Chinese firms gain ground

26 May 2011

BEIJING: Many multinational corporations believe their Chinese rivals will pose an increased threat due to improving brand recognition levels, wider product portfolios and stronger marketing capabilities.

Trade body the European Chamber, representing 1,600 regional firms active in China, worked with consultancy Roland Burger to survey 598 of its members. In all, 79% of featured organisations agreed the outlook for their category in China should remain positive over the next two years.

This is an increase from the 78% recorded in 2010.

Some 78% reported an uptick in local sales last year, as did 71% regarding profitability, partly reflecting the global recovery from the recession during 2009.

"Three to five years ago, profit margins in China were a concern, but they are no more," said Charles-Edouard Bouée, Asia president of Roland Berger.

"Profitability levels have increased and even surpassed those in certain other markets."

While 41% of professional services firms now derive at least a quarter of worldwide revenues from China, figures slid to 24% for consumer goods and services specialists, and 18% covering the industrial sector.

Elsewhere, 59% had boosted annual sales targets, and 51% pegged market expansion as the main strategy to achieve this goal, falling to 11% for better customer relations.

When identifying their current areas of advantage, 73% of European companies cited product quality, 70% mentioned innovation and design, 69% named management efficiency and 64% referenced procedural abilities.

Exactly 62% referred to brand awareness, a field the same number planned to prioritise in the coming two years, the best score on this metric.

Access to finance logged 55% on the latter measure, as governmental relations yielded 53%, marketing and sales generated 37%, and pricing hit 34%.

Upon assessing the disciplines where indigenous rivals had enhanced their position in the last two years, 44% highlighted brand recognition.

For 41%, this was true concerning price and 38% alluded to both product quality and technology development.

These ratings still lagged behind the fact Chinese players generally enjoyed an enviable standing with the government, posting 56%.

Indeed, 59% of those polled asserted local businesses boasted a clear advantage here, a view 52% adopted for price, 46% for accessing subsidies and incentives, and 39% for securing financing.

Looking ahead 24 months, 52% of the panel stated their Chinese counterparts would have made further strides in terms of building brand awareness.

Another 36% concurred when discussing product assortment and 35% anticipated marketing and sales capacities should strengthen.

"It is the first time that Chinese companies are seen as making improvements in market-based areas," Davide Cucino, the chamber president, said.

According to Cucino, telecoms group Huawei, electronics manufacturer Haier and machinery expert Zoomlion as commanding respect in this regard.

Determining broader factors set to impact their segment in the next two years, 40% of the Chamber's sample forecast rising competitive pressure, with climbing labour and raw material costs also a worry.

Meanwhile, 46% expected governmental policies to continue "discriminating" against foreign enterprises, a total jumping from 43% on an annual basis.

Similarly, 87% believed surging domestic consumption might fuel growth going forward, and 88% afforded the rule of law and greater transparency such a role.

Data sourced from European Chamber; additional content by Warc staff