Opinion: The One Thing Holding China Back

The One Thing Holding China Back

I had the pleasure of living and studying in Hong Kong at the Hong Kong University of Science and Technology. I took some incredible courses with some highly qualified and talented professors and soaked up so much knowledge and know-how that I am who I am today, in large part, because of my time there.

One thing that continues to stand out to me is how isolated the United States of America is, despite The US’s global influence. America knows about America. Asia knows about America, becuase of America’s influence. But America doesn’t know about Asia - which will come back to bite the US, I guarantee it.

There are many reasons for this that are the conversation topic of a different blog. But this blogpost is going to discuss how this point and marketing play into what is holding China back.

China’s Marketing Problem

China has a marketing problem. A brand awareness problem, specifically.

I recall sitting in my International Management class, having a class discussion on a case study about Jin Jiang group. They’re the 5th largest hotel company in the world, a Chinese state owned enterprise. We were listing all their brands, which are global by the way, and its 2017 partnership with French company, Louvre. J. Hotel, Jin Jiang, Metropolo, Jin Jiang Inn, Peace Hotel these are just a few of them. 680,000 rooms worldwide, 6700 hotels owned or managed, and is in 60 countries - straight off the company website.

I was thinking: something is wrong here. The 5th largest? You sure?

In this specific moment we were doing a SWOT analysis. (Go ahead, roll your eyes)

I raised my hand.

“I’m confused, you’ve mentioned all these different brands and like they’re the 5th largest hotel company in the world… I mean they’re right next to Hilton and Hyatt and Intercontinental. In my travels everyone knows Hilton, everyone knows Hyatt. I mean I might just be ill-informed but… I've never heard of Jin Jiang or a single one of those hotel brands they own or operate. Maybe i just don’t know, but, I mean… have you? [addressing the professor and the rest of the class]”

Everyone laughed. I’m thinking to myself, damn I said something I shouldn’t have.

The professor darts over to her desk. (Either it’s really good or really bad when you make a professor dash across the room)

She starts listing them, laughing to herself. Everyone was talking to each other. My Canadian friend was laughing.

She says, “you know what, I actually haven’t”

Sure enough, no one had heard of any of them. Interestingly, no one had even thought about it. The French students hadn’t even heard of Louvre, the French company they recently created a partnership with.

This class had students from Germany, France, USA, Canada, Hong Kong, Mainland China, and a few other Asian countries. That spans the entire world, sans Australia and Africa. No one had ever heard of even one of them.

It would take a ton of bad marketing to become THAT BIG of a company, and no one in an international audience of BUSINESS students had heard of a SINGLE one of those brands.

How is that possible? They have 680,000 rooms in 60 countries through the ownership/management of 6700 hotels! Mind Boggling.

Sounds like someone had a marketing problem. Specifically a brand problem - A severe deficit of Brand Awareness.

Lets examine why.

Case Study: Every Chinese Company sans Alibaba, Tencent, Baidu, Huawei, Oppo & a Few Others

China has a marketing problem. It’s holding them back.

You can be incredible at executing tactics, like Chinese companies are. You can be extremely resourceful and have a pool of nearly 1.5 billion people to sell something to, like Chinese companies have. But herein lies the problem. China’s main competitive advantage, as a country, is also proving to be a bit of a double edged sword.

Sure. Probably hundreds of millions of people have heard of Jin Jiang. That sounds like a lot. In fact, it is. Problem is, if they’re all from one country then it doesn’t really matter.

Well hold that thought. Of course it matters.

But President Xi Jinping specifically wants everything China to become global (Think Belt Road Initiative). It’s in his 5 year plans for companies to invest overseas, do M&A in other markets - and it’s all for the right reasons.

So then it does matter. But China has to know where their competitive advantage ends. There are several reasons for this that I want to get expand on.

Country of Origin

In doing international business, the country of origin factor can always plays into your product and brand. Think wine from France. A wine producer could be average when compared to other wine producing regions (The Judgement of Paris, I’m looking at you), but because it’s from France it is perceived as better. The flipside, to use China as another example, many products made in China and shipped overseas come with a certain notion of ‘quality’, even when a product form China may be exactly the same as its Japanese or Malaysian counterpart.

