The Quest for Foreign Brands in China

Singapore July 4, 2012 - The Chinese passion for brands sounds like good news for branded businesses wanting to expand in the region. With the wavering economic situation in the West, there is a growing array of troubled Western companies looking for big-spending foreign saviours. Western brands are passed into the Chinese arms on an increasing frequent basis. 

Perhaps the most visible manifestation of China's impact on global brands is the increasing number of Western brands being snapped up by Chinese companies. One of the highest-profile Chinese takeovers was that of Volvo Cars by Zhejiang Geely Holding Group in 2010. While Geely Automobile and Volvo Cars continue to operate as separate brands in China and abroad, we believe that the acquisition will enhance the Geely brand in China because of the halo effect that the international and well designed Volvo brand will have on the traditionally quite downmarket Geely. Volvo, meanwhile, will benefit from wider distribution.

While Chinese acquisitons abroad are often portrayed as attempts by Chinese companies to gain control of natural resources or advanced technology, many are in fact motivated by a desire to capture Western brand names - to enhance the buyers' domestiv standing as much as to boost exports. Hong Kong-based Trinity Limited bought the ailing British menswear brand Kent and Curwen in 2008 and now runs over 80 Kent and Curwen stores in mainland China, all of them trading on the company's British heritage and 1920s aesthetic. The Kent and Curwen brand commands a price premium in China. The company has only one store in Britain. 

The next strategic branding challenge facing Chinese firms will be to build indigenous brands that can compete globally. Despite the much-vaunted 'rise of China' only a small percentage of Americans or Europeans can name a single Chinese brand. Technology company Lenovo, beer maker Tsingtao and appliance maker Haier are the most frequently cited, but none are well known outside China. By contrast, the comparatively tiny South Korea has a host of increasing well-acclaimed brands on the global platforms, such as Samsung and Hyundai, while Taiwan has HTC to represent her. China overtook Japan last year to become the world's second largest economy, but where is the Chinese equivalent of Toyota and Sony ?

The simple answer is: wait and see. 

Japan's Datsun (now Nissan) and South Korea's Hyundai both started out selling weakly-branded cars that sold on price, but both are now established global brands featuring on the BrandFinance Global 500 list of the world's most powerful brands. As China moves up the value chain and produces more complex  and high quality goods, its companies too will begin to build global brands, and perhaps appear on exclusive BrandFinance Global 500 list.

Just this year alone, China Mobile was maintained its first position from 2011 in BrandFinance Top Chinese Brands List with a brand value of US$17,919million and achieved a AA brand rating. China Construction Bank improved its brand ranking from third placement last year to second placement this year, and achieved a brand value of US$15,464 with an AA brand rating.

With the paradigm shift in the global economy towards the burgeoning Chinese economy, Chinese owners and international brands in China are under the watchful eyes of economists and industry owners. Brand value and brand rating is one way to ascertain the standing of brands and to determine the strategic route to business expansion.

Contact Details:

South East Asia:

Samir Dixit, Managing Director, Brand Finance Singapore

Email: s.dixit@brandfinance.com

T:  +65 90698651 (Singapore)

Hong Kong:

Rupert Purser, Managing Director, Brand Finance Hong Kong

Email: r.purser@brandfinance.com

T: +852 2975 8386