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REMAKINGMADE IN CHINA

August 2012

Image credit: Jessica Va


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Executive Summary........................................................................................................3

Remaking Made in China ..............................................................................................4

Introduction ...............................................................................................................5

External Roadblocks to Expansion ....................................................................................6

Made in China = low quality.......................................................................................7

Safety is a key concern ..................................................................................................8

Fake products fuel copycat image .....................................................................................8

Sustainability, labor also key concerns ................................................................................9

Little differentiation between Poorly manufactured in China and Branded in China................. 10

Low awareness of Chinese brands ...................................................................................10

Adversarial political and economic relationship.................................................................. 11

Internal Roadblocks to Expansion .................................................................................. 12

Corporate structure and management style ................................................................... 13

Lack of brand-building innovation ...................................................................................13

Lack of international experience ....................................................................................14

Failure to conquer home turf........................................................................................ 15

Overcoming the Roadblocks........................................................................................... 16

Take back Made in China .........................................................................................17

Compete at a world-class level ...................................................................................... 18

Lean into national identity ........................................................................................... 20

Tap into the Millennial worldview ................................................................................... 23

Drive innovation and lead categories ...............................................................................25

Ride on international brand coattails ...............................................................................27

Become a leader in CSR ...............................................................................................28

Conclusion ..................................................................................................................30

Appendix ....................................................................................................................32

More About Our Experts/Inuencers ................................................................................32

Additional Charts ....................................................................................................... 34

A note to readers:To make the report easy to navigate, weve added hyperlinks to the Table of Contents, so you can

jump immediately to the items that most interest you (or, alternatively, you can read the material straight through).

This is a report from JWTIntelligence. Go to JWTIntelligence.comto download this and other trend research.

WHAT WELL COVER (contd.)TABLE OF CONTENTS
http://www.jwtintelligence.com/http://www.jwtintelligence.com/


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WHAT WELL COVER (contd.)

*See Appendixto learn more about these experts and inuencers

JOSEPH BALADI,CEO of BrandAsian, author of

The Brutal Truth About Asian Branding

TOM DOCTOROFF,

JWT North Asia area director and

Greater China CEO, author of

What Chinese Want

HOWIE LAU,VP of marketing and communications for

Asia Pacic and Latin America, Lenovo

DOUGLAS YOUNG,

co-founder of Hong Kong-based lifestyle

brand Goods of Desire

China is the globes most populous country and its second biggest economy (one thats forecast to move ahead of the

U.S. in another 15 years). But by and large, its brands havent yet made a notable impact on the global consumer

market. That may well change in the near future: China is actively seeking to export more than just the rest of the

worlds manufactured goods and to develop strong brands that can hold their own both at home and on the world stage.

Chinese brands face an uphill battle, with an array of external and internal forces currently hindering their efforts to

take root internationally. This report details those roadblocks, spotlighting the array of negative perceptions among

Western consumersstarting with their low regard for the Made in China labelas well as key reasons why many

Chinese rms arent yet innovative, at and exible enough to compete with global brands.

Remaking Made in China also takes a look at some of the strategies that leading Chinese brands, from Lenovo and

Li-Ning to Haier and Huawei, are deploying to knock down these roadblocks. As we move into what many forecast will be

a Chinese Century, there is tremendous potential for Chinas savviest marketers to break through.

Methodology

All our trend reports are the result of quantitative, qualitative and desk research conducted by JWTIntelligencethroughout the year. Specically for this report, we conducted on-the-ground research in Shanghai, Beijing and Hong

Kong. We also elded a quantitative study in the U.S. and the U.K. using SONAR, JWTs proprietary online tool, from

May 31-June 4, 2012; we surveyed 503 Americans and 503 Britons aged 18-plus. In addition, we interviewed four relevant

experts and inuencers.

This report builds upon Journey to the West, a 2011 report researched and written by Pete Heskett, Southeast Asia area

director for JWT. Special thanks to Pete, along with Tom Doctoroff, Eva Zhang and colleagues at JWT Shanghai, for their

assistance and insights.

EXPERTS AND INFLUENCERS*

EXECUTIVE SUMMARY


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As China starts to export more than just the worlds manufactured goods, well see a push to change

perceptions around what it means to be Made in China. Already a leading crop of businesses are

chipping away at some of the key issues standing between Chinese brands and global success.

Image credit: Jessica Vaughn

The shift from China as the worlds factory to China as a

brand creator and marketer is well underway.

DAVID ROTH, CEO, EMEA and Asia, The Store, WPP,BrandZ Top 50 Most Valuable Chinese Brands, 2012

REMAKING MADE IN CHINA


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Introduction:China is the globes most populous countryhome to 1.34 billion peopleand the worlds second biggest economy

(it unseated Japan from the No. 2 spot last year). Its forecast to move ahead of the U.S. in another 15 years. But by and large,

China brands havent yet made a notable impact on the global consumer market.

During much of the 20th century, China served as a manufacturing center for international brands, developing few of its own for

export markets. Meanwhile, Made in China became synonymous with cheap, mass-produced, low-quality goods. But now, three

decades after the Communist country opened up and instituted market reforms, China is looking to export more than just the

rest of the worlds manufactured goods. Were seeing a new focus on developing strong brands that can hold their own both at

home and on the world stage.

Its a tall order, given that Chinese businesses have little experience developing the type of brands that dominate on the global

stage. The result is that Chinese brands tend to lack equity in the domestic market. They have yet to gain enough status to earn

a price premium over global counterparts. Not only that, but Chinese labels are still tainted by association with shoddy Chinese

manufacturing. Consumers in developed markets are skeptical at best of Chinese products.

Still, there is tremendous potential. Japan, Korea and Germany are among the nations whose brands have overcome hostileor skeptical consumer perceptions. It was once seen as down-market to buy Japanese, for example, but today few shoppers

consider Made in Japan a negative. And in our hyper-connected, globalized, fast-moving world, the journey from negative to

positive perceptions can be signicantly shorter than it once was. Millennials already have a very different image of China than

the outdated associations that may linger among older consumers. And the youngest consumers, Gen Z, have only known China as

a rapidly modernizing economic giant.

Chinas brands have seen an explosion of value, as BrandZ recently noted, due to factors including a booming and increasingly

discerning middle class, product commoditization, efforts to drive homegrown business and heated domestic competition (from

both local and international companies). While we found very low awareness of Chinese brands among American and British

consumers, they may already be customers of the leading crop of Chinese labels. Among them:

REMAKING MADE IN CHINA (contd.)

Lenovo, expected to become the worlds largest PC

manufacturer this year. The company, which launched its

rst global branding campaign last year, garnered global

attention when it bought IBMs PC division for $1.75

billion in 2005.

Huawei, which recently slipped past Ericsson to become

the worlds largest telecom-equipment vendor and

ranked among the worlds top three patent applicants in

2011 (fellow Chinese rm ZTE took the top spot).

Haier, which currently holds the largest share of theglobal appliance market (close to 8% of the sector).

As China nds its footing as a superpower, some are forecasting that this will be the Chinese Century, not only because of

Chinas political and economic power but also because its worldview and values will inuence consumers everywhere (much as

American values and culture have). As perceptions of China align with this new status quo, and as its marketers nd ways to

knock down the obstacles to global expansion, expect some new, possibly formidable rivals to todays global consumer brands.

Within the next 10 years, we are

going to transition to a Chinese

Century relative to an American

benchmark. That means we are

going to have great Chinese brands,

both commercial business Chinese brands as well

as cultural brands, because thats what dened

the U.S. JOSEPH BALADI, CEO of BrandAsian,author of The Brutal Truth About Asian Branding


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In recent years, some Chinese brands have been venturing outside Chinas borders, nding great success

in emerging marketsfor instance, Chinese car exports were up 43% year-over-year in May, with the

majority of demand coming from Algeria, Brazil, Iran, Russia, Saudi Arabia and South Africa. Now, a few

Chinese companies are looking beyond the developing world in a bid to build global brands. But in moredeveloped, Western economies, they face an uphill battle.


EXTERNAL ROADBLOCKSTO EXPANSION


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Made in China = low quality: Though China is no longer the top spot for cheap manufacturingits rising labor costs

have pushed many companies to shift their outsourcing to countries such as Vietnam and Cambodiadecades of poorly

manufactured products from China have left a scar on consumer perceptions. Comparing perceptions of Made in China

with Made in Japan or Made in the USA points to a wide gap to be crossed by Chinese brands.

