Remaking 'Made in China' (August 2012)

Remaking
'Made in China'

August 2012

Image credit: Jessica Vaughn

WHAT WE'LL COVER
Methodology
Remaking “Made in China”
• Introduction
External Roadblocks to Expansion
• “Made in China” = low quality
• Safety is a key concern
• Fake products fuel copycat image
• Sustainability, labor also key concerns
• Little differentiation between “Poorly manufactured in China” and “Branded in China”
• Low awareness of Chinese brands
• Adversarial political and economic relationship
Internal Roadblocks to Expansion
• Corporate structure and management style
• Lack of brand-building innovation
• Lack of international experience
• Failure to conquer home turf
Overcoming the Roadblocks
• Take back “Made in China”
• Compete at a world-class level
• Lean into national identity
• Tap into the Millennial worldview
• Drive innovation and lead categories
• Ride on international brand coattails
• Become a leader in CSR
Conclusion

METHODOLOGY
SONAR™
All our trend reports are the result of quantitative, qualitative and desk research
conducted by JWTIntelligence throughout the year. Specifically for this report, we
conducted on-the-ground research in Shanghai, Beijing and Hong Kong. We also
fielded a quantitative study in the U.S. and the U.K. using SONAR™, JWT's
proprietary online tool, from May 31-June 4, 2012; we surveyed 503 Americans and
503 Britons aged 18-plus.

This report builds upon “Journey to the West,” a 2011 report researched and written
by Pete Heskett, Southeast Asia area director for JWT.

METHODOLOGY (cont'd.)

INFLUENCERS AND EXPERTS

In addition, we interviewed four relevant experts and influencers.

REMAKING
'MADE IN CHINA'
During much of the 20th century, China served as a manufacturing center for
international brands, developing few of its own for export markets. Meanwhile,
the moniker “Made in China” became synonymous with cheap, mass-produced,
low-quality goods. Now, we're seeing a new focus on developing strong brands that
can hold their own both at home and on the world stage.


REMAKING 'MADE IN CHINA' (cont'd.)

INTRODUCTION

It's a tall order, given that Chinese businesses have little experience developing the
type of brands that dominate on the global stage. Chinese brands have yet to gain
enough status to earn a price premium over global counterparts. Not only that, but
they are still tainted by association with shoddy Chinese manufacturing. Consumers
in developed markets are skeptical at best of Chinese products.

Still, there is tremendous potential. Japan, Korea and Germany are among the
nations whose brands have overcome hostile or skeptical consumer perceptions. It
was once seen as down-market to “buy Japanese,” for example, but today few
shoppers consider “Made in Japan” a negative.

And in our hyper-connected, globalized, fast-moving world, the journey from
negative to positive perceptions can be significantly shorter than it once was.
Millennials already have a very different image of China than the outdated
associations that may linger among older consumers. And the youngest consumers,
Gen Z, have only known China as a rapidly modernizing economic giant.


INTRODUCTION (cont'd.)

China’s brands have seen an “explosion of value,” as BrandZ recently noted. While
we found very low awareness of Chinese brands among American and British
consumers, they may well already be customers of the leading crop of Chinese labels.
Among them:

Lenovo, which is expected to become the world's largest
PC manufacturer this year

Huawei, which recently slipped past Ericsson to become
the world's largest telecom-equipment vendor and ranked
among the world's top three patent applicants in 2011

Haier, which currently holds the largest share of the
global appliance market (close to 8% of the sector)

Image credits: Lenovo; Huawei; Haier


INTRODUCTION (cont'd.)

As China finds its footing as a superpower, some are forecasting that this will be the
“Chinese Century,” not only because of political and economic power but also
because China's worldview and values will influence consumers worldwide (much as
American values and culture have). As perceptions of China align with this new
status quo, and as its marketers find ways to knock down the obstacles to global
expansion, expect some possibly formidable rivals to today's global consumer brands.

