1. The Global Branding of China Inc.
By Shruti Gopinathan
A Course Paper Submitted to the Faculty and Class of the
Milwaukee School of Engineering
Master of Science in Engineering Management
Doing Business With China, MG 8042B Section 101
Instructor: Dr. Carolyn “Kelly” Ottman
Milwaukee, Wisconsin
July 11, 2011

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Introduction
China’s accession to the World Trade Organization (WTO) in 2001 has opened a
floodgate of developmental opportunities for their manufacturing sector, with the nation earning
numerous titles such as “world’s largest exporter”, “world’s second largest importer” and
“world’s low cost manufacturer”. Consumers worldwide have become accustomed to the “Made
in China” label on virtually every brand name product may it be a high fashion luxury brand or a
low cost private label brand. Despite the fact that these products have their country of origin
listed as China, they belong to a non-Chinese brand. The purpose of creating a brand is to
combine elements such as reputation, values and culture of the country/nation of belonging as
well as emotional appeal to the functional elements of a product in order to enhance its overall
value. For example, French clothing and accessory brands are most coveted by consumers
because they embody the image of luxury, elegance and free spirit. Similarly, in case of
automobiles, German brands such as Audi, Volkswagen, BMW are instantly associated with
quality, power and status. The companies that own these brands spend considerable amount of
resources with brand upkeep and promotion. When it comes to buying Chinese brands,
consumers are faced with a certain level of skepticism attributed to the nation’s reputation for
making “cheap” or “copycat” products.
The purpose of this paper is to explore the major challenges that Chinese companies face
selling their brands to the global consumer base, and to identify the specific steps taken by the
companies and the Chinese government to improve China Inc.’s brand image. Furthermore, the
paper includes the author’s suggested action plans based on a comparative analysis of the
literature review and the author’s insights gained from a recent visit to multinational corporations
and cultural sites in Mainland China.

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China’s Tryst with Brands
China has received extensive international media coverage since Deng Xiao Ping’s Open
Door Policy in 1978, allowing the country to gain economic growth through low cost
manufacturing. Western companies with a cost leadership strategy have since then flocked
China to leverage the readily available resources and to meet the growing demands of
consumerism. Literature review suggests that there exists a strong relationship between the
country of origin of a product and the consumer’s purchasing decision: 1) Consumer’s
stereotypes of other nations impact the price that they pay for a product or brand originating from
the particular nations. 2) Chinese consumers lean towards brand names from developed
countries as opposed to developing countries (Loo & Davies, 2006). These two factors have
served as major pain points in China’s progress in the area of brand management.
In the book titled “China Price: The True Cost of Competitive Advantage”, the author
Alexandra Harney provides detailed accounts of the negative consequences of China’s “low cost
manufacturer” position such as subjecting employees to harsh working conditions, pressures to
create low cost products at the expense of poor quality, and the rising carbon emissions
impacting the environment (Harney, 2009). The argument can be made that it is the brand name
companies and the unending appetite of consumers for branded products who are responsible to
some extent in putting severe price pressures on the Chinese supply base, but these big name
companies have achieved strong brand equity and brand loyalty for being around in the
marketplace long enough. Additionally, news reports have painted unsavory images of China
such as the government imposed ban on social media websites such as Facebook and Twitter and
censorship of search engines to curb citizen’s freedom of speech, past quality issues especially

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with food and pharmaceutical products and the piling of toxic wastelands in Mainland China.
Such negative images of China in the global consumer mindset typically influence their buying
decisions.
Apart from being a manufacturing haven for Western companies, China also provides a
marketing base of a billion customers. A recent survey conducted by leading investment and
brokerage group in Asia reveals that the growing middle class in China’s Tier 1-3 cities account
for 15% of current global sales of luxury goods and will go up to 40% by 2020 (CLSA Asia-
Pacific Markets, 2011). Chinese consumers have strong affinity for products originating from
developed countries. Luxury brands appeal to Chinese consumers because of the high quality
workmanship may it be a Louis Vuitton purse or a Swatch wristwatch. During a recent visit to
the Kimberly Clark Corporation’s Beijing Mill, the author observed that the Chinese promotional
campaigns for female sanitary products featured Western families. The assistant mill manager,
Adam Cheng explained that Chinese consumers succumb to the “craze for foreign” trend when it
comes to buying decisions. Gift-giving and the “Mianzi” or face value culture are other factors
which heavily influence the average Chinese consumer’s buying decision for luxury brands
because they offer elevated social acceptance quotient. The author visited large shopping
districts in Beijing and found that the copycat brand name products sold in the Silk Market, Pearl
Market or Yashow Market are typically purchased by foreign tourists, whereas the actual brand
name stores are mostly visited by Chinese consumers.
China’s Global Branding Strategies
The Chinese government and enterprises have recognized that China’s double digit
economic growth cannot sustain solely on their manufacturing prowess but with the competitive