While around half of respondents to our survey said American- or Japanese-made goods are reliable and high-quality, fewer

than a fth said the same of Made in China brands. Rather, most people associate negative product attributes with Chinese-

made goods, including mass-produced (65%) and cheap (56%).

By contrast, a far smaller percentage view Made in the USA as mass-produced (31%) and cheap (8%). Instead, many

consumers see American and Japanese goods as well-designed and as stylish (especially in the case of USA brands). (See Figure

1A; for country and generation breakdowns, see Appendix, Figures 1E-1M.)

EXTERNAL ROADBLOCKS TO EXPANSION (contd.)

80%

70%

60%

50%

40%

30%

20%

10%

0%

FIGURE 1A:

Country manufacturer impressions (U.S. and U.K.)Percentage of American and British adults who associate the following traits with products made inChina, Japan and America

Made in China Made in Japan Made in the USA

High qualityReliable

Built/madewith pride

Impressive

Interesting

New anddifferent

Trendsetting

Cutting-edge

Stylish

Well-designedEthical

Environmentallysound

Poor safetystandards

Poorly made

Cheap

Mass-produced

Unreliable

Low-class

Ordinary

Boring


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Safety is a key concern:While perceptions of Chinese-made

goods as poor quality have persisted for decades, questions

about their safety have only built in recent years, both

domestically and internationally. Large-scale recalls havemade headlines worldwide. Mattel recalled 9 million toys,

including Barbie and Polly Pocket dolls, in 2007 due to lead

paint and magnets that posed choking hazards; countries

around the world banned Chinese milk products after recalls

by several Chinese dairy companies in 2008; 54 high-speed

trains, meant to symbolize Chinas sweeping modernization

push, were recalled last year.

In our survey, 46% of respondents cited poor safety standards

as an attribute of Chinese products, compared with only 9%

who said the same of American-made goods. (See Figure 1A.)Around 4 in 10 consumers in our survey (and more than half

of Americans) said they have low opinions of Chinese brands

because of recalls. And half of respondents agreed with the

statement, Chinese brands arent portrayed very well in the

news/media, citing this as a key reason for their low opinion

of Chinese brands. (See Figure 1C; for country breakdowns,

see Appendix, Figures 1P-1Q.)


Fake products fuel copycat image:Distrust is also driven by news about

an abundance of fakes: not simply counterfeit handbags and watches but

everything from plastic rice and chemically made eggs to forged university

acceptance letters, imitation medicines and even a chain of faux Apple

stores so authentic that even employees believed they worked for the

California company.

Such reports not only drive skepticism but help to perpetuate the notion that

Chinese products are copycats, lacking good design, style and originality. While

nearly half our survey respondents felt that American- and Japanese-made goods

are well-designed, only 18% said the same of Chinese goods. Similarly, just 12% agreed Chinese goods are stylish, compared to

45% for American goods and 36% for Japanese products. And while more than a third of consumers felt American and Japanese

manufacturers create products that are new and different, only 15% of respondents said the same about Chinese products. ( See

Figure 1A; for country and generation breakdowns, see Appendix, Figures 1E-1M.)

Perhaps this is why 34% of respondents agreed that Im not very impressed with Chinese companies in general. ( See Figure 1C;

for country breakdowns, see Appendix, Figures 1P-1Q.)


Chinese are cunning at marketing

products of very low quality but mass-

produced even when they know the

products are faulty. Male, U.K., JWT SONAR

I know not all Chinese products are bad,

but in general I think China has very

poor quality regulatory standards for

products. Im not keen to try Chinese products until

this improves. Male, U.S., JWT SONAR

Its not really important to me where

products I buy are made. Probably I

own a lot of things that are made in

China without realising it, but my impression, right

or wrong, is its not good quality.

Female, U.K., JWT SONAR

I am disappointed with items made inChina and sold in the U.S.

Female, U.S., JWT SONAR


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Sustainability, labor also key concerns:With consumers hearing much about things like the heavy smog hovering over Beijing

and conditions at Apples China-based Foxconn factory, concerns about environmental and labor practices have been further

degrading perceptions of Chinese products.

In our survey, Chinese manufacturers scored by far the lowest in terms of environmentally sound practices. ( See Figure 1A;

for country and generation breakdowns, see Appendix, Figures 1E-1M.) And environmental practices and workers rights,

when measured for inuence, all have a signicant negative effect on consumer opinion of China. (See Figure 1B; for country

breakdowns, see Appendix, Figures 1N-1O.)


FIGURE 1B:

Factors that inuence consumer opinion of China (U.S. and U.K.)Extent to which each of the following impact American and British opinions of China

POSITIVEOPINION

BIG IMPACT

SMALL IMPACT

NEGATIVEOPINION

Chinese workers rights

Chinese government

Chinese environmentalpractices

Traditional Chinese/herbal medicine

Chinese restaurants

Average Chinese citizen

Chinesecelebrities

Chinese Olympic athletes

Chinese-American athletes

Chinese-American celebrities

Chinesemartial arts

Chinese philosophy

Beijing Olympicsopening ceremony

Chinas global inuenceon the economy

Chinese brands

Chinese lms

Chinese manufacturers(Made in China)

News/media coverageabout China

Chinese humanrights policies


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Little differentiation between Poorly manufactured in

China and Branded in China:Consumers, most of whom

havent personally had negative experiences with Chinese

brands, are simply carrying over their negative perceptionsof Chinese-made onto Chinese-branded. When respondents

were asked to choose which phrases they associate with

Chinese brands, the top three responses were mass-

produced, cheap and poor safety standardsechoing

consumer sentiment around Made in China. (See page

23, Figure 2C; for full list and country breakdowns, see

Appendix, Figures 2I-2K.)

When respondents with poor perceptions of Chinese brands

were asked why they had such low opinions, just over

half agreed with the statement, I am not impressed withproducts that are Made in China and feel Chinese brands

would be a similar quality. Only 28% of consumers with

low opinions of Chinese brands had personally had bad

experiences with a Chinese label. (See Figure 1C; for country

breakdowns, see Appendix, Figures 1P-1Q.)

Low awareness of Chinese brands:Despite the heft of some

Chinese companies, our research found relatively low awareness

of Chinese brands in both the U.S. and the U.K. When presented

with a list of 40 heavyweight Chinese brands, a plurality of

respondents (36%) had never heard of any of them. Only a

quarter were familiar with Lenovo, currently the worlds second

largest computer manufacturer after HP. (See Appendix, Figures

1T-1V.) The most recognized brand, Air China, didnt fare much

better, with 28% of respondents recognizing the name.


Image credit: twicepix

FIGURE 1C:

Reasons for low opinion of Chinesebrands (U.S. and U.K.)

47

Percentage of American and British adultswho agree with each of the following

Millennials (18-34) Gen X (35-47) Boomers (48-67)

Chinese brands arentportrayed very well in

the news/media51%

52

48

54

I am not impressedwith products that

are made in Chinaand feel Chinese

brands would be asimilar quality

51%

46

51

55

Items made in Chinatend to get recalled

38%

37

37

40

I have personally hada bad experience with

Chinese brands28%

35

22

26

Im not veryimpressed with

Chinese companiesin general

34%30

34

39
http://www.flickr.com/photos/twicepix/4437851857/http://www.flickr.com/photos/twicepix/4437851857/


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Adversarial political and economic relationship:Further

hampering the landing of Chinese brands on Western shores is

a legacy of complicated Sino-Western relations, coupled with

an escalating sense of economic rivalry as China booms whilemuch of the West grapples with scal woes. There are even

fears of economic espionage, with reports of Chinese hackers

attempting to steal information from companies such as

DuPont, Nortel and Google.

While Chinas government has opened up to elements of

capitalism, anti-Communist sentiment remains strong, with 70%

of American and 64% of British respondents stating they are wary

of China because it is Communist. A majority of consumers also

said the rise of Chinas economy makes them anxious (62%), as

does increased Chinese investment in their country (57%). (SeeFigure 1D; for country breakdowns, see Appendix, Figures 1R-1S.

When measured for inuence, these factors have a signicant

negative impact on consumer perceptions of China. (See Figure

1B; for country breakdowns, see Appendix, Figures 1N-1O.)

