As 2007 year-end corporate results come in the level of contribution from China is plain to see. Projected growth potential seemingly exponential as the country’s economy continues to grow at unprecidented levels for its size, an apparent golden goose for domestic and foreign industry, the latter reliant upon WTO business reforms that will give independent access to the massive consumer-base.
Meanwhile, in Beijing and Shenzhen much is talked about the continued pace of change seen in recent years to better integrate China into the global economy, epitomised by the highly symbolic 2008 Olympic Games with the motto “One Dream – One World”. And so the corporate long-term strategies of western corporations such as VW, Coca Cola, Visa, Nike etc are aligned to optimistic scenarios for business opportunity and commercial influence going forward.
Typical optimism is seen with GM, its recent Asia-Pacific results (see yesterday’s essay) ‘dented’ by the high level of Chinese investment taking place – at a rate of $1bn per annum. China has proven to have come into its own after more than 20 years of waiting. A dominant ‘revenue well’ that many wish to drink from, indeed many would wish to ‘cap’ for themselves. Today, given the explosive rate of growth, the veritable glut of old stalwart and new domestic automotive companies involved makes the idea of market dominance look far fetched.
So given that dominance (in the old SAIC-VW paradigm) is remote, how should a foreign automaker create the best-prospect conditions to attract consumer and market favour? Thereby raising sales volume, allowing greater pricing command, successfully promote high-margin options up-take and so maximise profitability?
A vital clue may come from a recently published report from the consulting world which investigates the ‘acceptability levels’ of foreign branded products and services to the indigenous Chinese consumer. Marketing and Economics 101 states that brand perception is key to pricing policy. The report specifically sought to understand which industrial sectors could best benefit from these perceptions. Foreign brand acceptability ranked as follows:
#3 Consumer Electronics (eg laptops & audio)
#4 White Goods
#5 Household Furnishings
#6 Financial Services
Unsurprisingly, given their social symbolism and semantic references, cars ranked highest.
Chinese government and the close-coupled industrialists have log recognised this overtly obvious conclusion, and so have demonstrated an understandably fervent ‘lock’ on their auto-industry, keen to be the primary beneficiaries of the country’s eventual inexhaustible demands for cars, especially so highly regarded marques. Hence the 20 year negotiation struggle between Shanghai and the western automakers to reach hard-won ‘agreeable’ compromise solutions that came in the form of joint venture enterprises.
[Interestingly the Japanese weren’t so keen to ‘give away’ their potential and have relatively smaller JV output agreements, presumably thinking they can properly enter later, as the market opens, under less harsh terms? Of course Sino-Japanese history has a bearing but investment-auto-motives believes Japan has an ulterior market entry strategy as seen for other BRIC+ regions – “come in later but better”]
Such Chinese self-interest has ruled western company China revenue ambitions, off the record many would complain about Chinese demands for IPR and technology insights and transfer that are beyond the immediate scope of the mutually agreed project; recognising that their partners seek to draw-out all they can for the own ambitions of advanced technology independence – the usual twists and turns of high-end business dealings. So given that the bias of power possibly lies with the domestic realm, how can foreign VMs best challenge that political dominance?
Back to the issue of Brand Favourability, and the answer may come in the form of western corporations acting inter-dependently, in orchestra, through a unified exportation of their respective nation’s premium brand power. Looking at the industry sector rankings of the survey and the triumvirate of “Autos, Apparel & Consumer Electronics” could well demonstrate to “the whole is greater than the sum of the parts” – presenting a “United Front of Brands” for the US, UK, Germany, France, Italy & Sweden. In this manner individual nations could philosophically combine their domestic brands as presented to the Chinese consumer, thereby adding mutual support, a singular understandable façade, and critically networked brand leverage.
Hence to expedite this notion, we could see the following nationally-derived brand hierarchies & associations evolved to ‘educate’ the less worldly-wise aspirational sections of Chinese society:
Lincoln & Cadillac/ Ralph Lauren & Calvin Klein / Harmon Karden
Buick / Tommy Hilfiger / Apple
Chevrolet / Levis / XXXX
Rolls-Royce / New & Lingwood / Bowers & Wilkins
Bentley / Dunhill / Cambridge Audio
Jaguar / Aquascutum / XXXX
Land Rover / Barbour / XXXX
Maybach / Helmut Lang / XXXX
Mercedes / Birkenstock / Siemens
BMW / Hugo Boss / Bosche
Audi / Jil Sander / Loewe
(Bugatti) / Chanel & Dior / LVMH branded Electronics?
(Secondary New Brand) / Pierre Cardin & Karl Lagerfeld /
“Initial” (Renault) / Jean Paul Gaultier / XXXX
Peugeot / XXXX / Bull Computer
Citroen / XXXX / Thomson
Ferrari / Prada & Versace/ Alessi
Maserati / Armani / XXXX
Alfa-Romeo / Emanual Ungaro / XXXX
Lancia / Valentino / XXXX
Fiat / XXXX / XXXX
Koenigsegg / Viktor & Rolf / Hasselblad
Volvo / H&M / Ericsson
SAAB / Filippa K / XXXX
These incomplete examples are for basic illustration purposes only, thus the presented relativity of brand equity and pros & cons of association would require full investigation, expansion and re-alignment. However, in a similar format National Brand Centres could be created separately or together within high-end Chinese retail arenas and shopping malls.
From the perspective of a specific nation’s export potential, such an initiative could provide a launch platform to latterly introduce national brands in the lesser amenable sectors such as White Goods, Household Furnishings and Financial Services; in turn creating premium positions above today’s preferred Chinese producers and service providers Indeed the relatively powerful Auto-companies could act as the initiators and power-brokers in the scheme, acting as Agents and taking a percentage of the value of goods sold. After all, for the smaller unknowns from the weak sectors, what could be better than to ride the coat-tails of renowned marques.
This commercial ‘nation-building’ parallels DisneyWorld’s EPCOT Center, where since the 1960s Americans and tourists alike have been able to experience products and cultures from around the globe. A latter-day renowned example of similar ‘hyper-realities’ is Las Vegas’ re-interpretations of: New York, Paris & Venice with more to come. And perhaps the most ambitious recent effort is Dubai’s “The World” consisting of 300 man-made islands. China’s emergent middle classes are keen to taste the world beyond (WTO figures suggest 100m Chinese tourists by 2020) and western auto-makers and corporations could help pave the way through their consumer experiences). Infact similar to the Las Vegas initiative, China has already started to create mock theme-parks mimicking different countries – the UK one of the first built. These could be used as the initial obvious ‘hubs’ for the nationalistic export drive.
The recently celebrated Chinese New Year proclaims and welcomes The Rat, associated with bringing prosperity and the attributes of aggression, charm and order. Perhaps it is now time for western VMs to form a foreign Rat Pack and demonstrate a ‘Co-operative Capitalism’ of which renowned Economic Theorist and Nobel Prize winner John Nash would be proud.