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Creating and managing brand valueTM
创造和管理品牌价值
Made in China 2008:The Challenge for Chinese Brands Going Global
ABOUT INTERBRAND
Founded in 1974, Interbrand serves the world with 42 offices in over 22 countries. Working in partnership
with our clients, we combine rigorous strategy and analysis with world-class design and creativity. We
enable our clients to achieve greater success by helping them to create and manage brand value.
We recognize the importance of brand in an increasingly competitive business environment and tailor our
services to client needs. Our services include brand analytics, brand valuation, strategy naming and verbal
identity, corporate identity, packaging design, retail design, integrated brand communications and digital
branding tools.
Visit www.interbrand.com and www.brandchannel.com for the latest brand thought.
CONTACT
Jonathan Chajet
Managing Director, China
Interbrand China
C7-201, Red Town, 570
Huaihai Rd.W. Shanghai
200052, P.R. ChinaTel: +86 21 6192 5200
E-mail: [email protected]
www.interbrand.com.cnCreating and managing brand valueTM
创造和管理品牌价值
MADE IN CHINA 2008
Contents
p01 Background
p02 Executive Summary
p04 “Made in China” in the Global Market
p10 The Opportunity for Chinese Brands
p17 Appendix: Methodology
MADE IN CHINA 2008
Chinese manufacturers have long been proud of selling their goods to the world market and earning China trillions in trade surplus every year. Low-cost labor, massive infrastructure investment, tightly-clustered industrial chains and coordinated government strategies have sustained China’s economic miracle. But Chinese manufacturers now face increasing challenges posed by a weakened US dollar and the subsequent decrease in orders globally, as well as rising material and labor costs. While products made in China are struggling due to the downturn in the global economy, a few Chinese brands have continued relentlessly on their march towards the global market. Some leading brands (i.e. Lenovo, Tsingtao, Geely)have made significant progress by setting up overseas plants and making acquisitions. Growing confidence, world market experience and a stronger Renminbi may justify these strategic movements. However, as Korean and Japanese rivals would report, the route to the global market is not an easy one. The negative associations of poor quality, low safety, and cheap are
This report summarizes the key findings from our research and provides a tangible assessment of the made in China label and the progress of Chinese brands. We hope these insights will help those Chinese companies with international ambitions to identify the challenges and opportunities for going global and lay down a roadmap for the journey ahead.
deeply entrenched in the image of Chinese products. An image only further compromised by Chinese quality scandals and their subsequent media coverage in Western nations. Now is the critical moment for Chinese business leaders to re-think the next stage of growth. This transformation must not only take place in areas such as technology, quality control and international cooperation, but in brand creation and brand management. Asian companies like Toyota, Sony, Samsung and Hyundai which have already travelled the globalization path know that brand value is the key to unlocking shareholder value.
In Interbrand’s third study of “Made in China”, we surveyed over 700 business professionals on their perceptions of products made in China and the potential for Chinese brands going overseas. While our primary intention was to measure the impact of the Beijing Olympics on perceptions of China, the infant milk powder scandal broke in the middle of our survey, and we were given extraordinary insight into the impact of both events.
Asian companies which have already travelled the globalization path know that brand value is the key to unlocking shareholder value.
Now is the critical moment for Chinese business leaders to re-think the next stage of growth
01
Background
MADE IN CHINA 2008
As we have seen in the past, products made in China continue to hold a ‘low price’ image. In reality, ‘low price’ is not in itself a negative association if it can spur consumption. But our research shows that the ‘low price’ image has a high correlation with concerns of poor quality and safety issues in the eyes of consumers. Simply put, if concerns over quality and safety remain, the Made in China label will continue to hinder Chinese brands from going global.
The Olympics were an enormous success in impressing the world
In light of the China milk scandal, we would like to reassure our customers that none of our dairy ingredients are sourced from China.由于近来发生毒奶事件，我们特此声明绝对没有采用任何来自中国的奶类产品。
Demand from the North American and European markets has been the sustaining force behind China’s booming economy. However, the world financial turmoil, intensive competition and trade protection is making it very difficult for Chinese brands to move up the value chain and win further in the developed markets. Our survey suggests that emerging markets may offer the best opportunities for Chinese brands in the near term, as consumers in those markets may be more pre-disposed to China’s lower priced value proposition. China is making great progress already,with growing cooperation in the Asia-Pacific region and closer ties to other developing markets, i.e. Africa, Russia, and the Middle East.
of China’s creative flair and technological advances. After the Games, responses in our survey reflected a more positive image of China with nearly a ten point improvement in perceptions from one year earlier (summer 2007). However, perceptions returned to pre-Olympic levels after the milk scandal emerged, with 66% of respondents indicating that “made in China” hurts a brand.