Within the next 10 years, we are going to transition
to a Chinese century…relative to an American
benchmark. That means we are going to have Great
Chinese brands, both commercial business Chinese
brands as well as cultural brands, because that's what
defined the U.S.”
—JOSEPH BALADI, CEO of BrandAsian, author of
The Brutal Truth About Asian Branding

EXTERNAL ROADBLOCKS
TO EXPANSION


EXTERNAL ROADBLOCKS
“MADE IN CHINA” = LOW QUALITY

Though China is no longer the top spot for cheap manufacturing—its rising labor
costs have pushed many companies to shift their outsourcing to countries such as
Vietnam and Cambodia—decades of poorly manufactured products from China have
left a scar on consumer perceptions. Comparing perceptions of “Made in China” with
“Made in Japan” or “Made in the USA” points to a wide gap to be crossed by Chinese
brands.
I am disappointed with items made in China
Chinese are cunning at marketing and sold in the U.S.”
products of very low quality but mass —Female, U.S., JWT SONAR™
produced even when they know the
products are faulty.”
—Male, U.K., JWT SONAR™
It's not really important to me where
products I buy are made. Probably I own a
lot of things that are made in China without
realising it, but my impression, right or
wrong, is it's not good quality.”
—Female, U.K., JWT SONAR™

EXTERNAL ROADBLOCKS (cont'd.)

“MADE IN CHINA” = LOW QUALITY (cont'd.)


SAFETY IS A KEY CONCERN

While perceptions of Chinese-made goods as poor quality have persisted for
decades, questions about their safety have only built in recent years, both
domestically and internationally.
Large-scale recalls have made headlines worldwide. Mattel recalled 9 million toys,
including Barbie and Polly Pocket dolls, in 2007 due to lead paint and magnets that
posed choking hazards; countries around the world banned Chinese milk products
after recalls by several Chinese dairy companies in 2008; 54 high-speed trains,
meant to symbolize China's sweeping modernization push, were recalled last year.

I know not all Chinese products are bad,
but in general I think China has very poor
quality regulatory standards for
products. I'm not keen to try Chinese products
until this improves.”
—Male, U.K., JWT SONAR™

Image credit: Mattel


SAFETY IS A KEY CONCERN (cont'd.)

Around 4 in 10 consumers (and more
than half of Americans) said they
have low opinions of Chinese brands
because of recalls. And half of
respondents agreed with the
statement “Chinese brands aren’t
portrayed very well in the
news/media,” citing this as a key
reason for their low opinion of
Chinese brands.


FAKE PRODUCTS FUEL COPYCAT IMAGE

Distrust is also driven by news about
an abundance of fakes: not simply
counterfeit handbags and watches
but everything from plastic rice and
chemically made eggs to forged
university acceptance letters,
imitation medicines and even a
chain of faux Apple stores so
authentic that even employees
believed they worked for the
California company.



FAKE PRODUCTS FUEL COPYCAT IMAGE (cont'd.)


SUSTAINABILITY, LABOR ALSO KEY CONCERNS


LITTLE DIFFERENTIATION BETWEEN 'POORLY MANUFACTURED
IN CHINA' AND 'BRANDED IN CHINA'

Consumers, most of whom haven't
personally had negative experiences
with Chinese brands, are simply
carrying over their negative
perceptions of Chinese-made onto
Chinese-branded. When respondents
were asked to choose which phrases
they associate with Chinese brands,
the top three responses were “mass
produced,” “cheap” and “poor
safety standards”—echoing
consumer sentiment around “Made
in China.”


LITTLE DIFFERENTIATION BETWEEN 'POORLY MANUFACTURED
IN CHINA' AND 'BRANDED IN CHINA' (cont'd.)

When respondents with poor
perceptions of Chinese brands were
asked why they had such low
opinions, just over half agreed with
the statement, “I am not impressed
with products that are 'Made in
China' and feel Chinese brands
would be a similar quality.”
Only 28% of consumers with low
opinions of Chinese brands had
personally had bad experiences with
a Chinese label.