And in the U.S., its likely that anti-China sentiment will only

escalate in the run-up to the presidential election.

FIGURE 1D:

Attitudes toward Chinas economyand government (U.S. and U.K.)

47

Percentage of American and British adultswho agree with each of the following


The rise of theChinese economy incomparison to oursmakes me anxious

62%

57

64

66

I am anxious aboutincreased Chinese

investmentin my country

57%

53

54

63

I am wary that Chinais a Communist nation

67%

66

69

67

I support political/government

deals in China44%

50

47

36

China is takingaway all of the

jobs in my country53%

51

52

57

I would work for aChinese company that

opened up an ofcein my country

60%

61

63

56


With so much China-bashing going

on, it seems hard for Chinese

brands to deliver the message that

they are not threatening, and come in prot-

orientated goodwill. JENNY CHAN, Chinasbrands head West, Campaign, April 2012


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Roadblocks to expansion for Chinese brands are not solely external. More of Chinas state-run and

privately owned enterprises alike will need to learn how to innovate if theyre to compete in global

marketsindeed, even if theyre to compete against multinationals at home. Rigid corporate structures

and a reluctance to try different ways of doing business prevent new ideas from emerging and ourishing,and the focus is on narrow, short-term goals rather than a longer-term view. The result is weak brand

equity, one reason why domestic consumers tend to prefer Western labels.

Plus, Chinese rms tend to make the leap overseas before developing a long-term global strategy and

expansion plans, according to the Brooking Institution. Instead, the decision is based on government

mandates to go global (or face penalties) and a desire to chase prots and invest pent-up cash.


INTERNAL ROADBLOCKSTO EXPANSION


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Corporate structure and management style:Chief among

the internal roadblocks to expansion is the hierarchical

structure of Chinas companies, even among midsize,

relatively new and innovative companies. The CEOreigns supreme, his or her authority and judgment never

challenged or questioned in Chinas corporate culture.

(Plus, many of Chinas state-owned enterprises have ties to

the Communist Party, with CEOs appointed by a party body.)

This leads to a stiing of ideas and communication,

especially from the most junior employeeswho may be

the ones with experience working or studying in the West,

where they pick up soft skills such as decision-making

and working in team environments. The decision-making

apparatuses of these companies are very rigid, explainsJWTs Tom Doctoroff, JWT North Asia area director and

Greater China CEO, in his recent book, What Chinese Want.

They are traditional in outlook and management structures,

and frown upon entrepreneurial thinking and the risk-taking

required that generates innovation.

A rigid corporate structure also means that projects face

many layers of navigation before they can be executed. Jenny

Chan explained in Campaign, The culture of red tape and

bureaucracy associated with the Middle Kingdom is permeating

through to how Chinese brands behave. By contrast, todays

fast-moving, hyper-competitive world requires companies to

operate as lean and nimble machines.

To complicate matters further, Chinese managers tend

to ip-op, constantly changing course, which fosters

employee anxiety; theres limited interaction among

departments; and marketing units fall lower on the totem

pole than sales teams, which tend to control budgets.

Lack of brand-building innovation:Though China has seen

a sharp increase in research and development spending,

as well as an uptick in patent lingstwo indicatorstypically used to measure innovation effortsmost Chinese

companies have yet to foster a culture of innovation that

helps to build brand equity.

Instead, marketers put their innovation efforts toward product and package design, and tend to excel at development:

creating incremental improvements to existing products and services and driving scale. Companies focus on tweaks that can

be easily measured and tied to tangible resultsa logical emphasis in a hierarchical business culture that fears instability. But

its unlikely businesses will be able to create products and services that command higher price points without broadening the

focus of their R&D.

INTERNAL ROADBLOCKS TO EXPANSION (contd.)

Whether its a family company or

a multinational, the CEO is the

predominant voice in the company.

Nobody questions the CEO. He is

omnipresent, omni-seeing; hes omni-

powerful. So that creates an issue in terms of internal

communication. Right now in meetings you have

a silent group of Asians who arent willing to ask

questions, arent willing to express themselves,

because theyre not willing to expose themselves or

take a risk in being wrong. So nobody talks.

JOSEPH BALADI, CEO of BrandAsian, author oThe Brutal Truth About Asian Branding

Competition in developed

international markets requires a

price premium, rooted in both

value-addednot parityproducts

or services and strong brand equity.

The last can be acquired only gradually over

time. In these respects, Chinese brands are still

disadvantaged, in many cases grievously so, and not

just by a generic fear of anything Made in China.TOM DOCTOROFF, JWT North Asia area director and

Greater China CEO, author of What Chinese Want

One way of dening [innovation] would

be as fresh thinking that creates value

people will pay for. By that measure,

China is no world-beater. Though its sweat produces

many of the worlds goods, it is designers in

Scandinavia and marketers in California who create

and capture most of the value from those products.

From Brawn to Brain,The Economist, March 10, 2012


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Chinas current ve-year plan aims to

foster innovation in seven strategic

industries, and the government has

instituted incentives to lure scientistsand researchers home after they earn

degrees overseas. But ofcials tend to

dole out research grants for projects that

have a similar timeline as the tenure of

bureaucrats, thus sacricing long-term

horizons for short-term gains, as Mike

Chao, former senior principal at Boston

Consulting Group, told Knowledge@-

Wharton. By contrast, research that

leads to innovation requires a long-

range commitment and vision, makingallowances for dead ends and circuitous

paths to success.

A number of other issues prevent a culture of provocative research from taking hold. As with big rms, the research community

is characterized by respect for the command chain and senior-level positions; this tends to squelch those with nonconformist

ideas, and theres not much funding for merit-based research. And researchers say that government-issued funds come with rigid

guidelines that severely limit their ability to change course in accordance with new developments in their eld, according to

R&D Magazine. Issues of loose IP protection, plagiarism and phony research also plague the profession.

Privately funded research may not face some of these issues, but companies that arent state-run still have to battle poorly

enforced IP and antitrust legislation. Plus, state-run banks favor national champions over lesser-known companies. Still,

smaller private businesses, usually in fashion or food and beverage, have done a better job of fostering a culture of innovation,

according to Doctoroff, but they lack the capabilities to manage global expansion.

Lack of international experience:As with most novices, another issue is simply lack of experiencedoing business in China is

typically very different from doing business in most other markets. Scott Kennedy, director of the Research Center for Chinese

Politics & Business at Indiana University Bloomington, explained to Reuters: Chinese companies, when they rst go abroad,

expect it to be a lot like expanding in Chinathey go talk to the party secretary or mayor rst, make sure they are happy, and

that paves the way for everything else. Americans and [others] typically dont roll out the ofcial red carpet, and Chinese are

not prepared for that.

Expansion is especially challenging for private

enterprises, as state-run companies typically receivegovernment assistance when venturing overseas, in

terms of navigating unfamiliar languages, as well as

labor laws and various other regulations. Chinese

companies have seen mergers and acquisitions as a

solution to their inexperience overseas, but these

rarely prove successful (90% of Chinas 300 foreign M&A

transactions between 2008 and 2010 failed, according

to one report cited by the Brookings Institution).


Image credit: dcmaster

It is a catch-22: Companies big enough

to go global are the most encumberedby commoditized products and services.

Companies that grasp advantages

inherent in value-added products and

servicesthat is, the ability to charge a premiumlack

the critical mass to become global power brands.

TOM DOCTOROFF, JWT North Asia area director andGreater China CEO, author of What Chinese Want
http://www.flickr.com/photos/dcmaster/7458109134/in/photostream/http://www.flickr.com/photos/dcmaster/7458109134/in/photostream/


15/65


Failure to conquer home turf:Middle-class Chinese

consumers distrust many local labels, and international

brands still come with aspirational attributes, as well as

quality reassurance and reliable service. According toDoctoroff, There are few Chinese labels actively preferred

by mainland consumers. Plus, theres little brand loyalty

among shoppers. Most Chinese companies will need to win

the domestic war before tackling the international market.

Leading Chinese athletic-wear companyLi-Ningstumbled

when it tried to move upmarketbecause even in lower-

tier cities, shoppers will trade up to foreign labels like Nike

and Adidas when they can afford to spend more. Former

Li-Ning chief executive Zhang Zhiyong admitted to The

Financial Timesin 2011, I think we have to learn how tobalance the price-driven and quality-driven. When domestic

brands get that balance down, theyll be more attractive to

international consumers as well.


