Crunch Watch China

Related entries: Economy, General, News, Trading

Heavy economic news from Reuters:

    “Goldman Sachs on Thursday cut its growth forecast for China next year to 6 percent, the lowest prediction from any major bank, after a batch of extremely weak trade data across Asia.

    Goldman Sachs said China could stage a powerful revival in 2010, recovering to grow at 9 percent provided the government delivers effective monetary easing and fiscal stimulus.

    …The bank had previously called for 7.5 percent expansion next year.

    The forecast for 6 percent growth next year comes in well below the 8 percent median estimate of a dozen institutions polled by Reuters last week.”

And on the trade side, the LA Times notes a plunge:

    “China’s trading activity collapsed last month, as exports shrank for the first time in more than seven years and imports plunged, the government reported today.

    The 2.2% year-over-year decline in November exports contrasted with a 19.2% increase in October, underscoring the rapidly deteriorating conditions in China’s economy.

    …The falloff in exports was the first since June 2001 and worse than analysts had expected.”

We will report as more news of the crunch, and the stimulus, emerges.

See news source:

    RPT-Goldman cuts China ’09 growth forecast to 6 pct
    Reuters – USA
    BEIJING, Dec 11 (Reuters) – Goldman Sachs on Thursday cut its growth forecast for China next year to 6 percent, the lowest prediction from any major bank, …

    China trade figures plunge in November
    Los Angeles Times – CA,USA
    The declines underscore the rapidly worsening conditions in China’s economy. By Don Lee Reporting from Shanghai — China’s trading activity collapsed last …

One Response to “Crunch Watch China”

  1. josephsherman Says:

    Anjan Chhetry and Joseph Sherman
    World Mediterranean MBA
    Euromed-Marseille, Marseille, France

    Identity-based Branding in International Banks

    Can an international bank which is traditionally based on processes and transactions change to be known for its culture and quality of relationships with the clients? How does this relate to the global trend from functional to identity-based symbolic brands? What are the specific implications for Chinese firms?

    Organization

    Functional v. Symbolic Branding
    Physical Structures
    People
    Implications for China

    The global trend for market liberalization in the banking sector has increased the competition in the banking sector. The convergence of interest rates within Europe has contributed to making banking a commodity service. Consumers have the power to choose across similar banks where the fees charged on accounts and interests paid on loans comparable across borders. In this situation where the products and prices are becoming more similar, it is easer to see how experiential marketing can have a place in generating revenues for banks.

    To move into an experiential strategy, the bank must move from being functional to symbolic. Carù and Cova2 divide brands between functional and symbolic. Traditionally functional brand are focused on thinking and low involvement based on learning, memory, habit, perception, and minimization of effort. Banks focusing on process, atomization and internet based transactions without human interaction tend to be functional.

    Symbolic Brands3 however have a clear personality or identity. They are rich in cultural meaning, personality, relationship and trust. These brands are high in involvement with the customer and creating a feeling. Rather than focusing on the banking process involved in transactions, symbolic branding in banks emphasizes an emotional connection with the bank.

    For example, promotions for customer orientation, large bank service with small, personal service has been strongly promoted in the US. For large multi-national banks this is taking a different shape. After establishing strong processes to facilitate transactions and services across countries, their main area for growth is feelings and the experience.
    Physical Structures

    To create a distinctive identity and an image of trust and culture, banks use physical architecture and furnishings.

    The Citibank in Milan, Italy draws an aura from the a building in rich architecture of the past, both from the magnificent design of the nearby Galleria Vittorio Emanuele and the simpler but still elegant structure of the bank itself. For Italy, a country with many old and ancient structures an elegant building is fairly common – so the decorative building creates a link with a good past. This creates a feeling of security through authenticity.

    In other countries the feeling of security comes from modernity. Citibank, NA Bejing Kerry Sub Branch at the Kerry Center Shopping Mall, the Miguel Angel office in Madrid, Spain and Casablanca, Morocco occupy modern buildings emphasizing glass and technology. Rather than focus on historical architecture – China, Spain and Morocco have rich architectural traditions – they focus on the modern to look to a bright future for security.

    The furnishings and office equipment in all four countries are nearly the same – light wood tones and blues in a highly organized but soft layout are dominant. Small hints of local taste appear – especially in Morocco with a large red sofa and a photo of King Mohammed VI in a prominent place on the wall.

    People

    Buildings and furnishings are relatively easy to maintain consistency compared with the human aspect of banking. The feeling of security, trust and comfort created by the atmosphere lasts only until the client reaches the corporate representative, be it an account officer or bank teller. For international commercial banking primary importance must be given to technical, linguistic, and cultural competencies.

    Technical skills – the ability to process transactions – are the easiest to train and make uniform as the level of human interaction is low.

    Languages, not only English but increasingly a variety of languages based on regional integration and trade – such as the rise in importance of Mandarin being spoken in Europe – are critical for facilitating transactions. In order to develop a relationship for symbolic branding, the banker must not only speak a language that the client speaks, he or she should speak the client’s preferred language in a way that is comfortable to the client. English speaking banker for example should be able to relate not only to clients from the London, New Delhi, Cape Town or Toronto with ease of regional differences, but also with professionals who speak English as a foreign language.

    Cultural competences – often termed “the way we do things here” (reference) are the hardest and most critical to develop. Bankers must be able to represent their institution serving clients traveling internationally with the same service and comfort as they would receive at their local branch. They must be personally invested in their clients’ success by not just completing transactions and paperwork but by doing the work with passion. This is difficult to develop at a traditional international bank where the average banker never knows even a minority of the clients they are working for. Many banks including Citibank have the technical and linguistic qualifications. But to carry out these competencies in a say respectful to culture – both corporate and national, in a way that represents the core values of the bank evenly across countries can be vastly improved for most branches around the world.

    Implications for China

    What does this mean for Chinese banks?

    Chinese banks should move from providing just commodity products on a functional level to an identity-based position and adding symbolism. More than just a recognizable brand or low prices – as Chinese products are often stereotyped as – they must reach feeling and emotions with clients both in China and abroad.

    “In a fist step Chinese banks have to find a clear position in the competitive environment and define a distinctive identity”, says Dr. Hans Joachim Fuchs, General Manager of CHINABRAND Consulting Limited in Shanghai.4 He gives an example: In the German bank market, the Dresdner Bank has a clear position as the Adviser Bank. Based on his conservative heritage and culture, the Dresdner Bank defines itself as the adviser for the wealthy middle and upper classes, particular for senior people. The symbols used are accordingly conservative, symbolizing responsibility and reliability. “That position and identity makes the bank totally different in the competitive environment and gives the Dresdner Bank a strong competitive advantage”, argues Dr. Fuchs.

    After defining the position and identity, the bank has to define particular benefits and transform them into suitable symbols, e.g. names, logos, slogans etc. In immaterial service sectors, slogans are very important. The slogan defines what the bank stands for. Finally print media, advertising and interactive tools have to be adapted because they must fit with position and identity. All means of band communications have to be integrated by a 360-degree-approach. “To create a consistent brand experience, Chinese banks should use the contact point management approach”, recommends Dr. Fuchs. “Training of frontline employees is also very important.”

    Competition will increase as China liberalizes the banking sector. This empowers customers who can choose between more banks. Chinese banks must learn to compete on both a functional and symbolic level – being able to process complex transactions to support China’s growing economy, as well as to compete with other banks that have comparable functional competencies by communicating identity and using strong symbols.

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