Chinese, Indian brands expand with differing global strategies
Their success is critical to drive
brand value and world vitality
By Hari Ramanathan
Chief Strategy Officer, Asia
Didi, Ola, Baidu, Birla, Flipkart, Dalian Wanda... the list is long and varied of large and valuable brands in China, India, and other emerging markets and yet they firmly remain homebound despite some efforts to become global brands.
The leap from East to West seems to be as implausible as it's been for the past few decades. Why is it that brands from the East are not able to make that transition? Are they not interested, or simply not doing it right? And will we see any of them soon ranked in the BrandZÔ Top 100 Most Valuable Global Brands? The answer to this is as varied as what these brands represent.
Taking the shortcut
Companies from China seem to have taken a different lesson from the journey of Japanese and more recently Korean brands. Instead of trying to fight and overcome the perception issue of quality and reliability with millions of dollars, they have decided that it's much simpler to just use that investment to acquire brands that don't have these issues and get on with the job of selling product.
This has led to brands like TCL acquiring Thomson and Alcatel in Europe and Haier acquiring the GE appliance division and Fisher&Paykel. And real estate brand Wanda has added a diversification element to this by taking over AMC cinemas, Legendary Pictures and Dick Clark Productions.
This behavior is not so much a business approach as one that's a cultural response. Whenever you meet someone in China, they will tell you their name is Tom, or Kelvin, or Joe,-all made up names- for the easy consumption of foreigners. They view it as misspent energy trying to teach a hundred people that X is pronounced as “Ksh” or that Q is pronounced with a “Sh” sound. It's simpler to present themselves in your own syntax and cultural context and get down to business. The approach hasn't paid rich dividends yet, but it's too early to tell.
“We are like this only”
A phrase made popular, ironically, by MTV in India, it refers to the eccentricities of Indians and their unchanging nature. While it was a satirical sketch, the underlying cultural truth is very strong and again emerges in business. Indian brands with the exception of Tata's now famous acquisition of Jaguar Land Rover, do not favor being invisible and behind the scenes. Expansion to them is a conquest and it needs to be under their flag, this is more reminiscent of the Japanese and Korean way.
A lot of success has been achieved in the sphere of IT services by the likes of Infosys, Wipro, TCS and many other brands, but when it comes to consumer-centric brands it’s a different story altogether. No Indian brand has been able to make much of an impact. Auto brands have been leading in attempting forays abroad, with Mahindra launching tractors in the US and even acquiring a Chinese company. Tata has tried launching their pick-ups and trucks everywhere from Africa to Thailand. But none of the brands have made the same impact that is par for western brands in India.
Given Indian companies would be hard-pressed to fund aggressive expansion on the scale of Sony or Samsung, it might be prudent for them to consider the China method of acquisition. But Mahindra is trying a new route. They have acquired the storied Italian design house Pininfarina, and they are hoping to design and originate products for the European market from scratch.
A value perspective
There’s a school of thought that says that these moves at expansion are nothing more than ego-driven. After all, why hanker to get into a market where you have to navigate the differences of 28 countries to reach a combined market of only 743 million when you have a market exceeding 1.2 billion at home.
But it’s more nuanced. It’s not a question of ego or indeed even the size of the market; it’s important for brands to get to the West because for the next decade, and perhaps more, the consumer spending money is still going to be in that part of the world. And when brands expand into markets with higher affluence and higher price elasticity, they increase their brand value and ultimately their enterprise value.
There may be no one answer on how to do it, but the interposable nature of brands can’t be only one way. While the attention today is toward emerging markets, because of the decline in growth in developed economies, that shouldn’t distract brands from the fact that the opportunity to turn Asian brands into real global powerhouses is real and one that should be pursued. It is critical for brand value and also for a more balanced world where we don’t end up being homogenized to the point of losing cultural differences.