Chinese Companies Play the Name Game
Talk about an image problem. China has the world's sixth-largest economy and exports billions of dollars' worth of computers, DVD players, refrigerators, and other consumer goods every year. But try finding a Western consumer who's heard of Kejian cell phones, Legend PCs, TCL televisions -- or any Chinese brand other than the Tsingtao beer offered at the local Chinese restaurant.
That's starting to change. Spurred by China's membership in the World Trade Organization, a few of the country's manufacturing powerhouses are developing global ambitions -- and seeking to boost sales and profits by making their names and logos instantly recognizable around the world. The idea is to recreate the success of the Japanese and Koreans, who have built up big brand equity in names such as Sony (SNE ), Samsung, and Sanyo. Chinese companies "started brand development very late, so we have to catch up in a very short period of time," says Zhang Ruimin, chairman and CEO of appliance maker Haier Group.
He's not kidding. Legend Group, for instance, is the mainland's biggest PC maker, but makes only 7% of its sales overseas. It now plans a big foreign push, starting in Hong Kong and later in the West. The goal is for international sales to make up 25% of revenues by 2006.
Still, most Chinese brands face a long march before they become household names in the West. Despite the ambitions of companies such as Haier and Legend, few have made much headway in Europe or the U.S. Why? Managers have focused on building their businesses at home, in the world's fastest-growing consumer market, before starting the expensive and risky process of building a brand overseas.
Even now, some Chinese global-outreach efforts appear to be aimed primarily at consumers back home. Cell-phone maker China Kejian last August agreed to pay $3.2 million to sponsor the English Premier League soccer team Everton for two years. Kejian's name now appears on player jerseys, Chinese soccer superstar Li Tie has been put on the Everton roster, and in May the team will play two exhibition games in Kejian's hometown of Shenzhen.
There's just one thing Kejian hasn't done: try to sell its phones in Britain. Execs say that will happen soon, but haven't set a timetable. Still, Kejian officials say the deal has paid off by buffing up the brand's image in soccer-crazy China. "We got a lot of media exposure," says Marketing Director Samuel Lam. Similarly, Beijing Yanjing Beer Group Corp., aiming both at consumers back home and at Chinese Americans, is paying $6 million over five years to sponsor the Houston Rockets, where hoopster Yao Ming has made things Chinese hyper-cool.
Other Chinese managers, realizing that China isn't yet synonymous with quality in the eyes of many Western consumers, are downplaying the origin of their products. TV and cell-phone maker TCL Corp., for instance, last year acquired Schneider, a bankrupt German TV maker, and will sell its wares under that century-old brand. Although the TCL name has traveled well in Asia, the company felt it needed a known brand to succeed in European markets, says Vincent Yan, executive director of TCL International Holdings Ltd., the company's Hong Kong-listed subsidiary.
Haier has invested in advertising to build its brand -- even splashing its name on luggage carts at New York's John F. Kennedy International Airport. But it recognizes that its products will speak louder than ads in winning brand acceptance. So it's now trying to boost its image and move beyond its current strengths in low-end appliances such as $100 refrigerators for college dorm rooms. Today, the company is making distinctive flat-screen TV sets and wine-cooling cabinets sold in prestigious outlets like The Wine Spectator catalog and upscale New York retailer Fortunoff. "The precondition for any kind of effective advertising is to have innovative products," says Chief Executive Zhang.
True enough -- it was the innovative Trinitron TV that made Sony Sony. Once the Chinese figure out how to marry smart marketing with smart products, the Japanese and Koreans will have some serious Asian competition to worry about.
By Gerry Khermouch in New York, Bruce Einhorn in Shenzhen, and Dexter Roberts in Qingdao