Why can’t Chinese build global brands?

Posted by: Bruce Einhorn on October 4, 2006

The Japanese did it. The Koreans did it. Even the Indians are managing to do it now. So why can’t companies from Greater China have more success building global brands? For years now, companies from China and Taiwan have been trying to develop global brand names – and do it fast. Rather than slowly, slowly, slowly building their brands overseas, the way that the likes of Sony and Samsung did, many have tried to go global overnight by buying famous but troubled brands in the West and trying to lower costs by shifting production to China. One of the first to try was TCL, China’s top TV maker, which took over the RCA brand from France’s Thomson in 2004. TCL Multimedia, the TV division of TCL, has been sliding ever since. Lenovo, China’s top PC maker, last year acquired the struggling PC business of IBM. The verdict isn’t in yet on the Lenovo experiment, but the company has struggled beyond its Chinese home and has brought in a bunch of new executives from Dell. Investors in Hong Kong-listed Lenovo are underwhelmed. A few months ago Lenovo got booted off of the Hang Seng Index, Hong Kong’s equivalent to the Dow.

The latest flop is BenQ, the Taiwanese company that in 2005 bought the mobile handset business of Siemens. Executives spoke boldly about using the acquisition of the money-losing operation as a way to take the BenQ brand global. Last fall the company even became the sponsor for Real Madrid, the star-studded Spanish football team featuring, among many others, English idol David Beckham and French headbutt-er Zinedine Zidane The upbeat feeling didn’t last long. Last week, less than a year after the deal, BenQ announced that it was cutting off the German business. While the news is infuriating people in Germany, where 3,000 workers stand to lose their jobs, investors initially cheered the idea of BenQ finally cutting its losses from a money pit that has cost the company over a billion dollars in losses. After the fiasco in Germany, maybe more executives from Taiwan and China in search of brand-name glory will be more wary about taking on money-losing Western names.

Reader Comments

Andy

October 4, 2006 11:48 PM

Unlike Japan, South Korea and India; Greater China hasn't been exposed to the western style business management for a long time. It will take time for China to learn how the globalization works. But we can never underestimate their efforts. China can only succeed if they innovate rather than accepting outsourcing jobs.

Jeffreycao

October 6, 2006 2:57 AM

No one can deny that China is a world-class manufacturer. That offers China a good opportunity to get deep insight into some cutting-edge things. I think in the near future there will be many global brands that will emerge into society.

sunita

October 6, 2006 4:21 AM

Yes, your blog is right on target. China's industrialisation and prosperity has been largely fuelled by FIIs pumping in money and the Chinese goverment opening its doors to MNCs way before India did. Home grown entrepreneurs have played little role in China's growth. Now, they are in a hurry to become well known brands and acquiring businesses overseas as you rightly pointed out. Though, I might be little biased towards my country, I think that India's growth story will be more stable because of our own entrepreneurs and it can overtake China in the coming years.

Derek

October 6, 2006 11:48 AM

For me, one main reason is that most of the Chinese entrepreneurs are expecting returns at a short time. Quite often they would focus on one project which can bring them cashflow quickly and after that switch to another one.

As competition is getting tougher and tougher, such sweet projects will no more exist. They will be forced to have long term strategies and global view. I believe that sooner or later, we will see some strong global brands from China. It's only the time issue!

Gourav

October 6, 2006 12:13 PM

Acer, one of the top 5 PC makers in the world, and Asus are both well known brands and Taiwanese - so there is already a precedent of major brands coming out of Greater China.

Sony grew "slowly slowly" in the 1960s (which is way before I was around - so I'm hardly in any position to comment). Samsung (... and LG and Daewoo...) developed in the 1990s - their initial foray was in Asian markets, where they were able to build their volumes (and a brand) by virtue of bringing better technology to markets that lagged on the technology curve. Cashed up and confident, they were able to improve their technology (today, Samsung is the world leader in plasma displays) and head westwards. Not everything has worked to plan though - Daewoo imploded, and Samsung sold its car division to Renault at a huge loss - and both were involved in high profile scandals.

