International Brand Management of Chinese Companies: Case Studies on the Chinese Household Appliances and Consumer Electronics Industry Entering US and Western European Markets

371 Pages·2008·9.05 MB·English

by  Dr. Sandra Bell (auth.)

International Brand Management of Chinese Companies
Sandra Bell
International Brand
Management of Chinese
Companies
Case Studies on the Chinese Household
Appliances and Consumer Electronics
Industry Entering US and Western
European Markets
Physica-Verlag
A Springer Company
Author
Dr. Sandra Bell
Trappenbergstr. 35
45134 Essen
Germany
[email protected]
ISBN 978-3-7908-2029-4 e-ISBN 978-3-7908-2030-0
DOI: 10.1007/978-3-7908-2030-0
Contributions to Economics ISSN 1431-1933
Library of Congress Control Number: 2008923751
© 2008 Physica-Verlag Heidelberg
zgl. Dissertation der Mercator School of Management, Universität Duisburg-Essen, Germany
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Foreword
China is certainly doing its best to keep the world mesmerized by its eco-
nomic achievements. The Chinese economic growth story that begun 30
years ago has in terms of dynamics and duration long since surpassed all
those “economic miracles” which have brought Germany, Japan, and the
South East Asian Tigers into the top–league of the industrialized world.
The rapid expansion of the Chinese economy has gone along with a full-
fledged re-integration of China into the global economic system. In the
course of the last 30 years China has become a major player in the global
economy and today is on a trajectory towards even greater prominence.
In recent years, the Chinese economy seems to have reached an impor-
tant threshold line of economic development and global integration. In the
first quarter century of reform and global opening, Chinese enterprises
have been largely confined to a ‘passive’ role in the global division of la-
bor. Foreign enterprises as the proprietors of greatly superior business
models, production technologies, management models as well as very
competitively established brands have been integrating Chinese players in
their value chains and global operations. Lacking the necessary production
technologies, products as well as marketing knowledge to successfully ad-
dress OECD-consumers, Chinese enterprises have been hardly able to en-
ter the global markets without such guidance. Now, this constellation is
changing. An increasing number of Chinese enterprises has already ac-
quired a critical mass of production and management know-how and is
venturing out on the global markets in order to directly cater to the cus-
tomers of the OECD markets and gain a larger share in the profit pools un-
til recently monopolized by the established brand owners of the triad
economies.
The study presented here by Sandra Bell is dealing with these new Chi-
nese ‘global players’. Focussing on the Chinese household appliances and
consumer electronics industry she is taking a very detailed look at the
brand management of China’s new ‘multinationals’. The establishment of
strong brands in the OECD markets will be of fundamental importance for
a successful market entry by Chinese enterprises. But the successful
placement of new brands is known to be a very complex and resource con-
suming exercise, requiring very advanced management skills. However,
VI Foreword
the mere concepts of ‘marketing’ or even more so ‘branding’ have only re-
cently become common features in China’s transition economy: Are Chi-
nese players already in a position to deliver on the challenge of interna-
tional brand positioning? How successful are they? What strategies do they
employ, and to go one step further, is there something like a ‘Chinese way’
of going global and conducting international branding?
Sandra Bell provides answers to all of these questions. Founded on thor-
ough field research in China she presents a highly enlightening analysis of
how Chinese enterprises have ventured out in order to conquer the global
markets. By doing so she provides us with highly valuable insights in the
realities of brand management in China’s new corporate elite. With enor-
mous detail Sandra Bell dissects the international branding activities of
some of the most prominent Chinese enterprises and provides the reader
with an insider perspective not to be found elsewhere. Obviously most
Chinese enterprises are still in an early stage of their pro-active globaliza-
tion and are still paying a high price for learning from the markets. How-
ever, the learning curves seem to be steep and it does not appear to be too
far fetched to assume that Chinese brands will be soon a regular feature of
the European and American consumer markets.

Duisburg, November 30th, 2007

Univ.-Prof. Dr. Markus Taube
University of Duisburg-Essen
Mercator School of Management
East Asian Economics / China
Preface
Sun Tzu says: One who knows the enemy and knows himself will not be in danger
in a hundred battles. One who does not know the enemy but knows himself will
sometimes win, sometimes lose. One who does not know the enemy and does not
know himself will be in danger in every battle
(“The Art of War”, chap 3).