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advantage of owning and managing reputable Chinese brands which will fetch Chinese
enterprises high profit margins. Based on the literature review, the author explains below the
three most commonly employed Chinese global brand management strategies.
Boosting National Image
China has diligently worked towards creating opportunities to communicate to the world
that they are capable of becoming the epicenter of innovation in the future and producing high
value brands. Hi-tech construction of buildings in Shanghai, the progressive architecture of the
National Center of Performing Arts in Beijing, the high speed Maglev trains capable of
achieving 300 km/hr are just few of the striking examples of China’s road to boosting their
national image. Major events such as the 2008 Beijing Olympics and the 2010 Shanghai World
Expo served as suitable platforms for China’s brand development endeavor. Business Insider
magazine reports that Chinese retail brand “Li Ning”, founded by Chinese gymnastic Olympic
gold medalist Li Ning gained significant momentum in the US markets after they offered to
sponsor outfits for every CCTV-5 presenter at the Olympics.
The Ministry of Commerce (MOFCOM) has instituted several favorable initiatives such
as setting up a “Brand Development Fund” to encourage local firms to promote their brands on a
global platform (Gonzalez, Tan & Wang, 2011). Touted as the “biggest buying opportunity for
Chinese Traditional and Advanced products –once a year”, the China Brand Show, MOFCOM’s
brainchild, is a grand annual exhibition held at the Las Vegas Convention Center to promote top
200 Chinese brands for household electrical appliances and electrical products, light industrial
and consumer products.

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Raking on Product Placements
Traditionally, brand promotion through product placements rested in the expert hands of
US advertising giants and Hollywood bigwigs. Western companies spend ample resources for
brand promotion through seamless and creative incorporation of advertisements within music
videos, movies and entertainment websites to influence buying decisions. Metersbonwe, a
Chinese sporting apparel brand became the first Chinese company to jump on the product
placement bandwagon by paying the studios to get featured on the immensely popular
Hollywood movie franchise series “Transformers 2: Revenge of the Fallen” and its sequel
“Transformers: Dark of the Moon.” The latest sequel also features three other Chinese brands
such as “Yi Li Shuhua Milk” –Chinese milk brand, Lenovo – Chinese desktop/laptop brand and
TCL (Creative Life) – Chinese high definition television brand (Gilroy, 2011). Chinese
companies are in the process of introducing the product placement within Chinese films and
daily soaps, although the viewers are still hesitant to accept this trend and may have negative
perception of the brand because of the blatant portrayal (Landreth, 2010).
Revitalizing Heritage Brands
Chinese political leader, Mao Zedong’s driven Cultural Revolution in the 1950s not only
destroyed centuries ago literature and references to China’s rich cultural heritage but also
crippled the operation of over 2000 traditional firms, which existed during the pre-PRC era and
were bestowed the title of “lao zi hao” or “time honored brand” during the Ming and Qing
dynasties. In 2006, the Ministry of Commerce, renewed the status of these heritage brands;
however due to the declining economic significance, 70% of the brands were barely able to
survive and the remaining were filing for bankruptcy (Lim & Ma, 2010). The biggest challenge
that these heritage brands face is the fact that the parent firms do not have resources to infuse

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technological innovation into their existing products. These brands particularly appeal to the
older generation of Chinese people because they believe the historical lineage enhances the
brand equality. Also, the heritage brands’ minimal global presence is attributed to the language
barrier as they are difficult for foreign consumers to pronounce or interpret. Lack of intellectual
property protection in China has hurt the heritage brands, since some of these are registered
under the name of other enterprises who have failed to do their due diligence in preserving the
quality of these brands (Lim & Ma, 2010). Therefore, the government agreed to provide financial
support and subsidies to heritage brands for operational development and intellectual property
protection (Lim & Ma, 2010).
Some lao zi hao firms have implemented marketing strategies to increase visibility of
their brands. A Guangdong based herbal tea manufacturer, Wong Lo Kat, launched several
creative marketing campaigns through social media and popular Chinese blogging websites to
promote the “Wang Lao Ji” herbal tea, a lao zi hao brand that came into existence in the Qing
dynasty and has been in the market for over 170 years. The campaigns appealed to the
consumers mainly because of its emphasis on the family’s health and wellness. Despite the fact
that a can of Wang Lao Ji costs double the price of Coke or Pepsi, it has managed to take market
share from both top name beverage brands and emerged as a leader in canned drinks with $2.5
billion in sales (Rein, 2010).
Critique/Action Plans
Integrity is a key element of brand development, which Chinese companies must imbibe
within their own corporate culture. Li Ning, China’s leading sportswear brand, drew criticism
from international consumers because their marketing campaigns were strikingly similar to those
of competitors such as Nike and Adidas. Li Ning’s ad slogan “Anything is Possible” is merely