Image credits: Jessica Vaughn

If [international brands] can charge

a 20% price premium herewhere

Chinese people should know the

quality of Chinese brandssimply

because theyre not Chinese, the

battle abroad is pretty serious.

TOM DOCTOROFF, JWT North Asia area director anGreater China CEO, author of What Chinese Wan

Hong Kong people have often looked

to Western culture for inspiration,

we emulate their lifestyle yet we can

never convincingly pull it off as true

Westerners. If there were more locally

inspired alternatives that appeal to our young

generations, they may adopt these choices without

denying their true identity. Ownership of our culture

endows us with a sense of authenticity. It is only in

being condent of who we are that we can hold our

heads up high on an international level.DOUGLAS YOUNG, co-founder ofHong Kong-based lifestyle

brand Goods of Desire

When Western media report that Chinas

middle class is snapping up Western

goods, what they mean is that the

Chinese consumers who can afford to are spending

extra to avoid counterfeits. That is not consumers

acting as brand advocates, or out of afnityits fear

purchasing. It says less about Western brands than

about Chinas landscape.

ABE SAUER, Chinese Are Fear-Buying, Not in LoveWith Western Brands, Brandchannel, June 8, 2012


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Its key to remember that China was once known worldwide for producing expensive, quality products

from silks and paper to ceramicsthat awed European and American travelers, a far cry from its current

global perceptions. Today, 30-plus years after the start of economic reforms that opened up the market,

Chinese goods are moving back up the value chain.

Domestic manufacturers are producing a range of quality products for Chinas increasingly discerning

middle-class consumers and Western shoppers alike. Haier, for instance, is working on developing higher-

end products for the European market, where the appliance manufacturer has doubled its market share

over the past ve years. In some sectors theres simply no choice but to focus on brand-building, given

an increasingly competitive domestic market in which weak brand value makes a label easy prey for

commoditization.


OVERCOMINGTHE ROADBLOCKS


17/65

The push to build quality homegrown products is being fueled from above. According to Reuters, The government is

encouraging its companies to move up the value chain and develop margin-producing brands, partly as a matter of national

pride but also to shift the worlds second-biggest economy away from gritty, low-prot manufacturing. Beijing is also trying

to pump up local demand: For instance, the Ministry of Industry and Information Technology recently issued a mandate thatofcials buy only domestic cars, forcing a shift away from the German luxury brands that are currently favored.

While critics argue this method of protecting domestic brands wont help them to scale globally, the government hopes to

prove them wrong. Going beyond a boost from the state, there are several key ways that brands can begin to knock down the

roadblocks to overseas success.

Take back Made in China:Rather than be constrained by Made in China, some brands are working to take back the label.

These companies are tackling the negative stereotypes head-on rather than skating around the fact that consumers may

assume the Chinese-made products are unoriginal or poorly constructed.

Luxury apparel label Shanghai Tangonce traded on the tagline Made by Chinese, which helped the brand go global.

Prominent sportswear brand Li-Ningwelcomes visitors to its English-language website with the greeting Straight Out of New

China. Be Unexpected. Do Different. Make the Change. As Abe Sauer wrote in Brandchannel, The new China can be dened

by each consumer, and maybe thats their point.

OVERCOMING THE ROADBLOCKS (contd.)

Image credit: Li-Ning
http://www.li-ning.com/#a1:http://www.li-ning.com/#a1:


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One of the worlds largest air conditioning manufacturers, GREEtouts that its Created in China, focusing its branding

activities around the idea of being a leader in tech innovation. And the brand deliversits an industry leader in energy-

saving technology.

Proudly Made in China is

the slogan for One Small Point

of Pride, or OSPOP, a budding

footwear line dreamed up by

an American entrepreneur

living in Shanghai. The brand highlights that China is a

nation of industrious, optimistic people creating great

opportunities for themselves and for their future.

Interestingly, OSPOP initially targeted its shoesinspired

by the kicks Chinese construction workers wearat young,

trendy Westerners (with some success) before starting tofocus on Chinese consumers last year. (Judging by reports

of knockoff versions throughout China, Chinese shoppers

seem to have embraced the product.)

The Chinese government itself has been working to counter

negative perceptions around Made in China. Back in 2009,

the Ministry of Commerce kicked off an ad campaign that

aimed to illustrate that Chinese-made products represent

global collaborations, with various partners co-creating

something of value for consumers everywhere. Among other

scenes, a jogger laces up running shoes that carry the label

Made in China with American sports technology, and a

garment featured in a fashion shoot bears the tag Made in

China with French designers. The spot, which started airing

in Asian markets and then expanded to the U.S. and Europe,

closes with the tagline, When it says Made in China, it

really means Made in China, made with the world.

Compete at a world-class level:Until the Made in China

burden is shed, brands emerging out of China will need to

offer superior products that more than hold their own

against global benchmarks of quality and design. The

standards will be those of old Chinese culture, when

only the best would do.

A few brands are elevating Chinese goods to the world-class level by focusing on high-end craftsmanship and design. Flipping

the prevailing model on its headChinese companies manufacturing on their home turf, then adopting European-sounding

names to avoid negative associationsthe new luxury menswear line Sheji/Sorgeredesigns its wares in China but off-shores

its manufacturing to Italy, taking advantage of the nations legacy of quality craftsmanship. (As yet the line is focused on the

domestic market.)


Image credits: OSPOP; Jessica Vaughn

Its true that unscrupulous people have

tainted Chinas image. But as Chinese

ourselves, we cannot deny who we are

by pretending to be somebody else. We

must bravely face the challenges.

Im a believer in making a feature of our disadvantages

instead of hiding our roots (which a lot of local brands

do). We emphasize the fact that we are Chinese.

DOUGLAS YOUNG, co-founder oHong Kong-based lifestylebrand Goods of Desire

People are working hard, education levels

are rising, people are traveling more and

enjoying more leisure time. Why shouldn

Chinas development story be the foundation of a

fashion brand? BEN WALTERS, founder of OSPOPOSPOP: The shoe inspired by Chinas labore

comes home, CNNGo.com, Feb. 24, 201
http://www.ospop.com/ospop.phphttp://www.ospop.com/ospop.php


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Chinese retailer Bosideng, which operates nearly 11,000 mainland-China outlets, is taking a similar route for its rst European

outpost. Known in China primarily for its midmarket down coats, the company is debuting near Londons central Oxford Street

shopping area as a luxury label, with most of the garments made in Europe. The retailer will trade on exclusivity by limiting

production to 50 pieces per garment.

The concept is not entirely new: Since 1993, upscale clothing

label Marisfrolghas been designing its goods domestically

and sourcing most of its fabrics from markets such as Italy,

Japan and France. The company is making headway into

foreign markets, with recent expansions into South Korea

and Singapore.

Hangzhou-based fashion label JNBY, founded by a collective

of art and design students in 1994, has also made international

inroadsthe company boasts 600 stores globallyby focusing

on design and innovation.

ChangYuChinas rst winery,

established 120 years agohas

emerged as one of the top 10 wine

producers in the world. ChangYus

Jiebaina dry red ranked as one of the worlds top 30 wine

brands during the 2008 Salon International de lAlimentation,

a food and drink expo in France. Today ChangYus product has received a seal of approval in important wine-producing

regions such as France, Germany and Italy and is sold in almost 30 countries.

Superior quality, design and craftsmanship directly counters some of the biggest challenges facing Chinese brands withoutexplicitly addressing the Made in China stigma; instead, the products speak for themselves.


Image credits: ChangYu; Bosideng

[JNBY is] an example of how good

Chinese fabrication can be. The design is

quite simple, yet avant garde. Theyve

made an excellent transition from manufacturer to

brand builder. LIN LIN, co-founder of design groupJellymon, Made in China is nally cool,

CNNGo.com, Feb. 8, 201

Glad to see that ChangYu can produce

great white wines, red wines, sweet

wines and brandiesall different

products but all at a very high level. They compete

very well with the French wines.