LOW AWARENESS OF CHINESE BRANDS

Our research found relatively low awareness of Chinese brands in both the U.S. and
the U.K.
• When presented with a list of 40 heavyweight Chinese brands, a plurality of
respondents (36%) had never heard of any of them.
• Only a quarter were familiar with Lenovo, currently the world's second largest
computer manufacturer after HP.
• The most recognized brand, Air China, didn't fare much better, with 28% of
respondents recognizing the name.

Image credit: twicepix


ADVERSARIAL POLITICAL AND ECONOMIC RELATIONSHIP

With so much China-bashing going on, it
seems hard for Chinese brands to deliver
the message that they are not
threatening, and come in profit-orientated
goodwill.”
—JENNY CHAN, “China's brands head West,”
Campaign, April 2012


INTERNAL ROADBLOCKS
TO EXPANSION


INTERNAL ROADBLOCKS (cont'd.)

CORPORATE STRUCTURE AND MANAGEMENT STYLE

Chief among the internal roadblocks to expansion is the hierarchical structure of
China's companies, even among midsize, relatively new and innovative companies.
The CEO reigns supreme, his or her authority and judgment never challenged or
questioned in China's corporate culture.

Yang Yuanqing, CEO of Lenovo
Ren Zhengfei, CEO of Huawei

Image credits: Lenovo; Huawei


CORPORATE STRUCTURE AND MANAGEMENT STYLE (cont'd.)

This leads to a stifling of ideas and Whether it's a family company or a
communication, especially from the multinational, the CEO is the
most junior employees—who may be predominant voice in the company.
the ones with experience working or Nobody questions the CEO. He is
studying in the West, where they omnipresent, omni-seeing; he's omni-
powerful. So that creates an issue in terms of
pick up soft skills such as decision-
internal communication… Right now in meetings you
making and working in team have a silent group of Asians who aren't willing to ask
environments. questions, aren't willing to express themselves,
because they're not willing to expose themselves or
take a risk in being wrong. So nobody talks.”
—JOSEPH BALADI, CEO of BrandAsian, author
of The Brutal Truth About Asian Branding


CORPORATE STRUCTURE AND MANAGEMENT STYLE (cont'd.)

A rigid corporate structure also
means that projects face many
layers of navigation before they can
be executed. Jenny Chan explained
in Campaign, “The culture of red
tape and bureaucracy associated
with the Middle Kingdom is
permeating through to how Chinese
brands behave.”

By contrast, today's fast-moving,
hyper-competitive world requires
companies to operate as lean and
nimble machines.



LACK OF BRAND-BUILDING INNOVATION

Though China has seen a sharp increase in research and development spending,
as well as an uptick in patent filings—two indicators typically used to measure
innovation efforts—most Chinese companies have yet to foster a culture of
innovation that helps to build brand equity.

One way of defining [innovation] would
be as fresh thinking that creates value
people will pay for. By that measure,
China is no world-beater. Though its sweat
produces many of the world's goods, it is
designers in Scandinavia and marketers in
California who create and capture most of the
value from those products.”
—“From Brawn to Brain,” The Economist,
March 10, 2012

Image credit: James Bowe


LACK OF BRAND-BUILDING INNOVATION (cont'd.)

Marketers put their innovation Competition in developed international
efforts toward product and markets requires a price premium, rooted
package design, and tend to in both value-added—not parity—products
excel at development: creating or services and strong brand equity. The
incremental improvements to last can be acquired only gradually over
time. In these respects, Chinese brands are still
existing products and services disadvantaged, in many cases grievously so, and not
and driving scale. just by a generic fear of anything 'Made in China.'”
—TOM DOCTOROFF, JWT North Asia area director
and Greater China CEO, author of
What Chinese Want

Image credit: dcmaster



As with big firms, the research community is characterized by respect for the
command chain and senior-level positions; this tends to squelch those with
nonconformist ideas, and there's not much funding for merit-based research.

Image credit: DeclanTM



Privately funded research may not face some of these issues, but companies that
aren't state-run still have to battle poorly enforced IP and antitrust legislation.
Plus, state-run banks favor “national champions” over lesser-known companies.
Still, small to midsize private businesses have done a better job of fostering a
culture of innovation, according to Doctoroff, but they lack the capabilities to
manage global expansion.

