Chinese companies have been growing in volume for the past twenty years or so at a never seen before pace but their products have generally lacked a proper brand strategy and model.

At Labbrand, we see Chinese companies beginning to position their brands to be global brands. We can see them blossoming already, at home and, in some cases, testing international markets. But this is just the beginning and Chinese brands have a long way to go to compete globally.

Chinese brands need to overcome major obstacles before they succeed on the international stage. There are four areas where Chinese brands will need to change global customer’s perceptions and build strength:

- Chinese brands are generally associated with low quality
- Chinese brands have been relegated to niches, sometimes associated with
Chinese expat businesses
- Chinese brands tend to have a lack of brand identity in the international
arena which affects the brands positioning, differentiation and awareness
- Chinese companies have not built a marketing capability

This article will tackle the different issues aforementioned by looking at four famous Chinese brands. The branding efforts and aspirations of four Chinese brands provide instructive examples of where Chinese companies have succeeded and where they seek to go in the coming years.

Tsingtao (Beer)
Chery (Automobiles)
Haier (Refrigerators)
Beijing Urban Construction Group (Large Project Construction)

Today, Chinese brands are challenged by the “Made in China” label which is often associated with brands of poor quality and low value.
Overcoming the “Made in China” moniker will not be an easy task. As a result of recent product recalls consumers have become more skeptical about buying products manufactured in China. Tsingtao had an almost fatal problem when the barley grown in China was found to be heavily polluted with pesticides making it unsuitable for use.1 This did not seem to have a major impact on Chinese consumers but on the international market this was almost a fatal blow to Tsingtao. Consumers only started to gain trust in the brand after Tsingtao began to import its barley. This case reminds that Chinese companies must recognize and take radical measures to ensure the quality and integrity of their brand.

Chery, the automotive manufacturer, has a long way to go to successfully enter western markets. Chery is endeavoring to “over designs, over tests, and over services its products.”2 With time and the production of high quality products Chinese brands can begin to have positive associations for global consumers. As Chinese brands quality of products increase they have to tackle the issue of expanding into new markets other than niche markets.

Some Chinese products have been relegated to niche markets and have failed to expand. Tsingtao has been in the US market for thirty years. But the brand has been unable to break out of the niche market in the US and has captured only 0.04% of the market.3

A major issue that Tsingtao and other Chinese brands face is a lack of brand identity. In an effort to expand to a larger consumer market Tsingtao went through a major redesigning process in 2007 aimed at supporting more effectively the brand positioning.The new design revolved around the bottle label, thought to be more contemporary while still maintaining the signature pagoda medallion and red and green color pallet. Philip Congello, Tsingtao’s brand manager, thinks of the new Tsingtao brand as "Asian cool," or the fusion between time-honored traditions and the cool aspirational culture of the Western world.”4 Despite this Tsingtao still manages to be stuck in its niche market.

Tsingtao has successfully stressed its Chinese heritage but this alone cannot differentiate the brand enough to make it successful in the long run. Furthermore, Tsingtao has very limited visibility outside of Chinese restaurants and grocery stores which make the search cost too high and reduces considerably the brand capacity of winning new brand loyalist. So what can make Tsingtao unique?

If Tsingtao wants to build on their international brand identity they have something different than other Chinese beers: it was founded by a Germany company. Not renowned for its quality but if they brand themselves as a “Chinese German” beer Tsingtao could gain from Germany’s strong reputation for beer.5 By branding themselves as a “Chinese German Beer” this could be their ticket into new market segments other than Chinese restaurants and grocery stores. Though this may not be the be all and end all suggestion Tsingtao has to figure out what will differentiate itself from its competitors other than their Chinese heritage which so far has not proven to gain them a higher market share.

Similar to Tsingtao, Haier is relegated to a niche market. As well, Haier is associated with low quality refrigerators and lacks strong marketing capabilities. Haier is having difficulties breaking out of the low cost compact refrigerator segment targeted to college students. Haier has been successful in this price segment selling refrigerators because people are not buying brands their buying for price. Due to this they have not built a strong international identity. Without brand recognition Haier is unable to enter the high end segment in America because it is all about brands in the upscale market. After all most people who would buy a two-thousand dollar refrigerator would buy the General Electric brand over the brand that makes low cost refrigerators. In a market where products look increasingly similar it is vital to have a strong brand to get your product off the shelves and into your customer’s homes. Haiers association of lowquality products and their lack of strong marketing capabilities leave them a relegated market share. Another obstacle Chinese brands face is the lack of strong marketing capabilities. Naomi Klein in “No Logo” “illustrates the major shift in corporate strategy today: companies are not interested in production anymore, but only in branding images of their brand.”6 However, Chinese companies seem to have started only recently to be interested into branding. Maybe because of the peculiar development the Chinese economy has gone through in the past 20 years, Chinese companies have not built marketing capabilities either at home nor in the international arena. In fact, most Chinese companies do not have a marketing department. Branding is often treated as a "special project" led by the CEO.7 A brand is a major source of a products value in which Chinese companies need to invest and dedicate management to in order to build brand strength.