Chinese brands should continue to benefit from globalization as OEM production and global sourcing improve manufacturing techniques and ultimately raise industry standards for quality. In a few technology categories such as consumer electronics, PCs and mobile phones, products made in China and Chinese brands have a fairly good reputation because over 50% of the output in these categories is from China. Brands such as Lenovo and Haier enjoy high brand awareness and are considered to be ambassadors of Chinese brands in the global market.
A few categories have the best chance to succeed
02
Quality and safety issues and a “low price” image still dominate the perception of products from China
Choose emerging markets as the first foothold to global expansion
Executive Summary
Attached to a menu at a restaurant in Hong Kong:
MADE IN CHINA 2008
Chinese brands do not possess compelling brand personalities; in particular, a few attributes (i.e. attractive, world class, fashionable) are critical to swaying consumers’ purchase intention. Chinese brands have thus far failed to capture consumers’ mind share for these images. Therefore, Chinese brands should consider how to position their brand in the target market and start to build up brand personalities beyond simply good value.
Interbrand’s annual ranking of the Best Global Brands suggests that a country’s image is a halo for brands from that country. The same holds true for the made in China label; if China’s image can be enhanced, brands from China will benefit from
With the downturn of global economy, the transformation of the made in China label and the acceptance of Chinese brands overseas can not be made overnight. The first challenge is to improve the quality and safety of all Chinese products. The definition and enforcement of strict standards and the active engagement in environmental protection is a social responsibility for any global player, and a pre-requisite for changing consumer perceptions overseas.
The Chinese government can play a very special role in these difficult times. Leadership means taking short term actions to spur domestic demand and enhance the competitiveness of exports. But leadership also means creating a national agenda - like innovation in Japan, design in Korea or engineering in Germany - that serves as a guiding light for Chinese companies eager to make their brand mark on global markets. Now is the time for the Chinese government to set the bar high and build the next foundations for success in the future.
the endorsement. The Chinese government should reconsider its role in helping Chinese brands go global: as a thought leader in best business practices, as a supervisor of quality, as an organizer of industry associations, and as a voice in changing the country’s image overseas.
Today’s leading Chinese brands must learn how to create and manage their brand value on a global scale. Now is the time for Chinese brands to re-think their global brand strategy, and follow the best practices of the world’s most powerful multi-national brands. While we are still several years away from a Chinese brand appearing on Interbrand’s Best Global Brands, the lessons from the annual ranking are clear – great brands know their strengths and weaknesses and plot effective strategies to sustain and improve their value in the future.
03
Building a strong and appealing brand personality is critical
The government can play a role in enhancing China’s brand
Brand building is one of the first steps on the route to the global market.
MADE IN CHINA 2008
China’s annual export value is over 1200 billion US Dollars and is almost 8.8% of global trade according to the World Trade Report 2007. Many Chinese products are distributed to overseas markets on an OEM basis, but increasingly under their own brand names. The made in China label is now known everywhere in the world for its low price reputation. Behind this
value proposition, consumers hold strong opinions toward Chinese products, the made in China label and Chinese brands.
Exhibit 1 shows global preference towards products made in China and Chinese brands. Only six percent of respondents agreed to the statement “I like to buy products made in China” and “I am interested in buying brands from China”. Accordingly, over half of respondents report that they do not like products made in China or Chinese brands. The survey shows that Chinese products and brands have not won the hearts and minds of global audiences yet, despite substantial presence in global trade.
Much like our findings last year, cheap is the top association for products made in China (See Exhibit 2). The association appears to be entrenched as it is dominant among all factors.
A cheap and low quality image is the primary challenge for those Chinese brands with the ambition to go global. Furthermore, it makes them vulnerable to competitors in Southeast Asia, India, Africa and South America that offer a low cost sourcing alternative.
