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Consumer awareness of Chinese brands in the United States

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Consumer awareness of Chinese brands in the United States

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Content CONSUMER AWARENESS OF CHINESE BRANDS IN THE UNITED STATES by Chu Shen A Thesis Presented to the FACULTY OF THE USC GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree MASTER OF ARTS (STRATEGIC PUBLIC RELATIONS) May 2012 Copyright 2012 Chu Shen ii Dedication The thesis is dedicated to my beloved family and dear friends. Your constant support and encouragement accompanies me all the way through my thesis writing. Mom, Dad, and Grandpa, thank you for your unconditional love. You have always taught me to become a better person. iii Acknowledgements I would like to thank my thesis committee chair Burghardt Tenderich for his great support and careful guidance from the thesis outline to the final draft. I would also like to thank my committee members Jay Wang and Kjerstin Thorson for their valued feedback. My acknowledgement also goes to my interview sources for their insights and knowledge. iv Table of Contents Dedication ii Acknowledgements iii List of Figures v Abstract vi Preface vii Introduction 1 Chapter One: Why Build My Own Brand? 2 Chapter Two: How are Chinese Brands Performing in the United States? 7 Chapter Three: What do Americans Know about Chinese Brands? 10 Chapter Four: Media Coverage of Chinese Brands in the United States 14 Chapter Five: Made-in-China vs Designed-in-China 20 Chapter Six: Consumer Awareness of American Brands in China 23 Chapter Seven: Case Studies of Four Brands 26 Chapter Eight: Problems Facing Chinese Brands 40 Chapter Nine: Lessons Learned from Japanese Brands 46 Conclusions 49 Bibliography 50 Appendices Appendix A: Interview Transcripts with Jay Wang 55 Appendix B: Interview Transcripts with Rachel Catanach 57 Appendix C: Interview Transcripts with Mei Fong 60 Appendix D: Interview Transcripts with Bill Imada 63 v List of Figures Figure 1: Interbrand 2011 Best China Brands 4 Figure 2: Four key questions for Chinese companies going global 40 vi Abstract This paper discusses United States consumer awareness of Chinese brands as Chinese companies have entered the American market in recent years. Through several interviews with scholars and professionals in the public relations field, extensive secondary research as well as four case studies, this paper attempts to uncover the underlying problems Chinese companies face during their entry into the U.S. market and sees whether there is a preference between “made in China” and “designed in China” products. The paper also seeks to offer relevant solutions to these problems. vii Preface Chinese Brands in the U.S. Chinese companies, known as “the world’s factory,” are successful manufacturers but are unsure of themselves when it comes to being seen as a brand rather than an OEM (original equipment manufacturers) for well-established global brands. Examples of OEMs include Foxconn, a Taiwan-based electronics manufacturing company, which acts as one of Apple Inc’s largest original equipment manufacturers 1 , and Guangdong-based microwave oven manufacturer Galanz, a company that produces microwave ovens for almost all of the international leading consumer electronics companies. 2 Despite their efforts to go global with their own brands, Chinese companies oftentimes lack a consistent global brand strategy because they are so used to operating “behind the scenes.” According to Interbrand, a leading global brand consultancy, the role of branding is to drive market demand for products on the one hand and to allow companies to charge a premium price for better profits over their competitors. 3 Currently none of the companies listed in Interbrand’s Top 100 Brands 4 in the world are from China. This is not because Chinese companies lack the money to promote their brands. On the Forbes Fortune 500 list, 37 are Chinese 1 Vascellaro, Jessica and Fletcher Owen. “Apple Navigates China Maze.” The Wall Street Journal. 14 January 2012. <http://online.wsj.com/article/SB10001424052970204409004577158764211274708.html>. 2 Paul Gao, Jonathan R. Woetzel, Yibing Wu. “Can Chinese brands make it abroad?” The McKinsey Quarterly, 2003 Special Edition: Global directions 3 “’Thanks But No Thanks’ to Made in China?” http://knowledge.wharton.upenn.edu/article.cfm?articleid=2902 4 http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2011.aspx viii companies 5 . Related academic work has been focusing on the issue by comparing the merits and costs of branding and OEM. Though branding is costly, research indicates that China needs to own global brands in order to achieve sustainable economic growth and prosperity. 6 As of now, only a handful of Chinese companies have been able to successfully brand themselves on a global platform—one of the most famous being Lenovo, through IBM’s acquisition. 7 Chinese companies are currently at different stages of globalization. Some companies choose to remain as OEMs because they find the cost of branding too inhibitive. While some go global by acquiring international brands such as Lenovo/IBM and Geely/V olvo. There are still others that make profits through both being OEM and having self-owned brands. Research Purpose Through research, this paper tries to catch a glimpse of the status quo of Chinese brands on the international market, especially the consumer perception of Chinese products in the U.S. market. On the other hand, research helps to review the past and current efforts of Chinese firms in terms of branding. 5 “Fortune 500 of 2011.” CNN Money. 23 May 2011. <http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/>. 6 Fan, Ying. “The globalization of Chinese brands” Market Intelligence & Planning. Vol. 24 No.4, 2006 pp.365-379. 7 “Company History.” Lenovo U.S. website. <http://www.lenovo.com/lenovo/us/en/history.html>. ix Research Methodology This paper is based on both primary research and secondary research. Sources for qualitative secondary research included books, newspapers, magazines, blogs, websites and social media sites such as Facebook, Twitter, and YouTube. Qualitative primary research was conducted through one-on-one interviews with experts in public relations and cross-cultural branding including Jay Wang, associate professor at USC Annenberg School for Communication and Journalism, Rachel Catanach, Senior Vice President, Senior Partner & General Manager of Fleishman-Hillard Hong Kong, Bill Imada, Chairman and CEO of IW Group, and Mei Fong, Lecturer at USC Annenberg School for Communication and Journalism and former China correspondent for The Wall Street Journal. An online Qualtrics survey was also created as part of the research. 1 Introduction China opened its market to the world in 1978. Since then, numerous foreign companies have entered China’s marketplace through various forms including joint ventures and direct foreign investments. Meanwhile, a number of Chinese companies that have grown considerably have also ventured out to explore new business fields aside from the domestic market. These companies come from a wide range of industries, from manufacturing to natural resources, consumer electronics and telecommunication equipment. While they differ in industry, they all have one thing in common: Capital. But successful expansion into the U.S. market requires more than money. In their efforts to enter the U.S. market, Chinese companies face issues with cross-cultural brand building, human resources, global operations, and other trade barriers. This thesis examines consumer awareness of Chinese brands in the U.S. market through a communications angle. By conducting primary and secondary research, this paper tries to identify how American consumers perceive Chinese brands and seeks to determine whether consumers have different preference for “Made in China” and “Designed in China”. By examining several brand-building case studies of U.S. and Chinese companies, this paper will come up with corresponding public relations strategies and tactics for Chinese firms to build up their brand image in the U.S. 2 Chapter One: Why Build My Own Brand? Beverage industry publication Beverage World wrote, Chinese brands in wine and beer categories are dominating the sales ranking nowadays. 8 Based on volume consumption in millions of liters, two of the Top 10 Global Liquid Refreshment Brands in 2009 are from China. However, the two brands, Kangshifu and Wahaha, are rarely seen in the U.S., the largest market for liquid refreshment. Why? Because they primarily brand their products in the domestic market. Based on sales numbers alone, Kangshifu and Wahaha would top any global list. If the ranking are based more on consumer awareness, as Interbrand’s list is, these Chinese brands would not make the list. Executives from these companies may ask, now that we are a Top 10 Brand by consumption in the world and earning great profits, why bother to market our brand to the U.S. market? Widely recognized as the world’s factory, China up until now does not have a single brand that can compete on the global stage. According to Miles Young, Ogilvy’s CEO, Chinese companies’ comfort zone falls in assembling other people’s products. 9 As a result, OEM is one of the most favored business models for them. According to Mr. Young, Chinese companies are less interested in creating their own brands because they have not found market research that indicates global expansion would add value to their company. News reports say differently though. According to Business Week, the world’s top 100 consumer goods and retail companies that rely on imported products enjoyed a 8 Cirillo, Jennifer. “Chinese Brands on the Rise.” Beverage World. Oct 15, 2010. 9 “Going Global-Prospects and challenges for Chinese companies on the world stage”. IBM Business Consulting Services 2005 3 collected profit of US$228 billion, which is 57 times larger than the profits of top 100 OEM manufacturers in Asia in 2003. 10 The report puts into numbers what we already suspect—that owning a good brand is far more profitable than simply manufacturing for others’ brands. Seeing that Chinese companies were actively trying to develop a global presence, Ogilvy, in 2011, launched its China Practice in New York to serve Chinese firms that are ready for the U.S. market. 11 As the first advertising/PR agency to launch such practice, Ogilvy is likely to attract more agencies to follow suit. With the support of international advertising and public relations agencies, Chinese companies can better align their brand to the global market. Fleishman-Hillard also launched its Global China Practice in 2011 with an aim to help Chinese firms build brands and manage reputation on the global stage. So far, in terms of B2C (business to consumer) practices, Rachel Catanach, Senior Vice President of Fleishman-Hillard Hong Kong has seen at least two areas that Chinese companies should focus on to build their global brand presence. The first is social media, which is a key vehicle to reaching target stakeholders. The second is CSR (Corporate Social Responsibility), which helps build the reputation of Chinese businesses. It communicates that the company’s goal is not only to make a profit, but to contribute to society as a member of the community. In general, Chinese brands 10 Fan, Ying. “The globalization of Chinese brands” Market Intelligence & Planning. Vol. 24 No.4, 2006. pp.365-379. 11 “Ogilvy & Mather Launches China Practice in New York.” Ogilvy & Mather. 11 April 2011. <http://www.ogilvy.com/News/Press-Releases/April-2011-Ogilvy-Launches-China-Practice.aspx>. 4 wanting to expand globally should build trust and credibility through a comprehensive reputation management program that includes CSR, stakeholder engagement and public affairs. Best China Brands Jez Frampton, Group Chief Executive Officer of Interbrand said in the “Best China Brands 2011 Report” that, “many of the best China brands are still consolidating strength in their vast home market, learning and adapting, and preparing themselves for the next wave of development.” However, he believes it will not take long for Chinese brands to enter the global market. 