PIERRE BARTHE, French sommelier, Changyu holds wine tastingto mark 120th anniversary, China Daily, June 29, 2012
https://www.facebook.com/BosidengLondon/photoshttps://www.facebook.com/BosidengLondon/photos


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Lean into national identity:While Made in China is a negative, Chineseness itself is in many ways a positive in the eyes

of international consumers. When asked to personify China in comparison with the U.S., the U.K. and Japan, respondents

generally perceived the Middle Kingdom as successful, traditional and diligent. (See Figure 2A; for country breakdowns, see

Appendix, Figures 2E-2F.) And Chinas citizens are considered the smartest people around, laden with leadership potential.(See Appendix, Figures 2L-2N.)

A paradox has thus emerged in the Western mindset: Some of the brainiest and most hardworking people are producing some

of the cheapest, lowest-quality products available.

Our research also found that the traditional elements of its culture are the aspects of China that both American and British

consumers feel favorably about. When asked about Chinese history and heritage, 72% of respondents said they would be

interested in learning more about Chinas cultural history; three-quarters of respondents said they admire the way Chinese

people have been able to maintain their sense of tradition in the modern world. And 6 in 10 felt that their culture could learn

a lot from the Chinese way of life. (See Figure 2B; for country breakdowns, see Appendix, Figures 2G-2H.)


FIGURE 2A:

Country personality (U.S. and U.K.)Imagined personality characteristics of the following countries by American and British adults

TRADITION/DILIGENCE

SUCCESSFUL

RELIABLE

CAREFREE

Lives for themoment

Could probablyhotwire a car

Doesnt sweat the small stuff

Always makes agrand entrance whenwalking into a room Knows the best

restaurants in town

Treats themselves very well

USA

UK

Japan

China

Would give up seat for an elderly person

Enjoys the simple pleasures in life

You know what to expect from them

Has a goodsense ofhumor

Would follow to get outof a burning building Would jump

out of a boat

to save you

You could tell a secret to

Would leave your kidswith for two weeks

Would alwayshave a good time

Respectfulof nature/theenvironment

Always shows up when they say they will

Would have a well-organized closet

Could win aNobel Prize Family stories passed

down through generations

Would spend days working inorder to make sure it is perfect

Would be a successfulentrepreneur

Usually getstheir way

Always thinkingoutside the box

Loves to take things apartto see how they work

Believes in tough parentingto ensure child succeeds

More spiritually evolved

Doesnt question authority

Puts in whatever hours areneeded to get the job done right

Would sell everything to puttheir child through college


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These spheres of positive perception have been largely

overshadowed in recent decades by the legacy of Made

in China and the nations rocky relationship with the West.

For Chinese brands, theres an opportunity to trade onnational identity and drive a new conversation about

brand China, focusing on culture, history and widespread

perceptions of Chineseness.

At the same time, theres a nascent preservationist spirit in

Chinaa desire to protect its heritage and culture, which a

growing number of people see as being sacriced in the drive

toward modernization and development. (No other country

has tried to cut off its history more radically, argued artist

Johnson Chang in a Wall Street Journalfeature describing

his heritage-preservation efforts.) This recalibration ofvalues after a period of relentless, rapid change comes as

no surprise, given that Chinese society fears uncertainty and

instability above all. Bursts of growth are often followed by

periods of stabilization.

Perhaps this new mindset will give rise to Chinese brands that

lean into national identity and leverage that focus to nd

traction abroad. A few smaller companies are already trying

that tack or reviving Chinese heritage brands.

The mission of Hong Kong-based Goods of Desire, which

sells everything from furniture to apparel and accessories,is to be quintessentially Hong Kong and promote a new

Asian lifestyle brand by revitalizing local heritage. Over

the course of its 16-year history, G.O.D. (as its known

locally) has won a number of design and retail awards and

found a home in international boutiques; this year G.O.D.

opened its rst overseas retail location, in Singapore. The

companys products are inspired by Hong Kongs complex

history of Eastern and Western culture clashing up against

one another, with the brand making a conscious effort

not to perpetuate the clichs that come to mind for many

international consumers but rather to introduce shoppers to

an authentic, richer culture.


Image credit: Goods of Desire

FIGURE 2B:

Attitudes toward Chinese culture(U.S. and U.K.)Percentage of American and British adults whoagree with each of the following


China has such a longcultural history; Id

be interested to learnmore about it

72%

73

71

71

I think our culturecan learn a lot

from the Chineseway of life

62%

62

63

60

I admire how Chinesepeople have been

able to maintain theirsense of tradition in

the modern world

76%

74

77

77

There are someamazing things inChina that I think

would provokea lot of interest

here in the West

72%

69

71

76

Chinese companies only make products, and none of them

link their products to culture. XIA YANG, president of BeijingSunny Times Polo Sports Co. Ltd., High-end

Chinese brands coming soon, China Daily, May 1, 2012
https://www.facebook.com/photo.php?fbid=10151066794544311&set=a.321619894310.147087.289037724310&type=3&theaterhttps://www.facebook.com/photo.php?fbid=10151066794544311&set=a.321619894310.147087.289037724310&type=3&theater


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Meanwhile, spurred by both Western and domestic businesses, theres been a

revival of traditional Chinese labels, many of which all but disappeared after

multinationals started entering China in the late 1970s. In 2009, for example,

a limited-run redesign of heritage brand Shanghai Watch Co.sold out not onlydomestically but in trendy boutiques such as Colette in Paris and Kidrobot

in New York. Chinese-born labels Feiyueand Huili(or Warrior) sneakers,

established in the 1920s and 30s, respectively, have undergone design updates

albeit by European companiesand found favor among hip international

audiences, who buy into the brands heritage. Theres also been buzz about a revival of the Hongqi, or Chairman Maos Red

Flag limousine, which was originally manufactured from the 1950s to the 1980s.

Blending the old with the new in a way thats relevant for a modern consumer is one

potential route to success for Chinese brands. And as Chinese companies become more

savvy marketers, they will be able to better tell the story of Chinese culture and heritage

through their products.

Li-Ningtapped into this idea with the U.S. release of its Year of the Dragon Collection earlier this year. (2012 coincides with

the year of the dragon in the Chinese zodiac.) The company produced four limited-edition new designs of its Turningpoint shoe

that evoked visions of old China and carried symbolic associations. For instance, one design used the same shade of yellow

that Tang dynasty rulers wore. The names (e.g., Porcelain, Emperors Robe) reinforced the theme. Sneakerheads across

the U.S. went nuts for the shoes and the line.

Just as nations such as Japan, Korea and even Germany have done, Chinese brands looking to compete in international

markets will need to turn Chineseness into a conceptual advantage rather than a perceptional weaknessa turnaround that

will rely on clever branding campaigns that play on consumers more positive ideas about China.


Image credits: Huili; Feiyue; Li-Ning

I believe that globalidentity, national

identity and individual

identity can all

coexist. Due to the big

trend of globalization nowadays,

there is a lot less focus in Asia

on building regional identity.

I hope G.O.D. can re-emphasize

the importance of identity to our

consumers. I think it is our unique

identity that makes interaction on

the global level a lot more

interesting. DOUGLAS YOUNG,co-founder of Hong Kong-basedlifestyle brand Goods of Desire
http://www.warriorfootwear.com/http://www.feiyue-shoes.com/blog_en/https://www.facebook.com/photo.php?fbid=10150603839881152&set=a.152959566151.123662.103853416151&type=3&theaterhttps://www.facebook.com/photo.php?fbid=10150603839881152&set=a.152959566151.123662.103853416151&type=3&theaterhttp://www.feiyue-shoes.com/blog_en/http://www.warriorfootwear.com/


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Tap into the Millennial worldview:Chinese brands will

likely nd Millennials to be more receptive than older

generations. Compared with their predecessors, these

consumers have grown up in a much smaller, moreconnected world and have been exposed to a wider array

of worldviews at a younger age. And they know China as

a modernizing, rapidly emerging marketa very different

country from the one that older consumers remember.

Our research found that Millennials are slightly less biased

against the Made in China label. Compared with older

generations (especially Boomers), Millennials were the least

likely to identify Chinese brands as mass-produced, cheap

and constructed using poor safety standards. (See Figure 2C;

for full list and country breakdowns, see Appendix, Figures2I-2K.) American Millennials stand out in their openness to

trying Chinese brands, especially when it comes to video

games, appliances, clothing, alcohol and even cultural

exports such as music. (See Appendix, Figures 2O-2Q.) And

Millennials are the most likely to purchase and be impressed

by products made in China (seeFigure 2D), though its

important to note that these still fell well below American-

and Japanese-made goods.