With China’s marketing problem, it’s actually pretty simple - and again relating to their double edged sword of 1.386 billion people. Mandarin is the most spoken language in the world. But that doesn’t make it the most widely spoken. English is. It’s the language of business. If you travel to Europe and speak mandarin, it won’t get you as far as speaking English, and that’s just one example. More people speak English in Japan than Chinese, and arguably in many other Asian countries, despite being 5,000 miles from the UK.

That’s why words like ‘Hilton’ and ‘Hyatt’ and “Intercontinental’ are the names of brands that have Global Presence - Real brand awareness. Global meaning. It’s hard for people to say “Jin Jiang”. It just doesn’t work well with English and Romantic languages. It doesn’t feel like it means something in romantic phonetics. It’s easy to say Apple. Samsung even. Or BP. Romanized letters are just more widely used (Spanish, English, French, the list goes on). And more importantly, they feel like they have some kind of meaning, even if they’re made up words like Yahoo! or Google.

This is why companies like ‘Alibaba’ ‘Tencent’ ‘Baidu’ do have global relevance and recognition. They do, to varying degrees, feel like they mean something. It’s literally in the name. Chinese companies that are going to do business overseas need to seriously think about how translating their name into the English language, or Romanized letters at least, works. It needs to flow off the tongue.

China’s Love for Class & Foreign Products

China loves luxury. People say it. It’s true but not stereotypically true. It’s just a big market for the luxury segment, whether it’s jewelry, French wine, high fashion - China’s a market you have to be in for that type of product. Premiumisation works well in the China market.

But it extends further than that. Premiumization is all about intrigue. Intrigue also comes from consuming ‘foreign’ goods. This is why, for example, Pizza Hut in China always surprises Americans when they see it for their first time in China - It’s a premium restaurant. Chinese people love consuming brands from across the world.

Part of this likely has to do with the fact that the country was not always open to the world. The West has simply had access to it longer, and many of these brands are theirs, (although it’s not just the west. Other Asian countries do not have this same love for foreign products). Chinese people love their McDonalds, love their Starbucks, their KFC - the list goes on. Meanwhile in the USA and in Europe, westerners aren’t seeing Hua Lai Shi or Dicos in the USA. There are no Chow Tai Fuk either.

Describing this as a social and cultural phenomenon, China looking West, but the West not looking to China, it’s easy to see how that if this is the gradient to which the energy expended in consuming a brand happens, it will make it very difficult for Chinese brands to establish a brand identity where the energy of consuming the brand goes the opposite direction, speaking to the rest of the world. It doesn't need to be the west necessarily (I use it for sake of example), but you don’t see Chinese brands anywhere other than China.

And that’s the problem. You don’t see Chinese brands anywhere other than China. China likes China. China also likes the rest of the world’s brands. But the rest of the world isn’t in a hurry to go consume Chinese brands - and today, in fact, there is even some backlash where people are proactively against it, not to mention the country of origin issues (which are all stereotypes, but in business they factor in whether you like it or not).

Chinese brands and executives need to put themselves in the shoes of consumers around the world if they want their brand to truly speak to those people. But of course, the reverse is true - as we saw with the absolutely unacceptable commercials by Dolce & Gabanna.

None of these things are a one way street.

The Elephant in the Room

This is something that is not so much fixable, as it is something that Chinese companies are just going to have to get used to. It’s not true for all Chinese companies, but I believe that the influence of it is strong enough to make it more difficult for a Chinese company than a company, from say Japan.

I’m going to use the USA as an example for appropriate reasons (biggest trading partner, capitalist, etc.). In the USA there is capitalism. In China it’s a communist regime.

In China, state owned enterprises have the support of the government. This includes financial support. After all, they are literally part of the government. If a Chinese company needs help from the government, it can pitch it to them. If it fits the goals of the government, they’ll give you money. That’s an extremely simplistic way of explaining it, but the point is that there is a magical force in their economy (the Government) that can bail them out as the financial success of the company is in the interest of the company and, potentially, the government. State owned enterprises success is intrinsically tied to domestic & foreign policy. It all planned.

In the USA, there is no such situation. Companies have to make it on their own. The American dream. Individuality. Profits and losses. That’s it. Companies have to differentiate themselves, as it’s the only way to truly survive. An unmarked bottle of water is just water. Slap a logo, a picture of a snowcapped mountain, change the bottle shape and PRESTO! … Differentiation.