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an inversion of Adidas’s slogan “Impossible is Nothing”, as well as their logo bears resemblance
to the Nike Swoosh logo (Balfour, 2008). Chinese rich culture offers creative and inspirational
medium for brand developers and designers to create their own unique identity. A successful
example of the use of Chinese language in brand management is the cheery blue mascot from the
2010 Shanghai World Expo, “Haibao”, which embodies the central theme of “Better City, Better
Life.” Representing the Chinese character “人” (translation: people), the mascot aims to capture
global audience’s attention to the ocean city’s multiculturalism and the coexistence of
urbanization and humanity. Consumers worldwide are intrigued by the exotic nature of the
Chinese culture, which the local firms could turn into a “branding core competence” that will
give a unique look and feel to the products.
Leveraging the multi-dimensional capabilities of technology is a huge competitive
advantage for several companies outside China. Social media such as Twitter, Facebook and
Linkedin are providing Western companies a broad advertising platform and increased
interaction with consumers to promote their brand excellence. The advent of blogging has
opened numerous avenues for individuals and organizations to create collegial relationships. For
example, Kohler Company, a US based privately owned manufacturer of plumbing products has
integrated a blogging module to their corporate website, which allows customers, engineers,
designers across the world to share their comments on Kohler products, plumbing technology,
design features, etc. The blogging experience opens a form of dialogue between the company
experts, current/prospective customers and plumbing product enthusiasts, which further creates a
collegial atmosphere. Chinese corporate culture and the government should become more open
minded to the needs of the global consumers and invest resources in sales and marketing
activities to make the local brands profitable in the global marketplace.

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The author’s visit to Foton, a Chinese owned manufacturer of trucks and agricultural
machinery revealed that joint ventures and partnerships with well-known multinational brand
name companies allow for Chinese companies to gain global brand presence. Foton’s joint
venture with Daimler AG brings in useful synergies to the development of their “Auman” brand
of medium and heavy duty trucks with Daimler’s expertise in engine technology and creating
high-value and coveted automobile brands (eg: Mercedes-Benz ) for consumers worldwide.
Another example is the rising global presence of computer manufacturer Lenovo, after its
partnership with IBM’s personal computing business division. Strategic partnerships with
companies that have significant marketing expertise will allow Chinese entities to learn on adapt
to the global consumer demands, market dynamics, and international business models as well as
facilitate cultural transfer.
Based on the author’s interaction with Chinese origin business professionals from several
multinational organizations, it was determined that the most preferred career paths for Chinese
adults are law, civil service or engineering. Also, a recent article published in the China Daily
reveals that China’s rapid economic growth can absorb up to 600,000 MBA graduates per year;
however owing to the shortage of MBA programs and quality management faculty, the number
of students enrolled in 2010 is only 36,000 (Changxin, 2011). Higher education in China must
integrate elements of globalization and broaden the understanding of students regarding business
affairs. Partnering with world class business institutes or recruiting top faculty members from
these institutes can facilitate the process of developing strategic business thinkers in China.
Chinese companies can establish electronic learning and distance education programs to develop
employees who are interested to explore the management track and are open to advance their
existing knowledge base.

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Conclusion
Handful of Chinese brands such as Lenovo, Tsingtao, Li Ning, Huawei have taken the
right strategic steps in gaining global brand visibility. For an emerging superpower such as
China, with a middle class whose purchasing power is growing rapidly, it is necessary to create
Chinese brand name lifestyle and luxury products to avoid the outflow of Chinese income to
non-Chinese brands. The nation has to significantly revamp its national image amongst local and
global consumers and convince them that Chinese brands are trustworthy and innovative. China
must create brands that will tap the nationalist pride amongst its local consumers who are eager
to share the success of Chinese industry and technology. Chinese business professionals must
become more familiarized with the core concepts of brand identity, user experience and
sustainability. The existence of brands is imperative to give consumers the freedom to
differentiate themselves from others. China must understand that the younger generation is keen
to break away from the group culture to a more individualist culture, which means that every
product or accessory that they own will need to be custom specific. China must break away from
the copy cat culture and learn to develop unique products. Leveraging the significance of
heritage brands amongst the older masses and re-packaging the same brands through crisp
marketing campaigns are favorable towards China goal of becoming a branding genius. To foster
organizational growth, Chinese business managers must exhaust all sources of communication to
keep abreast with the changes around them, and focus on user-specific products and services. In
conclusion, China has immense potential to progress in the area of brand management; but
resource allocation and increased management expertise are crucial success factors.

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