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Five Signs The Next Apple, Google, or Sony Will Come From China

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MIDDLE BIG KINGDOM
DailyFeed
If you were asked to name the world's most admired brands, you'd likely rattle off a list of American companies. Google. Apple. Starbucks. Amazon. Some German automakers or French fashion houses might make it into the mix. But few of us can name a single major Chinese brand, as NPR recently demonstrated

Is that about to change? Some say yes, and insist that it will happen sooner than you think. Here are five signs suggesting that China may be on the verge of producing the next wave of powerful brands.

1. Chinese Brand Consultants Are Outpacing Their Western Mentors
In a recent interview with Peter Days of the BBC, Jez Frampton, Global CEO of Interbrand, said that he's noticed a growing body of "received wisdom" within Chinese companies. Normally this wisdom, or branding know-how, is inherited internally in an organization, he says, and there's more of it to be found in older, established Western companies compared to firms in emerging markets. In China, however, because so many young executives have studied abroad in MBA programs, a keen understanding of branding is now being finely honed and applied at home.

"The one thing that everyone should be watching out for are the parts of the world that are studying this hard and are going to get very, very good at it very, very quickly," says Frampton. "Places like China."

Although Chinese companies are known for running on price alone, they're now beginning to value other assets, like emotional connection and brand personality. Things that can help a company mature, improve a customer's experience and build loyalty.
 
"They're going through the same transformation that Japan went through 20, 30 years ago, and that Korea went through over the last 10 or 15. It's not going to be long before we're all buying China-branded products as well as Chinese-manufactured products," says Frampton.

He added that at his Beijing office, the vast majority of the staff is Chinese, saying. "We learn as much from them as they do from us... they picked it all up from their MBAs anyway."


2. Chinese Consumers Will Dwarf All Other Interests
China's middle class could now be as large as 240 million people, according to some estimates. In the next few decades, experts predict that China's overall consumer class will equal 600 to 800 million people. That kind of presence will force all companies to consider the Chinese market when creating a brand, and there's no doubt the home team companies will have the deeper understanding.

3. China's Own Business Schools Are Vying for Harvard Status
Just one example: Last February branding expert John Quelch took over as dean of China Europe International Business School, a 17-year-old university based in Shanghai. His stated goal is to make the CEIBS a top 10-ranked, research-focused institution, on par with Harvard's Business School, where he once served as a senior associate dean. (He's also the former head of the London Business School.) Quelch has told the press that he's made faculty retention a priority; he's looking for Western faculty to come and stay in China, not visit and leave.

Already Chinese enrollment in American business schools is soaring, and the trend shows no signs of abating. The Wall Street Journal recently reported that graduate schools "saw a 21% increase in Chinese applicants from the last school year and a 23% increase in admissions offers, for students slated to start this fall, according to a study by the Council of Graduate Schools. It is the sixth year in a row of double-digit percentage increases for Chinese students."
In China, some parents are spending $15,000 to help their kids prep for US college applications and entrance exams, according to the New York Times. The paper also reported that during the 2009-10 academic year, 39,947 Chinese undergraduates were studying in the United States, marking "a 52 percent increase from the year before and about five times as many as five years earlier."

4. China Is Already Learning to Use Sensory Research and Neuroscience
Martin Lindstrom, author of Buyology: Truth and Lies About Why We Buy, is a well-known branding expert who's particularly interested in the intersection of neuroscience and marketing. Earlier this year he wrote a story for Fast Company titled, How the Chinese Became Global Branding Geniuses. His main thesis: The Chinese have figured out how to appeal to all senses, which can't even be said of major Western counterparts. Here's Lindstrom visiting a new Chinese-made automobile showroom:

There I stood, having just been given permission to see an area of a building that few were allowed to enter. As I opened the door to the first room, the unmistakable smell of freshly cut grass pervaded my senses. The air was misty, the colors were light green, and the Mandarin name of the room I'd just entered, translated, meant "The people from the Nordic countries." With my Danish background, it was comfortably familiar--the colors seemed lifted directly from the designer Arne Jacobsen's catalogue, the smell took me right back to my parents' garden, and the air was full of spring sounds Scandinavian birds make at dusk.

The building I found myself in was huge--about the size of a football stadium--and it was located some 200 miles outside of Beijing. With the same level of zeal its country used in preparing for the 2008 Beijing Olympics, this business was fully detailing each sensory impression its products will have on potential consumers.Here, thousands of cars were lined up to leave an ultra-modern production facility, which, until recently, featured all the familiar global brands. Now, there was a new take on it. The cars that stretched, row upon row, were all Chinese brands designed specifically to appeal to foreign markets.

The world soon will see the ability of the Chinese to absorb new ideas, and fast-track them into the mainstream with accuracy, skill, and speed. In a very short time--despite a rocky start--they have grasped the essence of branding. In fact, their embrace of the fact that branding is a sensory discovery has put them ahead of others in the same industry operating on the other side of the globe.

Remember, this is the country that shot down rain clouds threatening to spoil the Beijing Olympics.

5. Chinese Brands Are Using Hollywood Product Placement
Forget communist propaganda, Chinese companies are looking at Hollywood to build a global name. In this summer's Transformer 3: Dark of the Moon, a record four Chinese brands appear in product placement segments.

  • Sam, the main character (played by Shia LeBeouf), wears a Meters/bonwe t-shirt

  • He also drinks Shuhua Low Lactose Milk, made by Yili

  • One robot is a transformed Lenovo computer

  • A TCL flatscreen TV makes a cameo


So what are the Chinese brands already recognized abroad? You could make an argument for Shanghai Tang, the luxury fashion label, or Lin Ning, a sneaker and sporting good company that recently open a retail outlet in Oregon (aka Nike country). There's Lenovo, of course, and appliance maker Haier.

In his BBC interview, Frampton also mentions Huawei, a maker of computer hardware systems, which he believes is about to become a major competitor to Cisco.

This morning, however, the Washington Post published an alarming story about Huawei's feared ties to the Chinese People's Liberation Army, just as Huawei is gaining clients in the US. "At issue for Huawei is widespread concern among U.S. military and intelligence agencies that Huawei’s switches, chips and firmware contain 'back doors' that can give China's military the equivalent of listening posts all over the U.S. telecommunications infrastructure," says the Post. The company denied any such possibility and asked the Defense Secretary to rescind the allegations.

Which brings us to the most serious hurdle facing China's potential for big brand development: political uncertainty. Despite the optimistic signs, one has to admit that it's hard to associate warm fuzzy feelings of brand loyalty with a country still seen as a potential threat to global security and known for ignoring human rights.

And we haven't even mentioned IP laws.


Also see: If We Punished Executives the Way China Does, We Wouldn't Have Any Left
POSITION:  No positions in stocks mentioned.

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