that believe they can simply replicate their domestic success in foreign markets often learn the hard way. On their quest for clout overseas, Chinese firms often underestimate the impact of cultural differences on their interactions with key stakeholders, including:
Employees: The results from our China CMO Study showed that cultural differences were the number one challenge (identified by 57 percent of respondents) faced by globalizing Chinese companies as part of their talent strategy. Chinese brands must acknowledge any discrepancies in working hours, communication styles and approaches to hierarchy when expanding into new markets. Compare for example the quirky perks that have turned internet giants in Silicon Valley into iconic employers to the grueling 996 work schedule prevalent in the Chinese tech industry. Without transcending the “Chinese way” of thinking and acting, Chinese brands’ global ventures will be doomed from the outset.
Business and institutional partners: The most successful global brands are the ones that are committed to understanding the divergence in decision-making patterns, business etiquette and administrative protocols between their country of origin and the country they are expanding to. Understanding these differences is a prerequisite to establish trust with trade partners, suppliers, government agencies and to preserve the brand’s reputational health on the long term.
Consumers: Chinese brands need to strike the right balance between maintaining their unique identity and localizing their communications and marketing campaigns to their target audiences. Brands need to be culturally relevant and reframe their message to foster an emotional connection with their potential customers. The idiosyncratic nature of the Chinese digital and social media ecosystem also means that brands need to familiarize themselves with an entirely new set of platforms and apps to get their message across.
Every globalization journey is unique, and there isn’t a one-size-fits-all strategy that can guarantee success for all aspiring global Chinese brands. As we enter a new decade and despite the economic ebb and flow, Chinese brands’ ambition to outclass their foreign competitors is still intact, if not stronger than before. Our study— Globalizing in a New Economic Reality: Making Chinese Brands Matter Globally—confirms what we firmly believe. China can reshape the global brand landscape in a record time. But it depends on fusing time-tested best branding practices to earn trust, attract to talent, and surmount cultural differences with Chinese companies’ entrepreneurial mindset and stellar innovation capabilities.
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For questions regarding the article, kindly contact Chris Reitermann (Chris.Reitermann@ogilvy.com)