For todays youth, China doesnt live only in textbooks

or on the History Channel. They are gaining a better

understanding of China through direct exposure, which

is likely to make for a generation thats more hospitable

toward Chinese brands.

Chinese students outnumber any other international cohort

in American universities, according to the American Chamber

of Commerce China. And some 90,000 Chinese students were

attending British universities in October 2011.

The cultural exchange goes both ways. Todays global-minded Western youth are looking to bridge the divide, simply out of

curiosity or to gain an edge in a future likely to be dened by Chinas economic might. One American undergrad studying

in China explained to Channel News Asia, I just have an interest in China and Chinese. ... Its really different, its reallychallenging, and I like that about it. Ive always found the culture fascinating from the rst exposure I had to it. Some

estimates forecast that the number of international students in China, currently at a quarter-million, will double by 2020.

(President Obama introduced an initiative to send 100,000 American students to China in 2009.)

Faced with a tough job market at home, some recent American and European college grads are relocating to Asia. The Chinese

government welcomes this inux and has eased its immigration policieseducated and ambitious young people can help ll

the labor gap this aging nation faces and potentially drive innovation. Last year the government extended an effort to attract

up to 1,000 non-Chinese academics and entrepreneurs over the next decade.


FIGURE 2C:

Impression of Chinese brands (U.S. and U.K.)Top six phrases associated with Chinese brands byAmerican and British adults


47

62

Mass-produced

35

53

Cheap

26

47


22

31

Poorly made

21

27

Unreliable

21

22

Ordinary

48

44

31

24

22

17

52%

44%

35%

26%

23%

20%

The openness among Millennials and

upper-income levels is a key part of ourstrategy, as it provides an opportunity for

us to tap into these markets and tailor our products

to t their needs. CRAIG HEISNER, VP of sales, marketingand merchandising at Digital Li-Ning,

Study shows Americans view Chinese brandspositively, China Daily, June 15, 2012


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FIGURE 2D:

Country manufacturer strength (U.S. and U.K.)American and British impression and likelihood of purchase for country manufacturers

LIKELY TOPURCHASE

IMPRESSED

NOTIMPRESSED

NOTLIKELY TOPURCHASE Made in Brazil Millennials

Made in the USA Millennials

Made in Japan Millennials

Made in India Gen X

Made in Japan Gen X

Made in India Boomers

Made in Brazil Gen X

Made in the USA Gen X

Made in Brazil Boomers

Made in Thailand Boomers

Made in Japan Boomers

Made in the USA Boomers

Made inThailand Gen X

Made in India Millennials

Made in Thailand Millennials

Made in ChinaBoomers

Made in ChinaGen X

Made in China

Millennials

Its not just that the technology is pulling people together.

Youve got a lot of cross-cultural integration, and youth today

travel a lot more as well, compared to when I was younger. This

has just made these guys a lot more aware, a lot more informed

and a lot more connected. HOWIE LAU, VP of marketing andcommunications for Asia Pacic

and Latin America, Lenovo


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Theres also been worldwide interest in learning Mandarinsome say there are 50

million people of all ages studying the language. The U.K. and Indian governments,

among others, are working to boost the Mandarin curriculum in schools. In the U.S., the

number of high school students taking Advanced Placement exams in Mandarin morethan doubled between 2007 and 2010; and the number of American undergrads studying

Chinese more than doubled between 1998 and 2009. (By the same token, within Chinas

borders there are nearly 300 million people learning English.)

This Millennial interest in China extends to the other BRIC nations. Lenovos Howie Lau says Brazilian youth are positively

inclined towards China, regarding it as the next big growth engine. And studying in China has become a popular option

for Indians, especially medical students, since the country started accepting Chinese university degrees in 2010. The

number of Indian medical students in China is forecast to increase by more than 20% this year.

Lenovosmartly tapped into the global

Millennial mindset with its rst global

campaign, For those who do, which

launched last year, positioning the

products as tools for this go-getter

generation to get things done. In

one ad, reminiscent of the nal

scenes of Fight Club, a team of urban

hackers passes along a Lenovo laptop

theyre using to orchestrate a dazzling

urban light show. In India, Russia and

Indonesia, Lenovo set up The Do

Network, an online forum where

young people could submit community

improvement ideas for a chance to win

access to university research labs (Do

Labs), Lenovo machines, a team of

mentors and $25,000 to turn their idea

into reality.

Drive innovation and lead categories:Developing a culture of innovation remains a

major challenge for many Chinese companies, but China is starting to address this. In

the realm of education, some Chinese are questioning the systems prevailing practice of

textbook memorization and data regurgitation. And wealthy parents are shipping their kids

off to foreign schools, where theyre learning self-expression and creativity.

Various government mandates are focused on spurring innovation. One goal in the current

ve-year plan is for China to create 3.3 patents for every 10,000 of its 1.34 billion citizens.

Overseas patent lings by Chinese companies are already up, rising from around 5,500

in 2007 to an estimated 16,400 last year, according to the World Intellectual Property

Organization.

Image credit: Eric Nishio; Lenovo[1], [2]
http://www.flickr.com/photos/ericnishio/6797015279/http://www.youtube.com/watch?v=KdZNUxPiwMshttp://www.youtube.com/watch?v=KdZNUxPiwMshttp://facebook.com/Lenovohttp://facebook.com/Lenovohttp://www.youtube.com/watch?v=KdZNUxPiwMshttp://www.youtube.com/watch?v=KdZNUxPiwMshttp://www.flickr.com/photos/ericnishio/6797015279/


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The most successful Chinese multinationals tend to pour a

great deal into R&D. Huaweirecently announced plans to

boost R&D spending to $4.5 billion this year as it seeks to

move more deeply into the mobile-device and enterprise-network markets; just under half of Huaweis employee

base is engaged in R&D. And Lenovooperates 46 research

labs across the globe.

Realistic or not, executives around the world believe

that China will begin to drive global innovations: 45%

of respondents to a 2012 survey by KPMG believed

China would become the next major innovation center,

and around 30% felt the next disruptive technology

breakthroughs would come from within Chinas borders.

Technology companies are indeed leading the way. This year,

for instance, Lenovo is set to release the IdeaPad Yoga, an

ultra-thin device thats part tablet, part laptop: It features a

keyboard that can be tucked behind the display, emulating an

iPad. Huawei, which makes mobile telecom equipment and

serves more than a third of the worlds mobile phones, was

one of Fast Companys top ve Most Innovative Companies

in 2010. On a mission to become one of the worlds

top three smartphone providers

by 2015, Huawei is pushing its

Ascend D Quad (which it claims is

the worlds fastest smartphone)

in Western markets.


Image credits: Lenovo; Huawe

We invest more than most others on

R&D just to be able to go out there

and consistently demonstrate the

innovations and the quality and the

product to go the extra mile. We

think its necessary, because this will give

the customers the peace of mind that we are

committed to what we say were going to do.

HOWIE LAU, VP of marketing andcommunications for Asia Pacic

and Latin America, Lenovo

We are optimistic

about the future

of the PC, but

we also know that we must

look beyond traditional PCs

for growth, innovation and

new markets.YANG YUANQING, CEO of

Lenovo, speaking at CES 2012
http://shop.lenovo.com/http://www.huaweidevice.com/worldwide/http://www.huaweidevice.com/worldwide/http://shop.lenovo.com/


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Appliance manufacturer Haier, dubbed a leader in Chinese innovation by Booz &

Company, has produced a range of innovations, from rat-proof appliances for Chinese

farmers to a refrigerator equipped with a pizza-sized drawer for American buyers. The

company also markets an air conditioner that doubles as a security device thanks to anembedded camera. Haier plans to attract midmarket European consumers with a similar

feature on an upcoming refrigerator, which will monitor the kitchen via an external camera

and touch screen. And it recently unveiled two novel television prototypes: an ultra-thin

transparent TV screen and Brain Wave, a TV that users can control with their mind.

Automaker BYDcreated a buzz at this years Beijing auto show by introducing a remote-controlled car, the F3 Plus,

claiming that its the the rst mass-produced vehicle featuring remote control driving as a standard feature, according to

MITs Technology Review. With a special key, drivers can remotely move the car forward and backward, and turn it.

