Chinese Brands vs. Foreign Brands: An Analysis of Chinese Consumers Preference for Foreign Brands - Essay Example

Chinese Brands vs. Foreign/Western Brands: An Analysis of Chinese Consumers’ Preference for Foreign Brands Introduction Essentially, Chinese consumers view all global firms similarly, without trying to discriminate with regard to their nationalities. Nowadays, Chinese consumers prefer global brands. The Japanese and Koreans may choose local brands over global brands because of strong national sentiment. On the other hand, the Chinese are highly receptive to imported goods. Because of this global brands became very popular among Chinese consumers. The Chinese consumers are more similar to Western consumers than Asian ones (Hilliard et al., 2012). Without a doubt, Chinese consumers are more global in their preference and behavior, which may be somewhat surprising to an outsider. They purchase a large number of imported goods on a daily basis. It may even be observed that the more imported a product appears, the more willing Chinese consumers are to purchase it. This great preference for global brands is the main reason for the thriving of numerous foreign firms in China, and is also one of the main reasons why China at this time does not have any global brands. China Does not have any Global Brands Between 1980 and 1990, the gross domestic product (GDP) of China increased at roughly 10% annually. China became one of the world’s biggest economies in terms of GDP by 1998 (Nolan, 2001, pp. 186-187). After two decades of industrial program in China, adopting several strategies utilized by Japan, and with the same clear policy objective, important developments have occurred in the nation’s major, state-owned industries. The major industries have developed quickly in terms of profitability. They have adopted new technologies, become skilled at competing in the marketplace, largely improved the technical skills of their workers, gained considerable knowledge of global financial markets, developed new managerial expertise, and became desired associates for multinational firms (Gu & Frank, 2006). However, in spite of major improvements, none of the major Chinese ventures has developed into a globally competitive firm, with a global acquisition structure, a global market, and, most importantly, a global brand. According to Nolan (2001), China has only five corporations in the Fortune 500. The Chinese economy has developed rapidly in the recent decades because of developments in economic, cultural, and political arenas, allowing Chinese industries to expand and support the nation’s demands for goods and/or services. It also paved the way for global trade and foreign investments. Ultimately, China, with its cheap labor, has become a popular Original Equipment Manufacturer (OEM), with the marker ‘Made in China’ known across the globe (Ben-Ur & Wang, 2008, p. 155). To acquire knowledge and skills, Chinese firms are pursuing partnership with and acquiring firms with leading brands. However, these techniques failed to raise China’s reputation as regards innovation and originality. Unbranded goods are destined to fail in China. Chinese and foreign branded goods rule the market. Global brands even govern several market sectors, but that does not necessarily imply that they are imported goods. There are foreign branded goods that are manufactured in China. For instance, the detergent industry is dominated by global brands of Henkel and Procter & Gamble (Zinzius, 2004, p. 12). The automobile industry, which had yearly growth rates of roughly 40% from 2000 to 2003, is also controlled by global brands. Majority of these global brands, like Volkswagen, are manufactured by partnership with Chinese leading associates (Zinzius, 2004, p. 12). Still, Chinese brands lead the foreign competition in several industries, like home appliances and electric. However, even leading Chinese brands should compete toughly for market share and position. The competitive condition in China’s marketplace can be portrayed as the ‘War of the Brands’ (Zinzius, 2004, p. 12). Chinese businesses are competing with joint ventures between Chinese companies and foreign firms, against foreign companies, and among themselves. Chinese brands are expanding in all sectors of the consumer market. This is proven by the leading positions occupied by Chinese brands in different market segments, which are immensely profitable. In Hong Kong, a chief executive of a U.S. pharmaceutical firm and a Chinese expert were talking (Gu & Frank, 2006, pp. 19-20): “What do you do in China?” “I help multinationals to invest here.” “Investing in China? The Chinese are too poor to afford our products. Maybe 10 years down the road.” “What products do you sell?” “Pharmaceuticals.” “They are all here or coming!” “Which companies?” “Every big name you can think of.” Roughly $620 billion had flowed into China by 2005 (Gu & Frank, 2006). Foreign companies are overjoyed to witness Chinese consumers becoming more interested in improving their lives and experiencing all the foreign goods available. Furthermore, Chinese consumers are always fond of imported goods. Nowadays, most popular products are foreign branded ones. This is agreeable to foreign businesspeople. The rapidly