Investment

Tue, 05/11/2010 - 10:18

 

As China accelerates the development of its own products for mainland and export consumers, it faces an epic test. In fact, the need for effective branding is all the more critical at this time that Chinese companies simultaneously face a three-fold challenge:

-To distinguish themselves form the ever growing thrust of foreign brands in the mainland,

-To compete with other emerging Chinese brands, and

-To effectively position their brands to seize foreign consumers in export markets.

The success of Chinese brands will largely be a function of how well they establish themselves in the minds and hearts of target consumers worldwide.

Therefore, considering that a brand, of either a product, service or company has a direct impact on an organization's value, it is essential that 'branding' activities be managed as a key function within the organization's strategic planning.

Handing off this critical process to even the most skilled product or brand managers, along with their advertising agencies is simply reckless. All too often, neither one has the authority, responsibility or the organization's strategic scope to effectively determine the best brand positioning that will support short- as well as long-term corporate goals, especially in today's complex global marketplace.

Cultural Brand Heritage - a Competitive Advantage

Of course, Chinese companies need to distinguish themselves from the competition. Foreign brands appeal to mainland consumers who adopt well-established and 'visible' western products as a means of conveying the image of wealth, success, and abundance they wish to project. This behavior can be observed around the world.

To this end, the current Made-in-China media campaign is a useful approach. The past Made-in-USA campaigns promoted national pride and stimulated consumers to buy products made 'with pride' by their compatriots.

However, China has a unique competitive advantage. It can actually leverage its long-standing cultural heritage by incorporating historical archetypes in its brands. Given the immense pride of Chinese people, it is reasonable to expect that a majority of mainland consumers will identify with their own unique heritage, when all of its glory it is presented in carefully branded products.

Foreign consumers are also poised to make China their brand of choice for three reasons. First, people in the hardest hit economies are compelled to face reality. They can no longer afford to fall prey to traditional holographic marketing ploys inciting them to consume ever more overpriced goods.

Second, many westerners trust Chinese goods such as traditional medicine because it encapsulates ancient wisdom. People are seeking peace and stability, in the wake of the global economic crisis and never-ending conflicts.

Third, and perhaps the most important, is that most westerners are not aware that the high quality products they have been relying on for decades are actually China-made goods. Therefore, it stands to reason that, as more foreigners discover these facts they will come to recognize and favor brands that embody Chinese cultural heritage.

Global Business Paradigm Shift

For the most part, the primary beneficiaries of China-made goods have been the shareholders of multinational corporations - not consumers and not Chinese people. These global organizations strategically shifted western manufacturing facilities and jobs to the mainland in order to pay the lowest possible price, at the factory loading docks.

Their massive profits were, and still are exported from China along with the high-quality low-cost goods. Sadly, the deep cost savings are not passed on to consumers in foreign markets. In addition, China has been left saddled with exorbitant externality costs many of which are unacceptable in western nations because of more strict labor and environmental regulations.

Nevertheless, there is hope. Western consumers still want and need products from China but at a price they can actually afford. In order to harness the western world's massive demand, Chinese manufacturers are retooling their business networks and strategies so that they can sell directly to western consumer markets.

Among the key players is Alibaba. Using its new logistics management system, it will in effect compete with the like of Amazon.com and Wal-Mart, among other retailers. Another China portal is DHGate. Its web interface makes it easy for mom-and-pop shops to order Chinese goods that they can resell on eBay and in local markets. These and other China supplier portals facilitate sales to western markets, although mostly to agents and resellers. 

There is yet another option for Chinese manufacturers to successfully compete with multinationals, within the mainland and foreign markets. NetReflex.com is an innovative eBusiness service that lets companies of all sizes maximize their revenues and profits by selling products directly to everyone around the world [resellers as well as end-users], in any language and currency.

This eBusiness solution takes less than a month to implement and pays for itself from a small fraction of the increased profits. Best of all, there is no learning curve and it is like having an MBA in a box. Business Managers get real-time data and expert management reports that allow them to optimize pricing, inventory, and shipping throughout their own integrated global supply chain network.

Contrary to typical China supplier portals, NetReflex users do not compete for buyers who see other suppliers' offers. Chinese manufacturers are fully independent to negotiate the best pricing with each one of their customers in different economic markets. NetReflex clients actually 'own' their confidential business data and are the only firms to profit from the customer relationships they build. Chinese manufacturers are now empowered to bypass international distribution networks controlled by multinational corporations.

Value of Responsible Governance

One of the greatest aspects about China is the Central government's ability and determination to restructure manufacturing and export activities. This will obviously benefit Chinese people. However, it will also benefit the whole world by creating a positive socio-economic spiral.

By making high quality exports available directly to global consumers at truly affordable prices, Chinese manufacturers will surpass pre-economic crisis production levels, increase their economies of scale, and retain higher profits. They will thus have the resources to upgrade their technology and labor force. This will generate new jobs and tax revenues fueling the country's continued growth.

Moreover, with the advent of a global advertising campaign promoting Made-in-China For the World, foreign consumers will be further motivated to buy high-quality low-cost Chinese goods providing them more discretionary income and improved living standards. In the wake of bankster-fueled corporate greed, this will certainly come as a breath of fresh air.

For centuries, China has been exporting its rich cultural heritage, sharing the wealth of its honest hard-working people. More than ever, we should all recognize China for what it truly is - the world's most powerful and valuable socio-economic driver. I can only hope that everyone in our global village will learn precious lessons from China on how to lead a balanced and harmonious life.

Robert Morrissette is a Professor of Global Strategy, Leadership, and Culture at the International Executive MBA program of China Agricultural University in Beijing. He also works as an Executive Coach and Business Consultant. He can be reached via email at profitsharing@mindspring.com

The above is a personal opinion piece by the author. Its publication in no way implies that Interfax shares the views expressed in the article.