12 Figure 1: Interbrand 2011 Best China Brands 12 “Best China Brands 2011.” Interbrand. <http://www.interbrand.com/Libraries/Branding_Studies/Best_China_Brands_2011.sflb.ashx>. 5 Figure 1, continued Resources: www.interbrand.com/Libraries/Branding_Studies/Best_China_Brands_2011.sflb.ashx 6 So what has prevented most Chinese companies from creating their own brands? Based on existing research, it’s mainly because they haven’t realized the value created by brands. They still think branding is a function in marketing communication instead of a business strategy that serves both the company and its customers. 13 Chinese companies that have already entered the U.S. market have various reasons for doing so. According to Professor Jay Wang, there are three main reasons for Chinese firms to expand globally. The first is that the domestic market is already saturated. Another case is that the company would like to be more competitive in the marketplace. The last are for political reasons, which also encourage some Chinese firms to look towards the U.S. market. 13 Fan, Ying. “The globalization of Chinese brands” Market Intelligence & Planning. Vol. 24 No.4, 2006 pp.365-379. 7 Chapter Two: How are Chinese Brands Performing in the United States? British advertising magnate Lord Saatchi once said “Chinese companies have a long way to go before they can develop their own Disney, Coca-Cola or Microsoft. It won’t happen overnight.” But more importantly, he also agreed “[that there isn’t] any reason why Chinese brands cannot have the same impact in the U.S., as U.S. brands have had in China.” 14 CES, the International Consumer Electronics Show is one of the most preeminent annual technology trade shows held in Las Vegas. This year, among “The 12 Best, Quirkiest CES Gadgets” selected by the Wired magazine, are two Chinese brands: Huawei’s newest smartphone Ascend P1 S and Lenovo’s notebook IdeaPad Yoga. 15 According to the magazine’s description, Huawei is “a Chinese manufacturer you’ve probably never heard of” and “a relative newcomer to the U.S. smartphone scene” while little brand introduction is given to Lenovo probably because it already enjoys a fair amount of consumer awareness in the U.S. One method for Chinese firms to reach their international target audience in recent years is through product placement. In the 2011 Hollywood blockbuster “Transformer 3: Dark of the Moon”, four of China’s well-known brands appeared in an unprecedented push for product placement. The fours brands are: Meters/bonwe, an apparel retailer loved by younger generation, Lenovo, China’s largest PC 14 Fan, Ying. “The globalization of Chinese brands” Market Intelligence & Planning. Vol. 24 No.4, 2006 pp.365-379. 15 “The 12 Best, Quirkiest CES Gadgets We’ve Seen So Far.” Wired. 11 January 2012. <http://www.wired.com/gadgetlab/2012/01/ces-2012-best-quirkiest-gadgets-weve-seen-so-far/>. 8 manufacturer, TCL, China’s largest television manufacturer, and Yili, China’s top dairy firm. The intention of the placement was to increase overseas brand recognition, but the results seemed more effective on domestic audiences as Chinese youth passed around the “breaking stories” online after the movie was released in China. 16 What is hindering Chinese companies’ abilities to be a recognized brand in the U.S.? And what should they do about it? According to an interview with Rachel Catanach, SVP, Senior Partner and General Manager at Fleishman-Hillard Hong Kong, Chinese companies should learn how to package their brand so as to appeal to the U.S. market, while not losing what is authentic and inherent in their own brand values. Catanach mentions Lenovo as an example that has packaged its brand successfully for the international audiences. She says though Thinkpad is not necessarily a Chinese brand, it has indeed achieved great business success. So it seems that Chinese brands haven’t found an ideal way to do that. Because of cross-cultural barriers, branding in the U.S. is totally different from what Lenovo has done in domestic market. Since the target audience is different, Chinese firms need to develop different key messages and strategies to cater to their U.S. customers. Another major challenge is that sustaining developed markets such as the U.S. is complex, expensive and uncertain in itself. According to the McKinsey Quarterly, the biggest obstacle facing Chinese manufacturers in the U.S. is their lack of vital marketing skills. For Japanese and South Korean consumer electronics manufacturers, 16 Hille, Kathrin. “Chinese Brands in Hollywood Placement Push.” Financial Times. 19 July 2011. <http://www.ft.com/intl/cms/s/0/88cbbac4-b1fc-11e0-a06c-00144feabdc0.html#axzz1mIti5HY0>. 9 it took them years and considerable financial investment to establish their brands globally. 17 17 Paul Gao, Jonathan R. Woetzel, Yibing Wu. “Can Chinese brands make it abroad?” The McKinsey Quarterly, 2003 Special Edition: Global directions 10 Chapter Three: What do Americans Know about Chinese Brands? It is widely acknowledged that Japanese brands and South Korean brands have managed to sustain and grow sales overseas while maintaining their competitive advantages: lower costs, efficient management practices, superior product quality and innovative R&D. Despite having exhibited some of the same product qualities found in Japanese and South Korean brands, poor universal perceptions of Chinese products keeps them from being held in the better regard. 18 A survey was conducted in August 2011 by the Wharton School of the University of Pennsylvania to learn more specifically about the American consumers’ preference for Chinese and non-Chinese brands. U.S. graduate students (ages 25-32) were asked to compare a Chinese product with a non-Chinese product. 65 percent of the respondents indicated that they were less likely to buy a Chinese product because it was made in China. Twelve percent of the respondents would not even consider buying any Chinese product. Higher-priced products including electronics and household goods were not welcome by most of the respondents if they were made in China. Only four percent of the respondents expressed the willingness to purchase a Chinese automobile. 19 A Qualtrics survey distributed among my American college friends on Facebook from Jan 10, 2012 to Jan 20, 2012, revealed similar results. There survey has nine questions and received twenty responses in the time period. When asked 18 “’Thanks But No Thanks’ to Made in China?” http://knowledge.wharton.upenn.edu/article.cfm?articleid=2902 19 See 18. 11 whether they have heard of the following brands, most respondents had heard of HTC, while only slightly more than half had heard of Lenovo. Huawei and Haier were known by just one third of the respondents, and only a limited percentage of respondents have heard of Geely, BYD and Glanz, some of the leading companies in the Chinese automobile industry. Half of the respondents did not realize that the above-mentioned brands were all from China/Taiwan, and only one in ten knew that these brands are owned by Chinese firms. When asked to name any other Chinese brands they knew, responses include Panda Express, Vizio, and Asus. Interestingly, only Asus is from Taiwan and the rest two are actually American brands owned by Chinese Americans. The majority of respondents stated that they couldn’t think of any other Chinese brands. If given the choice to purchase a Chinese home appliance, automobile, computer, mobile phone, or food, one-third of the respondents said they were more willing to buy Chinese branded food, while the rest of said they either they would prefer a “made in China” home appliance. The rest sated they would not buy Chinese brands in any category if they are Chinese brands. It is also interesting to note that none of the respondents stated they would buy an automobile designed by a Chinese firm. In questions regarding what would incentivize the survey respondents to buy Chinese brands, more than half chose price as a driver, while the rest chose quality and reputation, respectively. When asked about their major concern toward Chinese brands, most respondents indicated quality as their biggest concern. Less than half of 12 them identify treatment of workers. One respondent said, “Buying Chinese brands means I support them instead of U.S. brands.” Another indicated “food safety” as a major concern. Almost all of the respondents related the word “cheap” to Chinese brands with a fairly large percentage associating the poisoned milk powder incident with the overall quality of Chinese products. Mei Fong, former China correspondent for The Wall Street Journal and now teaching Global Journalism at USC Annenberg School for Communication and Journalism, says in an interview that the one moderately successful brand she can think of is Haier, which has achieved some success with small appliances like wine cooler fridges that students would put in dorms. Mei thinks China's edge is still cheap manufacturing. But Haier stumbled when it came to bigger appliances like refrigerators, which have to be made locally and are too large to ship cheaply from China. Already unfamiliar with products “made in China”, U.S. consumers have a hard time coming up with a brand that is totally owned by a Chinese firm. Their perception of Chinese products is still confined to low-cost outsourced labor and so-called “sweatshops” hired by American corporations. The average American consumer does not have enough confidence in products designed and produced in China, as their overall perception results from their daily exposure to negative media coverage surrounding Chinese products and brands. In a word, Chinese brands have 13 not done enough to reach their target audience across the ocean. This is also an issue in terms of nation branding that needs to be addressed. 14 Chapter Four: Media Coverage of Chinese Brands in the United States Bill Imada, Chairman and CEO of IW Group, Inc.—one of the leading Asian American marketing, advertising, and public relations agency—says in an interview that one key challenge for Chinese brands in the U.S. is perception. He thinks similar to Japanese products after World War II, many American consumers are under the impression that Chinese-made goods are inferior or poorly produced. On the other hand, Imada adds that American media has also perpetuated the belief that Chinese products are less than satisfactory, despite the fact that Americans wear, consume and use a wide variety of Chinese-made products. American and world coverage of tainted milk products in China and the widely covered train accident; have left an indelible impression on the psyche of American consumers. As a result, Imada urges Chinese firms to act more quickly and positively to stem growing concerns among Americans. Not all coverage on China events has hurt brand perception of Chinese products though. Frequent international media coverage on China’s recent holding of the Olympic Games and the Expo did, to some extent enhance, help boost the U.S.’s overall perception of China. Catanach thinks the Olympic Games and Expo especially had a positive effect on the perception of “made in China” brands. These international events demonstrated that China has the ability to stage a respected world-class global event. However, despite this positive association, Chinese companies are still struggling with common stereotypes people have towards Chinese brands. Thus, 15 despite improvements in national branding, there is still room for growth through different platforms. Fong says there has definitely been increased coverage of Chinese brands over the years, though the tone is not overwhelmingly positive. But on the whole, there aren't that many Chinese brands that are global household names at this point based on U.S. media’s coverage. Mass media is a huge driving factor when it comes to public brand awareness and perception. When it comes to media coverage of specific Chinese brands, food safety is a topic repeatedly covered by the U.S. press, resulting in negative perceptions of Chinese brands among American consumers. Most notable is the nationwide scandal of melamine-contaminated milk from China first unveiled in 2008. Recently contaminated milk was found again in China’s largest dairy company, Mengniu Dairy Company, whose reputation was already tainted in the melamine scandal. The New York Times covered the story in detail. Its coverage was mostly objective while at the end of the article the paper recalled the 2008 scandal and wrote about the Communist Party’s clampdown on parents asking for further investigation on the issue. 