Academic journal article IUP Journal of Business Strategy

'Going Global': The Case of Chinese Brands

Academic journal article IUP Journal of Business Strategy

'Going Global': The Case of Chinese Brands

Article excerpt

Introduction

China is considered as "the manufacturing hub of the world". Despite its position as the world's largest Original Equipment Manufacturer (OEM), its brands are less known in the international market. Global brands have been taking advantage of the cheap production cost in China, and earning good profit out of it. However, inspired by various internal and external market factors, many of the Chinese firms are trying to build their brand presence inside as well as outside their country. It would not take much time for the world to witness the emergence of China as a land of global brands from its current position as the land of OEMs.

In this context, this study sets out to explore the strategies used by Chinese firms to take their brands global, the motivating factors, their performance in the domestic and international market, and their prospects and challenges in the global market.

Global Market Entry Strategies of Chinese Firms

One of the easiest and prominent modes of internationalization used by the Chinese is exporting. They are the world's third largest exporter. Another strategy is to leverage its position as OEM leading brands. An example is Galanz, the world's largest manufacturer of microwave ovens. Entering into joint ventures with foreign firms is yet another strategy. Companies like TCL gained benefits including access to research and development, technology, expertise and manufacturing facility through their joint ventures. Yet another technique is merger and acquisition, a relatively recent strategy used by the Chinese firms. An example of this is the acquisition of UK-based MG Rover by Shanghai Automotive Industrial Corporation (SAIC).

The motivating factors for Chinese firms going global vary industry-wise as well as firm-wise. One of the major motivations is to secure markets abroad. Some garment manufacturing firms of China invest in less developed markets like Mauritius to gain access to the US and Europe (since these countries have some special concessions for exports). Another factor is acquisition of better technology and brand equity (as in the cases of Lenovo acquiring IBM and Geely's acquisition of Volvo). Some other firms like Sinopec and Petro China, motivated by natural resources like crude oil, natural gas, and so on, invested in countries like Indonesia, Sudan and many other developing countries. The Chinese government also promotes companies to compete in the global market. And finally, the tough competitive domestic environment also compels Chinese firms to seek out greener pastures elsewhere (Ding, 2009).

The entry of China into the World Trade Organization (WTO) has opened the Great Wall of China to global brands. This has resulted in intense competition in the Chinese market. It is a fact that Chinese brands have to compete with the new entrants offering goods and services that had been previously unavailable. They competed extremely well against these foreign companies and brands that have years of expansionist brand experience. It was their low-cost positioning which enabled them to maintain their position in the domestic market. However, China's impressive growth rate and its growing middle-class population with impressive purchasing power transformed product-oriented Chinese markets to a brand-oriented one. This makes brand building a must for Chinese firms. Now their very existence depends on branding, in domestic as well as in foreign markets.

Data and Methodology

Expert opinion survey is a widely used method for data generation in social science and marketing research. The usual practice is to collect opinion directly from the experts based on a structured or unstructured questionnaire which may be considered as a direct method of data collection. However, there is an indirect and less explored way of gathering expert opinion. Websites, blogs, news articles and so on serve as a source of expert opinion on different topics and by systematically examining and synthesizing these opinions, one can generate useful industry insights. …

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