Ai Feng: The Necessity of Brand Revolution in China
This brand event held in the Great Hall of the People would be the first time, ever, in the history, and has the symbolic meaning.
The theme of this year’s Brand China Festival is “Return and transcend”. If we look at the future, no matter what we have achieved before, we all need to face the coming tough road and start from zero.
The Chairman of BCIU Ai Feng
To combine return and transcend, I am going to talk about an important point which is also my topic for today’s presentation – “The Necessity of Brand Revolution in China”.
The Brand Revolution will be the first launched on the festival and given to dear attendants as gift.
Why a Brand Revolution is Necessary?
The constant 12 jump suicides of Foxconn in the 1st half of 2010 grabbed public’s attention and thinking. A research from a market survey company of America shows that: every ipad from Apple would be sold in $499 with the cost only in $260, and Foxconn charges $11.2, which is just 4% of the cost, for assemblage. Because Foxconn can’t request charge increase to those famous outsourcers, what they have done is to generate profit from workers, which means using Taylorism which has been abandoned by developed countries. That is the root reason of this tragedy.
The Foxconn incident reflects that China is the “manufacturing giant, but branding dwarf”. The smiling curve in the global economy is just reversed in China, because China now is famous in low-level manufacture rather internationally recognized brands. Every year, more than 90% of the goods exported from China are OEM, less than 10% are self-owned brands which unfortunately lack of awareness and added value. And meanwhile, foreign funded and joint venture enterprises take 55% of the exported goods, and 75% of profit.
Would Chinese be the low-priced labour forever? It shouldn't, therefore, we need a brand revolution!
Interestingly found by the research that, we are living in the environment that Chinese consumers look down upon Chinese self-owned brands.
There is no Chinese brand in the fashion zones of exclusive department stores in Beijing, but full of foreign logos. However, it is a shame that most of the brands sold in those stores are just common foreign brands, and even few of them are the brands registered by Chinese marketers in foreign countries in order to pretend they are not Chinese brands, which are almost all made in China. We have proposed Chinese brands sold in those stores for several years, but disappointed. Those stores blamed consumers are in preference of foreign brands even in higher price, which, however, can benefit the stores a lot financially. One international brands street in Shanghai just accept foreign brands, and refuse Chinese brands.
Sadly, that situation not only occurs in fashion industry.
The self-owned brands have been extinct in cosmetic industry, but few in toiletry. McDonlad’s and KFC dominate the fast food. Although tea originated in China, there is still no Chinese tea brand being recognized world widely. There are in total more than seventy thousands tea factories, but still can’t beat Lipton from UK. Jianlibao is the only one of the well-known brands that survived in the soft drink industry. Nokia, Motorola, Samsung are taking 70% of the market, and in fax machine, copy machine and camera market, only few Chinese brands are struggling to live within the dominance of foreign brands. China became the top one auto market around the world in 2009 with reaching 13,640,000 vehicles sold, however, Chinese brands just counted less than 2% in the highly profitable vehicles whose displacement are more than 2.0L. Chinese consumers only consider to purchase Chinese self-owned auto brands when the quality are in the same level but price is 30% less than foreign brands.
The phenomenon that “look down upon themselves” shouldn't be changed? Of course, it should. Therefore, we need a brand revolution!
The core problem of Chinese economy is to change the pattern of growth, and using the least resource to create the highest economic value is essential.
What the developed countries have done is consuming the less resources but generating the higher added value. The material cost of one Mercedes car is up to tens of thousands, but sold in millions. An LV bag costs hundreds, but sold in more than thousands. Contrarily, what we have made are just sold in one fifth, tenth or even fifteenth of the price tagged by the foreign dealers!
Should we do the high consuming high polluted but low value rough work forever? No, we can’t. Therefore, we need a brand revolution!
What is the Brand Revolution?
Blame no one but ourselves.
Chinese brands have been loading two bags on shoulder from historical perspective. One is the less developed old China has shaped foreigners’ conscious that Chinese brands are as less developed as the old China. Another one is the popularity of faked and low-quality products after China’s reform and open policy, which also have formed foreigners’ hard-to-change negative perception.
The reality tells us that under that concept of “China”, there is actually a huge contrary between advantages and disadvantages. The enormous improvement that we have achieved in manufacture, quality and branding during 3 decades also accompany with another side of coin – a huge numbers of problems. One tiny spot destroys the pure white, and negatives travel far more than positive, those situations also affect the evaluation of outstanding Chinese brands. When the success of holding 2008 Beijing Olympic, which is the best organized Olympic Games ever in the history, has just been talked for a while, the public is buzzed by the “Sanlu incident” which had negatively influenced the entire milk industry of China. The newly noticed national brand image hurt again, which also hurts us.
Brand revolution is not about defeating or rejecting foreign brands, not about complaining consumer are traitors, is about revolutionizing, changing and improving ourselves.
The primary of brand revolution is about correcting three misunderstandings.
The 1st one, “manufacture is more important than branding”.
Mr Deng Xiaoping had suggested an idea in 1990s that “we have to create our top products and out top brands, otherwise, we would be defeated”. Unfortunately, many people just remembered the first half of the suggestion, but missed the last half. When approving joint venture project in automotive industry, authority just asks the proportion of domestic products, but doesn't care who owns the brand, which makes the situation that all the domestic-made vehicles manufactured by joint venture companies are all foreign brands. That is the reason why “using market exchanges techniques” didn't achieve expected effect.