If a product proves its worth, standing out as a category leader or innovator, consumers ultimately wont care much where

its from. And if potentially breakthrough products like these live up to their hype, they can go a long way toward dispelling

consumer skepticism around Chinese brands, swatting at the perception that Chinese manufacturers are simply copycats.

Ride on international brand

coattails:Whether by acquisitions

or simply via one-time partnerships,

Chinese brands stand to make

valuable strides by aligning with

brands that are already global

sensations or know how to steer

through international waters.

Hong Kong-based Goods of Desirehas collaborated with a number

of global brands. Companies

including Swatch, famous French

paper manufacturer Clairefontaine,

BlackBerry, Hello Kitty, Dr. Martens,

Microsoft Xbox, Sony Vaio and Canon have created products in

partnership with G.O.D.s designers. In 2009, after Starbucks

tasked G.O.D. with designing a store in Central Hong Kong, co-

founder Douglas Young modeled the space after a bing sutt,

a midcentury-style Hong Kong food outpost where Western

foods were rst introduced. The store was such a success thatStarbucks created special avored drinks and Chinese snacks

for the location. G.O.D. also produced a line of souvenirs

for the ocks who came to the unique location. A second

such Starbucks opened this year, themed around locally

produced movies.


Image credits: Haier; BYD; Goods of Desire

Interior of bing sutt-inspired Starbucks outpost iHong Kong designed by G.O.D. co-founder Douglas Youn
http://www.engadget.com/2011/09/04/haiers-transparent-organic-tv-eyes-on-video/https://www.facebook.com/bydcompanyhttp://www.goodsofdesire.com/http://www.goodsofdesire.com/https://www.facebook.com/bydcompanyhttp://www.engadget.com/2011/09/04/haiers-transparent-organic-tv-eyes-on-video/


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Image credits: Swatch; Anta; Meters/bonwe

This year, Chinese celebrity clothing designerUma Wang, whose styles have graced the catwalks of

Milan, partnered with Swatch to create two watches for the Swatch Art and Fashion collection.

Chinese brands are also riding on the coattails of various sports teams and athletes across the West, via

sponsorships. This year, Lenovobecame the ofcial tech sponsor of Americas National Football League,

and Peak Sport Productssigned an endorsement deal with the Miami Heat. Peak, which has sponsored

the Heats Shane Battier for six years (among other NBA players), opened its rst U.S. store earlier

this year, in Los Angeles. Haieris the ofcial HDTV sponsor of the National Basketball Association and

sponsors a New Zealand netball team,

the Haier Pulse. Chinese sportswear

maker Antamade headlines in 2010

when it started sponsoring NBA

superstar Kevin Garnett. This year,

Li-Ninghas been making prominent

appearances at a range of sportingevents; for the London Olympics,

its backing a Russian pole vaulter,

a Jamaican sprinter, a Norwegian

javelin thrower and the USAs star triple jumper

Christian Taylor. Li-Ning also served as the gear and

footwear sponsor of the 2012 Red Bull King of the

Rock basketball championship.

A few Chinese brands including Lenovo and TCL

phones have also recently tried their hand at product

placement within American lms and TV shows.

Midrange apparel retailer Meters/bonwe, which

plans to expand internationally in the next three to

ve years, has made two cameos in the Transformers

movie franchise and tested out the gaming space,

collaborating with the producers of World of Warcraft

(which has been more successful for the brand than

the Transformerplacements, according to reports). In another notable placement, Yilimilk brand Shuhua made a brief

appearance on hit sitcom The Big Bang Theoryearlier this year.

A seal of approval from a strong Western brand (whether a product, person or TV program) potentially helps to elevate

the Chinese label at home while bringing it to the attention of international audiences.

Become a leader in CSR:With consumers skeptical about the trustworthiness of Chinese companies and dubious about

their green credentials, substantive corporate social responsibility initiatives would go a long way toward rebranding Made

in China among consumers. And some argue that CSR is an area in which Chinese brands could potentially excel, due to a

number of factors.

Patriarchs by nature, Chinese companies will likely begin to adopt a uniquely Chinese version of CSR, thanks largely

to the governments focus on promoting stability. Beijing is pushing for greater energy efciency, for example, because

runaway pollution in China means wasted lives, air, water, ecosystems and moneyand wasted money means fewer jobs

and more political instability, as The New York Times Thomas Friedman explained in a 2010 column.
http://shop.swatch.com/http://www.anta.com.cn/en/home.phphttp://www.metersbonwe.com/#/app=hothttp://www.metersbonwe.com/#/app=hothttp://www.anta.com.cn/en/home.phphttp://shop.swatch.com/


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Image credits: David Barrie; Haier

Currently the worlds top emitter of carbon dioxide,

China has set a range of pollution-reduction and other

environmental goals, including a 40-45% cut in carbon

emissions by 2020 and an 11.4% increase in non-fossil fueluse by 2015 as part of an emphasis on higher quality

growth. Its an ambitious target, though, given that Chinas

CO2 emissions increased in 2011.

While Western companies have gradually come to understand

that measures designed to help the environment can also help

the bottom line, this is something that pragmatic Chinese

leaders in government and business may be quick to understand.

Smart CSR policies are seen less as a matter of generating

warm and fuzzy feelings and more as the right thing to

do, mostly because it will be the thing that provides the bestreturn, according to branding consultant Joseph Baladi.

Due in part to mandates that all state-owned institutions publish CSR reports by 2012, reporting is on the rise. In the six

years leading up to 2005, only 22 CSR reports were published in China, largely by multinationals; in 2010, there were

703 reports, focusing on a diversity of content. Reporting begets more transparency, which increases awareness of CSR

activities among consumers and raises expectations, which in turn helps to drive more impactful CSR efforts.

Perhaps the next generation of leaders will drive more substantive change: In a 2012 survey by Deloitte on Millennial

attitudes toward business, Chinese youth stand out in their concern about the lack of commitment to sustainability among

business leaders. More generally, Chinese citizens rank the highest globally in terms of a desire to be in tune with nature,

according to GfK Roper Consultings Values Factbook. And per a 2010 Datamonitor report, Chinese consumers are deeply

concerned about environmental issues and how their everyday activities are contributing to them, with a high proportionalready taking action to improve the sustainability of their lifestyles.

Since a sense of collective responsibility is an important aspect of Chinese culture, along with conformance to social

norms, environmental concern could well start to drive consumer decisions. Plus, as growing numbers of Chinese see their

basic needs met, theyre beginning to demand more of consumer goods and services, not only in terms of sustainability.

Impatient with substandard product quality, food-safety violations, poor accountability

for major missteps and so on, they are less tolerant of secrecy and lack of transparency.

Haiers global brand building has emphasized its environmental credentials. This year,

for instance, the company helped to promote Earth Hour, staging performances across

North America, Europe and Asia to raise awareness around energy conservation. Haier

also supports a number of environmental organizations, including the U.S.-based

National Parks Conservation Association. The company was named one of Chinas top

global citizens by the World Economic Forum and the Boston Consulting Group, and

received Businessweek Chinas Greener China Business Award in 2009.

As part of its CSR efforts, Lenovohas focused on education in developing nations,

creating products geared for educational institutions. The company also has some of

the best green product ratings among PC manufacturers, receiving seals of approval

from a number of global bodies, and uses recycled materials in packaging.

Haze of pollution over Beijing
http://www.flickr.com/photos/addictive_picasso/274164473/https://www.facebook.com/Haieramericahttps://www.facebook.com/Haieramericahttp://www.flickr.com/photos/addictive_picasso/274164473/


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The journey to Western shores will undoubtedly be an arduous one for Chinese brands. Weve seen some notable

stumbles, such as sportswear maker Li-Ning closing its only U.S. retail outlet, a 2-year-old store in Portland,

Ore., in February. JWTs Tom Doctoroff believes that China as a nation will cross the river by feeling the stones

as it ascends to the global stageinching forward, occasionally overreaching but quickly correcting course.Perhaps this metaphor will prove apt for Chinas brands as well. Li-Ning, for one, isnt giving up on America, its

adopting a new tactic (focusing on e-commerce through a partnership with a Chicago marketing rm).