Unfortunately for the Chinese companies, they don't bring in any new technology (the Japanese and Koreans have them beat), and in high volume markets (such as India) they face well-entrenched Indian and Korean players - so they find it tough in the 'value' segment of the market as well.

However, as there is a precedent of at least 2 Chinese companies breaking out, I believe it's too early to call in the jury on this one.

glenn

October 6, 2006 12:37 PM

Historically, China has been more introverted, than the copycats in Japan who historically first copied all things Chinese and now copy all things American.

brooks

October 6, 2006 3:40 PM

It takes time to build global brand. Legend (now Lenovo) had no intention to be a global brand name before taking its new name several years ago. Now it has operations around the world, competing with Dell. To establish a global brand, the only thing Chinese companies lack is time.

Eric

October 6, 2006 11:12 PM

Taiwanese firms have never enjoyed the sort of government support given to Japanese and Korean firms.

Vikram

October 7, 2006 11:52 AM

Chinese lack globally savvy managers. If you look at countries like Japan , Korea and India they have talent that can penetrate deep into any market and make a success story out of it. In Chinese companies they try to solve their problems by recruiting talent from the West and other countries, but you have got to get your people exposed to the outside world. Now that's reason for fear and concern to the Chinese Communist establishment!

Vinco

October 8, 2006 12:50 AM

When you have a closer look at the process of industrialization and globalization, you find that the US/UK took more than 50 years to finish industrialization, and Japan took more than 30 years. Meanwhile, China is right on the track of industrialization, and so far it has taken mostly 20 years. Given another one decade, we would be bound to believe China will play an important role in this globalization, which, in return, will fasten its brands' globalization.

Derek

October 8, 2006 2:47 AM

Though few Chinese companies are known worldwide, China itself is a gigantic market. It needs time for the Chinese companies to develop and digest its own market. So I think the Chinese companies building their global brands is only the matter of time! Otherwise, the infrastructure, education and consumption capability of China is much better or higher than India, so maybe Indian should not be too optimistic.

Mike

October 8, 2006 2:45 PM

Maybe, Chinese are not able to build global brands because, unlike Japan, Korea or India, China does not share global values like human rights and democracy.

Andy

October 8, 2006 9:12 PM

It is too early to said that India will overtake China in the future. India's industries are too focused on tech services companies such as Wipro and Infosys. Meanwhile, China has invested in a wide range of industries. It will take time for India to learn all those manufacturing capabilities skills.

Vikram

October 9, 2006 4:39 AM

Here we go again. China doesn't have manufacturing capabilities. They use Western technologies and processes. They can't patent any manufacturing technology. But to be fair to the Chinese their government never allowed them to fully blossom or allow innovation during the Cultural Revolution and after. Only now some reality check is being done. Forget Japan and Korea. I guess India is years ahead when it comes to innovative marketing and branding.

Larry

October 9, 2006 3:38 PM

I suppose part of the problem is that most Chinese and Taiwanese companies with international reach are mostly OEM suppliers.

In computer stores, Asus, BenQ and D-Link are well known names. Outside of computer stores, Haier and Giant have brand name recognition, while Huawei and ZTE worry foreign competitors.

Budi Putra

October 10, 2006 7:16 AM

I think it's just a matter of time. I am sure in near future China's brand will take place. Lenovo would be the avant-garde for it.

China Law Blog

October 10, 2006 11:57 PM

Give it time. Look how long it took Korea. Very few Chinese companies have any global sense yet, but they will. Part of their problem is their unwillingness to pay much for anything that does not directly go to the bottom line. How can you have great brands without great products?

www.chinalawblog.com

PLA

October 11, 2006 5:49 PM

India? Do you know where you are?