It is a catch-22: Companies big enough
to go global are the most encumbered
by commoditized products and
services. Companies that grasp
advantages inherent in value-added
products and services—that is, the ability to
charge a premium—lack the critical mass to
become global power brands.”
—TOM DOCTOROFF, JWT North Asia area director and
Greater China CEO, author of What Chinese Want


LACK OF INTERNATIONAL EXPERIENCE

As with most novices, another issue is simply lack of experience—doing business
in China is typically very different from doing business in most other markets.

Chinese companies, when they first go abroad,
expect it to be a lot like expanding in China—they go
talk to the party secretary or mayor first, make sure
they are happy, and that paves the way for everything else.
Americans and [others] typically don't roll out the official red
carpet, and Chinese are not prepared for that.”
—SCOTT KENNEDY, director of the Research Center for Chinese
Politics & Business at Indiana University Bloomington, “A club in
China to help entrepreneurs go overseas,” Reuters, June 29, 2012


FAILURE TO CONQUER HOME TURF

Middle-class Chinese consumers distrust many local labels, and international
brands still carry aspirational attributes, as well as quality reassurance and
reliable service.



FAILURE TO CONQUER HOME TURF (cont'd.)

If [international brands] can
charge a 20% price premium
here—where Chinese people
When Western media report that should know the quality of
China's middle class is snapping up Chinese brands—simply because they're not
Western goods, what they mean is Chinese, the battle abroad is pretty
that the Chinese consumers who can afford to serious.”
are spending extra to avoid counterfeits. That —TOM DOCTOROFF, JWT North Asia area director and
is not consumers acting as brand advocates, or Greater China CEO, author of What Chinese Want
out of affinity—it's fear purchasing. It says less
about Western brands than about China's
landscape.”
—ABE SAUER, “Chinese Are Fear-Buying, Not in Love With
Western Brands,” Brandchannel, June 8, 2012


FAILURE TO CONQUER HOME TURF (cont'd.)

Hong Kong people have often looked
to Western culture for inspiration,
we emulate their lifestyle yet we
can never convincingly pull it off as
true Westerners. If there were more locally
inspired alternatives that appeal to our young
generations, they may adopt these choices
without denying their true identity. Ownership
of our culture endows us with a sense of
authenticity. It is only in being confident of who
we are that we can hold our heads up high on
an international level.”
—DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle
brand Goods of Desire


OVERCOMING
THE ROADBLOCKS


OVERCOMING THE ROADBLOCKS (cont'd.)

TAKE BACK “MADE IN CHINA”

Rather than be constrained by “Made in China,” some brands are working to take
back the label.

These companies are tackling the negative stereotypes head-on rather than
skating around the fact that consumers may assume the Chinese-made products
are unoriginal or poorly constructed.

Prominent sportswear brand Li-Ning welcomes visitors to its English-language
website with the greeting, “Straight Out of New China. Be Unexpected. Do
Different. Make the Change.”


TAKE BACK “MADE IN CHINA” (cont'd.)

Image credit: Li-Ning



“Proudly Made in China” is the slogan for One Small
Point of Pride, or OSPOP, a budding footwear line
dreamed up by an American entrepreneur living in
Shanghai.

People are working hard, education levels are rising, people are
traveling more and enjoying more leisure time. Why shouldn't China's
development story be the foundation of a fashion brand?”
—BEN WALTERS, founder of OSPOP, “OSPOP: The shoe inspired
by China's laborers comes home,” CNNGo.com, Feb. 24, 2011

Image credits: Jessica Vaughn; Ospop



In 2009, the Ministry of Commerce kicked off an ad campaign that aimed to illustrate
that Chinese-made products represent global collaborations, with various partners co-
creating something of value for consumers everywhere.

Image credit: adamimg



It's true that unscrupulous people have tainted China's image. But
as Chinese ourselves, we cannot deny who we are by pretending to
be somebody else. We must bravely face the challenges. I'm a
believer in making a feature of our disadvantages instead of hiding
our roots (which a lot of local brands do). We emphasize the fact
that we are Chinese.”
—DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle
brand Goods of Desire


COMPETE AT A WORLD-CLASS LEVEL

Until the “Made in China” burden is shed, brands emerging out of China will need
to offer superior products that more than hold their own against global
benchmarks of quality and design. The standards will be those of old Chinese
culture, when only the best would do.

