The main challenge Chinese brands will face when trying to expand abroad has to do with, well, China. The country’s rise is generating strong reactions that go from irrational Sinophobia to legitimate concern about the products churned out by the Middle Kingdom.

When it comes to branding, perception is all that matters. To counter the often negative perception of Chinese products, Chinese brands can either struggle to hide their “Chineseness” or try to make “Made in China” desirable. Haier chose the first option when trying to conquer the American market. Li Ning, on the other hand, is addressing the problem head-on by playing the China card in a cunning way. The brand’s very first ad targeting the American market makes fun of the traditional clichés Americans have about Chinese products. It features famous actors Garry Bednob and Donnel Rawlings as US Custom Officials interrogating Henry, a Chinese man attempting to import Li Ning shoes into the USA. The two comedians, not believing that a Chinese brand is capable of making a decent pair of shoes, angrily question Henry about his real motives; however, after trying out the Li Ning shoes during an improvised basketball game, they happily tell Henry “Welcome to America”.
When we think about it, many of the challenges faced by Chinese brands are familiar. Didn’t Samsung, Hyundai and HTC alike have to alter their reputation as makers of cheap and inferior products? Were Korea and Taiwan not synonyms for low prices and even lower quality a mere 30 years ago? Through an unflinching commitment to quality, and after a few resounding failures, these brands managed to change their image in the public eye. Samsung is now widely regarded as one of the most reliable brand names in the world, while HTC is the Iphone’s most serious competitor.
Li Ning has the potential to prove that “Made in China” can be made credible. The brand invests heavily in R&D, rolls out frequent product innovations and sponsors a number of famous western athletes, including basketball players Shaquille O’Neal and Baron Davis. If the brand plays its hand well and positions itself distinctively, it could become a serious competitor for Nike, Adidas, and other sport brands. The Opportunity
Chinese brands wanting to expand abroad would be well advised to follow Haier’s example and establish their brands in western markets by serving overlooked market segments. In the 1990’s, Haier entered the American market through the backdoor by catering to college students with small size refrigerators able to fit into crammed college dorm rooms. The approach was successful and allowed Haier to slowly build its brand in America. Today, Haier operates a plant in South Carolina and has leveraged its market leadership in small and medium size refrigerators to establish a foothold in the much more competitive market for large refrigerators. Like Haier, Chinese brands can exploit their cost advantage by serving neglected segments where competition is limited and their Chinese identity is less of a problem. They can then leverage their strong position in these segments to gradually make inroads in others. The key factors are time (such strategies won’t bear fruit overnight) and a portfolio approach (brands must be able to transfer equity from one product to another in order to expand beyond the niche).
The Challenge
Several factors can potentially limit the capacity of Chinese brands to successfully expand abroad, especially in developed western markets.
Many of China’s most powerful brands owe their success in part to government intervention meant to protect them from foreign competition. Baidu, ICBC, RenRen and the totality of Chinese auto companies enjoy high degrees of protection from foreign competitors in the form of import duties, strict banking regulations or Internet control. That’s not to say that they don’t have what it takes to make it abroad, but it remains to be seen whether Baidu can defeat Google outside China or whether Geely can beat GM or Volkswagen’s launches in Europe or the US.
When it comes to branding, China was a blank slate only 10 years ago. Brands have not been around for a long time and the Chinese consumer typically shows low levels of brand loyalty. Newcomers with smart ideas can more or less easily capture a sizeable chunk of the market. Succeeding in this high growth and still immature environment is one thing- going head to head with monsters such as Procter and Gamble or Nike in saturated western markets is quite another.
Unfortunately, Chinese companies often confuse brand awareness with brand equity. They spend millions of RMB on prime ad-space that they then fill with inefficient messages. Some Chinese brands lack a clear identity and consistent message. They often skip from one customer benefit to the other and try to be everything to everyone. A brand can only prosper when it has found a durable and original message rooted in a deep-seated customer need.
The Future
The question arises- is it a key priority for Chinese brands to expand overseas? Perhaps some brands will prefer strengthening their position in the domestic market. As we know, China holds over 1.3 billion potential consumers, featuring booming Tier 2 and 3 cities that are often overlooked by foreign competitors. As such, many Chinese brands may choose focus on fully tapping the potential of the domestic market before going abroad.