Andy

October 12, 2006 2:51 AM

@Vikram

The majority of manufacturing in China is owned by Chinese. How can you say that China doesn't have manufacturing capabilities? China has just really grown in the last two decades. As other members said, China will need at least another decade to expand globally. Japan and Korea also took that long. Remember that we used to say that Japanese and Korean goods were crappy. India isn't really as global as you think. The only global companies that India has are in the tech service sector. What other brand beside tech service sector that you can name? Most Indian global managers are not Indian citizens anymore. They live in London and New York. It is like China claiming the Singaporeans as its citizens.

Andy

October 12, 2006 2:57 AM

I'm also sick of the claim that because China is authoritarian, then the Chinese won't be able to be innovative. Chinese in ancient times became the most advanced nation in the world even though it was under Dynasty rule. What make you think that the Chinese today are less free than their ancestors in the past? It is true that China slowed down due to the Qing government. But that is because the Qing government closed itself, not because it was an authoritarian regime. Meanwhile, China today is very open to outside ideas. Besides politics, you can practically do anything you want in China.

Andy

October 14, 2006 10:05 AM

Andy,
Now I know why you are so critical of India. Well the same can be said about managers from China. Most of Chinese managers are educated in the West and maybe migrated back to China. So China does not have any more global managers than India. India and China are on the same boat as far management is concerned. The issue is what type of management style we want to adopt. India and China have distinct cultures that are among the oldest. Simply aping Western managment is not going to help us. What we need is to find the style of management that helps us. As far as brands are concerned, most of the products sold by Indians and Chinese are domestic and those products cannot be made global. Just because some dumb Westerners do not know any brand from India or China does not mean we cannot market or sell.

FYI there is manufacturing capablity in India too. It's like someone saying China does not have a services sector. I am sure there are very good IT services companies in China. Let's not stereoptype ourselves.

Andy

October 16, 2006 12:15 AM

First of all, I'm not anti-India. I'm just sick with their mentality. Indians, due to jealousy, attacked China as an undemocratic society while India is a democratic nation. But when their economy fails, they attack democracy as the culprit. It seems to me that democracy is a tool for Indians, not a goal itself. When everything fails, blame the tool.

Nelson Chung

October 16, 2006 5:54 PM

This question was answered by Francis Fukuyama in his book Trust: Social Virtues and the Creation of Prosperity. Japanese society is group-oriented, not family-oriented like Chinese society is. Thus Chinese firms have trouble expanding beyond being family-owned, and therefore mostly never become large enough to create their own brand names.

stone_ms

November 4, 2006 12:09 PM

Unlike Japan and Korea, China itself is a huge market which currently is enough to make big profit for domestic companies, while for Japan and Korea companies, they have to go abroad due to their relatively small domestic market.

Now there're already many Chinese brands like Lenovo,Haier,Huawei,ZTE,TCL(all producing high-end products) that have some global recognition.
I think it's just a matter of time for Chinese brands to boom in the global market.

fttd

November 14, 2006 12:05 AM

India has a global brand? Where is it?

Hun

November 22, 2006 12:21 AM

I have lived in China and am tired of workign in factory all day long. I rather go to india and do more creative work and think. In factory now I only do same thing day after day. Year after year.

