Chinese companies expanding internationally in search of growth prefer to build their presence from the ground up rather than simply acquire an existing brand, according to a new report, which also finds that branding in this context tends to be an afterthought to financial and operational concerns.
Globalizing In A New Economic Reality: Making Chinese Brands Matter Globally, from Ogilvy China, is based on interviews with 40 CMOs of major Chinese companies and the agency’s own insights.
Many Western businesses view mergers and acquisitions as a fast and easy route into overseas markets, but only one company in Ogilvy’s sample intended to follow this path. Half of the companies in the study said they would build from scratch – an approach that “shows the company’s long-term commitment to the market and demonstrates that it has something valuable to offer” – while 30% planned on a mix of build/acquire.
But companies seeking to expand overseas that already have some level of brand awareness have an easier time entering new markets, the study noted.
“Before American and Japanese companies entered China, they already had an existing level of brand awareness, making it much easier to communicate their mission, sell their products, and capture market share.”
For all their undoubted strengths in innovation, customer experience and execution, this is an area where Chinese brands are weak. The study notes how they punch below their weight on the global stage, with few of the leading Chinese companies ranked in the Fortune 100 also appearing in the BrandZ Top 100 Most Valuable Global Brands list.
Given the preference for building a brand overseas, it is perhaps understandable that practical matters, like arranging financing, setting up local operations and sales networks, while also negotiating local rules regulations and adapting to a new culture, tend to be prioritised ahead of branding.
But, the study states, “an early focus on branding and a clear understanding of its impact on various parts of a business is key to success”.
Brand building is, of course, about far more than advertising and while many Chinese companies have well-established domestic brand platforms, the study suggests that they may struggle to replicate this success overseas, either because the various elements are not a unifying strategy across the whole business, or if they are, businesses lack the ability to translate them into a global context and manage them successfully.
Sourced from Ogilvy China