20 A search for “food safety, China” in the New York Times’ search box reveals that “Food Safety in China” has already become a commonly searched topic. Surrounding this topic, there are altogether 14 pages of news articles published by the paper since 2008. Among these articles, an overwhelming percentage of them cover 20 Wong, Edward. “Contaminated Milk Is Destroyed in China.” The New York Times. 26 December 2011. <http://www.nytimes.com/2011/12/27/world/asia/contaminated-milk-is-destroyed-in-china.html?_r=1&ref=food safety>. 16 the food safety problem in a negative light with the incident that receives the most coverage being the “contaminated milk” incident. The Qualtrics survey mentioned in the third chapter revealed similar results. When asked to select from a group of words that first comes to mind when they think of Chinese brands, the majority of respondents chose “Poisoned Milk Powder”. As the media plays a heavy role in affecting consumer perceptions, Chinese companies must ensure positive aspects of Chinese products are covered in the media. Other events, such as the Wal-Mart toy recall have also attributed to American’s poor perception of products manufactured in China. In 2004, over 70 percent of the commodities sold in Wal-Mart were made in China. 21 Though in daily life American consumers still purchase Chinese products for their reasonable price/quality ratio, recall scandals have caused safety concerns among some consumers. U.S. consumers rely heavily on mass media to stay informed on the topic. In 2007, a number of consumer goods imported from mainland China were recalled in the U.S. market due to consumer safety issues. The toy giant Mattel 22 was one of the brands involved in the recall scandal because its toys were inspected to be coated with lead paint. The Chinese product crisis has led to widespread media coverage in the U.S. Research conducted through content analysis of national newspaper coverage on product recall revealed that the U.S. dominance in the news sources meant that 21 Jiang, Jingjing. “Wal-Mart’s China Inventory to Hit US$18b This Year.” China Daily. 29 November 2004. <http://www.chinadaily.com.cn/english/doc/2004-11/29/content_395728.htm>. 22 “Mattel CEO: ‘Rigorous Standards’ After Massive Toy Recall.” CNN U.S. 14 August 2007. <http://articles.cnn.com/2007-08-14/us/recall_1_polly-pocket-mattel-ceo-toys?_s=PM:US>. 17 Chinese stakeholders including the government, the manufacturers and the media were not very effective in communicating their messages, even though the Chinese government reacted swiftly to address problems of Chinese products. Such dominance also implies that U.S. perspectives largely shaped the social reality of the Chinese product recalls, which can also explain why American media are often viewed as biased. 23 Often criticized for covering developing countries with bias, international journalism usually positions non-western countries with a negative tone. Leading factors include dominant ideology, prejudice, government positions, national interest, and the positioning of a country in the international community. 24 Proof of such bias comes from a study that examined toy recalls in the U.S. from 1988 to 2007, which revealed that among the 550 recalls, over 76 percent of the cases were product design-related problems, which involved U.S. labor. However, as the product was physically assembled on the Mainland, U.S. media targeted China as the only one to blame. 25 The negative brand image from the toy recall scandal has tainted overall perception of China brands. It is no surprise that consumers would come to this 23 Hongmei Li, Lu Tang “The representation of the Chinese product crisis in national and local newspapers in the United States.” Public Relations Review. 2009. 24 Yang, J. “Framing the NATO air strikes on Kosovo across countries: Comparison of Chinese and U.S. newspaper coverage.” Gazette: The International Journal for Communication Studies. 2003. 25 Babuji, H. & Beamish, P . W. “Toy recall-Is China really the problem?” Canada Asia Commentary. September 2007. 18 conclusion--American branded products that are made in China cannot be trusted, let alone the quality of Chinese-branded products. China’s response to negative media bias The Chinese government may know the importance of brand image better than Chinese consumer brands. In January 2011, China’s President Hu Jingtao paid a state visit to the U.S. At the same time, the Chinese government ran several promotional commercials called “China Experience” on big screens in Times Square. Chinese celebrities such as former NBA player Yao Ming and the pianist Lang Lang were featured in the commercials. Soon after that, Xinhua News Agency, China’s state-run news agency, leased a 60-foot-tall LED sign in Times Square. The New York Times covered the story saying that “The arrival of Xinhua is a prominent expression of its ambitions with Americans like the Japanese and South Korean brands that came to Times Square to better familiarize the United States with their products.” 26 The price Xinhua paid for the LED sign was unknown to the public, but China’s expectation to change American audience’s bias against the state-owned news agency was clearly understood by the U.S. media. According to Chinese media experts, the Chinese government was planning to invest a lot in global expansion of Chinese media. The New York Times article also pointed out that sophisticated US audiences will remain skeptical toward government-owned news agencies at least in the short term. 26 Elliott, Stuart. “Sign of Arrival, for Xinhua, Is 60 Feet Tall.” The New York Times. 25 July 2011. <http://www.nytimes.com/2011/07/26/business/media/xinhuas-giant-sign-to-blink-on-in-times-square.html>. 19 During the past two years, the Chinese firm that received the most coverage on the Wall Street Journal was probably Huawei, the largest telecommunication equipment manufacturer in China and the second largest in the world. Over the two years, Huawei has made several attempts to enter the U.S. market through acquisition. However, based on the Wall Street Journal’s report, the company’s bid to purchase Sprint Nextel Corp. was shot down by U.S. Congress due to the company’s top executive’s connection with the nation’s People’s Liberation Army. 27 Though such media coverage may have little to do with U.S. consumers’ ultimate purchasing choice, the general impression of Chinese firms remains negative, which makes the entry barrier into the U.S. market even higher. Huawei’s active participation in this year’s CES to promote its consumer products provides China another strategy to attract the U.S. market besides all those rumors. 27 Lublin, Joann and Raice, Shayndi. “Security Fears Kill Chinese Bid in U.S.” The Wall Street Journal. 5 November 2010. <http://online.wsj.com/article/SB10001424052748704353504575596611547810220.html>. 20 Chapter Five: “Made in China” vs. “Designed in China” In response to the negative perceptions of products “made in China,” China is making great efforts to transition toward products “designed in China” as a sustainable strategy for its healthy economic growth. The nation now realizes that simply relying on manufacturing will not maintain the country’s two digit GDP. Thus, in China’s twelfth Five-Year Plan, the industry’s model is being gradually transformed from labor intensive toward talent intensive, closely tied to innovation. 28 This adds up to the nation’s core industrial competitiveness. “Is America Made in China?” is an article on Huffington Post that questions America’s over-reliance on products from China. The writer told two stories of American families who tried to live without Chinese products for one year and, as a result, had to give up their habits such as holiday decoration. 29 On the one hand, U.S. corporations outsource their work to China for its low-cost labor; on the other hand, while US consumers enjoy the reasonably priced made-in-China goods, they still fear that China is taking away their jobs. CNN’s recent article on China’s Vice President Xi Jinping’s state visit to the U.S. vividly depicted the love-hate relationship between the United States and 28 “China’s 12 th Five-Year Plan.” Apco Worldwide. 10 December 2010. <http://www.apcoworldwide.com/content/pdfs/chinas_12th_five-year_plan.pdf>. 29 Whitehead, John. “Is America Made in China?” The Huffington Post. 13 August 2008. <http://www.huffingtonpost.com/john-w-whitehead/is-america-made-in-china_b_118150.html>. 21 China. 30 As America’s second largest trading partner, China always exports more to the U.S. than it imports from the country. The trade imbalance has caused America’s manufacturing industry to struggle when competing with cheaper wages in China. When asked about U.S. consumers’ perception of “Made in China,” Professor Jay Wang said from the political aspect “Made in China” is widely perceived as a negative notion because U.S. consumers think outsourcing is taking away their jobs. However, with regard to the products themselves, consumers base their perception on user experience, and “made in China” products excel in price/quality ratio. The general impression of “made in China” turns out to be well- received by U.S. consumers. “The notion of made-in-China and designed-in-China are not in conflict with each other.” said Professor Wang. “Designed-in-China means value-added innovation that broadens the limit of made-in-China products.” He also mentioned the commercial of “Made with China” that was played on CNN in the Asian market in 2009. The 30-second TV commercial was produced by the Ministry of Commerce of China and China’s big four industry associations. Perceived as the Chinese government’s first branding campaign, the commercial ran under the slogan “Made in China, Made with World.” Unfortunately the notion of “Made with China” has not been followed up by Chinese businesses. 30 Censky, Annalyn. “Our Love-hate Relationship with China.” CNN Money. 13 February 2012. <http://money.cnn.com/2012/02/13/news/economy/china_us_relations/index.htm>. 22 Catanach says innovation or “designed in China” should definitely be promoted both at a corporate level and on the macro level or country level. By promoting their own innovation, Chinese firms will help improve perceptions of China Inc. and the “made in China” label. While the innovations do not need to be revolutionary, they should be promoted in tandem with a commitment to intellectual property protection. Fong thinks China still has the global perception as the world’s factory, instead of the world’s design studio when compared to French and Italian brands that have cornered the U.S. market by resting on the perception of fine living. With that said, it may take years for Chinese firms to develop their own brands in the U.S. and the payback process is slow, but considering the overall background, now is a good time for them to readjust their business strategy. 23 Chapter Six: Consumer Awareness of American Brands in China Having reviewed the consumer awareness of Chinese brands in America, it might offer some lessons if Chinese companies can take a look at consumer awareness of American brands in China. On the whole, American brands are doing quite well in Chinese market. Even the average child in China can name a few well-known brands from America, such as McDonalds, Coca- Cola, and Pizza Hut because these brands are deeply rooted in the Chinese people’s everyday life. It took these American companies less than 30 years to establish their brand image in China. Coca-Cola was the first U.S. company to distribute its products in China after the country opened its door to foreign investors in 1979. Its strategies in China include product localization and forming partnerships with Chinese government and Chinese companies. These strategies have allowed Coca-Cola to establish nationwide operations and excel as a competitor amongst other international and domestic businesses. 