Hun Lee

Aaron

November 23, 2006 5:31 PM

I guess that only time is a reason why China "cannot" build global brands. Most of the large companies in China (that have big manufacturing capacity) are state-owned and tend to produce goods under foreign brands (through joint-ventures), and thus have little incentives to build its own brand. The new, but smaller breed of private entreprenurial companies in China are only beginning to grow as of this decade. They are more motivated, more determined, more aggressive, more innovative, and very ambitious. However, they are still very small and have limitations to expand quickly into overseas markets. One of the reasons for this is because these companies right now only have two ways to finance any expansion plan: their own money (slow method) or bank loans (quick but dangerous). China needs to develop its capital market, so they can raise money from it. Furthermore, unlike in Japan or Korea, where the economies are relatively more closed compared to that of China during the same development stage, China does not actively support its companies. To illustrate, the close relationship between the Korean government and the chaebols (Korean conglomerates) does not exist in China. To end this, I just want to say that China should not rush to build global brands just so that it can "beat India first" or anything like that. China itself is a big market of 1.3 billion people. Chinese companies must master its domestic market first before going overseas. Without a strong domestic base, going global is too dangerous (look at TCL Corp.). China must develop all levels of distribution, marketing, and after-sales services (such as customer service) which are all still premature in every Chinese companies. China also need to invest more in its universities and these universitites must have close relationship/alliance to companies (think Silicon Valley) in order to fully tap expertise and skills on both science/tech and management skills. I think so far China is on the right track, from building basic infrastructures to alliances with Western companies. Learning from the West certainly gave them some leads (technology transfer, professional managerial skills, technical expertise). As for the rest, only time can tell. With "appetizers" such as Haier and Lenovo, I am optimistic and looking forward for the future. PS: Oh by the way, "authoritarian-vs-democratic politics" have NOTHING to do with the success of Chinese companies, or any companies for that matter. Innovation in science/tech will not be suppressed just because you cannot vote for who your next president will be. In fact, the two aren't even closely related.

google

February 5, 2007 4:30 PM

Take a look at the current global TOP 10 websites, five of them are in China.
And ALL global IT companies including Google, Ebay, MSN, Yahoo are defeated by Chinese IT companies like Baidu, QQ, Alibaba, Taobao in China's market.

In fact, the Chinese new generation is very creative, according to their posts in the Internet. It already forms its unique Chinese Internet culture.

Huawei's last year revenue is 10+ BILLION USD and it is growing at 30% each year. I am sure in the next several years it can beat down CISCO.

China's current infrasturcture is world's best one, including skyline, highway, subway, airport, railway, buses, condo, appartments, and shopping malls.

Without a good infrasturcture no country can become a good manufacturer. In fact, current India's infrasturcture is just like China 20 years ago. It doesn't stand a chance to compete with China in the next 30 years.

After China's companies occupy the domestic market, they will come to the world's stage. Just be patient.

chien-wen

February 5, 2007 11:11 PM

Wow, i have to disagree very strongly with "google" -- China's infrastructure is a nightmare compared to all other nations that hold strong global brands. Roads and subways are still being built and expanded and let's forget living spaces. If you live south of the Yellow River, heat is not built into your home no matter how new it is. Government/construction rule. Think of how much energy is being consumed by space heaters from October to March. I am an American living in China and am blown away at how many built-in inefficiencies there are to daily life. Global brand seems at least a decade away. Forget India -- it shouldn't be a competition about who's first but who's going to last. In my experience working at a design consultancy, our client, a midsized Chinese specialty retailer with the capital to be innovative, still wants to pretend to be foreign. (The 'proven' way to attract Chinese customers is to not be Chinese.) Despite his ability to develop an authentic Chinese brand, our client, a successful late-30's man, is still interested in making the quick dollar.
Being innovative requires thinking by analysis and critique. Until the Chinese government teaches its citizens to think critically and learn to be outspoken, China won't have a strong basis to create successful brands if its workforce can't think for itself. Building a global brand means first being proud of your own -- not simply assuming foreign brands are better -- and taking a genuine interest to appeal to customers from the stand point of authenticity.

