INTERNATIONAL BRAND MANAGEMENT OF CHINESE COMPANIES CASE STUDIES ON THE CHINESE HOUSEHOLD APPLIANCES

This preview shows page 1 out of 372 pages.

Unformatted text preview: International Brand Management of Chinese Companies Sandra Bell International Brand Management of Chinese Companies Case Studies on the Chinese Household Appliances and Consumer Electronics Industry Entering US and Western European Markets Physica-Verlag A Springer Company Author Dr. Sandra Bell Trappenbergstr. 35 45134 Essen Germany [email protected] ISBN 978-3-7908-2029-4 e-ISBN 978-3-7908-2030-0 DOI: 10.1007/978-3-7908-2030-0 Contributions to Economics ISSN 1431-1933 Library of Congress Control Number: 2008923751 © 2008 Physica-Verlag Heidelberg zgl. Dissertation der Mercator School of Management, Universität Duisburg-Essen, Germany This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permissions for use must always be obtained from Physica-Verlag. Violations are liable for prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: WMXDesign GmbH, Heidelberg Printed on acid-free paper 987654321 springer.com Foreword China is certainly doing its best to keep the world mesmerized by its economic achievements. The Chinese economic growth story that begun 30 years ago has in terms of dynamics and duration long since surpassed all those “economic miracles” which have brought Germany, Japan, and the South East Asian Tigers into the top–league of the industrialized world. The rapid expansion of the Chinese economy has gone along with a fullfledged re-integration of China into the global economic system. In the course of the last 30 years China has become a major player in the global economy and today is on a trajectory towards even greater prominence. In recent years, the Chinese economy seems to have reached an important threshold line of economic development and global integration. In the first quarter century of reform and global opening, Chinese enterprises have been largely confined to a ‘passive’ role in the global division of labor. Foreign enterprises as the proprietors of greatly superior business models, production technologies, management models as well as very competitively established brands have been integrating Chinese players in their value chains and global operations. Lacking the necessary production technologies, products as well as marketing knowledge to successfully address OECD-consumers, Chinese enterprises have been hardly able to enter the global markets without such guidance. Now, this constellation is changing. An increasing number of Chinese enterprises has already acquired a critical mass of production and management know-how and is venturing out on the global markets in order to directly cater to the customers of the OECD markets and gain a larger share in the profit pools until recently monopolized by the established brand owners of the triad economies. The study presented here by Sandra Bell is dealing with these new Chinese ‘global players’. Focussing on the Chinese household appliances and consumer electronics industry she is taking a very detailed look at the brand management of China’s new ‘multinationals’. The establishment of strong brands in the OECD markets will be of fundamental importance for a successful market entry by Chinese enterprises. But the successful placement of new brands is known to be a very complex and resource consuming exercise, requiring very advanced management skills. However, VI Foreword the mere concepts of ‘marketing’ or even more so ‘branding’ have only recently become common features in China’s transition economy: Are Chinese players already in a position to deliver on the challenge of international brand positioning? How successful are they? What strategies do they employ, and to go one step further, is there something like a ‘Chinese way’ of going global and conducting international branding? Sandra Bell provides answers to all of these questions. Founded on thorough field research in China she presents a highly enlightening analysis of how Chinese enterprises have ventured out in order to conquer the global markets. By doing so she provides us with highly valuable insights in the realities of brand management in China’s new corporate elite. With enormous detail Sandra Bell dissects the international branding activities of some of the most prominent Chinese enterprises and provides the reader with an insider perspective not to be found elsewhere. Obviously most Chinese enterprises are still in an early stage of their pro-active globalization and are still paying a high price for learning from the markets. However, the learning curves seem to be steep and it does not appear to be too far fetched to assume that Chinese brands will be soon a regular feature of the European and American consumer markets. Duisburg, November 30th, 2007 Univ.-Prof. Dr. Markus Taube University of Duisburg-Essen Mercator School of Management East Asian Economics / China Preface Sun Tzu says: One who knows the enemy and knows himself will not be in danger in a hundred battles. One who does not know the enemy but knows himself will sometimes win, sometimes lose. One who does not know the enemy and does not know himself will be in danger in every battle (“The Art of War”, chap 3). The motivation for this doctoral thesis has its origin in my childhood, when my father invited Chinese colleagues to our home in Germany, and I, then ten years old, became fascinated by their Chinese difference in appearance and culture. I therefore owe my father, Dr. Wolfgang Steinwarz, not only thanks for his great support during the thesis itself, but finally my education path as well. I would not have studied Sinology and the Chinese language, and would not have chosen a China-related topic without him. I would also like to express my gratitude to my sponsor JürgenManchot-Stiftung, who constantly supported my research, living and travelling with generous funding in both Germany and China. Special thanks also due to the DAAD and the Chinese Scholarship Council who enabled my research period at Shanghai Fudan University. I am also extremely indebted to the representatives of the participating Chinese companies, namely Haier, TCL, Hisense and Lenovo, for volunteering their time into my in-depth interviews. Special thanks to Haier for a fantastic exhibition tour. I would also like to especially thank Valinna, Simon Zhao, Guillaume de Lavallade, Ying Zhang and Wei Ke, who enabled these interviews. The study could not