31 According to Euromoniter, Coca-Cola accounted for 17 percent of the Chinese market share by the end of 2010. 32 Having entered China in the late 1980s, Kentucky Fried Chicken (KFC) is now one of the most well-known U.S. consumer brands in China and enjoys greater business success than McDonald in Chinese market. How did it achieve such success in China when it is losing market share to McDonald’s in the U.S.? The most important reason is because KFC the company has 31 Drake Weisert. “Coca-Cola in China: Quenching the Thirst of a Billion.” The China Business Review. July-August 2001. <https://www.chinabusinessreview.com/public/0107/weisert.html>. 32 “Coke Sees China’s Market as the Real Thing for Growth.” Daily Finance. 29 July 2011. <http://www.dailyfinance.com/2011/07/29/coke-sees-chinas-market-as-the-real-thing-for-growth/>. 24 tailored its menu more to the Chinese people than McDonald’s has. KFC marries American’s fast-food with Chinese ingredients and regularly launches new products such as “Old Peking Chicken Roll” and even offers rice with fried chicken combo to better cater to Chinese consumers’ taste. Besides the localization of its products, KFC has also made sure to localize its brand. During the Chinese Spring Festival in 2003, Colonel Sanders’s employees in 800 franchises in 170 cities all over the China all changed into traditional Chinese garments. This brand strategy tied the KFC brand to the image of family, which is highly valued in China’s collectivist society and the most important theme during Chinese New Year holiday. From the example of KFC and many other successful U.S. brands in China, Chinese firms can surely learn something. In terms of cross-cultural branding, creating an emotional connection with U.S. consumers is something Chinese firms should consider. A study has been done to learn the perception of U.S. branded apparel in Shanghai. In the study, Chinese shoppers in Shanghai shopping malls were asked to do a survey by comparing U.S. and Chinese brands in terms of product attributes, brand identification and store environment. The result of the survey reveals that U.S. brands were perceived more positively than Chinese counterparts on attributes of design innovation, workmanship, brand image, service, and display of products. Chinese brands, on the other hand, received more positive reviews on fit and price. The conclusion of the study found that country of origin does not play the most 25 important role in branding. Instead, what characterizes modernity and quality for different groups of consumers is the key. 33 Brand knowledge is defined by Schmitt and Pan as brand awareness including brand recall, recognition, image and associations. Based on their study, a brand name that appeals to one Asian market may not necessarily appeal to another. The following three steps are to be closely followed by global brands that want to enter the Chinese market. 1). Selecting the brand name. 2). Establishing the right image. 3). Enhancing quality perceptions. 34 Successful American brands in China can all be analyzed from these three steps. Could it apply to Chinese brands in the U.S.? It is something Chinese companies should consider. 33 Marilyn Delong, Mingxin Bao, Juanjuan Wu, Huang Chao and Meng Li “Perception of US branded apparel in Shanghai” Journal of Fashion Marketing and Management. Vol. 8 No. 2, 2004. 34 Schmitt, B.H. and Pan, Y. “Managing corporate and brand identities in the Asia-Pacific region” California Management Review. Vol. 36 No.4, pp32-48 1994. 26 Chapter Seven: Case Studies of Four Brands Lenovo, the Pioneer from China On Interbrand’s Best China Brands 2011 list, the company that ranks the first in the electronics sector is Lenovo. 35 It is probably the most well-known Chinese brand in the U.S. Lenovo was established in China in 1984 and at that time was called New Technology Developer Inc. Lenovo’s fast global expansion was mainly because of its acquisition of IBM’s personal computer business in 2005. The company was able to use IBM’s Thinkpad brand for five years after the acquisition. 36 During this time, Lenovo aggressively expanded its global operations and made a plan to create an international reputation for the Lenovo brand instead of solely relying on the Thinkpad brand. Over the years, Lenovo has become the fastest growing major PC company in the world. 37 Its goal, stated by the group chairman, is to challenge perceptions of Chinese companies as producers of cheap, low-end products. 38 As of the second quarter of 2011, Lenovo had become the third largest vendor of personal computers in the world. Lenovo’s major strength is the established brand image of Thinkpad, something inherited from the IBM brand. The five years’ authorized usage of IBM 35 “Best-in-Class to World Class—Best China Brands 2011.” Interbrand. <http://interbrand.com/en/Interbrand-offices/Interbrand-Shanghai/BestChinaBrands2011.aspx>. 36 “China’s Lenovo Acquires IBM Division.” MSNBC. 1 May 2005. <http://www.msnbc.msn.com/id/7695811/ns/business-world_business/t/chinas-lenovo-acquires-ibm-division/>. 37 “Lenovo History.” Lenovo U.S. website. <http://www.lenovo.com/lenovo/us/en/our_company.html>. 38 MingShir Lin, Kyriakos Manolis, Shyam Srinivasan, Boyuan Sun, Wanwan Yang “Lenovo: Competitive Strategies for Dominance In the Corporate Market” 27 allows Lenovo to enter the U.S. market with a good brand heritage and mature consumer base. By the end of the second financial quarter of 2011, Lenovo’s worldwide market share was 13.5 percent. Despite its success, Lenovo is still a relatively inexperienced new player on the international stage compared to its competitors Dell, HP, and Apple, all of which are US-based household brands. The right to use IBM brand expired in 2010, now Lenovo can only use Thinkpad as a trademark. Instead of IBM Thinkpad, the laptops are named Lenovo Thinkpad. To ensure Lenovo sustained its growth, the company needed to convince U.S. consumers that Lenovo is a brand as good as IBM and to override any American prejudice against Chinese brands. The unit sale of IBM PC division in the first quarter after the ownership switch was up by two percent. 39 The rise of social media makes it easier for Lenovo to reach out to its U.S. consumers in a way they like. According to Pew Center’s research, 65 percent of online adults use social networking sites. 40 Social media is fully leveraged by Lenovo to enhance its brand image among adult consumers as well as young, fashion-oriented consumers. On Lenovo’s US website, there’s a section called “Blogs & forums” under the Resources title. It is a website that incorporates all kinds of social media revolving around the Lenovo brand. It has an official Twitter account, Facebook page, Youtube 39 Hamm, Steve. “Lenovo and IBM: East Meets West, Big-Time.” Bloomberg Businessweek. 9 May 2005. <http://www.businessweek.com/magazine/content/05_19/b3932113_mz063.htm>. 40 Madden, Mary and Zickuhr, Kathryn. “65% of online adults use social networking sites.” Pew Internet. 26 August 2011. <http://pewinternet.org/Reports/2011/Social-Networking-Sites.aspx>. 28 channel, and a Flickr page. The slogan for Lenovo’s social media initiative is “Lenovo-For Those Who Do.” It has 313,340 Facebook fans and 18,253 Twitter followers as of March 22, 2012, while HP has 1,735,529 Facebook fans and 136,065 Twitter followers. From this comparison, Lenovo still has a lot of space for improvement in its leverage of social media. Its Facebook fan page is updated three or four times a day with campaign pictures, videos, and online surveys, etc. Its latest post on Facebook is a picture of “Most Beautiful Lenovo Product Ever.” Under the post, there are 76 “likes” and 13 comments. Interestingly, one of the comments says “Another iMac clone. Can’t you people design something of your own?” It is a common question often asked by U.S. consumers towards Chinese products. The shift from “made in China” to “designed in China” seems all the more important for Chinese firms. Given that the U.S. consumer market is saturated, how to design something that Americans like, and at the same time, something that has not been produced by American firms, should be the priority of Chinese firms. The IBM Branding During the early years since the acquisition, Lenovo used IBM brand’s consumer base to promote its own products as a strategy in the transitional phase. However, Lenovo tried to downplay the IBM brand and constantly pushed its own brand in the U.S. market because Lenovo knew it well that after the 5-year period, it could no longer use IBM but would be on its own. Lenovo focused on the trademark 29 of Thinkpad and Ideapad, separating itself from IBM. Though there were concerns among U.S. consumers over the quick erasing of IBM brand and some felt uncomfortable from buying PCs from a China-based firm that they had never heard of, the transition period was successful mainly because of the consistent usage of Thinkpad inherited from IBM. 41 Lenovo’s Youtube Campaign Lenovo came up with this idea of cooperating with YouTube to launch an online campaign in October, 2011. It was a clever decision to leverage YouTube’s platform to attract potential consumers. Aware that the target audience for Thinkpad brand is young consumers, Lenovo created this campaign, asking students ages 14-18 to submit their science projects that could be done in space on YouTube. 42 Though the youth campaign seems less promotional than other business campaigns since it is more of an educational sponsorship than a campaign that encourages people to buy their products, Lenovo had the strategic vision that these participants will soon become their target consumers, securing their future return on investment. Lenovo’s latest public relations strategy is to create brand personality in the U.S. market to enhance its consumer outreach. The company aims to build an 41 Rifkin, Glenn and Smith, Jenna. “Quickly Erasing ‘I’ and ‘B’ and ‘M’.” The New York Times. 12 April, 2006. <http://www.nytimes.com/2006/04/12/business/media/12adco.html?pagewanted=all>. 42 Learmonth, Michael. “Lenovo and YouTube Want to Launch Your Teen’s Science Project Into Space.” Ad Age Digital. 27 October 2011. <http://adage.com/article/the-viral-video-chart/lenovo-youtube-teen-science-contest-tops-viral-chart/230647/>. 30 emotional affinity for the brand when there are many choices today. “Choice isn’t always driven by a rational decision; choice is more often driven by emotional affinity.” Said Tracey Trachta, VP of brand experience at Lenovo. 43 Based on the theme of this campaign, Lenovo will create pop-up stores around the world where consumers can try Lenovo’s products and ask related questions. Because there are so many choices in the PC market, these pop-up shops will allow consumers to experience the different features of Lenovo through engagement. HTC, Taiwan’s Pride HTC is another case worth studying in the consumer electronics field in terms of branding. Based in Taiwan and formerly an ODM (Original Design Manufacturer), HTC is one of the fastest-growing companies in the mobile sector. The company has achieved great success by following the OBM (Own Branding & Manufacturing) business model in the global market. It now ranks the first place on Interbrand’s Top Taiwan Global Brands 2011 44 and the 98 th place on Best Global Brands 2011 45 . Established in Taiwan in 1997 by a technical team, HTC started with ODM business and produced hand-held devices. It began to build its own brand in mid-2006. By the 43 Stein, Lindsay. “Lenovo to build ‘brand personality’ in US.” PR Week. 30 January 2012. <http://www.prweekus.com/lenovo-to-build-brand-personality-in-us/article/225149/?DCMP=EMC-PRUS_Technol ogy>. 44 “Top Taiwan Global Brands 2011.” Interbrand. <http://www.interbrand.com/en/Interbrand-offices/Interbrand-Singapore/TopTaiwanBrands2011.aspx>. 45 “2011 Ranking of the Top 100 Brands.” Interbrand. <http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2011.aspx>. 31 end of 2007, HTC’s reliance on ODM business had been reduced to less than ten percent. 