Going Global: Consumer brands move beyond Belt and Road
Gaining local insight tops list of global growth challenges
The presence of Chinese products and services abroad is probably most associated with the government’s Belt and Road initiative to build infrastructure and other projects overseas as a way to extend the China’s soft power. But Chinese consumer-facing brands are moving beyond belt and road with ambitious plans to build businesses in both the developing markets of Asia and Africa and in the mature, competitive markets of Europe and North America.
Global expansion is evident in the product categories that dominate the BrandZ™ ranking of Chinese brands with the greatest overseas presence. In 2013, half of the Top 10 Brands in overseas presence were State-Owned Enterprises, either airlines or oil and gas companies. This year, six of the Top 10 are technology brands. One is a home appliance maker. And the remaining three are SOEs.
This shift is not incidental. It includes a combination of established and start-up brands that fit into the key industries of the Chinese government’s Made in China 2025 strategy, a plan to transform China from the world’s factory to a leading maker and marketer in categories that include artificial intelligence, particularly the Internet of Things and Smart Appliances; robotics, green energy and vehicles; medicine and medical devices.
The three newcomers to the Top 10 Brands in overseas revenue are DJI, the world’s leading maker of consumer and commercial drones; UBTECH, a leader in artificial intelligence and humanoid robots used for business, education, and entertainment; and Xiaomi, a leading smartphone maker in China and India, now devoting attention to artificial intelligence and the Internet of Things.
How to establish the brand overseas is another question, however, according to the China Outbound practice at Ogilvy. Some brands choose to establish themselves as global citizens without special reference to their national origin because they define themselves as leading experts in their category. For brands in certain categories, traditional Chinese medicines, for example, their provenance adds obvious credibility.
Most Chinese brands still face similar challenges when expanding abroad. Some challenges are category-specific, like the intellectual property debates in technology. Other challenges are geopolitical, like the security concerns that limit access to certain Western markets. Finally, many challenges faced by Chinese brands looking to go global are operational, according to Ogilvy. Among these challenges are:
Local Insight The No. 1 challenge facing Chinese brands expanding abroad is lack of local insight.
Brand Management Brands struggle to understand with whether it is best to manage the brand globally or locally.
Communications Some brands rely on short-term fixes to successive problems when success requires being guided by a long-term communications strategy.
Talent Expanding Brands need to find the right balance between hiring talent who know the local market and relying on people who know the operating style of Chinese brands.