Despite challenges, Chinese brands build international presence
Chinese brand builders are going global.
These brands fall into two categories: market-driven organizations without government backing; and those that BrandZ™ calls Competitive SOEs (State Owned Enterprises) that depend on brand contribution to compete, although the Chinese government is among the shareholders.
In contrast, companies called Strategic SOEs, in BrandZ™ parlance, drove China’s initial overseas commercial engagement because these giant enterprises—financial institutions and oil and gas companies, for example—help advance government policy objectives.
The growing overseas presence of Chinese brand-building companies is clear in the BrandZ™ analysis of the most valuable Chinese brands ranked according to the percent of total revenue derived from overseas business. Lenovo, the technology company, tops the list, with 57 percent of its revenue from overseas sales. Similarly, home appliance maker Hisense gained 32 percent of total revenue from international sales. Lenovo and Hisense are Competitive SOEs.
Brand-building firms outnumber Strategic SOEs, 11 to nine, in the BrandZ™ Top 20 ranking of brands that derive a large portion of revenue from overseas sales. The ranking includes five market-driven brands and six Competitive SOEs, with the balance made up of Strategic SOEs—four airlines, two oil and gas companies, two banks and an insurance company.
Technology and home appliances lead categories
The Top 20 ranking includes six market-driven or Competitive SOE brands in technology or home appliances, two of the categories for which overseas consumers are most likely to consider purchasing Chinese products. The brands are: Lenovo, Hisense, Midea, Gree, Haier and Sohu.
Lenovo vaulted to international recognition with its acquisition of IBM’s Personal Computing Division, including the ThinkPad™ notebook, in 2005. It’s now number one in PC sales worldwide and a leader in mobile devices. Hisense, a leader in flat-screen TVs, exports to over 100 countries.
Midea has joint venture appliance production facilities in Brazil, Argentina, Egypt, India, and Vietnam. Gree, which manufactures air conditioners in China and several other countries, continued its global brand-building campaign with the Gree LED sign in New York’s Time Square. Haier brand appliances are present in about 100 countries. Sohu is one of China’s leading Internet brands with a portal that includes popular games.
Challenges of awareness and consideration
Chinese brands expanding internationally face two fundamental challenges: (1) building awareness and consideration of Chinese brands among overseas consumers; and (2) changing the overseas perception of “Brand China.”
Only 20 percent of consumers worldwide can name a Chinese brand, according to Millward Brown’s 2013 Going Global Study. Awareness is higher in fast-growing markets. Awareness of Chinese brands is highest in Brazil, 29 percent, and lowest in the US, 6 percent. Awareness grew fastest in India, where the level is 22 percent.
Similarly, consideration to purchase is higher in fast-growing markets. The level is highest in India and South Africa, 45 percent and 44 percent, respectively. In the US, just over a quarter of consumers will consider purchasing a Chinese brand.
The reputation of “Brand China” may constrain the growth rate of acceptance and consideration.
National brands can help propel products. German engineering enhances the performance reputation of the country's car brands, for example. But, fairly or not, “Brand China” too often is associated with government-run companies, safety issues and fake merchandise.
Implications: While these challenges may impact the speed with which Chinese brands expand and find acceptance abroad, they’re unlikely to reverse the long-term trend. A country that built its modern economy on the products it manufactures is gaining a reputation for the brands it markets.