46 Its rise from being a B2B electronic supplier to becoming a well-known global consumer brand is what needs to be emulated by its Chinese counterparts. Before HTC came up with its global branding strategy, its strength lied in its significant investment in R&D as well as its partnership with key global communication service providers. Its low brand recognition and late entry into the U.S. market was the company’s major weakness. The success of its global partners can be both an opportunity and a threat to HTC. Since the launching of its own brand in 2006, HTC suffered a short period of branding dilemma as a few of its subcontracting clients regarded the brand as a potential competitor and did not want to continue business with HTC. Within a short period of time, HTC attracted Microsoft and Google as business partners and grew healthily in a symbiotic relationship. By leveraging Microsoft and Google’s established brand image and consumer loyalty, HTC is on its way to becoming a trusted global brand with price competitiveness. HTC’s Branding Efforts When asked about the branding strategy, John Wang, CMO of HTC said in an interview with Jonathan Chajet, Interbrand’s Executive Director in Asia Pacific that “When the brand is at the heart of the company, you start to use the substance of the 46 Wan-wen Chu “Can Taiwan’s second movers upgrade via branding?” Research Policy. 2009. 32 brand, not just the communication of the brand.” 47 HTC came up with its brand strategy “Quietly Brilliant” not deliberately, but from its own culture. HTC’s people are committed to innovation so they did not have time to promote their brand. Quietly brilliant is probably the best way to explain HTC’s philosophy. For Chinese brands, what they can learn from HTC is first of all, find out what distinguishes them from other brands and create a brand image accordingly. HTC knows its strength well and then creates a brand image based on the strength instead of relying on marketing words that come from nowhere. Only something that comes out from its own culture will be convincing and consistent. HTC overcame cross-cultural barriers through strategic cooperation with Google. By running Google’s Android system, HTC smartphones creates an emotional attachment with consumers who have no idea what HTC is. Why cannot other Chinese brands follow suit? Huawei, the Crouching Telecom Tiger Unlike Lenovo and HTC, American consumers are probably unfamiliar with the company called “Huawei.” It used to be a solely industry brand on the global stage, but starting in 2010 the company has made efforts to create a consumer brand in markets including America. 48 Established in 1988 in Shenzhen, China as a private 47 “Top Taiwan Brands 2011.” Interbrand. <http://www.interbrand.com/en/Interbrand-offices/Interbrand-Singapore/TopTaiwanBrands2011.aspx>. 48 Chao, Loretta. “Huawei Burnishes Consumer Brand.” The Wall Street Journal. 15 October 2010. <http://blogs.wsj.com/chinarealtime/2010/10/15/huawei-burnishes-consumer-brand/>. 33 enterprise, Huawei is now China’s largest telecommunication equipment manufacturer and the second largest in the world. On its North America corporate website, it touts itself as “a 100 percent employee-owned private company” in the first sentence of introduction. 49 This can be regarded as a positive reaction towards rumors of its connection with Chinese military. Huawei’s strength lies in its capital resources, human resource, strong R&D, experience in other parts of the world, influential lobbyists and public relations firms in the U.S. On the other hand, company founder Ren Zhengfei once served in the People’s Liberation Army. His military service experience has led to rumors about the company’s relationship with the government. Legal issues with Cisco and Motorola also bring troubles to Huawei. 50 To clear its name in the U.S. market, the company has published an open letter that requests the U.S. government to investigate its background. 51 This can be an opportunity for Huawei to rebrand its image and increase brand awareness. Strong U.S.-based competitors such as Cisco and Motorola pose as Huawei’s biggest threats in the U.S. market. Amid all the problems facing the company, being transparent to its U.S. stakeholders is probably Huawei’s first priority. 49 “About Us.” Huawei U.S. website. <http://www.huawei.com/us/about-huawei/index.htm>. 50 Hille, Kathrin and Taylor, Paul. “Relief for Huawei as it settles with Motorola.” Financial Times. 13 April 2011. <http://www.ft.com/intl/cms/s/0/9b767044-65f6-11e0-9d40-00144feab49a.html#axzz1mtFZi800>. 51 Chao, Loretta. “Huawei Executive’s Open Letter to the U.S.” The Wall Street Journal. 25 February 2011. <http://blogs.wsj.com/chinarealtime/2011/02/25/huawei-executives-open-letter-to-the-u-s/>. 34 Early PR Hiccup In 2008 Huawei partnered with Bain Capital LLC in a bid for a minority stake in 3Com, a digital electronics manufacturer based in Massachusetts. The attempt did not succeed and to make it worse, Huawei did not have an in-house spokesman to deal with the media. The company remained silent on assertions that threatened U.S. security, which turned out to be the major concern that killed its attempted purchase of 3Leaf and contract with Spring-Nextel in the U.S. market. 52 Dealing with Negative U.S. Media Coverage Faced with media bombardment depicting Huawei as the US’s security threat, Ken Hu, Deputy Chairman of Huawei Technologies, Chairman of Huawei USA wrote an open letter to the editor of Wall Street Journal in which he countered the paper’s article that wrote “inaccurate” assertions about the company’s founder and CEO Ren Zhengfei. 53 In the open letter, Huawei made it clear that the company had nothing to do with the Chinese military and delivered the key message that by bringing innovation to the U.S. market, Huawei is playing a positive role in its economic commitment to the U.S. This letter did a good job when it emphasized that Huawei is a “fully employee-owned and privately held company.” Such counterattack is 52 Dean, Jason. “Huawei’s PR Strategy: Everything But the Boss.” The Wall Street Journal. 25 February 2011. <http://blogs.wsj.com/chinarealtime/2011/02/25/huawei%E2%80%99s-pr-strategy-everything-but-the-boss/>. 53 Chao, Loretta. “Huawei Executive’s Open Letter to the U.S.” The Wall Street Journal. 25 February 2011. <http://blogs.wsj.com/chinarealtime/2011/02/25/huawei-executives-open-letter-to-the-u-s/>. 35 necessary because it is one of the most direct ways of communicating with stakeholders. Building a Consumer Brand Despite large investments in R&D, Huawei is still internationally perceived as a low-cost, low-margin telecommunication equipment manufacturer. The company’s competitive advantage is still low-cost. Its engineers cost one-fifth to one-eight of their counterparts in the U.S. or Europe. In the U.S. market, it faces the question of how should the company position itself in the sophisticated market. 54 Huawei now is on its way to build global awareness as a consumer brand. 55 The unveiling of its Ascend P1 S—“world’s slimmest smartphone” at CES 2012 was widely covered by major US media such as The Huffington Post and The Wired magazine. 56 This is already a great step for the company to reach out to target audiences. The company started selling mobile devices in 2007, manufacturing mobile phones that carry the name of major telecom carriers such as China Mobile. In 2010, Huawei set up a consumer sales drive and began to appear frequently in major consumer electronics expositions. Outside China, Huawei also has established 54 Brian Low “Huawei Technologies Corporation: from local dominance to global challenge?” Journal of Business & Industrial Marketing. 2007. 55 Hille, Kathrin. “Huawei seeks to build global awareness.” Financial Times. 18 October 2011. <http://www.ft.com/intl/cms/s/0/8a8491e8-f65c-11e0-86dc-00144feab49a.html>. 56 Emerson, Ramona. “Ascend P1 S: Huawei Unveils ‘World’s Slimmest Smartphone’ At CES 2012.” The Huffington Post. 9 January 2012. <http://www.huffingtonpost.com/2012/01/09/ascend-p1-s-huawei-ces-2012_n_1194509.html#s598364&title=4 3Inch_Super_AMOLED>. 36 business relationships with mobile operators such as AT&T and the company is working on its smartphone portfolio for low, middle and high-end users. Hagen Fendler, the chief design director for Huawei’s handsets said in an interview that “When you have a strong portfolio of devices, it will help branding with the consumer and also let the operators know you have a roadmap to bring more devices to the market, so they will be willing to work with you.” 57 Haier, the White Goods Giant Haier is the world’s largest home appliance manufacturer in terms of market share. It now has manufacturing locations in Asia, Europe, America and the Middle East. During its early years the company only manufactured household refrigerators. Because of its successful expansion in product line on the international stage, Haier now ranks the fourth in white goods in the world by Euromonitor. Haier’s U.S. division was established in 1999. Headquartered in New York, Haier America has manufacturing facilities in South Carolina. It is the first Chinese company to set up manufacturing locations in the U.S. market. The company now plays the leading role in sales of compact refrigerators and wine coolers in the U.S. market. 58 The business model of Haier includes both OEM and self-owned brands. Its communication efforts can be seen on billboards in major overseas market such as 57 Kan, Michael. “China’s Huawei Aims to Build an Iconic Phone Brand.” PC World Australia. 13 October 2011. <http://www.pcworld.idg.com.au/article/404055/china_huawei_aims_build_an_iconic_phone_brand/>. 58 Maktoba Omar, Robert L Williams Jr. “Managing and maintaing corporate reputation and brand identity: Haier Group Logo” Journal of Brand Management 2006 37 New York and Tokyo. It even sponsored the Italian Series A football games. Its footprints in the U.S. include an R&D center in Los Angeles, an industrial park in South Carolina, and a sales and marketing center based in New York. Haier’s strength lies in its No. 1 ranking in global major appliances brand market share. Its price competitiveness over other major white goods manufacturers also adds up to its key success. Being a Chinese brand and lack of consumer base is still its weaknesses. Its global strategy has been trying to convey the brand as a global brand as its America President Michael Jamal once said in a 2002 interview that “we promote Haier as a global brand—not Chinese or American.” 59 Haier’s stated goal is to build the brand into the Top 5 appliance manufacturers in the U.S. To achieve its goal, the company deemphasizes its Chinese origin and focuses their efforts on R&D and product quality. Moreover, by forming a partnership with the NBA, it is able to gain significant consumer awareness without letting them realize that Haier is actually a Chinese brand. The rise of social media and the global trends toward a low carbon society can be seen as an opportunity for Haier. Taking the above points into consideration, Haier’s U.S. strategy should revolve around the theme of building of a green, technology-oriented image that appeals to American consumers. U.S. Department of Energy has this incentive to encourage the usage of energy saving home appliances 59 Maktoba Omar, Robert L Williams Jr. “Managing and maintaing corporate reputation and brand identity: Haier Group Logo” Journal of Brand Management 2006 38 through appliance rebates. 60 Haier is an active member of this initiative and has a link on its U.S. website to the official page of “Energy Star.” 61 The Evolution of Haier’s Logo A case study has been done to measure consumer attitudes and feelings for Haier’s logo change in 2002 to see whether the change has any positive or negative impact on Haier’s reputation in the U.S. market. Historically Haier has used the “two brothers” logo on its products across the world. A slight change was made in 2002 to the logo which showed two boys, one holding an ice cream and the other giving a thumb up. The study found that Haier was deficient in brand recognition in the U.S. market and its new logo would have a negative impact on the company image. Only 38 percent of respondents viewed the logo positively and 71 percent of these positive respondents would link the logo to a company that sells children’s products. 