(When these companies do business with each other, for each side it’s like doing business with a unicorn. One company relies on brand because the environment in which it operates demands competition through the creation of an identity, the other company operates under conditions where the forces of competition are not 100% dependent on the market, where other forces can intervene effecting the overall outcome of the company ). Different economic situations mean different economic forces effect each company and direct their strategy. Trying to manage that while doing business with each other is a huge reason for the current state of affairs between the two countries. Something extremely important for both sides to overcome. Even if not all companies are SOEs, the overall environment is different because of the planned element of the economy and it’s role in the country’s domestic and foreign policy, so it still effects the company)

Because of this, in the USA and in all capitalist societies, companies live and die by brand. That is why brand is so important in the USA. It’s also why companies work so hard on Brand. It’s also why US Brands overwhelmingly make up the highest valued brand equity estimates of companies all around the world - Brand is an obsession in the USA. It’s also why US brands have penetrated every market in the world - Nike, Apple, Coca-Cola, Hyatt, Hilton, Ford, Pepsi, Amazon, Microsoft, Facebook, Instagram, McDonalds, KFC, Visa, SAP, even Hollywood, and I could keep going. It’s also why US brands - keyword, brands - have penetrated China so hard and not the other way around. Chinese people have not always had access to these company’s brands - company’s whose advantage (besides other competitive advantages like technology and superior supply chain, etc.) specifically have to compete on brand to survive and thrive.

Brand speaks to people. There are differences in people all over the world. But emotions are extremely similar. Employing smart adjustments to take into consideration cultural differences and you can make a brand speak to any culture (not any brand but certain ones, as some products do not work in some cultures for a myriad of reasons).

So the influence of consumerist America basically penetrates across the world. Simularly, but to an arguably less degree, with consumerist Europe.

It’s a huge problem for Chinese brands. They have much less experience in this type of landscape, competitively. Basically, Alibaba, Tencent, Baidu, and some Chinese phone companies are the only ones successful at it so far. As a result, it is a serious uphill battle for Chinese companies to compete globally. Sure they can do M&A. They are, and it’s working. But Business is about people. You’re dealing with people. As long as a brand is more recognizable and has influence over the others, it will never be over taken, unless you do some seriously poor decision making or there is a large disruptive force (like the advent of smartphones and the decline of Nokia).

Case in point. In the USA, Apple rules. So it’s extremely difficult for Americans to imagine how Huawei is now a larger producer of phones than Apple.

Is it Americans fault’s for not being aware of the rest of the world. Probably. Are Chinese people at all to blame. No. They’re just consuming what they want to consume and creating what they want to create. Is the Pacific Ocean to blame? I mean, it’s pretty big. I’d say New York is more connected with London, than San San Francisco to China. It’s what separates West from East after all. So perhaps.

Basically, America’s brands influence the world, but Americans themselves aren’t so aware of that very world their home-country brands are influencing. It’s a problem. Meanwhile, China isn’t branding, and as such will always be at fighting an uphill battle in business to compete. Who has the advantage? Well, Asia, Africa and Europe are physically connected, and comprise 6.3 billion of the 7.5 Billion people in the world, so that’s a huge advantage for China. The North America (if we forget South America for a minute) is arguably a giant island in between two HUGE bodies of water (and this entirety takes up the majority of the earth) - basically, we have few neighbors except Canada and Mexico to do business with. This is why the USA has so strategically, and not coincidentally, branded so hard.

The USA has played their hand. Create something intangible that people can consume - Brand - and associate it with physical products they can consume. China’s hand? One Belt One Road, Unifying regional influence and diplomacy. Who knows which will win. China has numbers on their side, and is still an emerging market which is insane, considering it’s economy is around the size of the USAs. Basically, this means that they haven’t even bloomed yet. They’re a flower still in the process of blooming. The USA has already bloomed. Do countries get ‘old’. I don’t think so. But the world changes. Getting old would mean not keeping up with the world. Americans not being aware of Chinese brands and other brands in the world (indian brands etc.) could be an example of getting ‘old’, could bite them in the butt because maybe Chinese brands don’t need to ‘brand’ as hard - they can just leverage the proximity of the Middle East and Central Asia, Europe and Africa. Perhaps the USA’s hyper-branded array of offerings to the world won’t save them. Or maybe it will. Who knows.

It’ll be interesting to see what happens. But in the meanwhile, Chinese companies should focus on brand and marketing.