growing China suggests a thriving economy at home. This is the key drive for transforming China into a global arena. With massive resources and enormous capital, multinational companies have a wide array of options and opportunities. Certainly, they could expand their operations anywhere they want. But China has become a leading preference (Alon, Littrell, & Chan, 2009). They have numerous reasons. Every country has its distinctive benefits. Nevertheless, in this period, China has been progressing more rapidly than most developing nations. Consumption levels in China are rapidly increasing. By 2006, with more than 400 million users of mobile phones, it is already the world’s top market. It becomes apparent that having the largest population in the world can be a dynamic advantage (Gu & Frank, 2006). Without these booming levels of consumption, it would have been very hard to draw massive foreign investments. The Chinese government declared in 2001 the ‘go global’ movement aimed at persuading the country’s leading state-owned businesses to become global competitors (Ben-Ur & Wang, 2008, p. 156). But, unfortunately, China still does not have leading, popular brands in the international market. The country is more popular for its cheap OEM, rather than for its creative and competitive brand image. Swystun and colleagues (2005), in their investigation of the outlooks of 243 CEOs all over the world, reported that 79 percent of them thought that the marker ‘Made in China’ harm Chinese brands, and that categorized by the occurrence of an articulated opinion, the most important features of the Chinese branded goods are that they are inexpensive, low quality and value, poorly made, unrefined, novel, obsolete, mostly unheard of, and forceful (as cited in Ben-Ur & Wang, 2008, p. 156). These issues have to be resolved before hoping for a more successful future. Chinese professionals are informed of these issues while they are trying to support and strengthen Chinese branding. It is known in China that ever since the transition toward a market economy and the restructuring process, there has been a considerable improvement in the brand awareness of Chinese businesses, but this occurrence is not pervasive. It was stated by the Chinese media that “some enterprises only focus on the immediate technical research and development and thus they are inadequate in R&D investment and weak in brand awareness without a long-term branding mechanism” (Ben-Ur & Wang, 2008, p. 156). However, this does not necessarily mean that the interest in moving from manufacturing model to marketing framework is absent. This statement by the Chinese media emphasizes the fact that the process of building a brand involves a continuous study of the market, the culture and the organizational competence that will motivate businesses toward branding. Furthermore, even though China is selling and distributing goods abroad, some enterprises are “satisfied with the status quo of manufacturing foreign brand name products and many enterprises run short of transnational talent and experiences in the operation of the international brand-name products” (Ben-Ur & Wang, 2008, pp. 156-157). It is especially vital that China understands that for branding to be successful, there should be knowledge, skills, and leadership that take the risks and operate autonomously in the global market. The Fifth Plenary Session of 16th Party Conference supported the necessity “To develop as soon as possible a number of internationally competitive enterprises with self-owned intellectual property rights and famous brands” (Ben-Ur & Wang, 2008, p. 157). Loo and Davies (2006) claim that this suggests that Chinese professionals are informed of the discrepancy that is present between the contemporary position of Chinese branding and the appropriate objective for Chinese ventures to attain in the global arena. It also emphasizes the value of intellectual property rights as the foundation for a flourishing brand. Chinese Consumers Prefer Imported Goods China is widely popular for its cheap manufacturing of goods sold all over the world as brands of recognized foreign global firms and leading foreign merchants. The capacity of Chinese firms to build competitive global brands is influenced by factors associated with country of origin. The country is not popular for its creativity, originality, or premium quality. One of the key constraints of the present condition is that China is playing a secondary role as ‘order takers’ from foreign firms that are in direct contact with consumers (Jap, 2010, p. 92). These global corporations have in-depth, precise knowledge of the consumers’ preferences and buying behaviors. Chinese consumers, in general, choose foreign branded products over local ones. Specifically young Chinese consumers like foreign branded clothes better than domestic ones (Jin & Kang, 2010). For instance, McEwen and colleagues (2006) reported in 2005 that roughly 30% of respondents under 18-24 age bracket bought foreign branded clothes; the numbers are roughly 10% and 20% for those under 30-39 and 25-29 age brackets, respectively (as cited in Kang, 2007, p 15). Other researchers substantiated this finding. Smith and Wylie (2004) studied college pupils in Shanghai and Beijing and