Image credit: IvanWalsh.com


COMPETE AT A WORLD-CLASS LEVEL (cont'd.)

Since 1993, upscale
clothing label Marisfrolg
has been designing its
goods domestically and
sourcing most of its fabrics
from markets such as Italy,
Japan and France.

Chinese retailer Bosideng, is debuting near London's central Oxford
Street shopping area as a luxury label.

[JNBY is] an example of how good
JNBY, founded by a
Chinese fabrication can be. The collective of art and design
design is quite simple, yet avant students in 1994, has also
made international
garde. They've made an excellent transition inroads—the company
from manufacturer to brand builder.” boasts 600 stores globally—
by focusing on design and
—LIN LIN, co-founder of design group
innovation.
Jellymon, “‘Made in China’ is finally cool,”
CNNGo.com, Feb. 8, 2011

Image credits: Bosideng; JNBY; Marisfrolg


COMPETE AT A WORLD CLASS LEVEL (cont'd.)

Glad to see that ChangYu can
produce great white wines, red
wines, sweet wines and brandies—all
different products but all at a very high level.
They compete very well with the French
wines.”
—PIERRE BARTHE, French sommelier, “Changyu holds
wine tasting to mark 120th anniversary,”
China Daily, June 29, 2012
ChangYu wine—China's first winery, established 120 years ago—
has emerged as one of the top 10 wine producers in the world.
ChangYu's Jiebaina dry red ranked as one of the world's top 30
wine brands during the 2008 Salon International de
l'Alimentation, a food and drink expo in France.

Image credit: ChangYu


LEAN INTO NATIONAL IDENTITY

While “Made in China” is a negative, “Chineseness” itself is in many ways a
positive in the eyes of international consumers.

Image credit: Dainis Matisons


LEAN INTO NATIONAL IDENTITY (cont'd.)



When asked about Chinese history
and heritage, 72% of respondents
said they would be interested in
learning more about China's
cultural history; three-quarters of
respondents said they admire the
way Chinese people have been
able to maintain their sense of
tradition in the modern world.

And 6 in 10 felt that their culture
could learn a lot from the Chinese
way of life.



These spheres of positive perception have been largely overshadowed in recent
decades by the legacy of “Made in China” and the nation's rocky relationship with
the West. For Chinese brands, then, there's an opportunity to trade on national
identity and drive a new conversation about “brand China,” focusing on culture,
history and widespread perceptions of “Chineseness.”

Image credit: Scazon



At the same time, there's a nascent preservationist spirit in China—a desire
to protect its heritage and culture, which a growing number of people see
as being sacrificed in the drive toward modernization and development.

This recalibration of values after a period of relentless, rapid change comes
as no surprise, given that Chinese society fears uncertainty and instability
above all. Bursts of growth are often followed by periods of stabilization.

Image credit: ShamirFlinkazoid



The mission of Hong Kong-based Goods of Desire, which sells everything from
furniture to apparel and accessories, is to be “quintessentially Hong Kong” and
promote “a new Asian lifestyle brand by revitalizing local heritage.”

I believe that global identity, national
identity and individual identity can
all coexist. Due to the big trend of
globalization nowadays, there is a lot
less focus in Asia on building regional
identity. I hope G.O.D. can re-emphasize the
importance of identity to our consumers. I think
it is our unique identity that makes interaction on
the global level a lot more interesting.”
—DOUGLAS YOUNG, co-founder of Hong Kong-based
lifestyle brand Goods of Desire

Image credit: Goods of Desire



Chinese-born labels Huili (or Warrior) sneakers, established in the 1930s,
has undergone design updates—albeit by European companies—and found In 2009, a limited-run redesign of heritage
favor among hip international audiences, who buy into the brand's heritage. brand Shanghai Watch Co. sold out not only
domestically but in trendy boutiques such as
Colette in Paris and Kidrobot in New York.

