The Real Reasons Chinese Firms Have Weak Branding
In a column for the New York Times, David Brooks posited that the U.S. has one clear advantage over Chinese competition: branding. He notes that U.S. firms are powered by "eccentric failed novelists" (presumably from agencies and consulting firms that are gifted at brand positioning and execution) and "visionary founders" (think Steve Jobs) who have created exceptional brands. This talent is lacking in the Chinese market where "executives tend to see business deals in transactional, not in relationship terms," as Brooks says. This observation is important because there are Chinese firms that seem to have everything to win globally except for branding and marketing.
Speaking as a long-time observer of brands and brand strategy, I believe that Brooks is correct but his analysis is incomplete. China's lack of people with brand instincts is not the only or even the main brand challenge of Chinese firms. Further, he does not address the big questions: How, and when, will they overcome this deficiency?
Brooks left out at least three important weaknesses in Chinese branding. First, other global firms have a deep bench of seasoned brand strategist supported by rich and varied set of brand management systems and tools that are lacking in Chinese firms. Both are largely based on the brand management effort pioneered by P&G some 75 years ago and extended by the many P&G progeny. Approaches to brand management have been created, tested, and refined by decades of smart people from varied perspectives and contexts. The talent and brand-building capability go far beyond a few brilliant strategists or inspired founders with their wonderful stories.
Second, there has been little motivation for Chinese firms to develop branding capability, in part because most top companies have not been in a competitive context in which branding was important. Many of these firms, such as China Mobile and Bank of China, are current or ex state-owned enterprises who have been successful because of the government's assistance in one way or another. Further, many of China's sectors have been blessed with high growth so that success is a matter of delivering on manufacturing and distribution, not branding. In addition, most of the very large firms in China are content to compete as B2B players where the value of branding is not obvious. The change in the competitive context will occur but very slowly.
Third, Chinese firms lack not only talent to develop and implement brand strategy but also the will to do so at the top. Most top managers in China are not trained in marketing and, are more focused on operations, costs, and delivering functional benefits, so report my colleagues at Prophet working closely with Chinese firms on branding issues . Further, as a group, they are much less global in first-hand experience, in understanding of marketplaces, and in their orientation than their counterparts in other global firms and this will take generations to change. Their instinct is not to build a global business based on strong brands or even long-term customer relationships. It is a different mindset. The absence of support for branding at the top is magnified by the fact that Chinese firms are run in a highly autocratic manner and there is seldom an effective program to communicate the business vision even when it exists. Employees do not speak out, and the executives are not to be questioned. How can employees be energized to pursue branding a vision they don't understand?
Chinese firms may be decades behind most global firms, and have a long way to go with respect to brand strategy development and execution. So what are the prospects of their catching up in branding enough to become global brand players like Samsung, GE, or Nestle?
It is likely that brand building will hold back China's global prospects for some additional decades to come. But Chinese firms to not have to create a branding capability from scratch. Based on what the best global firms have done, there are at least two approaches that could accelerate the process:
One approach is to buy firms with strong brand management systems and people and leverage that IP and talent. One example may be the purchase of Volvo by the Chinese car firm Geely, although notably there were other more important motivations for that acquisition. A key challenge for such an acquisition would be to provide an organizational acceptance of the new capability.
Another approach is to rely on consultants and new hires to upgrade their capabilities. Haier, the appliance and consumer electronics manufacturer, might be in that category. In essence they can attract talent and knowledge from those that have those assets. It is definitely easier to copy what works elsewhere than to develop it from scratch. But most Chinese entrepreneurial firms that are candidates for this strategy are likely too frugal to have the big vision needed to execute it.
There are also a few potential role model firms that do get branding and innovation with a "copy but then improve" philosophy. There is the low-cost smartphone brand Xiaomi with its direct-to-customer online sales channel (think how Dell changed the PC channel) and a host of accessories and services that click with customers. And Tencent, a large Internet service portal, has branched out to other countries such as Malaysia with services such as their WeChat free app, which is reported to have over 200 million users worldwide and is supported by very good brand advertising.
Despite the success of these tactics, it is unlikely that Chinese firms will employ these practices on a significant scale in the near future. First, top management would need a new mindset, one free of the legacy of the government's high-growth, protectionist strategy. Without that, China's ascent to global business leadership will continue to be held back by their weakness in branding and marketing.
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