reported that the respondents viewed foreign brands, like Nike, to be highly ingenious, while more than half of the sample population believed that China does not have any innovative, original local brands (as cited in Kang, 2007, p. 15). The preference of Chinese consumers for global brands can be attributed to three factors. First, products and/or services from developed or affluent nations have symbolic worth like high prestige, success, and power for many Chinese consumers; consumers in developing societies like foreign branded goods better than local products because imported goods are related not just to values of premium quality, but also to symbolic and social superiority (Liu et al., 2011). Batra and colleagues (2000) stressed that the appeal of foreign branded goods in developing societies is motivated largely by symbolic reasons, like identifying and expressing social statuses (as cited in Kang, 2007, p. 15). Just like consumers in other developing societies, Chinese consumers are intensely drawn to imported goods for the expression of their social status. Second, Chinese consumers believe that foreign branded products are of higher quality than local ones. For instance, Chinese consumers recognized shoes to be of greater quality when it is produced in a developed nation, like the United States or the UK, rather than in developing countries, like China or India (Liu et al., 2011). Chinese consumers regard global brands as goods from highly developed nations, and these global brands are competing at the high-end market. Within this market context, Chinese consumers believe that the quality of imported goods is superior over local ones. Third, the beliefs and ideals of Chinese consumers are shifting. Chinese consumers, especially those younger ones, have become more and more materialistic and individualistic due to extensive industrialization, modernization, and economic progress. With a larger number of materialistic and individualistic Chinese consumers, the cultural divide between China and other societies shrinks, and Chinese consumers have a greater tendency to be knowledgeable of or accustomed to imported goods and foreign cultures (Liu, Chang, & Lin, 2012). Researchers discovered that materialistic and individualistic consumers are more likely to prefer foreign branded goods over domestic ones. Nevertheless, earlier research on Chinese consumers’ preference has not presented empirical substantiation of consumer inclination to global brands. Many studies merely investigated the pattern of Chinese preference or rashly attributed Chinese consumer preference to symbolic content (Hiu et al., 2001). Moreover, research that empirically reported the correlation between Chinese consumers’ ideals and inclination toward imported goods has a weakness. Since ideals are a personal belief system, it is hard to identify those who are materialistic and individualistic without interview or survey tools. Research on the image of the country of origin demonstrates how the view of the country of origin influences the belief about national brands. Goods from less-developed countries (LDCs), according to the study of Loo and Davies (2006), are seen as substandard. For instance a television manufactured in Taiwan is regarded as substandard compared to those that are manufactured in Japan. Even though these reports are credible, it is still important to consider the possibility that Taiwanese brands may in fact be of poorer quality to Japanese brands irrespective of the country of origin, and that this poor quality is affecting and mirroring the country of origin brand reputation (Loo & Davies, 2006). Because of this it is essential for LDCs to focus on quality to build strong, positive brand reputation and country image. Moreover, it is important to consider these sets of evidence as cross-section research, embodying an actual phenomenon in a specific period of time. For instance, neither Toyota nor Honda was popular for producing premium products until consumers all over the world discovered the premium quality of their products. This discovery led to the rapid growth in popularity of Honda and Toyota products, even outperforming American and European product lines. Toyota attempted for a long time to enhance its performance and its image in the American market, and now it is regarded as one of the major companies in the automotive industry (Ben-Ur & Wang, 2008). This progress is the outcome of continuous dedication to systematic investigation of consumer ideals and demands, and the emergence of distribution systems reaching end users worldwide and delivering the utmost satisfaction level (Jap, 2010). This development strengthened the image of Japan as a leading manufacturer of automobiles. Long-lasting desire fulfilled by consumer products and/or services is believed to be the catalyst of a consumer society, contrary to a manufacturing society focused on meeting essential needs. Tian and Dong (2010) found out that the desires of Chinese consumers for foreign brands are great that goes beyond essential needs, and usually rational desires. In fact, it would appear that the financial difficulty of purchasing foreign brands due to their costliness is one of their distinctive characteristics. For Chinese consumers