have been completed without the contributors and interviewees: Liu Zhenyu, Liu Zhanjie, Wang Ruiji, Stacey Sun, Meng Yutian, Zhang Ying, Roland Gerke, Dr. Steffen Stremme, Prof. Lu Xiongwen, Prof. Zhou Dongsheng, Prof. Allan K. K. Chan, Prof. Hang Zhonghe, Rüdiger Burkat, Isabelle Gras, Prof. Sven Müntel, Dr. Michael Meyer, Holger Gottstein, Jim Hemerling, David C. Michael, Collins Qian, Joseph Wan, Paul French, Laurie Underwood, Benedikt Sobotka, Dr. Marc Bieling, Dr. Christian Schmidkonz, Dr. Matthias Schramm, Ponpon Zhan, Dunja Saleh-Zaki, Andreas Günther and Laurence Bagot. Also invaluable was everyone who filled in the online survey. VIII Preface Very special thanks are due to The Boston Consulting Group who enabled my thesis by a supportive leave of absence and strong global networks. I am especially grateful to Heidi Huang and Jacqueline Joliet who have always served my research requests, regardless how strange and challenging they were, during their spare time. I also owe large debts to Prof. Dr. Markus Taube, my doctoral father, with whom I have discussed many of the ideas in this thesis and whose influence should be apparent. I would like to express special thanks for his encouragement and invaluable comments throughout the research process. I thank my friend Anja Wollschläger for her great support, since she was never tired off sending me literature from German libraries to my home in Shanghai. Finally, I owe a great deal and ultimately my sanity to my family and husband John Daniel Bell who have supported me during all stages of my thesis. I thank John for his never-ending overwhelming support, encouragement, inspiration, and editorial contribution. Thank you for moving with me to Shanghai. The thesis is dedicated to you. Shanghai, February 10th, 2008 Sandra Bell For any feedback and comments feel free to email to the author at [email protected] Contents 1 Introduction............................................................................................. 1 1.1 Problem statement ............................................................................ 1 1.1.1 Chinese companies in changing business environments ........... 1 1.1.2 Role of brand management when going-international............... 4 1.1.3 Insufficient research .................................................................. 7 1.2 Limits and aims of the study........................................................... 10 1.3 Theoretical und empirical access.................................................... 13 1.3.1 The basic theoretical framework ............................................. 13 1.3.2 Development of hypotheses..................................................... 14 1.3.3 Why case studies?.................................................................... 15 1.3.4 Choice of data gathering methods ........................................... 17 1.3.5 Chosen research objects........................................................... 19 1.4 Structure of study............................................................................ 21 2 Theory of international brand management ...................................... 23 2.1 Aims of global brand building........................................................ 23 2.2 Strategic brand decisions when going-international....................... 25 2.2.1 Brand positioning .................................................................... 25 2.2.2 Mode of market entry .............................................................. 31 2.2.3 Decision influencing factors .................................................... 35 2.3 Operative brand decisions when going-international ..................... 42 2.3.1 Branding .................................................................................. 42 2.3.2 Brand communication.............................................................. 49 2.3.3 Brand distribution .................................................................... 55 2.3.4 Brand organisation................................................................... 58 2.4 Control and adaptation of brand decisions ..................................... 65 2.4.1 Brand control ........................................................................... 65 2.4.2 Brand adaptation...................................................................... 69 3 The who is who of Chinese branded companies................................. 71 3.1 Domestic brand management experiences...................................... 71 3.1.1 Landscape of Chinese brands .................................................. 71 3.1.2 Chinese consumer behaviour towards brands.......................... 81 X Contents 3.1.3 Chinese organisational behaviour towards brands .................. 91 3.2 Experiences with developed markets............................................ 102 3.2.1 Learnings from multinationals in China................................ 103 3.2.2 China’s presence in developed markets................................. 112 3.3 Brief evaluation of both areas of experience ................................ 125 4 Hypotheses – How to enter developed markets................................ 129 4.1 Aims of global brand building...................................................... 129 4.2 Strategic brand decisions when going-international..................... 130 4.3 Operative brand decisions when going-international ................... 135 5 Empirical study................................................................................... 143 5.1 The global household appliances & consumer electronics industry ............................................................................................... 143 5.2 The case studies ............................................................................ 156 5.2.1 Case study 1: 海尔集团 Haier Group.................................... 157 5.2.2 Case study 2: TCL 集团 Corporation.................................... 186 5.2.3 Case study 3: 海信集团 Hisense Group................................ 211 5.2.4 Case study 4: Lenovo Group联想集团 ................................. 234 6 The Chinese way of international brand management ................... 269 6.1 Cross-case comparisons................................................................ 269 6.1.1 Aims of global brand building............................................... 269 6.1.2 Strategic brand decisions when going-international.............. 274 6.1.3 Operative brand decisions when going-international ............ 