By Lucien Harrington
Western brands have dominated the global market with their assurance of quality and performance (often encapsulated in a sophisticated brand identity) In fact, the top five most powerful brands are from the US. That being said, Asian brands have been gaining visibility at the top. The 70’s and 80’s saw the emergence of Japanese brands on the global stage, followed closely by those from South Korea. At present, China is at the tipping point of exporting its successful and financially powerful brands into the global market.
Asian Brands Vs Western Brands
How do Asian brands match up against their Western counterparts? According to Interbrand 2015 rankings, only 7 out of the top 100 most powerful global brands are from Asia — a grave under representation. The usual Asian brands are on the list, with Toyota outranking BMW in the automotive industry and Samsung trailing close behind Apple in the smartphone industry. While Lenovo made it to the list, securing the 100th spot, it’s the only Chinese brand to have made the cut and even then, just barely. A similar study by FutureBrand had eight Chinese brands in the worlds top 100 brands — but the trend was up and the thinking was more brands would force their way in over the coming years.
Lenovo — an outlier?
Lenovo’s progress since its acquisition of IBM in 2005 has been nothing short of spectacular. The acquisition turned the company, which had been known as Legend Computers and was rebranded into Lenovo (“Le” a historical reminder of its beginnings) — which was serving the Chinese market — into a truly global brand. In doing so, Lenovo redefined the term “Made in China” by producing the industry’s highest quality machines. It was able to achieve such success due to the company’s strategy of seamlessly blending the Eastern way of thinking, with best practices from Western businesses, a practice that produces rapid innovation and dexterity. Such practices are reflected in the global nature of its top leaders, who live, sell, work and manage all over the world.
So, could Lenovo simply be just an outlier, or is it an indication of the impending rise of Chinese brands going global?
Made in China, for the world
China’s smartphone industry is unlike any other, where Samsung and Apple dominate by default. The most popular smartphone brand is Xiaomi, a company that is already making inroads in other parts of Asia. Just recently, it celebrated its first million sales after only five months of operations in India. Huawei is not far behind, with strong sales of its smartphones worldwide. It is now the third largest in terms of global market share, behind only Samsung and Apple. Other Chinese brands such as TCL and OPPO have also announced their entry into the global smartphone industry. These brands offer similar features for less, giving consumers the best value for each dollar spent.
Another formidable global brand is the Alibaba group. The company, which started off as an e-commerce platform for Chinese businesses, has since diversified into other industries. Alongside its global success in e-commerce, the group ventured into the cloud computing, electronics, sports and entertainment industries. Alibaba’s logo has even penetrated the hollywood scene, with its first major investment in “Mission: Impossible — Rogue Nation” and the recent “Teenage Mutant Ninja Turtles: Out of the Shadows”, under the arm of Alibaba Pictures.
These Chinese brands provide hints as to what other Asian brands need to do to take their place alongside global brands from the West.
1. Solidify local advantages
The common theme within successful global brands from Asia lies in their ability to consolidate local advantages. Xiaomi achieved this through creating online communities and having open platforms for ‘tech geeks’ to criticise its software and suggest improvements. Alibaba gained likeability because it understood its local market well. Local consumers were concerned about payment and shipment complications, and this was eliminated when the company allowed consumers to approve payment only after receiving their products. By first understanding the local market and strengthening its foothold, these companies are then able to adapt to the nuances of other markets when expanding abroad.
2. Extend advantages abroad
Although many companies start off by competing on the basis of cost and price, they will eventually be able to charge a premium for their offerings. Take Huawei as an example, where the average prices of its smartphones increased by 21% in 2015 compared to the previous year, indicating higher brand value and perception from its consumers. The most successful global brands, such as Samsung, have learned to overcome the disadvantage of solely competing on the basis of cost by tapping into resources in developed countries. The company established a major R&D center in Silicon Valley for its memory chip technology, subsequently transferring the know-how gained back to its headquarters in Seoul. By doing so, companies can emulate industry best practices and coerce speedier innovation that can be replicated throughout the business.
3. Brand Identity
Having a strong brand identity is the single most important aspect of business that a company looking to expand globally needs. Back when I was working with corporate clients for re-branding projects, my advice often include the need for lifestyle branding as a key part of their positioning strategy. Doing so helps bridge the gap between inexpensive, utilitarian products and aspirational luxury goods. Rising Asian brands need to incorporate a strong brand identity, and be able to transfer core brand propositions for a better chance at success on the global scale.
4. Diversify — based on a case-by-case basis
Diversification into key industries could also contribute to a brand’s global success. Xiaomi, which has enjoyed considerable success bringing its smartphones outside of China, has started introducing other web-connected home gadgets in the market. The company has plans to introduce more of its Internet-of-Things (IoT) gadgets to the global market.
Although diversification is generally positive, case studies from Western brands suggests that extensive diversification may not be healthy in the long-run. Top companies such as Facebook, Google and Amazon are mostly focused on one or two core businesses. This is in contrast to rising Asian brands such as Alibaba and Wanda group, which are diversifying into numerous unrelated industries. Such ‘conglomerates’ were once popular in the West, but they eventually sold off most of their unrelated assets due to complications for management as well as for shareholders.
Crossing borders and becoming global are not the easiest of business ventures for Asian companies, but identifying best practices and current weaknesses within the strategy is the first step to removing the barriers that might exist. Brands that try to expand without having a strong brand identity, neglect timing of entry and do not consider proper market research, might face greater difficulties when entering a foreign market.
Even so, Western companies will soon find themselves competing with Asian brands, particularly those from China. China has come a long way from just being a source of cheap manufacturing to where it is today. Although the increasing number of rising brands have slowly chipped away on the ‘Made in China’ stereotype, there is still much to be learned before Chinese brands can take their place alongside their Western counterparts. For a start, Chinese giants such as Alibaba and Wanda group, who are the frontrunners of the rising Asian brand, need to look into enhancing their brand appeal so that it matches their current economic strength.
This article first appeared in June 2016 on the 85Fifteen Consultancy Blog.