Karl Gerth’s new new book gives us a lot of of insight into why brands and branding are rising up the agenda in China in both government and business circles ( in reality that is one and the same thing). Quotes from the book and my comments…
“Chinese exports have low added value meaning that the real value is not collected by China-…for example a 30 gig ipod has an export value of $150 but the added value collected by Chinese labour amounts to only $4”
“in 1980 the Chinese govt received 20,000 trademark applications, a number that by 1993 had reached 132,000…more than 80 % of trademark applications have been made by Chinese companies”
“Building or buying brands is considered a matter of national economic security and , of course, of national pride-China wants its own international brands to reflect its success and its status as a first rate power.”
The problem is that Chinese consumers do not have much faith in their indigenous brands for good reason-scandals have hit the reputation of manufacturers for cutting corners on quality and safety. It is the by product of a culture that produces so many fakes- people cannot be sure that they are buying the real thing and so they cannot be certain of consistency and reliability. Relability and consistency is the bedrock of any brand – without it you have nothing to build on
Result: Chinese brands are weak and the government tries to support them …….
” in the summer of 2008 even incorporated the establishment protection and management of national brands into its national strategy”
If the quality is not perceived as being good then government can put its guarantee behind the brands…”Chinas watch dog for product quality set up a “China brand name strategy promotion commission” and awarded 57 brands the title of China top brand”
This is to some extent an admission of weakness- else where in the world a company puts its good name on the line through branding here the Chinese government is doing it-effectively underwriting brands with the party’s guarantee.
“the ministry of commerce had set ambitious targets that include developing one hundred restaurant brands,fifty hotel brands and prominent brands in the beauty industry”
” the biggest hurdle to Chinese brand development is the fact that China often resembles a collection of diverse markets rather than a single integrated one..ther are 400 brands of cigarette where 60 % of men smoke”
“in the 1990s Tsingtao Brewery successfully built and national network by acquiring 22 local breweries.”
As Gerth says… “If you cant build them buy them” The fate of IBMs thinkpad (bought by S.O.E. Lenovo in 2004) points the way to the immediate future…..2011 will see more brands bought by Chinese companies