Image credits: Huili; Shanghai Watch Co.



Blending the old with the new in a
way that's relevant for a modern
consumer is one potential route to
success for Chinese brands. And as
Chinese companies become more
savvy marketers, they will be able
to better tell the story of Chinese
culture and heritage through their
products. Li-Ning tapped into this
mindset with the U.S. release of its
“Year of the Dragon Collection”
earlier this year.
Earlier this year Li-Ning produced four limited edition sneakers, dubbed the
“Year of the Dragon Collection,” to coincide with the Chinese zodiac year
by the same name.

Image credit: facebook.com/liningusa



Just as nations such as Japan, Korea and even Germany have done, Chinese
brands looking to compete in international markets will need to turn
“Chineseness” into a conceptual advantage rather than a perceptional
weakness—a turnaround that will rely on clever branding campaigns that play on
consumers' more positive ideas about China.

Image credits: Gill_Penney; ToGa Wanderings


TAP INTO THE MILLENNIAL WORLDVIEW

Chinese brands will likely find
Millennials to be more receptive
than older generations. Compared
with their predecessors, these
consumers have grown up in a
much smaller, more connected
world and been exposed to a wider
array of worldviews at a younger
age. And they know China as a
modernizing, rapidly emerging
market—a very different country
from the one that older consumers
remember.

Image credit: Wesley Fryer


TAP INTO THE MILLENNIAL WORLDVIEW (cont'd.)

Millennials are slightly less biased
against the “Made in China” label.
Compared with older generations,
Millennials were the least likely to
identify Chinese brands as mass-
produced, cheap and constructed
using poor safety standards.



Chinese students outnumber any
other international cohort in
American universities. And some
90,000 Chinese students were
attending British universities in
October 2011. The cultural exchange
goes both ways. Some estimates
forecast that the number of
international students in China,
currently at a quarter-million, will
double by 2020.

Faced with a tough job market at
home, some recent American and Some say there are 50 million people of all ages studying
European college grads are Mandarin. The U.K. and Indian governments, among
relocating to Asia. others, are working to boost the Mandarin curriculum in
schools

Image credits: Eric Nishio; Sewanee: The University of the South;
London Permaculture



Lenovo's “For those who do” campaign positions the products as tools for
this go-getter generation to get things done.

In one ad, reminiscent of the final scenes of Fight
Club, a team of urban hackers passes along a Lenovo
laptop they're using to orchestrate a dazzling urban In select emerging markets Lenovo set up “The Do Network,” an
light show. online forum where young people could submit community
improvement ideas for a chance to win an opportunity to make
their ideas reality.

Image credit: Lenovo [1]; [2]


DRIVE INNOVATION AND LEAD CATEGORIES

Developing a culture of innovation remains a major challenge for many Chinese
companies, but China is starting to address this.

Image credits: Seth1492; Wisegie


DRIVE INNOVATION AND LEAD CATEGORIES (cont'd.)
DRIVE INNOVATION AND LEAD CATEGORIES

We invest more than most
others on R&D just to be able
to go out there and
consistently demonstrate the
innovations and the quality
45% of executives
believe China will
and the product … to go the
extra mile. We think it's necessary, because become the next
this will give the customers the peace of major innovation
mind that we are committed to what we say center.
we're going to do.”
—HOWIE LAU, VP of marketing and
communications for Asia Pacific and Latin
America at Lenovo



On a mission to become one of the world's top three smartphone
providers by 2015, Huawei is pushing its Ascend D Quad (which it
claims is “the world's fastest smartphone”) in Western markets.

Lenovo is set to release the IdeaPad Yoga, an ultra-thin device that's
part tablet, part laptop: It features a keyboard that can be tucked
behind the display, emulating an iPad.

Haier recently unveiled two novel television prototypes: an ultra-thin
transparent TV screen and Brain Wave, a TV that users can control
with their mind.

Image credits: Haier; Lenovo; Huawei



Automaker BYD created a buzz at this year's Beijing auto show by introducing a remote-
controlled car, the F3 Plus.