the word ‘foreign’ refers to imported goods, goods manufactured in China by a foreign firm, and by a joint venture between Chinese and foreign firms (Crocker & Tay, 2004). Basically, brands that were not entirely Chinese with regard to production and distribution were regarded ‘foreign’. This is suggestive of perceptions during the semi-colonial period, where in ‘foreign’ was described as not being entirely made in China. Five features were identified as integral to the description of foreign brands (Tian & Dong, 2010; Kang, 2007): (1) recognized country of origin; (2) global reputation; (3) guaranteed quality; (4) technically sophisticated production; and (5) costliness. Foreign brands were viewed as goods with recognized connections to affluent Western countries. Examples are Western European nations, like Finland, Italy, France, and Germany—Nokia, Christian Dior, Mercedes Benz—and the United States—McDonald’s, Coca Cola, Adidas—but also products from Japan (Tian & Dong, 2010, p. 56). For some Chinese consumers, perceptions of Western brands relied less on an effort to determine the good’s country of origin and more on whether the meaning of a brand name shows departures from standards of Chinese culture and language (Li & Shooshtari, 2003). Several examples of established Chinese brand names may contribute to a more accurate understanding of brand name creation, like names that express the message of a product (Tian & Dong, 2010, p. 56): For Feige bikes, fei means flying while ge means dove, rendering a meaning that the bike flies as fast as a dove. Hudie (butterfly) sewing machine conveys both the transformational process and the ease or lightness of sewing. For Hongxing radio, hong means read and xing means star, and reflects an early norm for many technological goods to bear names tied to nationalism. Not every brand name that showed departures from Chinese culture and language were considered Western or foreign. For instance, a number of translated brand names express poor understanding of Chinese culture and language which indicates being Western or foreign. The inappropriateness of their presentation weakens their reputation as a well-known global brand (Li & Shooshtari, 2003). The absence of refinement or finesse shown in the translation of their brand name excludes them from the Chinese consumers’ perception of Western or foreign. The perception of some Chinese consumers substantiated the findings of some researchers that translating a foreign brand name in order to enhance its linguistic value strengthens its success. Also excluded from the group of Western or foreign brands were translations bearing a solid Chinese cultural attribute that they were not distinguished as foreign. For instance, Pantene was ruled out by Chinese consumers from the category of ‘foreign brands’ because they associated Pantene with Pan-ting, a customary name of a Chinese girl (Peng & Zou, 2007). Thus strongly localized brand names, or those that do not express being Western or foreign, lose any recognized positive connections with Western brands. Nevertheless, there are brand names which are translated to embody the essences of the Chinese culture and language, showing signs of elegance and cultural respect while still characterizing the products as Western or foreign. In several cases this was carried out with a brand name resembling the sound of the Chinese language but features or messages associated with being foreign (Li & Shooshtari, 2003). For instance, Safeguard has been converted into its Chinese counterpart to indicate it is a Western brand with local sensibility. The Chinese translation of Safeguard is ‘Shu-fu-jai’ which means ‘comfort skin nicely’ (Tian & Dong, 2010, p. 58). This translation expresses the features of the product, in harmony with the rules of Chinese language. Some Chinese consumers claim that in order to be regarded a sophisticated foreign brand name the signified Western-ness does not have to exactly articulate the country of origin of the brand. As stated by one Chinese consumer: “I think the brand name Bi-sa-bing (Pizza Hut) is made very well… Pizza reminds people of the Leaning Tower of Pisa in Italy. Just by seeing the brand name you can tell its country of origin which reminds you of its cultural legacy” (Tian & Dong, 2010, p. 58). Moreover, others suggest that a more effective translation of a foreign-based brand name appeared suitable for technical goods to toughen their Western origin. Many Chinese consumers believe that technologically advanced products are manufactured in Western countries (Hilliard et al., 2012). Brand names contribute to the characterization of foreign brands but are not as crucial as are elements of global reputation, guaranteed quality, technical sophistication, and being pricey. This mirrors the experience of the local population with domestic products branded to express foreign-ness and take advantage of the perceived positive connections. Reactions to brands names that are translated reveal a phenomenon called ‘nationalistic visuality’, which is defined as “training the eye to identify visual clues and to distinguish between the foreign and the domestic across social life” (Tian & Dong, 2010, p. 8). Reasons for identifying these differences are different