62 The company may have discovered the potential threat posed by its new logo in the U.S. market, so in December 2004 Haier announced the release of its new vector logo in the global market, getting rid of its “two brothers” logo. 63 60 “Rebates for ENERGY STAR ® Appliances.” U.S. Department of Energy. <http://www.energysavers.gov/financial/70020.html>. 61 “Energy Star.” Haier U.S. website. <http://www.haieramerica.com/energy-star>. 62 Maktoba Omar, Robert L Williams Jr. “Managing and maintaing corporate reputation and brand identity: Haier Group Logo” Journal of Brand Management 2006 63 “Haier Vector Logo.” Hdicon website. <http://www.hdicon.com/vector-logos/haier-2004/>. 39 James Liess Jr. is Senior Manager of Corporate Communications at Haier America. He once said that to deal with savvy U.S. consumers, a company “has to understand consumer needs and differentiate itself with better and targeted products” despite the location of the company. 64 64 “’Thanks But No Thanks’ to Made in China?” <http://knowledge.wharton.upenn.edu/article.cfm?articleid=2902>. 40 Chapter Eight: Problems Facing Chinese Brands Figure 2: Four key questions for Chinese companies going global Source: IBM Institute for Business Value analysis, 2005. The above image shows the four key questions that need to be answered by Chinese companies before they go global. Combining this and the aforementioned secondary research, I’ve found there are at least five sections for improvement for Chinese firms that want to grab their market share in the U.S. Lack of Brand Recognition The perception that products “Made in China” are cheap products with moderate value is widespread among U.S. consumers. Chinese brands usually target the lower-end market because of its price competitiveness. It is difficult for them to 41 enter the higher-end market segment because consumers in this section usually care less about price than they do about brand recognition. One way to solve this problem is to purchase foreign companies. In this way, Chinese firms can take advantage of the manufacturing facilities and established brand reputation. Another way is to focus on product quality and let the quality speak for itself. Cross-Cultural Communication In terms of cross-cultural communication, Imada says Chinese firms have very awkward brand names that are unknown outside of China or in the Western world. These brands have done very little to develop brand equity with the American public and brand trust with consumers. Admittedly, language barrier makes communication even more difficult. For example, Huawei sounds like “Hawaii” to some US consumers. Even though Huawei changed its name into “FutureWei” in the U.S. for a certain period of time, its name has changed back to Huawei again, probably because U.S. consumers were confused by the use of FutureWei in the U.S. and Huawei in other places. Haier sounds like a German last name and has different pronunciations among U.S. consumers. (In fact the brand Haier evolved from the company’s German partner Libenhaier.) For Chinese brands to be fully accepted by U.S. consumers, they need to create a campaign to educate target audiences. But it seems that most Chinese businesses do not want to invest that much. 42 However, it is necessary for Chinese brands to hire global branding experts once they enter the U.S. market. Developing a global branding strategy is a difficult process. Chinese firms need to make clear the relationship between branding strategy in domestic market and in the U.S. market. They first need to understand American culture and then create and communicate key messages tailored to the U.S. market. Consumer behavior should also be learned to communicate the brand to foreign consumers. Simply basing one’s knowledge upon stereotyped images is not going to help a brand survive in the U.S. Catanach thinks that in terms of communication, the biggest obstacle facing Chinese companies is the lack of brand awareness and transparency. Many Chinese companies are not used to the level of transparency required in the West to build credibility and trust. Often an important part of this is presenting the company’s human face, which can create internal cultural challenges as well as the obvious external ones. Chinese corporations also need to figure out how to tell their story in a compelling way to different stakeholders. Self Identification Many Chinese brands try to hide, or at least downplay, their Chinese origin in the international market to avoid the general hostility toward Chinese products in the U.S. market. Finding a way to maintain the Chinese origin while promoting the brands in a way that caters to the western consumers is an important part of the global 43 branding strategy. Catanach thinks even though Chinese companies may need to repackage their products for a Western audience, Chinese companies should be true to their brand’s DNA. This is key. Burberry, for example, has built its global footprint by holding closely to its British heritage. Likewise, Chinese brands should create value for their brands by developing a compelling story that resonates with Western audiences. Hiding is not the way to go global. The story of Feiyue teaches Chinese companies a lesson that Chinese origin can indeed create value and profits if branded in the right way. Feiyue is a sneaker brand first established in Shanghai in the 1920s. The shoes were once famous around China as ideal footwear for martial arts featured by flexibility, comfort and affordability. In 2006, French entrepreneur Nicolas Seguy purchased the right to produce the brand outside China and repackaged the brand as a fashion icon with vintage appeal to Western consumers. 65 Interestingly the brand now identifies itself as a French brand with Chinese heritage while the sneakers are still being manufactured in China, but the price of the shoes went up from less than RMB 20.00 (approximately US$ 3.20) to over US$ 80.00. Intellectual Property and Counterfeiting Problems Chinese manufacturers are “famous” for their capability to copy internationally well-known brands. The fake products produced by manufacturers 65 “Feiyue History.” Feiyue website. <http://www.feiyue-shoes.com/pages_en/historique.cfm>. 44 especially in southern China are seen everywhere in the nation and have leaked to other parts of the world as well. U.S. consumers are fully aware of the counterfeiting problem and have developed a negative impression of Chinese brands. One selling point for Chinese firms that want to develop the U.S. market might be innovation. To counter consumers’ pre-conceived impression as counterfeit manufacturers that violate intellectual property rights, the key message should position the brands as innovators that value both design and value. Working Environment for Employees In the Qualtrics survey mentioned in Chapter 3, most respondents express their concern towards the unfair treatment of workers in Chinese factories and still relate them with “sweatshop”. The most recent and well-known scandal took place at Foxconn, China’s biggest contract manufacturer of electronics. The company experienced its most severe public relations crisis in 2010, when 11 of the company’s workers committed suicide consecutively within five months. 66 The 11 employees were quite young, with an average age around 20. They jumped off the dorm building in Foxconn’s Shenzhen factory campus in southern China, pushing the company to the frontline of media criticism and government inspection. Rumors were that the 11 workers could not stand the harsh working environment and the extremely long working hours. The Foxconn case is not alone. Many other similar cases have not 66 Barboza, David. “String of Suicides Continues at Electronics Supplier in China.” The New York Times. 25 May 2010. <http://www.nytimes.com/2010/05/26/technology/26suicide.html?ref=foxconntechnology>. 45 been covered by international media. Whether the Chinese firms can change U.S. consumers’ perception of the manufacturers will to some extent influence consumers’ purchasing power. 46 Chapter Nine: Lessons Learned from Japanese Brands Asian firms first eyed on the U.S. market long time ago, among which Japanese companies undoubtedly play the leading role. Japanese brands now enjoy worldwide recognition for their technological innovation and reliable quality. However, in the 1970s when Japanese products initially entered the U.S. market, they had low brand expectation. Consumers would associate Japanese brands with poor craftsmanship and cheap products. Under that situation, according to Mike Amour, CEO of Project Worldwide Asia Pacific, “Sony took a long-term view on brand building, with a focus on developing unconventional ideas, which are brilliantly executed and which got attention and results.” 67 Japanese companies like Sony made great efforts in their transition from low-cost manufacturers to providers of high value-added products and services. In the 1980s Japanese companies such as Toyota and Honda had already achieved success in the automobile industry and were well-known for efficient management practices and superior product quality. Following in their steps, other Japanese brands entered the U.S. market, one after another, creating a global name for themselves in the consumer electronics and the diversified technology products market. 68 67 Harjani, Ansuya. “‘Made in Japan’ Brand Still Resilient.” CNBC. 21 July 2011. <http://www.cnbc.com/id/43836683/Made_in_Japan_Brand_Still_Resilient>. 68 “’Thanks But No Thanks’ to Made in China?” <http://knowledge.wharton.upenn.edu/article.cfm?articleid=2902>. 47 Investment on Global Branding To increase the consumer awareness of Japanese brands in the U.S., Japanese firms distributed brand building duties to international advertising and PR agencies because these agencies knew much better about U.S. consumers than Japanese firms. Over the half century, Japanese consumer brands such as Sony, Panasonic, and Toyota have established strong brand image in the U.S. and have obtained a high level of brand loyalty among consumers. OEM is Not the Ultimate Approach Take Sony as an example. When Sony’s founder Akio Morita brought his portable radio to the U.S. market one year after he paid the first visit to the U.S., local dealer offered him a US$100,000 order only if the Sony brand could be replaced by the dealer’s brand. At that time US$100,000 meant a lot to the struggling Sony, but Akio Morita refused the offer because he was certain that Sony needed its own brand instead of being OEM. This was the first step on Sony’s path to international success. How did Sony achieve such success in the U.S. despite cultural differences? Firstly, its name was cleverly designed back in 1958 because it is easy to pronounce by people around the world in any language. 69 Secondly, through the process of hiring local employees, Sony learns the way of doing business in the U.S. and finds it easier to develop networking circles in local communities. Sony also maintained a 69 “Sony’s Story.” Sony Middle East & Africa. <http://www.sony-mea.com/article/233748/section/sonysstory>. 48 balance between U.S. culture and Japanese culture by directly teaching the essence of Sony’s brand and corporate culture to U.S. retailers. In this way, these retailers would serve as a bridge in communicating the Sony story to consumers. A Long Way to Go With the stigma of products, “Made in China” will take years for Chinese brands to achieve what their Japanese counterparts have done across the Pacific. Interestingly based on Haymarket Media’s recent survey, none of the Top 100 most valued brands in Asia-Pacific were from mainland China. The closest one was Haier which sat at the 102 nd spot. 70 There is a lot that Chinese firms can learn from Japanese firms. Aside from their international business model, the way Japanese companies delivered eastern philosophy to U.S. consumers needs to be studied by Chinese counterparts. At some point, the label of a product being “made in China” may become a positive or at least neutral association. 70 Harjani, Ansuya. “‘Made in Japan’ Brand Still Resilient.” CNBC. 21 July 2011. <http://www.cnbc.com/id/43836683/Made_in_Japan_Brand_Still_Resilient>. 