The Beijing Olympics improved perceptions, though gains were quickly erased by the milk scandal
“Made in China” in the Global Market
Image has not changed
Only 6% ofrespondents agree that they like to buy Chinese products and brands
Exhibit 1
I like to buy products made in China. I am interested in buying brands from China.
04
6%Agree
56%
38%
Disagree
Neutral
Agree
Disagree
Neutral
6%
55%
39%
MADE IN CHINA 2008
By correlating the importance of key attributes with attitudes to the made in China label, our findings point to quality and safety as the major concerns (See Exhibit 3).
Quality and safety issues, frequent product recalls, and an inevitable negative reputation are leading to distrust. Our survey also shows that most respondents are unsure or doubt if the quality of products made in China is improving.
A respondent from Canada noted, “I avoid buying products made in China at all costs. I don’t trust anything made in China for a variety of health and safety issues. Just check the headlines over the last few years....”
The second association, good value, may in fact be a strength in a weak global economy in which consumers will be more price sensitive. But, over the long-term, low price is a weak value proposition if products lack intrinsic advantages such as cutting edge technology and advanced manufacturing management. After all, value is an equation that suggests getting something for a good price. With only half the equation complete, low price is just as likely to be seen as a threat to the environment or fair trade as it is a symbol of efficiency. Chinese brands need to stand for more than low price if they are to compete globally.
Concern over quality and safety
05
Exhibit 2
How well do the following attributes describe products made in China?
66%28%14%8%7%7%6%6%5%5%4%4%3%2%2%
CheapGood valuePracticalSmartInnovativeFriendlyFunYouthfulAttractiveHigh qualityFashionableWell-designedWorld classSafeLuxurious
MADE IN CHINA 2008
12%
47%
41%
Agree
Neutral
Disagree
Unfortunately, current perceptions prevent Chinese brands from achieving positive associations. For all the hard work and investment put into the Olympics, 66 percent of respondents (the same as in 2007) agree that the Made in China label hurts Chinese brands (Exhibit 4).
Even among those respondents who have travelled to China in the past 12 months, the findings indicate similar perceptions. This suggests that familiarity and experience with China alone is not enough to win consumer confidence.
For the Chinese government, the Olympics was more than a grand athletic competition; it was a precious opportunity to demonstrate the new capabilities of China. Technology, culture and environment are the key
The Olympics: the ultimate advertisement
“Made in China” hurts Chinese brands
06
Exhibit 3
Derived importance of attributes describing products made in China
The quality of products made in China is improving.
60%59%54%53%51%49%48%46%45%44%44%43%43%36%6%
High qualitySafeFriendlyWorld classAttractive Well-designedSmartLuxuriousInnovativeFashionablePracticalFunA good valueYouthfulCheap
MADE IN CHINA 2008
4%
66%
30%
n=776
Total sample 2008
Hurts
Neutral
Helps
Total sample 2007
n=700
4%
66%
30%
Hurts
Neutral
Helps
n=139
30%
64%
6%
Hurts
Neutral
Helps
themes which China wants to convey to the world. Indeed, the magnificent display at the Olympics impressed billions of people in the world, but the impact alone is not enough to improve China’s image.
The survey shows that only 10 percent of respondents agree that the Olympics improved their impression of China (Exhibit 5). Even a $40 billion marketing campaign can not change a country’s image quickly. Perceptions of Japan and Korea took 5-10 years to change following their hosting of the Olympics in 1964 and 1986 respectively. Furthermore, when a major product quality scandal erupts only three weeks later, the gains from the Olympic investment are even harder to see.
Exhibit 4
Do you believe the Made in China label helps or hurts Chinese brands today?
Respondents who have travelled to China in the past 12 months
07
MADE IN CHINA 2008
If the Olympic Games made any improvement in China’s image, the milk scandal undermined it virtually overnight. In the question of “Do you believe the made in China label helps or hurts Chinese brands today”, we found that, before the scandal emerged, 59 percent of respondents believed the label hurts Chinese brands, but after the scandal, the
Globalization offers Chinese companies immense market opportunities in the coming decades. Going global is critical for large scale growth, but it is a complex question that even the most sophisticated companies struggle to answer. Developing a brand is not only costly but complicated, and suspicions of quality and safety for anything made in China make building a positive image very difficult. In addition, “No competitive advantage beyond low price” and “anti-Chinese sentiments” may also be factors which hinder Chinese brands from going global (See Exhibit 7).