among Chinese consumers and aimed at purchasing foreign brands, purchasing local brands, or comparing and contrasting between the two in studies of the performance of China in building competitive global brands. Many Chinese consumers proposed that foreign or Western brands should be called ‘famous foreign brands’ because they should be popular if they want to successfully enter China (Li & Gallup, 1995). The study of Tian and Dong (2010) reported that many Chinese consumers view foreign brands to be widely famous, prestigious, and an exceptional brand. For them, the greatest asset of foreign brands is they are widely popular, famous, or globalized. Furthermore, besides celebrity promotion, many Chinese consumers believe that popular foreign brands have intensive promotional support from their manufacturers, reflected in the attention given to packaging and marketing (Jap, 2010). With the launching of foreign brands during the economic restructuring in the latter part of the 1970s, Chinese consumers were introduced to the process of packaging that was different from what had been widespread in China. The process of packaging in China was compatible with ideals highlighting sincerity, truthfulness, and essence. Because of this, most Chinese would rather have a useful and exceptional product with plain packaging than a generic product in complex packaging (Marks, 2005). Increased emphasis on the ‘attractiveness’ or ‘appearance’ of the package was fairly new at the start of the restructuring, which consequently encouraged Chinese consumers to differentiate foreign brands based on the packaging (Kolesnikov-Jessop & Foroohar, 2010). A widespread idea that characterized foreign brands in the Chinese consumers’ mentality was a feature widely called guaranteed quality. Quality is described to be the dependability and strength of products and/or services and outcomes complementing consumers’ demands and expectations and promotional assurances. It is also defined as the availability of customer service channels for addressing dissatisfaction or complaints (Gu & Frank, 2006). Maybe this discovery is not unexpected since news about product quality problems with products manufactured in China were also reported in the Western media. The Western mass media generally emphasizes quality weaknesses in production, instead of reporting about the remarkable development of a country whose industrial revolution occurred simultaneously with economic changes (Nolan, 2001). More rightful would be to emphasize that much of the production arena of China has developed in the fairly brief duration of time since the reform. Basing on the knowledge of the local population of quality control practices required of exports in contemporary China and capitalism’s doctrine of survival, many Chinese consumers believe that foreign brands must be of greater quality than local brands if they were able to successfully enter China. From their point of view, due to the protectionist background of China hardly any local brands are global, and thus do not have the equivalent quality values of the global market (Notar, 2012). Branded goods should have quality so as to thrive in the international market. The study of Tian and Dong (2010) reported actual opinions of Chinese consumers about foreign brands in terms of quality: foreign brand consistently have established, guaranteed, good, reliable, and credible quality; the greatest asset of foreign brands is exceptional quality and good service; and foreign brands never mislead consumers, disregard customers’ complaints, produce counterfeit goods, are defective, have poorer quality than domestic brands, and avoid acquiring copyright. Most Chinese consumers believe that foreign brands are more technologically sophisticated than their local counterparts. The term ‘technologically sophisticated’ for Chinese consumers is associated with convenience, durability, absence of unpleasant features, and improved performance (Peng & Zou, 2007). Foreign brand technologies like air conditioners and televisions were usually cited by Chinese consumers as being more technologically superior. Many Chinese consumers also stated that foreign brand sports equipment, and beauty and health products were technologically sophisticated (Hiu et al., 2001; Hilliard et al., 2012). According to some Chinese consumers, the greatest asset of foreign brand is they are complex and stylish. For a number of Chinese consumers, foreign brands were believed to work or perform better due to the highly developed technology used in their development and production. Associated with the view of technological superiority is the idea that foreign brands are consistently ‘new’. Many Chinese consumers believe that newness is a defining characteristic of foreign brands (Tian & Dong, 2010). Ultimately, as reported by Jin and Kang (2010), most Chinese consumers believe that foreign brands are expensive. They usually associate price with quality; thus, being pricey implies greater quality. Building Global Brands One of the key steps in building a brand is successful marketing. The capacity to attract and meet the demands of local consumers is the first phase for creating successful brand image. Of late, China was bestowed with urban consumers of upper worldly wisdom who looked for premium quality products. Even though Chinese consumers are factual and plain and do not commonly value originality and creativity, the present-day Chinese consumer is as materialistic and sophisticated as s/he can be predicted to be, particularly those residing in highly urbanized areas (Liu et al., 2012). They are driven by self-recognition, reputation, and status. This kind of market gives Chinese businesses the opportunity to try their capacity to meet the demands of this kind of urbane consumer while competing with foreign brands (Liu et al., 2011). The success of some Chinese firms can be credited to four main aspects. First, Chinese consumers have become more interested in and concerned about quality and safety; branded goods provide greater assurances than unbranded ones, and Chinese Compulsory Certificate (CCC), the new safety label of China, will further enhance safety and quality values (Nolan, 2001). Chinese consumers are prioritizing good quality. Second, Chinese consumers are somewhat concerned about status. Social acceptance is more essential than self-determined personality. Some Chinese consumers have a tendency to imitate others; for them, brand names guarantee security (Nolan, 2001). Third, Chinese consumers are becoming increasingly less certain about the advantage o or dominance of foreign brands. They have confidence in the dominance or parity of Chinese brands. There are still foreign branded products that are considered of greater quality and superior, such as cosmetic or beauty products, mobile phones, computers, cars, and other luxury products (Li & Gallup, 1995). And lastly, Chinese firms have eventually become skilled at reengineering, developing, and promoting brands. They adopt Western models without imitating them passively. They apply the brand strategy of the West to Chinese situations and Chinese consumers (Crocker & Tay, 2004). There are a number of instances where in Chinese firms either are absorbing international firms with knowledge and fame, or they are building partnerships or joint ventures with international firms. It is apparent that the Chinese leadership is informed of the discrepancy that is present between the present status of Chinese branding and the appropriate objective for Chinese ventures to realize in the global arena (Alon et al., 2009). In order to build a reputable global brand, Chinese firms have to abandon that reputation of poor quality, cheap products and less originality, and embody high quality and creativity by international standards. Chinese firms have to build their presence in the international marketplace to guarantee direct contact with the consumers for gathering of information. And, most importantly, in order for the Chinese firms to acquire market prospects that are accessible only to major international brands, they have to pay greater attention to the expectations and demands of consumers globally, espouse originality and novelty, and take part in interdependent global production and distribution. Conclusions The world has been witnessing the rise of China as an economic superpower. However, ironically, China is unable to develop its own global brands. One of the main reasons for this is the preference of many Chinese consumers for imported goods or foreign or Western products. Chinese products have a reputation for being inexpensive and poorly made. Mass produced products from China are usually exported to less developed and developing countries, and these products are generally generic and of poor quality. China also became popular for its talent in imitating original products of foreign brands. Because of these factors, many Chinese consumers regard Chinese products lowly. Some researchers provided empirical explanation of this phenomenon. They found out five major factors that influence Chinese consumers’ buying preference. These are recognized country of origin, global reputation, guaranteed quality, technical sophistication, and being pricey. Chinese consumers associate all of these attributes with foreign brands. China has an established reputation for being a manufacturer and supplier of cheap goods which are traded either as branded goods of internationally recognized firms or under the private brands of global merchants. It appears that numerous Chinese brands are having difficulties competing with global brands in the local markets, since Chinese products are somewhat viewed by Chinese consumers to be of poor quality. Because of this, many Chinese consumers prefer imported products. In comparison to major foreign brand names there appears to be a key difference in marketing approaches adopted by firms in foreign countries. The Chinese do not have a very strong reputation for creativity and originality, while the innovativeness and sensitivity of foreign brands to consumer values and expectations appear to have paid off liberally. References Alon, I., Littrell, R., & Chan, A. (2009) “Branding in China: Global Product Strategy Alternatives”, Multinational Business Review 17(4), 123+ Ben-Ur, J. & Wang, J. (2008) “From Made in China to Global Chinese Brand”, Journal of International Business and Economics 8(3), 155+ Crocker, G. & Tay, Y. 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