Made in China Part 1 : Chinese Brands (or the Lack Thereof)

I have the utmost respect for China Law Blog as it regularly hits on topics that make me think and, more often than not, nails a topic that I was planning on blogging about. He's done it again, this time around its on brands in China. I'm working on a series of articles on the "Made in China" issue, and since Dan's hit on the topic of Chinese brands, that's what I'll start off with.

This topic's been in the news a lot lately, Dan's entry hits on a recent Newsweek article titles "Generic Giants". Interestingly, Fortune's taken a different approach with an article titled "China Buys the World". From an American standpoint, it doesn't appear that there are a lot of big Chinese brands out there and people are only starting to recognize them when they purchase a major American brand. However, that is far from reality.

First off, and what should be most obvious, is that China's brands are on the rise, but there's still a ways to go. Its hard to believe, but Japanese brands haven't been major players in the US market for that long and Korean brands, limited mainly to electronics, have been around even shorter. Chinese companies have started out fighting in home electronics, a wide open category where they can beat a lot of competitors on price and still offer good quality. In other areas, there have been minor achievements, but its going to take some time, in 10 years the picture will be far different.

Another issue is that the magazines are writing from a US perspective, where Chinese brands are few and far between, yet if a more global view is taken, greater influence can be seen. China has placed a heavy focus on developing countries that the Western world and multinationals has left behind. In Asia, Latin America, and especially Africa. This allows them a more open playing field, less brand loyalty, and less obsession with locally made goods. Not only is it an incredibly smart move, but its also a "training ground" for these brands before they make the more difficult entry into the US market. A number of Chinese car manufacturers have started building factories and importing cars into Mexico, hoping that the market there will pave their way into entering the US and having factories nearby will ease deliveries.

Newsweek argues that its the "incredibly competitive" domestic market (what market isn't competitive?) that hurts Chinese brands, but they are missing something about the domestic market, its incredibly large. If you're the boss of a major Chinese brand in a 2nd tier city and you're making money hand over fist domestically, why bother dealing with the bureaucrats in Beijing only to then battle your way in an unfamiliar market? For many, the headaches involved with creating a global brand aren't worth the potential gains.

This post focused on the major reasons why we've yet to see a lot of Chinese brands "go global", but it doesn't hit on all the issues, for that I'd need a lot more words and I think I'm already trying most of my few dear readers patience, so they'll be more on this in the coming days.

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