Chinese companies have to develop into truly world-class brands in order for China is to achieve its future economic ambitions”, Danish Martin Roll, business and brand strategist at the Martin Roll Company said.
“China cannot rely on low costs and high volume manufacturing. Another guy will come along tomorrow with even lower costs. China is already facing this problem. Shanghai, in particular, and the eastern coastal region is no longer a cheap place to manufacture anymore,” he said.
And does he have a point, the Danish brand guru?
In the Interbrand Best Global Brands rankings for 2010, the United States, the only economy currently larger than China’s, had 47 brands in the top 100, headed predictably by Coca-Cola. No China brand made the list at all.
Nonetheless, the Chinese economy marches on with near double-digit growth whereas the United States has near-zero interest rates to breathe life back into its economy.
Major European countries all register a number of hits in the top 100. Finland has the only non-American brand in the top 10 with Nokia. Germany has no fewer than 10 in the top 100, the biggest being Mercedes Benz; France eight, mostly in luxury goods such as Louis Vuitton and Cartier; and the United Kingdom five, headed by banking giant HSBC.
Martin Roll sees developing brands as almost a defensive measure to maintain economic success.
“It is a way to protect yourself and add value. China is still manufacturing driven. They are starting to innovate and think about branding but they are not there yet.”
Many experts believe China is following a path well-trodden by other major Asian economies in its brand development.
Japan began as a low cost economy after World War II and it took 40 years for its brands to develop major recognition. Now it has six in the Interbrand top 100 including Sony, Canon and Toyota.
South Korea’s brand success has come in the last 10 to 15 years with Hyundai, the car manufacturer, and Samsung, the electronics group, now being well-known names across the globe.
Roll said there is still a lack of understanding among Chinese management about the significance of branding.
“A lot of Chinese companies tend to be run by engineers and people with technical or financial backgrounds. Somebody with the job of marketing director is often found at the bottom level in Chinese firms. This is what you used to find in Korean firms but now they are some of the best run companies in Asia and they are doing very well,” he said.
The Interbrand survey might downplay the progress that some Chinese brands have already made.
In the BrandZ Top 100 Brands 2010 survey, produced by global market research and consulting firm Millward Brown, China had seven in the top 100 in the world.
This survey attached greater weight and importance to the strength of Chinese brands in its home market.
In this list, China Mobile was the eighth biggest brand in the world with a value of $52.6 billion, closely followed by ICBC in 11th spot valued at $43.9 billion.
Other Chinese brands to make the list were China Construction Bank, PetroChina, Internet search engine company Baidu and China Merchants Bank.
Martin Roll believes China’s lack of focus on branding risks undermines the economy and many Chinese companies will soon be driven into action.
“I think up until now branding in China has been seen as being something that is nice to have. Now, however, it is a need to have. It is going to be a question of survival,” he said.
“I think branding will become one of the top three issues for the Chinese CEO over the next five to 10 years.”
Roll said the key problem at present is that it is not taken sufficiently seriously or central to a company’s core offer.
“Branding is fundamental and not some promotional song and dance. It really starts with a shareholder discussion about the entire purpose of the firm and then ends up in thousands of retail stores around the world where exactly that promise is brought to life.”