49 Conclusions Here are a few tips for Chinese firms that want to build their footprint in the U.S. by summarizing the above interviews with scholars and professionals and related research. To build a better brand equity and brand credibility, Chinese companies should be encouraged to work together to establish a brand image that is featured by quality, affordability and value. To be perceived by American consumers as being on the same level as U.S. companies, Chinese firms should act the same way as their counterparts by demonstrating that they hold the same values as U.S. firms do. These things include good working conditions, reasonable salaries, environmental awareness and other facets related to corporate social responsibility. To overcome cross-cultural barriers, Chinese firms could hire Western public relations/marketing/advertising agencies to help reach target audiences they are not familiar with. This could reduce the risk of market entry and speed up the process of localization. To counter misperceptions against China and Chinese products on U.S. media, Chinese firms should engage themselves actively in the court of public opinion instead of letting misunderstanding become rumors. In order to achieve this goal, Chinese firms should focus on people-to-people discussions and conversations by presenting a human face to their brands. 50 Bibliography Babuji, H. & Beamish, P. W. “Toy recall-Is China really the problem?” Canada Asia Commentary. September 2007. 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July-August 2001. <https://www.chinabusinessreview.com/public/0107/weisert.html>. Elliott, Stuart. “Sign of Arrival, for Xinhua, Is 60 Feet Tall.” The New York Times. 25 July 2011. <http://www.nytimes.com/2011/07/26/business/media/xinhuas-giant-sign-to-blink-on- in-times-square.html>. Emerson, Ramona. “Ascend P1 S: Huawei Unveils ‘World’s Slimmest Smartphone’ At CES 2012.” The Huffington Post. 9 January 2012. <http://www.huffingtonpost.com/2012/01/09/ascend-p1-s-huawei-ces-2012_n_11945 09.html#s598364&title=43Inch_Super_AMOLED>. Fan, Ying. “The globalization of Chinese brands” Market Intelligence & Planning. V ol. 24 No.4, 2006 pp.365-379. “Feiyue History.” Feiyue website. <http://www.feiyue-shoes.com/pages_en/historique.cfm>. “Fortune 500 of 2011.” CNN Money. 23 May 2011. <http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/>. Gao, Paul; Woetzel, Jonathan and Wu, Yibing. “Can Chinese brands make it abroad?” The McKinsey Quarterly. 2003 52 “Going Global-Prospects and challenges for Chinese companies on the world stage.” IBM Business Consulting Services. 2005. “Haier Vector Logo.” Hdicon website. <http://www.hdicon.com/vector-logos/haier-2004/>. Hamm, Steve. “Lenovo and IBM: East Meets West, Big-Time.” Bloomberg Businessweek. 9 May 2005. <http://www.businessweek.com/magazine/content/05_19/b3932113_mz063.htm>. Harjani, Ansuya. “‘Made in Japan’ Brand Still Resilient.” CNBC. 21 July 2011. <http://www.cnbc.com/id/43836683/Made_in_Japan_Brand_Still_Resilient>. Hille, Kathrin. “Chinese Brands in Hollywood Placement Push.” Financial Times. 19 July 2011. <http://www.ft.com/intl/cms/s/0/88cbbac4-b1fc-11e0-a06c-00144feabdc0.html#axzz1 mIti5HY0>. Hille, Kathrin. “Huawei seeks to build global awareness.” Financial Times. 18 October 2011. <http://www.ft.com/intl/cms/s/0/8a8491e8-f65c-11e0-86dc-00144feab49a.html>. Hille, Kathrin and Taylor, Paul. “Relief for Huawei as it settles with Motorola.” Financial Times. 13 April 2011. <http://www.ft.com/intl/cms/s/0/9b767044-65f6-11e0-9d40-00144feab49a.html#axzz 1mtFZi800>. Jiang, Jingjing. “Wal-Mart’s China Inventory to Hit US$18b This Year.” China Daily. 29 November 2004. <http://www.chinadaily.com.cn/english/doc/2004-11/29/content_395728.htm>. Kan, Michael. “China’s Huawei Aims to Build an Iconic Phone Brand.” PC World Australia. 13 October 2011. <http://www.pcworld.idg.com.au/article/404055/china_huawei_aims_build_an_iconic _phone_brand/>. Learmonth, Michael. “Lenovo and YouTube Want to Launch Your Teen’s Science Project Into Space.” Ad Age Digital. 27 October 2011. <http://adage.com/article/the-viral-video-chart/lenovo-youtube-teen-science-contest-t ops-viral-chart/230647/>. Li, Hongmei and Tang, Lu. “The representation of the Chinese product crisis in national and local newspapers in the United States.” Public Relations Review. 35, 2009. 53 Lin, MingShir; Manolis, Kyriakos; Srinivasan, Shyam; Sun, Boyuan; Yang, Wanwan. “Lenovo: Competitive Strategies for Dominance In the Corporate Market.” Liu, Wendong. “Huawei’s Globalization.” Haitian Publishing House. October 2010. Low, Brian “Huawei Technologies Corporation: from local dominance to global challenge?” Journal of Business & Industrial Marketing. 2007. Lublin, Joann and Raice, Shayndi. “Security Fears Kill Chinese Bid in U.S.” The Wall Street Journal. 5 November 2010. <http://online.wsj.com/article/SB10001424052748704353504575596611547810220.h tml>. Madden, Mary and Zickuhr, Kathryn. “65% of online adults use social networking sites.” Pew Internet. 26 August 2011. <http://pewinternet.org/Reports/2011/Social-Networking-Sites.aspx>. “Mattel CEO: ‘Rigorous Standards’ After Massive Toy Recall.” CNN U.S. 14 August 2007. <http://articles.cnn.com/2007-08-14/us/recall_1_polly-pocket-mattel-ceo-toys?_s=PM :US>. “Ogilvy & Mather Launches China Practice in New York.” Ogilvy & Mather. 11 April 2011. <http://www.ogilvy.com/News/Press-Releases/April-2011-Ogilvy-Launches-China-Pr actice.aspx>. Omar, Maktoba and Williams, Robert. “Managing and maintaing corporate reputation and brand identity: Haier Group Logo.” Journal of Brand Management. 2006. “2011 Ranking of the Top 100 Brands.” Interbrand. <http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-glob al-brands-2011.aspx>. “Rebates for ENERGY STAR ® Appliances.” U.S. Department of Energy. <http://www.energysavers.gov/financial/70020.html>. Rifkin, Glenn and Smith, Jenna. “Quickly Erasing ‘I’ and ‘B’ and ‘M’.” The New York Times. 12 April, 2006. < http://www.nytimes.com/2006/04/12/business/media/12adco.html?pagewanted=all> Schmitt, B.H. and Pan, Y. “Managing corporate and brand identities in the Asia-Pacific region.” California Management Review. V ol. 36 No.4, pp32-48 1994. “Sony’s Story.” Sony Middle East & Africa. <http://www.sony-mea.com/article/233748/section/sonysstory>. 54 Stein, Lindsay. “Lenovo to build ‘brand personality’ in US.” PR Week. 30 January 2012. <http://www.prweekus.com/lenovo-to-build-brand-personality-in-us/article/225149/? DCMP=EMC-PRUS_Technology>. “‘Thanks But No Thanks’ to Made in China?” 3 January 2012. <http://knowledge.wharton.upenn.edu/article.cfm?articleid=2902>. “The 12 Best, Quirkiest CES Gadgets We’ve Seen So Far.” Wired. 11 January 2012. <http://www.wired.com/gadgetlab/2012/01/ces-2012-best-quirkiest-gadgets-weve-see n-so-far/>. “Top Taiwan Global Brands 2011.” Interbrand. <http://www.interbrand.com/en/Interbrand-offices/Interbrand-Singapore/TopTaiwanB rands2011.aspx>. Vascellaro, Jessica and Fletcher Owen. “Apple Navigates China Maze.” The Wall Street Journal. 14 January 2012. <http://online.wsj.com/article/SB10001424052970204409004577158764211274708.h tml>. Whitehead, John. “Is America Made in China?” The Huffington Post. 13 August 2008. <http://www.huffingtonpost.com/john-w-whitehead/is-america-made-in-china_b_118 150.html>. Wong, Edward. “Contaminated Milk Is Destroyed in China.” The New York Times. 26 December 2011. <http://www.nytimes.com/2011/12/27/world/asia/contaminated-milk-is-destroyed-in-c hina.html?_r=1&ref=foodsafety>. Yang, J. “Framing the NATO air strikes on Kosovo across countries: Comparison of Chinese and U.S. newspaper coverage.” Gazette: The International Journal for Communication Studies. 2003. 55 Appendix A: Interview Transcripts with Jay Wang Jay Wang: Associate Professor at USC Annenberg School for Communication and Journalism 1/20/2012 Q: Does the changing brand of China over the past few decades have any effects on “made in China” products on the international stage? A: Consumers base their perception on their user experience. Most of the “made in China” products are fine in terms of quality. To answer this question, there are two aspects: political notion and products themselves. Politically outsourcing jobs to China is viewed negatively in the U.S. However, the excellent price/quality ratio of “made in China” products is in general well-received. Q: Should successful Chinese consumer brands be encouraged to enter the U.S. market despite cultural differences? A: There are three main reasons for Chinese firms to expand globally. The first is that the domestic market is already saturated. Another case is that the company would like to be more competitive in the marketplace. The last are for political reasons, which also encourage some Chinese firms to look towards the U.S. market. 56 Q: Do you think the timing is good to promote “designed in China” against the widespread negative perception of “made in China” now in the U.S.? Do you see any opportunities for Chinese firms at this point? A: Innovation is encouraged from both the aspects of politics and customer experience. There was a TV commercial on CNN that promoted the notion of “made with China” but the concept has not been followed up by Chinese businesses. “Designed in China” is not created to go against the “made in China” label but to broaden China’s product line. To better understand the U.S. market, Chinese firms should learn consumer behavior. Q: What’s your personal impression of Chinese brands in the U.S. over the years? A: Chinese brands historically achieved greater success in the lower-end market segment. In order to reach more target audiences, Chinese firms need to direct their brand messages in the U.S. to audiences on a middle and higher end. 57 Appendix B: Interview Transcripts with Rachel Catanach Rachel Catanach: Senior Vice President, Senior Partner, General Manager of Fleishman-Hillard Hong Kong 2/6/2012 Q: Does the changing brand of China over the past few years such as the holding of Olympics and Expo have any positive effects on “made in China” on the international stage? A: Yes, the Olympic Games and Expo had a positive effect on the perception of “made in China” brands. These international events demonstrated that China has the ability to stage something that made the world really sit up and notice, something world-class. However, despite this positive association, a lot of Chinese companies are still struggling with common misperceptions some people have towards Chinese brands. Despite improvements in national branding, there is still room for growth through different platforms. Q: Should successful Chinese consumer brands be encouraged to enter the U.S. market despite cultural differences? A: Yes. Chinese companies should learn how to package their brand so as to appeal to the U.S. market, while not losing what is authentic and inherent in their own brand values. Lenovo, for example, has packaged its brand successfully for the international 58 audiences. Though Thinkpad is not necessarily a Chinese brand, it has indeed achieved great business success. Q: Do you think it is good timing to promote “designed in China” (innovation) against the widespread negative perception of “made in China” now in the US? Do you see any opportunities for Chinese firms at this point? A: Yes, innovation should definitely be promoted both at a corporate level and on the macro level or country level. By promoting their own innovation, Chinese firms will help to improve perceptions of China Inc. and the “made in China” label. The innovations do not need to be revolutionary but they should be promoted in tandem with a commitment to intellectual property protection. Q: From communication’s point of view, what do you think would be Chinese brands’ greatest obstacle on their road of international expansion? A: I think it would be the lack of brand awareness and transparency. Many Chinese companies are not used to the level of transparency required in the West to build credibility and trust. Often an important part of this is presenting the company’s human face and this can create internal cultural challenges as well as the obvious external ones. Chinese corporate also need to figure out how to tell their story in a compelling way to different stakeholders. 