China's No-Name Giants Move to Build a Brand Name

Huawei maybe the best company many Americans and Europeans have never heard of, and that's a big problem for China, according to a recent report in Newsweek entitled Generic Giants. With revenue of more than $18 billion in 2008, soon it will overtake Nokia (NOK) Siemens (SI) as the world's second-largest maker of telecom hardware, after Ericsson (ERIC).

The challenge for many Chinese companies as they go global is to build an attractive brand image that motivates consumers to pay premium prices for their products. With headquarters in booming Shenzhen, the telecommunications equipment-maker with a hard to pronounce name made BusinessWeek's latest list of the world's 10 "most influential" companies, alongside Apple (AAPL), Wal-Mart (WMT), Toyota (TM), and Google (GOOG). Yet Huawei is by far the least internationally recognizable name on the list.

The Chinese government is calling on local companies to build up their brands. According to Newsweek, Premier Wen Jiabao in March called for China to create companies that can innovate and churn out "brand-name export products" —meaning companies with reputations for quality, innovation, and service so strong that customers are willing to pay a premium for their products.

And Huawei is not the only company trying to change its business strategy. In March, Shandong-based manufacturer Haier announced that it was leaving direct manufacturing and concentrating on building the company’s brand and service network. Despite Haier’s fame as a manufacturer, the move was not unexpected, said Kent Kedl, general manager of Technomic Asia, a market strategy consultancy.

"It's a very natural progression. I don't think that's a surprise... that's the way all brands need to go." Kedl was quoted in the China Economic Review (CER) as saying. “They start off with the manufacturing [and then] move to being a product developer and marketer.”

Companies find it difficult to differentiate their products and build value. A key reason for China's failure to build global brands is cutthroat domestic competition. In most product categories, hundreds of firms compete for domestic market share, leaving profit margins razor thin. For example, China has more than 500 bicycle manufacturers.

Building a brand takes time, money, and often a complete change in the organization’s strategic priorities. “Haier is still very much a [short-term] sales organization,” Tom Doctoroff, Greater China CEO of JWT said to the CER in June. “Marketing organizations back short-term sales with long-term equity to a point where they are able to command a price premium... There’s no evidence that Haier has made much progress in reinforcing that value added – both on an emotional level and on a functional level.”

The best Chinese companies are putting pressure on industry leaders. The latest Boston Consulting Group (BCG) list of 100 "global challengers," or firms "disrupting the established order of many industries," includes 36 Chinese companies, more than from any other country. Chinese companies, such as Haier and Huawei, have shown "demonstrable success" in ensuring quality control, says Benjamin Pinney, a principal in BCG's Shanghai office.

Despite Haier's decision to leave the factory floor, China's manufacturing sector has emerged strengthened by the recent turmoil in global financial markets and the country is moving up fast on the services front as well. So says a recent report from PricewaterhouseCoopers on the relative attractiveness of emerging markets for investment by UK businesses.

China's manufacturing sector has shot up from 14th position in PwC's index in 2008 to become the fourth most attractive destination in 2009, beaten only by Malaysia, Chile and Bulgaria, which are all much smaller economies.

The “Made-in-China” brand has suffered as industries like pet foods and baby milk have endured product recall disasters. Newsweek cites a report last year by Interbrand, a London-based consultancy, found that 66 percent of 700 international business professionals cited "cheap" as the attribute best describing Chinese goods. Only 12 percent of respondents said that made-in-China quality was improving. Eighty percent said a "low quality" reputation "most prevents Chinese brands from succeeding in overseas markets."

Doubts also remain over the safety of intellectual property. In 2003, California-based Cisco Systems (CSCO) sued Huawei in highly-publicized case for copying computer codes used in routers. The Chinese company was forced to pull the contested products from the market before dropping the case.

While many companies based in China have struggled with quality issues, the country is making progress. Apple depends on its supplier Foxconn to make its popular iPod in China. Foxconn is able to meet the highest standards of quality. The product says 'Designed in California, Assembled in China' on the back of its package.

Branding success for Haier and Huaweiwill require investments in market research and in improving its corporate structure to become more competitive. However, JWT's Doctoroff thinks a necessary cultural shift is still a long time off. He concludes, “I don't think it's going to happen until the new generation comes into power... You're really talking about another 10 years at the minimum.”