282 6.2 Test of hypotheses ........................................................................ 296 6.2.1 Aims of global brand building............................................... 296 6.2.2 Strategic brand decisions when going-international.............. 297 6.2.3 Operative brand decisions when going-international ............ 299 6.3 Development of a descriptive model ............................................ 303 7 Summary and future research........................................................... 313 Appendix................................................................................................. 317 List of abbreviations .............................................................................. 331 Glossary of Chinese terms..................................................................... 335 References............................................................................................... 339 1 Introduction 1.1 Problem statement 1.1.1 Chinese companies in changing business environments For years the People’s Republic of China1 is the largest growing market in the world. The gross domestic product (GDP) increased on average 8.4% between 1984 and 2005 (EIU 2006). This is faster than the US and Japan grew during their early stages of economic development, and China’s rapid growth is projected to continue through the next decade and beyond (Xinhua 2005). Besides rapid economic growth, China also means an enormous market size. 1.3bn inhabitants or one-fifth of the world’s entire population live in China. They are not only considered a low cost labour force, but also an attractive customer base (Zeng/Williamson 2004; McGregor 2005; French 2006). No global corporation therefore dares strategise without taking the country into consideration (Grant 2006). As a result, China has attracted hundreds of world’s largest companies and investors, and has obtained immense amounts of foreign direct investments (FDI). In 2004, contractual value of foreign fund was US$153.5bn, up by 33.38% compared to 2003, and actual utilised foreign fund value was US$60.6bn (MOFCOM 2006c). But, not only foreign companies have been attracted by the large Chinese market place, also domestic Chinese companies have benefited from the Chinese open door policy and increased market-economy environments since 1978 (Chai 1997, 2000; Zhang 2003). They have achieved leading positions in the domestic markets and have become the world’s second largest exporter after the USA with an export volume of US$593bn in 2004 (EIU 2006). However, at least since China joined the World Trade Organisation (WTO) in the end of 2001 the competition with foreign companies has increased dramatically. Chinese companies are forced to organ1 The People’s Republic of China is hereinafter replaced and equally used by the expression of ‘China’. According to usual practice (e.g., MOFCOM, UNCTAD reports), the regions of Hong Kong and Taiwan are excluded if not explicitly indicated otherwise. 2 1 Introduction ise their businesses according to more free-market principles in order to survive. They are also encouraged by the Chinese government to enter foreign, international markets to strengthen their positions in the home market, and to access new, profitable markets and strategic assets. Karl P. Sauvant, Director of the investment division of the United Nations Conference on Trade and Development (UNCTAD) even said that “Chinese enterprises are on the threshold of becoming major foreign direct investors in Asia and beyond” (UNCTAD 2003: 2). Fig. 1-1 shows the development of China’s outward FDI (stock) according to UNCTAD reports. In 2004 China accumulated US$38.8bn and is forecasted by Bain to have a stock of more than US$81bn outward investments by 2015.2 In bn US$ 80 China’s outward FDI (stock) 1979-2004 Bain-forecast 2004-2015 70 60 50 40 30 20 10 0 '80 '85 '90 '95 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Fig. 1-1. China’s outward FDI (stock) 1979-2015 (UNCTAD 2003: 2; Bain 2004; UNCTAD 2006) Whereas in the eighties and nineties Chinese outward investments particularly came from state-owned companies like the China International Trust and Investment Corporation (CITIC), Shougang and Sinochem in order to seek natural resources for the growing Chinese economy (Cai 1999; Zhang 2003) and partly to boost the confidence of foreign investors in China’s open door policy (Zhang/Bulcke 1996: 417), the 21st century seems to be more dominated by transnational operations because of individual corporate business goals. One major business goal is the strengthening of Chinese brand names in developed markets (UNCTAD 2003: 2). For example, TCL Corporation, a television manufacturer from Huizhou, purchased the traditional German brand Schneider in 2002, and is co2 Forecast based on 2003 exchange rates. See appendix 1 for applied exchange rates. 1.1 Problem statement 3 operating with French Thomson since November 2003. Shanghai Automotive Industry Corp (SAIC) bought the design rights of MG Rover and plans to launch its first self-branded family car by end of 2006 (Jing 2006). Lenovo Group purchased the IBM Personal Computer (PC) division for US$1.25bn in 2005, and caused excitement not only in the global computer industry (Lenovo Deutschland 2005). The new Lenovo Group is now the third largest manufacturer of PCs in the world and enjoys global brand awareness through the brands of ThinkPad, ThinkCentre, and IBM, and through Lenovo’s own brand popularity in China (fig. 1-2). Fig. 1-2. Lenovo Group acquires IBM ThinkPad (own illustration) Taking these recent developments of Chinese companies into account, are brand acquisitions thus the successful market entry strategy into developed markets? Do we have to expect more cross-border acquisitions in future? Will the notebook IBM ThinkPad be re-branded into Lenovo ThinkPad? Will IBM customers and employees accept the new Chinese ownership? Haier Group, China’s largest manufacturer of household appliances, however, decided against brand acquisitions, and has already demonstrated reasonable success in the US-market by self-branded products. What can developed markets finally expect from Chinese brands and their global brand management? What are the challenges facing these Chinese branded companies going global? And, what strategies and operational capabilities do they have in place to succeed? Thes...
View Full Document

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture