Editor’s note:

Many businesses such as Lenovo and Huawei from China, Tata Motors from India, and the Corona brewery from Mexcio have established a foothold in global markets, but their brands do not carry the same clout as Apple, Toyota or Heineken. Why is that? Professor Jan-Benedict Steenkamp of the University of North Carolina at Chapel Hill answered the question in a book he co-authored with Nirmalya Kumar, titled “Brand Breakout — How Emerging Market Brands Will Go Global.” He shared his insights with Shanghai Daily reporter Ni Tao in an interview at East China Normal University last week.

Q: Despite their growth and spending on advertising, few companies in emerging Asia have built global brands in the past few years. Why?

A: Well, when you look at the advertising spending by emerging market companies, it’s trivial compared to what is spent by large Western companies.

Hai’er is an example. They say we do not have the marketing dollars of Whirlpool, LG or Samsung to push our brand. I would argue that emerging market companies have spent really little on advertising.

That may change in the future, but the challenge is that if you are an engineer, you might think it is a waste of money, because engineers tend to believe in hardware. Marketing, branding, advertising seems a little vague.

Besides advertising and more importantly, why are emerging market companies not currently in the house of names?

If we look at China as the most prominent example, 30 years ago, China was at the very early stage of industrialization. After the reform policy, China really took off. But it takes some time to develop brands.

The first thing you need to develop is manufacturing infrastructure. The second thing is to build a certain skill of industrial production because you need to have cost and control. What we are finding now is that a lot of Chinese companies have built their manufacturing infrastructure, they have cost and control, so now they have a production portfolio which allows them to enter the next stage, that is to chase Western brands in terms of quality.

Q: Talking of “brand breakout,” a common approach would be to first set up operations in less advanced countries. Is starting low a good pathway to “brand breakout”?

A: Sometimes it can be a good pathway, I would say especially in the B2B market, because those low markets are ignored by the big giants. Huawei is an example of a company that follows this approach. The coastal areas of China are seized by others, so Huawei has to focus on the countryside, the smaller cities for telecom equipment. So they conquered China and then went to Africa and Vietnam and so on, those are not markets that Alcatel-Lucent or Ericsson, Nokia or Siemens are interested in. So Huawei was able to build up its competence and then went to Western Europe.

However, in general, how do you improve your skills? By playing against the best. And especially to build the consumer brand, it’s better to enter Western markets first. If you can survive in those markets, you can survive everywhere.

Q: What have emerging market brands done to manage the “country-of-origin” effect?

A: People in the West usually associate low quality with countries from emerging markets. In emerging markets, the country-of-origin effect of other emerging markets also tends to be negative.

Now what can you do about it? There are a number of strategies you can use. One strategy is to focus on if there is something positive about my country.

Shanghai, for example, is perceived to be grounded in two worlds. It has its mystique of the exotic East, but it is also an emblem of modernity. There are certain Chinese brands that have leveraged that, like Shanghai Tang, a fashion brand and Shanghai Vive, a premium luxury brand introduced by Shanghai Jahwa United, a very famous cosmetics company. The general manager of Jahwa thinks that a Shanghai label means something. That’s one approach.

Another approach is to counter against the country-of-origin effect by giving extra guarantee.

A third approach is to hide the country-of-origin label.

A fourth approach is to invest in advertising. The best example in my view is Emirates Airlines, which improves its image by sponsoring large European football clubs.

Q: German goods are a byword for quality. French brands convey class and luxury, and Japanese are known for their attention to details. But there are little, if any, of those national myths about Chinese brands. What is the myth Chinese brands can promote?

A: I would say a general message is unlikely to play out because Germans have a great reputation for engineering, which is very important for machinery and cars. But they are very bad for clothes or cosmetics. Certain national characteristics are true. They help certain industries but hurt other industries.

Now, what will be China’s route?

It depends on the products that you’ll make successful, because your point about Japanese attention to details and careful manufacturing has more to do with the fact that Japan focuses on electronics, car industry where those things matter a lot. So the image of Japan now is largely a function of the characteristics of those Japanese products that have been very successful.

As I will see it, China has the greatest potential of supplanting Japan and possibly South Korea in that position of being a high-quality, cutting-edge manufacturer.

But there is something else I believe China could do. China has history and the richness of its history is second to none. Every European of any education knows Marco Polo. People have built archetypes in their memories of China being a good inventor since ancient times. People should be sufficiently aware of it to tap into all those resources. China has a lot of symbols and archetypes to work with. Very few other countries have that.

Q: You talked to a lot of Chinese business leaders. What did you find about their branding strategy?

A: I would say that among the leading companies there is a lot of ambition and desire to build strong brands. One pattern would be that Chinese business leaders think a lot about logic, but too little about magic when it comes to brands. But strong brand has both logic and magic. Logic is only about performance, magic is about emotions, how does the brand make me feel? What kind of desires can the brand fulfill for me? It is kind of a fluffy language, but it’s relevant.

Q: Has any anecdote changed your long-held views of Chinese brands?

A: The one thing that changed my views is that I visited the Pearl River Piano factory in Guangzhou, and I did see a whole line of pianos being meticulously worked on by people that looked like they were in lab outfits rather than workers’ outfits.

I walked around for two hours or so. The precision with which the manufacturing was done, and the workers’ attention to detail, was completely inconsistent with at least notions I have had long ago of shoddy workmanship. I found that to be very impressive.

Why that factory visit is important is because piano is one of the ultimate European products. The Germans are leading piano manufacturers, not in terms of volume, but of craftsmanship. There was this idea that mass production might be underway in China and hurt quality. But here I see craftsmanship, first and foremost of a product that is not indigenously Chinese.

Q: When do we expect to see a wave of globalized Chinese brands?

A: My prediction would be before the end of this decade, so that’s within 10 years. 

My hopes are highest in consumer electronics. And the reason is that in consumer electronics, brand loyalty is as long as the latest model. Apple is the only real exception that commands very deep loyalty and devotion among people.

So if the Chinese brands are able to come up with some good products — and they are doing that — they can easily sway consumers in that direction and that will have a dramatic effect on the general perception of the Western public concerning the Chinese brands.

We have seen this play out earlier with Japanese brands and their image. Perceptions can change if you are successful with branding and can turn out good products. However, to turn the country-of-origin effect around, you need to be successful in industries like high-tech, engineering, these sort of things.

Q: What’s your advice to Chinese brands embarking on global brand breakout?

A: I would say three things.

First, make sure the quality is good, otherwise don’t even do it.

Second, have patience. One of the things that strikes me a little bit about Chinese managers is that quite a few of them are quite impatient. Brand-building takes time.

And third, realize that brand is about logic and magic.

I think all three are perfectly doable. The quality is in many cases there and is increasing by the day; for patience, you set a realistic goal for yourself; for logic and magic, hire more graduates from MBA programs. That is the way some Western companies have done it.

Nearly all companies started out with engineers. The marketing guys only came later, because they’ve got nothing to sell if the products were just rubbish.