Mani

February 13, 2007 1:57 PM

Being innovative means arrogant,out spoken, loud mouth, bad mouth, angry, confused, insecure, dreamy, imaginative, superiority complex, critical of evrything and everyone including one own self,
parents etc, rejecting everything. Indians and chinese have to make such traits in their children in order them to be innovative like westerners.
If they will be able to make sure their children dont know who they are, and not develop any values, make sure they are greedy enough and selfish to the extreme degree, next generation will be highly innovative. They should also be taught in schools that west is after them, enslave them,exploit them, if they wont compete with wetsern kids.So their goal in life is to beat westerners.They should be taught to spend all their time thinking about monney and imaginative to build toys which other people will like.They should be taught to think they are better than other kids and try to prove it till they die. Develop enough negative thinking skills so to be able to proud of having critical thinking. Certain segree of vulgurity is necessary to develop innovativeness of westerners

Apart from these secrets of western innovativenes
chinese and indians should stop being stupid figthing with each other when westerns are united against them.

googleabcd

February 26, 2007 3:05 PM

To Chien-Wen:
If you think China is not building the world's best infrastructure.
Please take a look at the following thread
http://www.militaryphotos.net/forums/showthread.php?t=104814

HC

March 6, 2007 2:12 PM

Why can't Chinese build global brand? Because they don't want to spend any serious money on marketing. When was the last time you saw comercial by a Chinese company like Haier or Acer? NEVER. I can't even count the number of times I saw a Sony or Samsung commercial. Chinese, including those from Taiwan, Hongkong and Mainland, are still a century behind the rest of the world in their business philosophy.

will

March 8, 2007 1:14 AM

IT's just a MATTER of TIME!

Check out china 's own clothes brand, li- ning etc.
they r still stupid looking but they r trying to be global. Li-ning just signed O'neal.

http://www.lining.com/EN/press/inside-3_1_17.html

Lonely loner

June 26, 2007 9:09 AM

Dear Blogger Bruce and commentators here,

May I ask you guys one question from the article above ??

He said India has global brands, sorry can you please name some please ?? Cos I couldn't find any Indian global brands you are talking about, let alone hearing about them.

Japan, Sony, Korea, Samsung but India ???? I never heard of any brands.

Thank you .

Please bruce, next time try to be more accurate in your article please. And avoid exaggerating things please.

Tony

June 26, 2007 9:20 AM

Lenovo and Acer are the world's third and fourth largest computer makers and they have their presence in many european countries and America.
Haier is the world's second largest household appliances maker and is present in france, Germany, spain, and USA, Australia, yet Haier is really not a global brands but it is investing a lot in R&D and striving in achieving the global brand status.

And sorry where are the Indian brands you were referring to ??

Keith Slurry

June 27, 2007 5:43 AM

OK

Japan, global brands yes
Korea, global brands yes
India, global brands ??? what global brands ???

Are you serious bruce ?? Can you please tell us some indian brands ??

So you're saying Acer and Lenovo are nothing ????
Haier is at the infant stage but it is already present in so many countries from asia to europe to the USA.

What Indian brands can you name please ?? Bruce

YinduAsan

June 29, 2007 7:23 PM

The answer is pretty simple in this case. China was a 100% planned and state-owed economy before 1990's. Private and joint-venture companies started only to exist in mid 1980 and mostly after 1996. With current performance of Huawei, Haier, Hisense so on, it should be already considered stellar performance. In a word, time is not up yet.

square

July 4, 2007 10:37 AM

Chinese business giants have a long way to go..especially in management philosophy

Mojo

July 7, 2007 6:52 PM

Oooops!

Bruce is very sorry for his terrible mistake. The combination of having partied hard the previous night, and then having gotten out of bed on the wrong side the next morning followed by drinking bad coffee all conspired for Bruce to slip up and say something positive about India (gasp!).

It shall never happen again. The Ministry of Truth officials from Beijing have paid Bruce a visit and he now understands the gravity of his error.

So, we can all relax, OK! China will no doubt rule the world any time now as soon as it flicks pesky America out of the way. There is absolutely no need to be concerned about a fourth-rate country like India peopled by a low IQ race.

Right, Bruce?

Katie Li

July 16, 2007 3:29 PM

Ok Bruce, I think I have to disagree with you a bit here. How old is Lenovo ?? How old is Haier ?? How old is huawei ??

