Brands in China. Bring or Buy?

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The lure of China’s growing consumer market has resulted in many an international brand planning market entry. These activities sometimes result in high-profile problems as consumers react against “imperialist” arrogance and high prices (see here), but some find success on the back of their global brands. The Age reports on some of the latter in a recent article based on a new KMPG report:

    “POPULAR global brands including Ikea, Starbucks and Cadbury are leading the investment push into emerging markets such as China, achieving their financial goals ahead of schedule as they take advantage of a growing middle class…The surprising success appears to be linked to decisions by many to introduce their own leading brands as opposed to acquiring local brands”.

KPMG’s findings, based on research of 77 global brands in emerging markets (including China) included:

    • 42 percent of imported a global brand

    • 22 percent bought a local brand

    • Over 50 percent of companies investing in China “reported profitable operations within five years. Almost a quarter of the companies surveyed had achieved that in just two years”

    • 83 percent said “now was the time to invest in China”. 70 percent felt that way about India.

Companies obviously need to think hard about their brand strategy in big, new markets like China, where many “famous” international brands have no real recognition, let alone loyalty. Though it is sometimes difficult to get brand owners (who love their brands so very much) to understand this point.

Even when taking in a global brand, it is important that it is localized to some extent, whether that means serving more chicken in McDonalds, Unilever having different soap formulations for north China (dry) and south China (humid) or finding a name that translates some of the brand values – unlike “little flaccid” (Microsoft) or “easily broken” (iPod).

Whether buying a local brand or taking in an international one, success may rely on the management – and good people are hard to find. Successful companies can be built on the back of a single leader, whose energy and drive is critical to success. Installing new management may not always be the best idea – just look at different approaches of Yahoo and Google.

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3 Responses to “Brands in China. Bring or Buy?”

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