Disclosure: No positions

Comments

[madmilker:]

People in America need to realize jus what got America in this shape…”cheap” yes so-call cheap items from a foreign land.

quote*Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. *end quote!

Now! if there be 182 country’s making items for the world to buy and they have only 5% of the pie in China…duh! This company makes the nice people of China support their currency(yuan) by keeping it in their country working for the people there…. but with the “yuan” going up in value and the US dollar going down…all the foreign items that the American consumer buys thinking it is cheap has went up in price.

People…its all about the currency and to keep a currency strong you got to keep it floating around the country you live in so it can work for you. For the past 12 years all them US dollars are being shipped overseas to a foreign bank and with the American worker not making anything for the foreigner to buy the “we the people” have to turn to the “second” largest employer in America(Uncle Sam) to sell “we the people” debt in order to get all them dollars back!

50 years ago a foreigner would had given their left nut for a US dollar or a Hershey’s chocolate bar and today the same foreigner has got Uncle Sam and the American consumer by both all the while Hershey is moving the chocolate factory to Mexico. Wake up! America and think “MADE IN AMERICA.”

quote*”Considering that there are over 30,000 ships at sea this morning,” writes James Carlton, director of the Williams College-Mystic Seaport Maritime Studies Program, in an e-mail, “the total number of organisms and species in this global ‘bioflow’ on the morning your readers read your piece could be staggering - billions of individuals, and thousands of species.”

Indeed, scientists have long considered ballast water the primary way invasive aquatic organisms are introduced. From the zebra mussel’s arrival in the Great Lakes, to an American jellyfish severely disrupting Black Sea fisheries, the potential costs of accidental introduction of a species to new homes can be tremendous. Aquatic invasives cost the US $9 billion yearly, according to estimates by David Pimentel, professor emeritus of ecology and evolutionary biology at Cornell University in Ithaca, N.Y. Zebra and quagga mussels (a cousin to the zebra) alone cost the $1 billion annually.*end quote!

tat is $9 billion a year in hidden taxes to all Americans…
cheap ain’t chic and it cost America…………jobs!

“Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what’s in the best interests, and we should make sure that trade is not only free, but fair too.”

www.worldthinktank.net...

and when it comes to all them ther turnips in D. C. ….they all need to red…oops! read George Washington’s farewell address after only eight years of serving his country…

Retail makes nothing! ….and until the American people get off their lazy @ss and start to demand…”made in America”….all the retail jobs will be sitting in a foreign land.

The dang government makes only debt…like all it knows is spend…spend…spend. The turnips ain’t never past a dang “saving” bill. They go up on tat big hill and play banker with my dang tax dollars and every dang one of them is one sandwich short of a picnic when it comes to balancing their dang check book.

National Debt from 1776 to 1910 wus only $2.6 billion and tat wus without a income tax. After the stiff-shirt “my sh!! don’t stink” bankers met in 1910 at Jekyll Island tat debt wus put in high gear in 1913 and even with a income tax and now a tax for every dang thig a person touches…even the air he/she breaths tat debt has mushroom to over $10 trillion in 2008.

Now….we the people in the past 7 months has taken on another $1 trillion and tat person in tat big white house is saying the car is going to slow…well…maybe he needs to get out of the dang thig and walk.
dailybail.com/home/the...?

And with America being over $57 trillion in debt….a little walking wouldn’t hurt them either. People….it ain’t no place in the Constitution tat states the government is suppose to take care of you….not one dang sentence. The word “cheap” ain’t no place to be found either. If you don’t buy American made…you don’t have jobs cause RETAIL makes nothing.

Quit thinking in terms of a jack@ss and elephant….they the ones tat put US in tis mess….think in terms of character, faith in God, love of Country, your State, your town, your family and your dang job. Spend a month…maybe two red…oops! reading Michael Hodges “Grandfather Economic Report” series and learn how the people in government has pull the wool over the eyes of “we the people” for the past 96 years.

“Our constitution was made only for a moral and religious people. It is wholly inadequate for the government of any other.” - John Quincy Adams, 6th President of USA.

“I hope our wisdom will grow with our power, and teach us, that the less we use our power the greater it will be.” - Thomas Jefferson

“No generation has a right to contract debts greater than can be paid off during the course of its own existence.” - George Washington to James Madison 1789.

“support your town…shop around.” - madmilker

Aug 01 10:39 PM