Beijing – It’s a long way from here to a castle in France, but that was an early stop – a pilgrimage of sorts – for a group of senior Chinese executives intent on taking the next great leap in capitalism.
At Chateau Touffou, the Chinese huddled with representatives from the ad agency Ogilvy & Mather to plot a global branding strategy.
If Chinese companies ever become household names – if Lenovo computers and Haier refrigerators and Chery automobiles ever rival Dell and GE and GM – they can trace their roots to those meetings last October in France.
“You’ve got to remember this one thing,” said Joseph Wang, chairman of Ogilvy’s southern China business. “Chinese companies are very quick learners.”
Walk the aisles of a local Wal-Mart, Target or Best Buy, and the words “Made in China” are stamped on everything from sweat socks to auto parts to cellphones. But those products still carry all-American brand names like Fruit of the Loom or Delco or Motorola.
But Chinese companies are not satisfied just slapping someone else’s name on their products. Some Chinese companies want to buy established Western brands; others will build from scratch. They all share a common urge to own brand names they can export worldwide – and import the profits back to China.
Consumer electronics company TCL of China bought Thomson Electronics, maker of RCA televisions. China’s Shanghai Automotive Industry Corp. was seeking a Western brand when it offered to rescue Britain’s failed MG Rover early this year.
Go-it-alone strategies seem likely to be the favored strategy, though.
China’s Haier Group tried to buy instant credibility last spring with its bid for Maytag Corp. But when Whirlpool Corp. nabbed Maytag, Haier opted to go solo.
Haier currently sells low-end refrigerators in Wal-Marts and Targets across the United States, where it competes exclusively on price. But its strategy calls for a push into higher-end products, and bigger profits to Haier.
To pull it off, Haier is building a research and design center near its U.S. production plant in Camden, S.C. There it will collect intelligence about American tastes and market trends. Back in China, designers will use the information to dream up new products that will sell in the United States.
Think U.S. competitors don’t take China’s new branding effort seriously? They do.
When China’s Chery Automobile Co. announced a daunting plan to enter the crowded U.S. market by 2007 – amid hints that its advertising budget might reach $225 million a year – GM took note.
The auto giant threatened to sue, claiming Chery sounds too much like GM’s Chevy. Chery in late September agreed to use a different nameplate when it comes to the United States.
Nowhere is the push to push product more pronounced than at Lenovo Group, China’s biggest maker of personal computers. A close look inside Lenovo’s business shows how China’s brand-name giants plan to take on the wider world. Combining leading-edge technology, low- cost production, top-flight management methods and cutting-edge marketing, they hope to get the job done.
Lenovo took two bold steps designed to put it on a world-class stage. Last year, it ponied up an estimated $75 million to become a top Olympic sponsor, on the same level as brand-name giants like Visa, Coca-Cola and McDonald’s. Then in May it paid $1.75 billion to buy the ThinkPad brand and the rest of the personal computer business from IBM Corp.
Now executives on both sides of the Pacific Ocean must make the IBM merger work.
For Lenovo, that has meant adopting English as the official language and moving the corporate headquarters to Purchase, N.Y., near IBM’s corporate offices.
Surprisingly enough, the world may be ready to buy from China.
According to a consumer survey conducted by Millward Brown, a sister company of Ogilvy, consumers in the United Kingdom, the United States and France are not put off by Chinese products.
Nearly half of respondents cared little about where products were made. More than half said a company’s brand is the key buying decision.
Not household names here … yet
Chinese companies looking to make a splash in U.S. markets:
Lenovo (computers, IT services)
Sales: $2.9 billion for year ended in March
Net income: $143.72 million for year ended in March
Key move: Bought IBM’s personal computer unit
Haier Group (home appliances, cellphones)
Exports: $1 billion in first three quarters of 2005
Key move: Imports to Middle East and South Asia growing; bid for Maytag failed
Chery Automobile
Cars sold in 2005: 66,000 through May
Share of China market: 6.4 percent
Key move: Plans to sell low-cost cars in U.S. and Europe by 2007
Source: Bloomberg News