Image credit: BYD


RIDE ON INTERNATIONAL BRAND COATTAILS
9

Whether by acquisitions or simply via onetime partnerships, Chinese brands
stand to make valuable strides by aligning with brands that are already global
sensations or know how to steer through international waters.

Image credit: Doug_Wertman


RIDE ON INTERNATIONAL BRAND COATTAILS (cont'd.)
9

In 2009, after Starbucks tasked G.O.D. with designing a store in Central
Hong Kong, co-founder Douglas Young modeled the space after a “bing
sutt,” a midcentury-style Hong Kong food outpost where Western foods
were first introduced.

Image credit: god.com


9

Chinese sportswear maker Anta made headlines in 2010
when it started sponsoring NBA superstar Kevin Garnett.

This year, Li-Ning has been making prominent appearances at the
London Olympics, it's backing a number of international athletes.
+
Above, Jamaican sprinter Asafa Powell.

Image credits: Miami Heat; anta.com; facebook.com/liningusa ; haieramerica


9

Meters/bonwe plans to expand internationally in the next three to five years, and has
made two cameos in the Transformers movie franchise and tested out the gaming
space, collaborating with the producers of World of Warcraft.

Image credit: metersbonwe.com


BECOME A LEADER IN CSR

With consumers skeptical about the trustworthiness of Chinese companies and
dubious about their green credentials, substantive corporate social
responsibility initiatives would go a long way toward rebranding “Made in
China” among consumers.

Image credit: photologue_np


BECOME A LEADER IN CSR (cont'd.)

Patriarchs by nature, Chinese
companies will likely begin to
adopt a “uniquely Chinese”
version of CSR, thanks largely
to the government's focus on
promoting stability. Beijing is
pushing for greater energy
efficiency, for example,
“because runaway pollution in
China means wasted lives, air,
water, ecosystems and
money—and wasted money
means fewer jobs and more
political instability,” as The
New York Times' Thomas
Friedman explained in a 2010
column.

Image credit: Janie.Hernandez55



Currently the world's top
emitter of carbon dioxide,
China has set a range of
pollution-reduction and other
environmental goals,
including a 40-45% cut in
carbon emissions by 2020 and
an 11.4% increase in non-fossil
fuel use by 2015 as part of an
emphasis on “higher quality
growth.” It's an ambitious
target, though, given that
China's CO2 emissions
increased in 2011. This is the haze of pollution over Beijing.

Image credit: David Barrie



While Western companies have
gradually come to understand that
measures designed to help the
environment can also help the
bottom line, this is something that
pragmatic Chinese leaders in
government and business may be
quick to understand.

Smart CSR policies are seen less as
a matter of generating “warm and
fuzzy” feelings and more as “the
right thing to do, mostly because it
will be the thing that provides the
best return,” according to branding
consultant Joseph Baladi.

Image credit: NASA



Due in part to mandates that all state-owned institutions publish CSR reports by
2012, reporting is on the rise. In the six years leading up to 2005, only 22 CSR
reports were published in China, largely by multinationals; in 2010, there were
703 reports, focusing on a diversity of content. Reporting begets more
transparency, which increases awareness of CSR activities among consumers
and higher expectations, which in turn helps to drive more impactful CSR
efforts.

Image credit: Juhansonin



Perhaps the next generation of leaders
will drive more substantive change: In a
2012 survey by Deloitte on Millennial
attitudes toward business, Chinese youth
stand out in their concern about the lack
of commitment to sustainability among
business leaders. More generally, Chinese
citizens rank the highest globally in terms
of a desire to be in tune with nature,
according to the GfK Roper Consulting's
Values Factbook.

Image credit: state library and archives of Florida



Since a sense of collective responsibility
is an important aspect of Chinese culture,
along with conformance to social norms,
environmental concern could well start to
drive consumer decisions. Plus, as
growing numbers of Chinese see their
basic needs met, they're beginning to
demand more of consumer goods and
services, not only in terms of
sustainability. Impatient with substandard
product quality, food-safety violations,
poor accountability for major missteps
and so on, they are less tolerant of
secrecy and lack of transparency.

