Chinese firms face obstacles to growth

15 May 2012

BEIJING: Brand owners from China are pursuing a range of strategies to try and expand abroad, but the results experienced by firms like Lenovo, Li Ning and Jianlibao have been equally varied.

Lenovo, the IT group, bought IBM's PC arm and Thinkpad brand in 2005, and last year acquired Medion, a German firm, alongside forming a tie-up with NEC in Japan. It now also has major offices in Beijing, Paris and North Carolina.

"We are a global company with roots in China. Because of our acquisitions over the years, we are actually 'from' many different places," David Roman, Lenovo's chief marketing officer, told the BBC.

Lenovo's senior management features executives from over six markets, and it emphasises creating a global marketing framework, then adapting it to suit the local context. Shoppers in the 18-34 year old range are the primary target.

"We find that consumers in this demographic share many similarities across cultures given their level of connectivity and openness to new experience," said Roman.

Li Ning, the sportswear manufacturer, established a US arm in 2008, based in Portland, near to the headquarters of main competitor Nike. It also launched a flagship store at the same site, which has since been wound down.

It now runs a unit from Chicago that focuses on ecommerce, having allied with the Acquity Group. Craig Heisner, Digital Li-Ning's VP, digital operations, argued this gave it "more control" over product positioning.

"I don't think the original plan adequately presented the heritage of Li Ning as a major Chinese brand founded by a famous Olympian ... and then went right into a fiercely competitive overseas market going directly against the likes of Nike and Adidas," he added.

Jianlibao, the number one energy drink in China during the 1990s, also unsuccessfully attempted to crack the US in that decade as part of a push into more than 12 markets.

"Jianlibao's fatal flaw was that while it produced a good-tasting beverage, its brand name prevented it from being able to connect with the average American consumer," said Jack Shea, who was the firm's VP, marketing and sales in North America, and now of Attitude Drinks.

"On top of that, our North America operations did not have a sufficient marketing budget to make the necessary investments to promote Jianlibao within the United States."

An increasingly common strategy for Chinese firms is taking shares in overseas brands. Geely, the automaker, owns Volvo, the Swedish car marque, while Shandong Heavy Industry holds a 75% stake in the Ferretti Group, the Italian yacht manufacturer.

Bright Foods, China's second biggest food group, also recently bought a 60% share in Weetabix, the UK-based cereal firm. "We'll be focusing on bringing Weetabix's products to the rest of the world," said Wang Zongnan, chairman of Bright Foods.

Data sourced from BBC; additional content by Warc staff