These hurdles are high, but not insurmountable. There are many opportunities for Chinese brands to go global, but Chinese enterprises must learn from the successful experience of their neighbors (i.e. Japan, Korea), who have faced similar challenges before.
number increased to 68 percent (See Exhibit 6).
One lesson to learn from this disaster is that a brand's basic promise to consumers can not be delivered purely through communications (i.e. advertising). Chinese brands should care for and protect their brands by spending time building on their core values and delivering on their promise to consumers. After all, a promise is only meaningful when it is kept.
The milk scandal erased all gains
Factors preventing Chinese brands from going global
Exhibit 5
The Olympics improved my image of China.
08
12%
37%
51%
Agree
Disagree
Neutral
MADE IN CHINA 2008
Exhibit 6
Do you believe the made in China label helps or hurts Chinese brands today?
Exhibit 7
What most prevents Chinese brands from succeeding in overseas markets?
09
5%
59%
36%
n=208 (Before milk scandal) n=564 (After milk scandal)
29%
68%
3%
Hurts
Neutral
Helps
Hurts
Neutral
Helps
80%53%45%31%27%24%22%12%5%4%4%
Low quality reputationNo competitive advantage beyond low priceAnti-Chinese sentimentsPoor communications (i.e. advertising, websites)Lack of awarenessInexperience in marketing/promotionDon’t understand foreign consumersNames difficult to pronounceMoving too slowlyInsufficient investmentNot sold in enough locations
MADE IN CHINA 2008
In our study, Chinese brands are expected to excel in the consumer electronics, IT and mobile phone categories (Exhibit 8). Already, a few brands are emerging as leaders and expanding with carefully orchestrated and coordinated acquisition.
In 2004, Lenovo acquired IBM’s Personal Computing Division and the ThinkPad brand which
The country of origin label is often a significant factor in a purchase decision. Our survey shows over 40% respondents are aware of it and like to check the products they buy (Exhibit 9).
The country of origin is seen as less important in home appliances, personal computers and laptops, personal electronics and mobile phones (Exhibit 10). This offers a good opportunity for established Chinese brands to grow further in these categories.
While 60%-70% of respondents feel that the country of origin is important in banking, automobile and airlines, only 30%-40% feel it is important in white goods. This provides a space for Chinese brands like Galanz which produces about 50 percent of the world's microwave ovens (under 80 different brands). In such a highly concentrated market, consumers have reason to accept that a product made in China may be the best choice.
is helping Lenovo increase its awareness around the world. Haier Group, China’s leading appliance manufacturer, acquired local brands in the US in 2005 and is now the third-largest appliance brand behind Whirlpool and GE. Acquiring recognized and valuable brands has helped Chinese companies earn substantial global attention and initiated them into the global brand arena.
For any Chinese brand to succeed, every Chinese brand must take responsibility to deliver on its promises to customers
Country of origin matters...usually
Exhibit 8
In the next five years, I expect a Chinese brand to be a global leader in…
10
The Opportunity for Chinese Brands
38%36%35%35%14%14%12%11%11%9%9%7%7%7%5%
Personal computers and laptopsPersonal electronicsMobile phones Home appliancesSporting goodsEntertainmentShippingBankingAutomobilesFashionPackaged foodsfast foodsAirlinesHotelsWine, beer, spirits
MADE IN CHINA 2008
Exhibit 9
How often do you believe consumers look for the country of origin on the label of products they buy?
Exhibit 10
In the following categories, how important is the country of origin (where a product is made) in your purchase decision?
