China 2016: PERFORMANCE ANALYSIS | OVERSEAS REVENUE
Appliance, airlines and technology brands lead in overseas revenue
Chinese brands continue to grow the percentage of annual revenue they derive from overseas activities. The expansion of international business is especially important as the growth of the domestic economy slows and Chinese companies attempt not only to sell products outside of China, but also to raise awareness of Chinese brands, or Brand China.
Around two-thirds of Chinese believe that building strong brands worldwide is essential for advancing the Chinese Dream of a more prosperous, equitable and internationally respected China. And, in a virtuous circle, achievement of the Chinese Dream should help elevate Brand China. These findings are contained in the BrandZ™ research report, The Power and Potential of the Chinese Dream. (For more information, please visit www.wpp.com/wpp/marketing/brandz/the-chinese-dream).
The top three brands with the greatest proportion of revenue derived from overseas business come from the technology category. Huawei, a newcomer to the BrandZ™ China Top 100, joined Lenovo and ZTE, which were present last year.
Fifteen of the Top 20 in overseas revenue come from only three categories: home appliances, with six brands; airlines, five brands; and technology, four brands. The other four categories represented are oil and gas with two brands, and with one brand apiece, banks, cars and retail. Reflecting the rebalancing of China’s economy, the seven categories include both State Owned Enterprises (SOEs) and market-driven brands.
Half of the Top 20 brands are marketdriven and half are SOEs. Seven are Strategic SOEs, meaning they are in fundamental industries, such as oil and gas or banking, which influence and implement government policy. Three brands are Competitive SOEs in consumer-facing categories like home appliances.
Lenovo, the world’s largest PC maker, led the Top 20. It continued to grow its PC, mobile and enterprise businesses outside of China, which helped balance the softening of the Chinese market. Lenovo gained 68 percent of total revenue from overseas business, up from 62 percent a year ago. By ofering smartphone quality at a more afordable price than market leaders Apple or Samsung, Huawei successfully gained market share not only in emerging markets, but increasingly even in Europe. Meanwhile ZTE expanded its presence in the Android market in the US.
Following the three technology brands, the home appliance brand TCL had the fourth largest proportion of overseas revenue. TCL makes a range of home appliances, but is known chiefly for its TVs. The home appliance brands typically started as Original Equipment Manufacturers (OEMs) making products for other companies to market.
These producers of TVs, white goods or air conditioners, brands like Hisense, Midea, Haier and Gree, increasingly sell under their own brand names through massmarket channels. Significantly, Haier announced plans to acquire the appliance division of General Electric
The strong presence of the airlines category in the Top 20 in Overseas Revenue is not surprising. But the number of brands increased from four to five this year, with the addition of Spring Airlines, an entrepreneurial brand started in 2004 to provide more afordable domestic travel. All of the airlines brands have benefited from the surge in tourism. Chinese outbound travel grew 12 percent in 2015, according to the World Tourism Organization, an agency of the United Nations.
The largest carriers, Air China and China Eastern Airlines, continue to add international routes and gain passengers through their memberships in, respectively, Star Alliance and SkyTeam Alliance. China Southern Airlines, a strong domestic carrier, is well positioned to link with the connecting flights of international visitors. Hainan Airlines added routes to Australia and Europe.
Strategically important state-owed brands, like Bank of China and the oil and gas giants, PetroChina and Sinopec, continue to derive a major proportion of revenue from overseas businesses. But each brand ranks lower than it did last year in the Top 20 in Overseas Revenue, because of market conditions and the stronger overseas revenue growth of the technology, home appliances, and airlines brands.
While BYD, the electric car brand, and e-commerce brand Alibaba, derive only a small portion of revenue from overseas business, 13 percent and 9 percent respectively, the growth potential is significant. BYD buses already operate in Europe. Alibaba is aggressively investing for global growth with initiatives like AliExpress, a platform to sell Chinese products to overseas customers, and establishment of a cloud computing center in California.