There is a metaphor to describe the relationship between manufacture and brand. There are three styles writing articles: common one is writing by and signing ourselves’ names; the sectary style is writing by ourselves but for others; and the leader style is writing by others but for ourselves. Writing stands for manufacturing, and signing means branding. For the IP point of view, the first style is no loss or benefit; the second one just suffers loss but no benefit; the last one is no suffer but all benefit. The main method we are using in our auto industry is the sectary style, and 90% of export is OEM, which means also implementing the same style.
However, some of our companies have really good market sense and have adopted the leader’s style. Lenovo merged the PC part of IBM, Brilliance hired Italian group to design car types for them, Chery employed Austrian company to design the engine, and Saab also have been taken over by Chinese company, as well as the acquisition between Geely and Volvo.
The second misunderstanding is unilaterally understand “Brand no Boundary”.
When discussing the acquisition between Huiyuan and Coca Cola, somebody mentioned brand no boundary. Coca Cola can provide better tasted beverage to Chinese consumers after merging Huiyuan with its own strong capital, why should we reject the offer? It sounds make sense, but not actually. Lucky film was sold in 12 yuan per unit in China, whereas Kodak sold in 18 yuan, which was far cheaper than its price in America – 40 yuan per unit. Why? Because Lucky was cheaper. Feng Qi, the CEO of aigo mentioned a lot that the price of aigo camera is lower than 1,000 yuan, no matter how famous Sony is, they daren’t tag the price over 2,000 yuan for the same type. Self-owned brand means we own the right to say, to act, to price. Just assume that if there were no such self-owned brand in market, consumers could only purchase Japanese products, the price wouldn't be like now.
The popularity of the Olympics relies on two principles: “Sport no boundary” which makes the Olympics being the biggest and the best competition; “Medal belongs” is the core motivation of the Olympics. The competition of international brands follows the same rule – “market no boundary, brand belongs”. Those internationally sold famous global brands all belong to somewhere. It is the nation.
The third misunderstanding is that branding just for money.
Some people believe that branding is marketing for money. Yes, it is, but not sufficient. Brand has three abilities which mixed macro and micro levels: self-owned brand can not only promote the development of enterprises, but also elevate the economy of the whole country, that is economic ability; credibility, creativity and responsibility are the three fundamentals of brand culture, which are also the fundamental of social culture under the market economic conditions, that is the culture ability; The status of brands also represents the quality of our nation and the soft/hard power of our nation, that is the social ability.
Why do people respect the funders of Lenovo and Hair? Because they deeply understand the three abilities of brands, and cultivate the self-owned brands under that principle of “benefit country with industry”, so being recognized as the leader or even national hero. But some of the brands gave up, dead or take over by others, that is because the thoughts of those decision makers are still narrow.
Six missions need to be accomplished when brand revolution.
The first one, quality. Chinese products are still perceived as “low-level manufacture”, and the reliability of Chinese famous brands are still lower than standard.
The second one, technology. The manufacturing equipments are mostly imported and the manufacturing techniques lack self-owned intelligence property. The popular copycat phenomenon in China shows the deficit of IP knowledge.
The third, marketing. No sale channel in the international market, faked and low-quality products are impossible to be banned in Chinese market and consumers’ negative perception of Chinese brands, are all the high barriers for Chinese brands to grow.
The forth, system. The legislation system which can benefit the growth of self-owned brands is not perfect yet. No matter in macro level or micro level, there is no such a hierarchy improving the development of brands. State-owned enterprises consider brands as not that important, whereas private companies feel less cared.
The fifth is culture. Fickleness, short-sight and chasing instant success are the common attitudes amongst entrepreneurs. And unfamiliar with foreign cultures is the invisible barrier for brands entering global market.
The last mission is management. The inappropriate brand management and brand communication are still the vital weakness for companies.
In summary, revolutionizing ourselves, correcting 3 misunderstandings, finishing 6 missions are what I am talking about brand revolution.
How to revolutionize?
Need three essential factors: determination, confidence and patience. Determination is the consciousness, confidence equals braveness, and patience means will.
Also need the collaboration and coordinance of government, enterprises and medium organizations. Especially the medium organization.
Need really comprehensively understand the meaning of this revolution.
Somebody noticed the 3 decades cycle of the development in China:
During the period between the May 4th Movement in 1919 to the establishment of New China in 1949, the Chinese revolution succeeded, and finished the mission of change.
From 1949 to 1979, accomplished the initial stage of industrialization and the mission of “stable”.
From 1979 to 2009, China found his way to strong, and finished the primary levels of “rise”.
What is the core mission in the next 30 years?
It is branding! No matter under the consideration of macro and micro levels, the mix of economy and culture, the combination of social and political, and from both internal and external, the rise of Chinese brands including national brands, regional brands, industrial brands, corporational brands and product brands in worldwide, is both the most important leverage for the next 30-year development and mission, as well as the most recognized symbol.
In the next three decades, if 10 to 20 Chinese self-owned brands become the world top brands, if under the lead of famous brands, China starts her way to branding, if the Chinese Premier can take brands as the icon of the nation, just like the Japanese Premier’s word “Toyota is my left face and Sony is my right face”, if all these happen, brand will win China more respect!
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