Image credits: familymwr; Katie Tegtmeyer



Haier's global brand building has emphasized its environmental credentials

Image credit: Haier



Lenovo has some of the best green product ratings among PC manufacturers.

Image credit: Lenovo

CONCLUSION
The journey to Western shores will undoubtedly be an arduous one for Chinese
brands. We've seen some notable stumbles, such as sportswear maker Li-Ning
closing its only U.S. retail outlet, a 2-year-old store in Portland, Ore., in February.
JWT's Tom Doctoroff believes that China as a nation will “cross the river by
feeling the stones” as it ascends to the global stage—“inching forward,
occasionally overreaching but quickly correcting course.”

Image credit: Dave Morrow

CONCLUSION (cont'd.)

We've outlined some key strategies that Chinese brands might use to overcome
the roadblocks to expansion:

• taking back “Made in China” rather than be constrained by the label;

• competing at a world-class level, offering superior products;

• leaning into national identity and turning “Chineseness” into an advantage;

• tapping into the worldview of Millennials, a more open and globally connected
generation;

• driving innovation and leading categories;

• riding on international coattails, aligning with popular global brands;

• and becoming a leader in CSR.


This list is by no means comprehensive, nor is there a one-size-fits-all equation
for successful expansion into developed markets. For the methodical and
cautious Chinese, this need not be the first order of business anyway—a booming
domestic market and lucrative developing markets represent tremendous
opportunity. The lessons learned here will ultimately help brands move beyond
those markets. And as rising incomes create more discerning emerging market
consumers, improved quality and safety standards are likely to follow. The
question is whether consumers will follow Chinese products up the value chain or
veer toward established brands.

Image credit: IvanWalsh.com


If they can pioneer unique niches
for themselves, Chinese
companies won't need to go
head-to-head with successful
brands. “Trickle-up innovation”
is one area of potential: taking
low-cost products designed for
developing markets to penny-
pinching consumers in developed
markets. After all, the Chinese
are masters of driving down costs.

Image credit: epSos.de


More generally, products will need to compete at or above a world-class level,
given that consumers are carrying their negative perceptions of Chinese-made onto
Chinese-created.

Image credits: Angusf; Li-Ning


That will come over time as Chinese companies hone their advertising and
marketing skills—keep in mind the industry in China is relatively young. Chinese are
adept at studying the competitive advantages of other cultures and putting them
into practice in uniquely Chinese ways, a point Doctoroff makes. Savvy executives
will watch and learn from many of today's dominant brands, mastering the best
practices of branding.

Image credit: travel2.0


Chinese brands have an opportunity to tell a fresh story about China, emphasizing
everything consumers like and appreciate (its culture, its people) or easing
anxieties tied to the Middle Kingdom.

Image credits: Fransisco Diez; Stevendepolo


The next generation of business
leaders may help accelerate
change in China's corporate
world. Millennials have grown up
in a booming and interconnected
China, and many are Western-
educated, trained to think more
creatively. As a result, we'll
likely see a push-pull between
the Millennial mindset and
prevailing cultural norms.

Image credit: mobilechina2007


The idea of Chinese brands is new to many consumers, but it won't be for long.
From Bosideng's recent landing in central London to Haier's drive to produce
American-targeted goods (via an upcoming U.S.-based R&D center), more Chinese
brands are pushing into Western markets every day.

At the end of the day, people are
not buying national brands, and
they're not buying brands that
have a certain provenance, they
are buying great brands, and
that's the most important thing.”
—JOSEPH BALADI, CEO of BrandAsian, author
of The Brutal Truth About Asian Branding

Remaking 'Made in China' (August 2012)

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (19)

Andere mochten auch

Andere mochten auch (20)

Ähnlich wie Remaking 'Made in China' (August 2012)

Ähnlich wie Remaking 'Made in China' (August 2012) (20)

Mehr von J. Walter Thompson Intelligence

Mehr von J. Walter Thompson Intelligence (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Remaking 'Made in China' (August 2012)