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MARKETING: Chinese Brands Taking Over the World
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altThe term ‘Made in China’ has been appearing on the labels of consumer goods in just about every country in the world. In many Western consumers' minds ‘Made in China’ has conjured up strong impressions of mass production, cheap, low quality, and low durability. For a number of decades now, China has been the “world's factory”, producing everything from computer parts to textiles and sporting goods equipment. As China continues to develop into an economic powerhouse, large Chinese firms, aimed at developing a global presence, have been making headlines as they expand overseas. However, despite so many goods and components being made in China, few people around the globe can actually name a Chinese brand. In a study done by HD Trade Services earlier this year, only 6% of Americans were able to name a Chinese brand. The only Chinese brands that were named in the survey of 1500 Americans were Lenovo, Huawei, Air China, Baidu, and Haier  (respondents also mistakenly named Toyota, Sony, and Honda, which are of course Japanese brands). Despite this, many American consumers are in fact purchasing a lot of Chinese products, for the most part unknowingly. This is because Chinese firms have mainly been pursuing growth strategies through acquisitions and mergers to enter unfamiliar foreign markets. Chinese firms know the risks of entering new markets and would much rather acquire a pre-established and successful foreign firm along with its brand name, reputation, infrastructure, and market share. However, these strategies don't help in building appreciation for Chinese products in the way that many people might have for Japanese or Korean products.

The reasons for these overseas investments have been diverse. Originally, Chinese firms sought to gain technology to enhance their managerial skills, to increase production and the flow of raw materials, and to escape fierce competition with lower margins at home. Recently, Chinese firms have been looking to prop up their brand - their reputation for quality products or services, in order to capture a greater market share in the world economy. The industries and geography in which Chinese firms have been investing overseas has also been diversifying as of recent. Below is a look at some of the major overseas foreign direct investment moves made by Chinese firms in recent years. 

Dalian Wanda Group

Last May, Dalian Wanda Group purchased AMC Entertainment Holdings to form the world's largest cinema chain. At the time Wanda operated 730 screens in 86 theatres across China, while AMC operated 346 theatres with a total of 5,034 screens, mostly in North America. This deal, in combination with increasingly better movie production studios in China, could help to give greater exposure of Chinese culture overseas. Wanda’s move will also greatly help efforts for Chinese movie studios to “crack” western audiences who have traditionally not been so receptive towards Chinese films. Success abroad has been eluding Chinese studios for a number of years. The Flowers of War, starring superstar Christian Bale, was an ambitious Chinese production that severely underperformed at the U.S. box office where it only showed in 30 theatres across the country.

Geely Automotive Holdings 

Zhejiang based Geely Automobile Holdings purchased Volvo back in 2010 from Ford Motors for 1.5 billion USD. The struggling Swedish luxury car brand hasn't been profitable since 2005 but prospects have been looking up since Geely's acquisition, which has the potential to open up new markets in China, now the world's largest automobile market. At the end of August of this year, Geely opened a new Volvo manufacturing plant in Chengdu in order to supply the growing Chinese market. In 2012, 42,000 Volvos were sold in China. With the new manufacturing plant, Geely is expecting to sell 200,000 cars by 2018, and a rapid increase to 800,000 cars by 2020.

Shuanghui International Holdings, Ltd.

In September, Henan-based Shuanghui purchased Smithfield Foods Inc. for a whopping 4.7 billion USD, making it the largest acquisition of a U.S. company by a Chinese firm. As the price of pork in China has been one of the largest driving factors of inflation, the move by Shuanghui was logical to satisfy China's growing demand for meat, especially pork. The deal will most likely only involve the flow of pork being shipped from the U.S. to China, as a number of food-safety scandals have plagued China recently. The Smithfield deal will help Shuanghui build up its brand and reputation, as many Chinese citizens have been concerned about the sanitation and quality of their food products. In an effort to help raise the issue of food safety and brand awareness amongst pork-loving children, Shuanghui has sponsored a cartoon series, Shuanghui Big Forrest. The show features a grandpa who expertly cooks sausages on “Sausage Island” while an evil witch plots to steal the recipe.

Huawei

Huawei made headlines last year when the U.S. House Intelligence Committee ruled that the firm, along with its Chinese competitor ZTE, posed a threat to national security. However, this ruling has not affected its success in other overseas markets. Huawei has been enjoying success in markets all over the world including Asia, Africa, the Middle East, and Europe. Last year Huawei announced that it would invest 2 billion USD in the U.K. and 90 million USD in Finland to expand its operations and research facilities in Europe. Huawei recently surpassed Sweden's Ericsson as the world's largest telecoms equipment manufacturer.

Haier Group   

In November of last year Haier, based in Shandong province, obtained a 90% share of New Zealand's Fisher & Paykel Appliances, New Zealand's top home appliances brand. Zhang Ruimin, CEO of Haier Group, said, "Fisher & Paykel is a world famous luxurious brand, but after over 10 years, it hasn't expanded fast enough in the global market. Haier on the other hand, has a global market network. We have many resources, but we are lacking this high-end brand, the joint hands will enlarge the business on both sides." Fisher & Paykel Appliances has been troubled financially since 2009, when Haier bought a 20% stake in the company. 
 

By Justin Toy
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