11
2007
21%
36%
33%
200810%
0%
Always
Frequently
Sometimes
Seldomly
Never
18%
43%
32%
6%
1%
Always
Frequently
Sometimes
Seldomly
Never
69%66%60%58%53%45%42%41%37%36%32%31%30%29%28%
BankingAutomobilesAirlinesPackaged foodsWine, beer, spiritsFast foodsHome appliancesPersonal computers and laptopsPersonal electronicsFashionEntertainmentMobile phonesHotelsShippingSporting goods
MADE IN CHINA 2008
46%32%24%23%23%22%17%13%13%12%10%8%8%6%5%5%5%5%4%4%4%4%4%3%
LenovoTsingtaoBank of ChinaAir ChinaHaierCCTVChina MobileCheryAlibabaHuaweiChina EasternTCLLi NingZTEUnionpayGeelyChanghongMoutaiAigoMideaGreeAntaBrillianceSany
There is little doubt that future global rankings will herald a handful of Chinese brands among the best in the world. A quarter of respondents believe a Chinese brand will be a household name in his or her home country in the next five years (Exhibit 11).
Who will this brand be? Some Chinese brands have already achieved substantial brand awareness overseas (Exhibit 12).
While a few Chinese companies may be stewarding their brands into the world economy, Lenovo, the world’s fourth largest PC maker, may well become China’s first brand ambassador (Exhibit 13).
This year, the Beijing Olympics was the ideal venue for Lenovo to emphasize its brand name to the world as it was the only global sponsor from China.
Lenovo may be China's first global brand
Awareness first
Exhibit 12
Please indicate your familiarity with the following brands:
Exhibit 11
A Chinese brand will be a household name in my home country in the next five years.
12
24%
33%
43%Neutral
Disagree
Agree
MADE IN CHINA 2008
Lenovo has already learned that successful branding takes more than high awareness. Quality, safety and design are the must-wins for building a brand (Exhibit 14). Despite high awareness for a few brands, delivering products of satisfactory quality is still the challenge for Chinese brands.
Perceptions of product quality have haunted Chinese brands for years, producing shocking headlines in everything from foods to toys to pharmaceuticals. For any Chinese brand to succeed, every Chinese brand must take responsibility to deliver on its promises to customers. One failure can destroy all the gains in consumer trust that billions of dollars and decades of work took to build. The Olympics and the milk scandal are vivid examples.
Exhibit 13
Please indicate how effective the following brands are as an ambassador for China:
13
Quality, Quality, Quality
Exhibit 14
How well do the following attributes describe the brands you typically buy?
37%24%23%23%18%17%15%10%10%
8%8%7%6%
LenovoTsingtaoAir ChinaBank of ChinaHaierCCTVChina MobileHuaweiAlibabaCoscoLi NingChina EasternChery
68%62%61%54%52%49%46%45%37%37%33%29%23%19%
8%
High qualityWell-designedSafePracticalA good valueSmartInnovativeAttractiveFashionableWorld classFriendlyFunYouthfulLuxuriousCheap
MADE IN CHINA 2008
Among self-identified brand purchasers, brand personality (i.e. attractive, world class, fashionable) is critical to success, but Chinese brands do not currently possess personalities that influence critical purchase intention (Exhibit 15).
What is generally missing from Chinese brands is emotional attributes and benefits beyond
nine markets identified by our respondents as high potential for Chinese brands are emerging markets, including Brazil, India, Russia, Eastern Europe, Southeast Asia, Middle East and Africa (Exhibit 16).
Trends for Lenovo reinforce the opportunity for Chinese brands in emerging markets. The company reported that worldwide PC shipments grew 14.6 percent in its most recent quarter, citing strong performance in China and EMEA (Europe, the Middle East and Africa), but flat in the Americas.
low price. Great brands are highly focused on a few key audiences, offer a balance of emotional and functional attributes relevant to their audience, and deliver on their promise in everything they say and do.
Emerging markets may offer thebest near-term opportunities forChinese brands. Eight of the top
Build up a brand personality
The emerging opportunity: emerging markets
Exhibit 15
Derived ranking of attributes among those who like to buy branded products
14
47%40%37%36%30%25%20%20%18%18%17%
7%2%1%1%
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%0% 5% 10% 15% 20% 25% 30% 35% 60% 65% 70%
AttractiveWorld classFashionableLuxuriousYouthfulFunSmartWell-designedFriendlyInnovativeHigh qualitySafePracticalA good valueCheap
Attractive
World classFashionable
Luxurious
Youthful
FunWell-designed
SmartInnovative
Safe
Practical A good value Cheap
High qualityFriendly
Currently, Chinese brands do not own
distinctive attributes
Brand personality of products made in China
Bra
nd p
erso
nalit
y m
ost
desi
red
MADE IN CHINA 2008
industry organizations, and environmental awareness: with each new initiative, the government can build equity in China as a country that puts quality first. These are the ingredients of a recast ‘made in China’, and a force like the government can bring about this commitment to excellence more quickly.