As Chinese brands move from being low cost Original Equipment Manufactures (OEMs) to creating their own strong global brands they have realized the importance of brand building. However, creating strong, valuable brands will take a long time. Overcoming the association of cheap and poor quality can not be changed with the snap of fingers. Furthermore, as new companies or other countries start to capitalize on low production costs, Chinese brands realize that they can no longer use their low price advantage if they want long term success in the international market. After all there is more to a brand than just a cheap price tag.

“A product is something that is made in a factory; a brand is something that is bought by a customer” says Peter Schweitzer the president of J. Walter Thompson.8 China is used to manufacturing products for exports but as they start making more and more products for themselves they then can offer more than just a low price. A brand is not created by only using a low price advantage. The consumer who bases his purchasing decision only on the price is generally not loyal to the brand and most of the time does not even know the brand name. 

The Road Ahead
Chinese companies have become successful by entering less developed markets first whichhelps gain brand awareness before entering mature markets. This allows companies to understand the international market in a less competitive environment and comprehend how their brand is perceived in different countries. Yin Tongyao, CEO of Chery, is very vigilant when going overseas. Tongyao’s philosophy is “We always start small. If this works, we’ll increase our investment. You always need a nurturing period if you want to take root in a local market, so I don’t expect exceptional sales in any country.”9 Building a brand is a very expensive and time consuming endeavor but it is vital for Chinese companies to invest.

The 2008 Beijing Olympics will be the opportunity for Chinese company’s to showcase their brands. Beijing Urban Construction Group is hoping that their 19 Olympic related facilities will gain worldwide publicity causing foreign companies to come to them for new contracts.10

Tsingtao is the official domestic beer sponsor of the Olympics. This opportunity will gain Tsingtao tremendous awareness internationally but only time will tell if this will be enough for them to gain a stronger market share in the US. As Tsingtaos brand campaign is heavily associated with Chinese culture they anticipate that while watching the Olympics a bottle of Tsingtao will be in hand. This also marks their one hundred year old anniversary which they will be able to display to the world their strong Chinese heritage. In fact it could be said that Tsingtao’s sponsorship exist to promote not just itself but China as well.

In the increasingly competitive global economy the role of the brand has never been greater. Chinese brands are in the learning phase of beginning how to position their branding strategies. By looking at Tsingtao, Chery, Haier, and the Beijing Urban Construction Group we see that these companies are successful by ensuring that their products sent overseas are of highest quality, starting small when entering markets overseas, creating brand designs that translate well over many different countries, , and using their Chinese heritage in their brands image. It is no doubt that it will take Chinese companies time to gain brand recognition but by continuously managing and creating brands that are strongly differentiated Chinese companies will become major players in the international market.

1. "Tsingtao Brewery ." Wikipedia Apr 2007 08 Jun 2008 .
2. "Selling Chinas Cars to the world: An interview with Cherys CEO." McKinsey Quarterly May 2008 08 Jun 2008 .
3.Tschang, Chi-Chu. "Budweiser, Miller...and Tsingtao?." Bussiness Week 19 Feb 2008 08 Jun 2008 .
4. "Tsingtao Creates Far Reaching Campaign Built on New Designs." Packaging Design Apr 2007 08 Jun 2008 .
5.Trout, Jack. "China at The Crossroads." Forbes 02 Jan 2008 08 Jun 2008 .
6.Klein, Naomi. No Logo. New York: Picador, 2000.
7. "Made In China: 2007 Brand Study." Interbrand (2007)
8. Klein, Naomi. No Logo. New York: Picador, 2000.
9."Selling Chinas Cars to the world: An interview with Cherys CEO." McKinsey Quarterly May 2008 08 Jun 2008 .
10.Li, Charlotte . "Building on the Games." Business Week 24 Apr 2008 08 Jun 2008 .