Weve outlined some key strategies that Chinese brands might use to overcome the roadblocks to expansion:

taking back Made in China rather than be constrained by the label; competing at a world-class level, offering

superior products; leaning into national identity and turning Chineseness into an advantage; tapping into

the worldview of Millennials, a more open and globally connected generation; driving innovation and leading

categories; riding on international coattails, aligning with popular global brands; and becoming a leader in CSR.

Image credit: Dave Morrow

CONCLUSION
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CONCLUSION (contd.)

This list is by no means comprehensive, nor is there a one-size-ts-all equation for successful expansion into

developed markets. For the methodical and cautious Chinese, this need not be the rst order of business

anywaya booming domestic market and lucrative developing markets represent tremendous opportunity. The

lessons learned here will ultimately help brands move beyond those markets. And as rising incomes create morediscerning emerging market consumers, improved quality and safety standards are likely to follow. The question

is whether consumers will follow Chinese products up the value chain or veer toward established brands.

If they can pioneer unique niches for themselves, Chinese companies wont need to go head-to-head with

successful brands. Trickle-up innovation is one area of potential: taking low-cost products designed for

developing markets to penny-pinching consumers in developed markets. After all, the Chinese are masters of

driving down costs.

More generally, products will need to compete at or above a world-class level, given that consumers

are carrying their negative perceptions of Chinese-made onto Chinese-created. A consumer who nds a

shortcoming or defect will quickly attribute the issue to poor Chinese quality and write off the brand, whereasconsumers who encounter similar problems with goods from elsewhere are more likely to give the brand a

pass. And thanks to low awareness of Chinese brands, some consumers will transplant negative perceptions

of one brand onto others, underscoring the need to build brand equity.

That will come over time as Chinese companies hone their advertising and marketing skillskeep in mind

the industry in China is relatively young. Chinese are adept at studying the competitive advantages of other

cultures and putting them into practice in uniquely Chinese ways, a point Doctoroff makes. Savvy executives

will watch and learn from many of todays dominant brands, mastering the best practices of branding.

Chinese brands have an opportunity to tell a fresh story about China, emphasizing everything consumers

like and appreciate (its culture, its people) or easing anxieties tied to the Middle Kingdom. As our researchfound, an array of factors are fueling negative consumer perceptions of China, but at the other end of the

spectrum, there are a number of factors that, while less inuential, drive positive opinions. Largely absent

from the global chatter on China, Chinese brands can start to drive new conversations about the nation (just

as American brands have done for 50-some years).

The next generation of business leaders may help accelerate change in Chinas corporate world. Millennials

have grown up in a booming and interconnected China, and many are Western-educated, trained to think more

creatively. As a result, well likely see a push-pull between the Millennial mindset and prevailing cultural norms.

Tom Doctoroff cautions that while this generation is increasingly worldly and conceptually adventurous,

they may regress to the mean when they are confronted with structure. But at minimum, executives adept

at navigating multicultural environments and foreign languages will be invaluable. On the consumption side,

Millennial consumers will be more welcoming than their elders to the arrival of Chinese brands.

The idea of Chinese brands is new to many consumers, but it wont be for long. From Bosidengs recent

landing in central London to Haiers drive to produce American-targeted goods (via an upcoming U.S.-based

R&D center), more Chinese brands are pushing into Western markets every day. And ultimately it may not

matter to consumers where theyre from: At the end of the day, people are not buying national brands, and

theyre not buying brands that have a certain provenance, says consultant Joseph Baladi. They are buying

great brands, and thats the most important thing.


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APPENDIX:MORE ABOUT OUR EXPERTS/INFLUENCERS



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JOSEPH BALADI, CEO of BrandAsian, author of The Brutal Truth About Asian Branding

As CEO of BrandAsian, Baladi provides one-on-one business and branding advice and counsel to CEOs

of some of Asias largest companies. He has experience in business communications across multiple

geographies; for the past 10 years, hes been based in Singapore, covering all of Asia. He has helped to

shape and reposition brands including Millennium Hotels (Hong Leong Group), Crocodile International,Eu Yan Sang, National Health Care Group and Macau Grand Prix. Prior to moving to Asia, he held senior

regional and global brand responsibilities at DMB&B and McCann Erickson Worldwide.

He is a frequent speaker on the conference circuit, a regular guest on business television programs, and regularly

contributes to business magazines and newspapers across Asia. His book The Brutal Truth About Asian Brandingwas

published in January 2011.

TOM DOCTOROFF, JWT North Asia area director and Greater China CEO, author of What Chinese Want

Doctoroff started his advertising career at Leo Burnett in Chicago but jumped ship to JWT (Chicago).

In 1994, he moved to Hong Kong as regional business director for clients such as Pepsi, Philip Morris/

Kraft and Citibank. In 1998, he landed in China as managing director of JWT Shanghai. In 2002,

Doctoroff was appointed Northeast Asia area director, covering China, Taiwan, Hong Kong and Korea,

and Greater China CEO. In 2008, he also assumed leadership of JWT Japan. Through diversication

into customer relationship marketing and trade marketing, promotion network management, digital engagement and

brand identity/design, JWT North Asia has emerged as one the most synergistically integrated, creatively dynamic

communications networks.

Doctoroffs book What Chinese Want: Culture, Communism and the Modern Chinese Consumerwas published in May

2012. He previously wrote Billions: Selling to the New Chinese Consumer.

HOWIE LAU, VP of marketing and communications for Asia Pacic and Latin America, Lenovo

Lau oversees branding, demand generation and public relations for markets including ASEAN,

Brazil, HTK (Hong Kong, Taiwan and Korea), India, Japan, Latin America and ANZ (Australia and

New Zealand). In his previous post as general manager of Lenovo ASEAN, Lau oversaw Lenovos

business across 10 countries. He was responsible for business operations, strategy development,

implementation, sales, marketing and relationship management with all stakeholders in the PC

industry for Lenovos commercial and consumer products and services.

Lau graduated from the National University of Singapore with a Bachelor of Business. He serves on the executive

council for Singapore Computer Society and Singapore IT Federation.

DOUGLAS YOUNG, co-founder of Hong Kong-based lifestyle brand Goods of Desire

Born in Hong Kong, Young was trained as an architect at Shefeld University and the Architectural

Association in the U.K. and has worked in Hong Kong on projects ranging from residential to

retail interiors. In 1996, Young co-founded Goods of Desire with Benjamin Lau. The shop retailscontemporary furniture, homewares and lifestyle accessories with a contemporary Chinese twist.

Most of the merchandise is designed in-house by a multidisciplinary design team led by Young. The

long-term vision is to build a Hong Kong brand that is both forward-looking and proud to display its cultural origins.

To date, G.O.D. has eight stores in Hong Kong, including a 20,000-square-foot agship store. G.O.D. products are

available in many of the worlds department stores, boutiques and museum shops.

APPENDIX: MORE ABOUT OUR EXPERTS/INFLUENCERS


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APPENDIX:ADDITIONAL CHARTS



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APPENDIX: ADDITIONAL CHARTS (contd.)

80%

70%

60%

50%

40%

30%20%

10%

0%

FIGURE 1E:

Country manufacturer impressions (U.S. and U.K.)Percentage of American and British Millennials aged 18-34 who associate the following traits with products made inChina, Japan and America




Impressive

Interesting

New anddifferent

Trendsetting

Cutting-edge

Stylish




Poorly made

Cheap

Mass-produced

Unreliable

Low-class

Ordinary

Boring


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80%

70%

60%

50%

40%

30%20%

10%

0%

FIGURE 1F:

Country manufacturer impressions (U.S. and U.K.)Percentage of American and British Gen Xers aged 35-47 who associate the following traits with products made inChina, Japan and America




Impressive

Interesting

New anddifferent

Trendsetting

Cutting-edge

Stylish




Poorly made

Cheap

Mass-produced

Unreliable

Low-class

Ordinary

Boring


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80%

70%

60%

50%

40%

30%20%

10%

0%

FIGURE 1G:

Country manufacturer impressions (U.S. and U.K.)Percentage of American and British Boomers aged 48-67 who associate the following traits with products made inChina, Japan and America




Impressive

Interesting

New anddifferent

Trendsetting

Cutting-edge

Stylish




Poorly made

Cheap

Mass-produced

Unreliable

Low-class

Ordinary

Boring


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f remaking made in china 08.14.2012

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