Chinese brands have many reasons to look to emerging markets as the right next step. With world-class manufacturing techniques, advanced technologies and attractive prices, Chinese brands speak to needs in emerging markets. With increased regional cooperation and multilateral trade agreements, Chinese brands are finding market access easier than ever. And with American and European companies cutting spending in the face of a tough economic environment, it might be a good time for Chinese brands to step up investment.
Every product or brand must be labeled with its country of origin; it is a key point of reference for many customers and a barrier for Chinese brands today. To conquer hearts and minds overseas, the Chinese government will need to embrace the art of branding and play an active role in the creation and management of China as a brand.
Building a quality backbone that can lead to a new set of
positive associations is top of the agenda. With its deep reach into the media and the emerging influence of the internet, the government can drive a nationwide initiative of strict quality control, and guide a range of organizations and departments towards effective coordination. Quality policies, enforcement mechanisms, market research, fair trade,
Role of the government
15
Exhibit 16
In which of the following markets outside China do you think Chinese brands have the best chance to succeed?
48%48%33%31%31%28%25%21%20%19%16%10%
9%7%5%5%
AfricaSoutheast AsiaIndiaUnited StatesEastern EuropeRussiaMiddle EastBrazilAustralia/New ZealandMexicoKoreaCanadaJapanEnglandFranceGermany
MADE IN CHINA 2008
The events of the last few months have been a roller coaster ride for the Made in China brand. From the peak of the Olympics to the trough of the milk scandal, Chinese brands are still on a bumpy journey to international recognition. While these are not regular occurrences, they illustrate the challenges, and opportunities, for Chinese companies in going global.
Government and category leaders should work together to build up a fresh image of the made in China label, particularly in categories where the opportunity for growth is large. Just as Japan has done in automobiles and electronics, Switzerland in watches and finance, and Italy in fashion and design, China will ultimately establish its own reputation in key global markets, and build an image well beyond the world’s factory.
Conclusion
16
MADE IN CHINA 2008
4%
6%
7%
15%
51%
17%
Australia/ New Zealand
Latin America
Europe
US/Canada
Asia Pacific *
Other regions
Interbrand’s Made in China studies are designed to gain a greater understanding of global attitudes toward Chinese products and brands. We believe these insights can help businesses and organizations formulate global growth strategies. Branding is a crucial discipline for any organization, and our research pinpoints the aspects of branding that can inform best business practices.
This year’s survey included 776 respondents (see regional distribution below). Respondents
approximately two weeks after the end of the Beijing Olympics. The milk scandal first emerged in the middle of September - a coincidence which added substantial insight to our study.
were invited to participate by email or through links on:www.brandchannel.comwww.interbrand.comwww.fortune.comOur respondents excluded consumers from Mainland China as the goal was to collect feedback from foreign consumers. In addition, there was strict control on the number of participants from Chinese living overseas.
Our survey was fielded over a three work period, launching in early September 2008,
Methodology
What is your home country?
*Excludes respondents from mainland China
17
Appendix
Creating and managing brand valueTM
创造和管理品牌价值
Made in China 2008:The Challenge for Chinese Brands Going Global
ABOUT INTERBRAND
Founded in 1974, Interbrand serves the world with 42 offices in over 22 countries. Working in partnership
with our clients, we combine rigorous strategy and analysis with world-class design and creativity. We
enable our clients to achieve greater success by helping them to create and manage brand value.
We recognize the importance of brand in an increasingly competitive business environment and tailor our
services to client needs. Our services include brand analytics, brand valuation, strategy naming and verbal
identity, corporate identity, packaging design, retail design, integrated brand communications and digital
branding tools.
Visit www.interbrand.com and www.brandchannel.com for the latest brand thought.
CONTACT
Jonathan Chajet
Managing Director, China
Interbrand China
C7-201, Red Town, 570
Huaihai Rd.W. Shanghai
200052, P.R. ChinaTel: +86 21 6192 5200
E-mail: [email protected]
www.interbrand.com.cnCreating and managing brand valueTM
创造和管理品牌价值