How old is Sony ?? How old is samsung ??

Huawei is now 19 years old and it is one of the world's top telecom equipment supplier.( a lot of contracts with many phone companies like vodafone, telia, BT.. )

Lenovo is now 23 years old and it is one of the world's top laptop/computer producer, present in many european countries, USA and Asia.

Haier is now 23 years old, and it is one of the top white goods manufacturers in USA and is present in quite a number of european countries and Asia, and as someone already mentions Haier is currently not as succesful as other Chinese companies but it is investing a lot in R&D at the moment. And it is determined to create a global name for itself by moving on to high-end products

Sony now is 61 years old (established in 1946) and it only achieved worldwide reputation in the 80s.

Samsung now is 38 years old (samsung electronics was established in 1969)but the world only saw the tremendous growth of Samsung in the 90s and since then Samsung became a global brand.

To Mojo

Please stop that racist talk, Indian people are not low IQ race, all races can achieve, and there is no such thing as fourth rate country.

Lastly, I would like to say that everything takes time, everything starts off bad but then improve and move on.

Aaron

August 1, 2007 1:52 AM

I knew it, Here we go again, another fight between India and China.
I think most of the people here,not everyone, is reading only Indian newspapers while the others is reading only Chinese newspapers.

Mojo

August 2, 2007 11:09 AM

Katie,

Sarcasm got the best of me.
As an Indian, I see my fellow countrymen at all economic levels show amazing grit and resourcefulness just to make it through the day. When I see posts disparaging us for being lazy or having low IQ, to me it's more a reflection of a sadly out-of-touch racist worldview of the poster than a reflection of reality.
I was also poking a finger at some Indian posters. They keep harping on a totalitarian Chinese state, as if the gov't controls every aspect of people's lives. As best as I can tell, the Chinese gov't leaves its people well alone as long as they remain largely apolitical. The Indian government could learn a thing or two here.
My impatience at our own Bruce Almighty's condescending tone is real enough though.

Peace,
Mojo

mohan

August 5, 2007 2:52 PM

US of A was quietly rising to it's pinnacle of glory while world had his eyes fixated on the Greatest power of the day UK.Sun never sets on British empire.Surely it did, one century afterwards.How many could predict in late 19th century US would rise to it's greatest glory mere 50 years ahead.How many could predict Japan would beat the crap out of china in 17th century.The idea that history can be predicted as if everybody has a crystall ball of an oracle is domain of ingenuous mind.I don't have to look too far.How many Indians could predict there country which once was full of wealth and apple of all greedy westerner's eyes will come to see a day when millions of it's own populace will die of starvation and where malnutrition and famine would become order of the day.Well times change.Nothing remains the same.But as someone commented here the biggest positive one can take from all the negativity surrounding people's daily lives are the grit,guts, enterprise shown by common people to survive and never once abandoning hope.As long as mankind has hope we are certain bad times will change and will lead to a better time in future.I bow my head in deference to that unkindred spirit that I come to see from my fellow country men every passing day.

Phillip Woon

April 8, 2008 12:17 AM

The reason why China doesn't have a global brand is because there is no need? 1.5 billion Chinese is a big market, bigger than Europe and North and South America combined.

Avinash

April 14, 2008 5:59 AM

Guess we all need some external views about China
China's economy looms large but overestimated by Chinese authorities
Exchnage rate revalution needed
Round tripping from HK & Caymon islands
Inequality in income acorss China
China's ODI is so tiny in front of India please read this articles and i vent written it

http://chasingthedragon.blogs.fortune.cnn.com/2007/10/28/india-outpaces-china-in-global-dealmaking/

Alex

May 24, 2008 5:35 PM

Lonely Loner,

To enlighten your ignorant mind about Global Indian brands, what do you think about companies like Tata, Mittal Steel Infosys, Wipro, TCS ?

Do they sound like Global brands to you ?
If they don't think again about your definition of global brands...

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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