59 Q: How to maintain their Chinese origin while promoting their brands in a way that caters to the western market? Many Chinese brands try to hide their Chinese origin in the international market. Is it a long-term strategy? A: Even though they may need to repackage their products for a Western audience, Chinese companies should be true to their brand’s DNA. This is key. Burberry, for example, has built its global footprint by holding closely to its British heritage. Likewise, Chinese brands should create value for their brands by developing a compelling story that resonates with Western audiences. Hiding is not the way to go global. Q: Fleishman-Hillard launched its Global China Practice last year with an aim to help Chinese firms build brands and manage reputation on the global stage. So far, in terms of B2C, have you seen any specific field for improvement for Chinese brands, such as social media, CSR or etc? A: Social media is a key vehicle to reach target stakeholders. CSR is also useful in terms of building the reputation of Chinese businesses. It communicates that the company is not there merely to gain profits, but that it recognizes it has certain responsibilities as an integral member of the community. In general, Chinese brands wanting to go global should build trust and credibility through a comprehensive reputation management program that includes CSR, stakeholder engagement and public affairs. 60 Appendix C: Interview Transcripts with Mei Fong Mei Fong: Lecturer at USC Annenberg School for Communication and Journalism 2/11/2012 Q: Does the changing brand of China over the past few years such as the holding of Olympics and Expo have any positive effects on “made in China” on the international stage? A: I think in particular the Beijing Olympics did. Traditionally the Olympics appear to be a kind of exclusive club where hosts are first-world countries, and China really did hold a momentous event and win the biggest amount of gold medals. Dire predictions of huge sweeping human rights violations, pollution and scandal didn't happen, and it really did seem like China's “coming out party.” Q: Should successful Chinese consumer brands be encouraged to enter the U.S. market despite cultural differences? What would be their major advantages over their U.S. counterparts? A: The one moderately successful brand I can think of is Haier, which has some success with small appliances like wine cooler fridges, the kind students put in dorms. For these and others, China's edge is of course cheap manufacturing. But Haier stumbled when it came to bigger appliances like fridges, which have to be made locally and are too large to ship cheaply from China. This is in part because of U.S. 61 housing bust—if nobody is buying houses, nobody is buying new fridges to put in them. The continued U.S. Economic slump has made U.S. a much less attractive market, so I don't think Chinese consumer brands are necessarily eyeing the U.S market. Certainly not when everyone is fighting for a share of the Chinese market-- companies like Li Ning, for example, have basically decided to focus on domestic market share. Where the U.S. is attractive to them is the possibility of getting design talent and innovation-- Li Ning I think opened up a research lab in Oregon, in Nike's heartland. If they can harness that quality of design innovation which the U.S. is still a leader in, and put it together with inexpensive Chinese manufacturing, they may have something. On the other hand, plenty of U.S. Consumer brands are going about it the other way---taking their designs and manufacturing cheaply in China. So there's still competition. I don't at this point see a major advantage, and Chinese consumer brands are still struggling to have a global presence. The major Chinese companies with largest market share and name recognition are still the commodities, banking companies. Tech companies, by and large, are domestic in their reach—Baidu and Renren don't have global reach, for example. Q: From communication’s point of view, what do you think would be Chinese brands’ greatest obstacle on their road of overseas expansion? A: As you said, perceptions of quality, particularly for luxury brands. The French and to some extent the Italians have cornered the market on this, which all rests on the 62 perception of fine living. China still has this global perception as the world's factory, not the world's design studio. Q: How to maintain their Chinese origin while promoting their brands in a way that caters to the western market? Many Chinese brands try to hide their Chinese origin in the international market. Is it a long-term strategy? A: Possibly-- it may work depending on the sector. Ports 1961, a luxury clothing brand, for example, is based in Xiamen but you'll never hear about that when it is written up in places like V ogue and Women's Wear Daily. Rather, the company emphasizes its Canadian roots as preferable to talking about its Chinese base. Q: From the point of media coverage, what’s your personal impression of American media’s coverage on Chinese brands over the years? Is there any slight change? A: There's definitely more coverage on Chinese brands over the years, though not overwhelmingly positive. But on the whole, there aren't that many Chinese brands that are global household names at this point. I think researchers have pointed out that at a similar stage in Japan's economic evolution they were rolling out names like Sony and Toyota. Chinese have argued WTO agreements worked against the development of Chinese brands, since they were forced to open up their domestic markets to foreign competition before their own brands could evolve, unlike Japan and even Korea. 63 Appendix D: Interview Transcripts with Bill Imada Bill Imada: Chairman and CEO of IW Group, Inc. 2/24/2012 Q: What do you think is the major problem of Chinese brands in the U.S. market? A: One key challenge for Chinese brands is perception. Similar to Japanese products after World War II, many American consumers are under the impression that Chinese-made goods are inferior or poorly produced. American media has also perpetuated the belief that Chinese products are less than satisfactory, despite the fact that Americans wear, consume and use a wide variety of Chinese-made products. Chinese brands can do more to support their brand image by demystifying their products and services, and by demonstrating that Chinese firms do make quality products. Apple products, for instance, are manufactured in China; the designs are beautifully executed and developed; however, China has allowed the media and the court of public opinion to judge them about other factors that influence negative perceptions about Chinese-made products. These factors include poor working conditions for laborers; low wages for workers; unsanitary conditions for laborers, etc. Q: Do you think it is good timing to promote “designed in China” (innovation) against the widespread negative perception of “made in China” now in the U.S.? Do you see any opportunities for Chinese firms at this point? 64 A: Yes, I think countering American impressions and perceptions is critical to China and to Chinese companies. I strongly encourage some activities to counter these perceptions in very positive and meaningful ways. For instance, if there are medical devices that can help an American child recover from an injury; products that can harness the power of the sun in clean, efficient and sustainable ways; shoes and clothing that exemplify the quality of Chinese manufacturing, etc., it will be easier to make that emotional connection and bond with American consumers to help shift perceptions. China should have acted more quickly to stem growing concerns among Americans. American and world coverage of tainted milk products in China; the widely covered train accident; etc., have left an indelible impression on the psyche of many American consumers. Furthermore, China bashing by both Republican and Democratic candidates seeking the office of the presidency, also erodes public confidence in anything coming from China. China should focus on more people-to-people discussions, conversations, and interactions to ensure that they are not marginalized in the world of public opinion. Chinese companies and associations should work together to change public perceptions and to ensure that counter-measures are in place whenever the public is exposed to a negative story about China and Chinese firms. Q: From communication’s point of view, what do you think would be Chinese brands’ greatest obstacle on their road of international expansion? 65 A: Chinese firms are judged harshly in the court of public opinion. In a downward economic situation, the American public is easily susceptible to pointing fingers of blame (or finding a way to scapegoat) what is occurring in this country. In economic hard times, politicians in particular want to place blame on China and on Chinese firms. This fuels public perceptions that China is unfriendly towards the U.S. or malevolent country. It also fuels perceptions that Chinese firms are only interested in making money and spending less time worrying about international trade deficits, raising the value of their currency to encourage free trade, treating their workers with good working conditions and producing quality products. What Americans don’t understand is that they fuel China’s economy (and the interests of Chinese firms) by demanding less expensive goods, shorter delivery times, and more. Chinese firms also have very awkward brand names that are unknown outside of China or in the Western world. These brands have done very little to develop brand equity with the American public and brand trust with consumers. In order to build brand equity and brand trust, Chinese firms must make a concerted effort to establish a brand platform based on quality, affordability, and/or value. They must be seen as companies that care about the same things that most Americans care about, including philanthropy, good working conditions for company employees, salaries that provide a livable wage, environmentally conscientious and civically engaged. 66 Q: How to maintain the Chinese origin while promoting their brands in a way that caters to the western market? Many Chinese brands try to hide their Chinese origin in the international market. Do you think it’s a long-term strategy? A: China should not try to disguise their brands under other international names. Instead, it may want to partner with well-known, well-regarded international brands. Many Western brands have built brand trust and equity with Western and Asian consumers. Partnering with these international brands makes good business sense. I don’t believe that hiding behind an international brand is a good, long-term strategy. Instead, Chinese firms and brands should invest in supporting their own brand image. While this could be enhanced working with Western public relations and marketing firms, it is really up to China and the Chinese companies to change public perceptions about their companies, their products and their services. Q: What do you think are the top three factors that influence U.S. consumers’ purchasing decision? A: 1) Value 2) Quality 3) Convenience/Accessibility These factors also depend heavily on the consumer/audience. For each audience, the factors could be radically different.

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Asset Metadata

Creator Shen, Chu (author)

Core Title Consumer awareness of Chinese brands in the United States

School Annenberg School for Communication

Degree Master of Arts

Degree Program Strategic Public Relations

Publication Date 05/05/2012

Defense Date 04/01/2012

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag awareness,brands,China,North America,OAI-PMH Harvest

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Tenderich, Burghardt (committee chair), Thorson, Kjerstin (committee member), Wang, Jay (committee member)

Creator Email chushen@usc.edu,shenchu1210@gmail.com

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c3-31813

Unique identifier UC11290444

Identifier usctheses-c3-31813 (legacy record id)

Legacy Identifier etd-ShenChu-780.pdf

Dmrecord 31813

Document Type Thesis

Rights Shen, Chu

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA