Can Chinese Brands Make It Abroad Essay

China is known for its manufacturing due to low labor costs and supplies the world’s biggest brands. Most Chinese companies take on the role of original-equipment manufacturer (OEM). However, due to the home market being so competitive, the Chinese government now wants Chinese companies to tackle the market abroad by establishing their brands in developed countries. Currently, companies have now emerged in developed markets with products such as appliances and consumer electronics. Examples of this include Lenovo computers which have positioned itself for overseas expansion. Keijian, a mobile-telephone maker, sponsors one of England’s top soccer teams to build brand recognition. The way in which Samsung achieved this was acquiring basic product-development skills through joint ventures and more than 50 technology-licensing agreements. On establishing their brand in the US, Samsung discounted their products to target price-sensitive customers. Slowly it learned the requirements of its markets by conducting extensive market research, building sales overseas and manufacturing operations in the US, Germany, the UK and Australia. They also increased R&D budgets which allowed them to invest in products and technologies that would raise their brand profile. China competes against the world’s best electronic products in features, quality and price. Furthermore, its low labor costs make Chinese goods less expensive. Also, China has a large growing pool of skilled engineers and money to invest in new products. By products alone, it is safe to say that China can establish themselves abroad, however, developing the right marketing strategy for branded goods is key. Branding Before, consumers were reluctant to buy good from Japan or Korea in fear of quality issues and now China is experiencing the same issue. The Chinese companies most likely to succeed are those which have a track record in low-cost, high-quality manufacturing and show marketing skill on a local level. Haier has built factories in the US which they believe the added expense of producing goods there is outweighed by the ability to respond quickly to changes in the market. OEM Cost, quality leadership, acquiring the need technology and capabilities and the ability to support a number of global customers are the key success actors in the OEM model. Low costs must be accompanied by excellent skills in supply chain management and sourcing. Manufacturers for OEM customers target those who want lower manufacturing costs but not ready to set up operations in China. Channels – Step by step approach Retailers are looking for distinct brands and products. They may also be interested in deals with Chinese companies who supply products on an exclusive basis. Shelf space is also expensive and the competition for it can be intense. SVA has transformed itself, focusing on high-end plasma TVs, TFT-LCD displays and DLP projection TVs. It also mass-produces quality products at a low cost. The company took a step by step approach to success: 1. Relying largely on distributors that offer promotion and service assistance to manufacturers. This gave the company a chance to learn about the US market. 2. Working with distributors on trade-level promotional activities including attendance at industry conferences rather than spending millions to build brand awareness. Distributors find SVA attractive because it can offer customers low-cost products, a factor that’s important to small and midsize electronic retails that compete with big retailers like Wal-Mart. 3. Avoid low-end color TV market where it would be up against other Chinese companies selling on an OEM basis. They instead focused on upmarket products where the market is growing and there is little rivalry from other Chinese companies. 4. Recruited US-based executives to whom they gave an equity stake in the venture and hired Japanese ex-Sony production man agers to help control its manufacturing quality. It’s also working with international firms to improve design. Taking this model to Europe may prove a little trickier due to Europeans being more conscious of brands and quality. Channels – Buying your way in An alternative is buying into the market through mergers and acquisitions. Suitable targets would have valuable assets, brands, customer bases, technology or channels. A buyer could move the bulk of the acquired company’s production to China while retaining the brand name, distribution channels and some of the local talent. Over time, it could co-brand the product with its own name to build customer awareness of its Chinese brand. Once this is established, the buyer could phase out the target brand. The biggest obstacle is locating qualified turnaround managers. TCL International Holdings purchased a German television maker in an attempt to tap into the European market. Included in the acquisition was Schneider’s plants, distribution network of chain stores, hypermarket, mail order and trademark rights to a series of brands. Some Schneider employees were also rehired to oversee production. TCL is also using the Schneider brand to position its mobile telephones in the high-end segment of the Chinese market.