The motivation for this doctoral thesis has its origin in my childhood,
when my father invited Chinese colleagues to our home in Germany, and I,
then ten years old, became fascinated by their Chinese difference in ap-
pearance and culture. I therefore owe my father, Dr. Wolfgang Steinwarz,
not only thanks for his great support during the thesis itself, but finally my
education path as well. I would not have studied Sinology and the Chinese
language, and would not have chosen a China-related topic without him.
I would also like to express my gratitude to my sponsor Jürgen-
Manchot-Stiftung, who constantly supported my research, living and trav-
elling with generous funding in both Germany and China. Special thanks
also due to the DAAD and the Chinese Scholarship Council who enabled
my research period at Shanghai Fudan University.
I am also extremely indebted to the representatives of the participating
Chinese companies, namely Haier, TCL, Hisense and Lenovo, for volun-
teering their time into my in-depth interviews. Special thanks to Haier for a
fantastic exhibition tour. I would also like to especially thank Valinna,
Simon Zhao, Guillaume de Lavallade, Ying Zhang and Wei Ke, who en-
abled these interviews. The study could not have been completed without
the contributors and interviewees: Liu Zhenyu, Liu Zhanjie, Wang Ruiji,
Stacey Sun, Meng Yutian, Zhang Ying, Roland Gerke, Dr. Steffen
Stremme, Prof. Lu Xiongwen, Prof. Zhou Dongsheng, Prof. Allan K. K.
Chan, Prof. Hang Zhonghe, Rüdiger Burkat, Isabelle Gras, Prof. Sven
Müntel, Dr. Michael Meyer, Holger Gottstein, Jim Hemerling, David C.
Michael, Collins Qian, Joseph Wan, Paul French, Laurie Underwood,
Benedikt Sobotka, Dr. Marc Bieling, Dr. Christian Schmidkonz, Dr. Mat-
thias Schramm, Ponpon Zhan, Dunja Saleh-Zaki, Andreas Günther and
Laurence Bagot. Also invaluable was everyone who filled in the online
survey.
VIII Preface
Very special thanks are due to The Boston Consulting Group who en-
abled my thesis by a supportive leave of absence and strong global net-
works. I am especially grateful to Heidi Huang and Jacqueline Joliet who
have always served my research requests, regardless how strange and chal-
lenging they were, during their spare time.
I also owe large debts to Prof. Dr. Markus Taube, my doctoral father,
with whom I have discussed many of the ideas in this thesis and whose in-
fluence should be apparent. I would like to express special thanks for his
encouragement and invaluable comments throughout the research process.
I thank my friend Anja Wollschläger for her great support, since she was
never tired off sending me literature from German libraries to my home in
Shanghai.
Finally, I owe a great deal and ultimately my sanity to my family and
husband John Daniel Bell who have supported me during all stages of my
thesis. I thank John for his never-ending overwhelming support, encour-
agement, inspiration, and editorial contribution. Thank you for moving
with me to Shanghai. The thesis is dedicated to you.

Shanghai, February 10th, 2008

Sandra Bell

For any feedback and comments feel free to email to the author at
[email protected].
Contents
1 Introduction.............................................................................................1
1.1 Problem statement............................................................................1
1.1.1 Chinese companies in changing business environments...........1
1.1.2 Role of brand management when going-international...............4
1.1.3 Insufficient research..................................................................7
1.2 Limits and aims of the study...........................................................10
1.3 Theoretical und empirical access....................................................13
1.3.1 The basic theoretical framework.............................................13
1.3.2 Development of hypotheses.....................................................14
1.3.3 Why case studies?....................................................................15
1.3.4 Choice of data gathering methods...........................................17
1.3.5 Chosen research objects...........................................................19
1.4 Structure of study............................................................................21
2 Theory of international brand management......................................23
2.1 Aims of global brand building........................................................23
2.2 Strategic brand decisions when going-international.......................25
2.2.1 Brand positioning....................................................................25
2.2.2 Mode of market entry..............................................................31
2.2.3 Decision influencing factors....................................................35
2.3 Operative brand decisions when going-international.....................42
2.3.1 Branding..................................................................................42
2.3.2 Brand communication..............................................................49
2.3.3 Brand distribution....................................................................55
2.3.4 Brand organisation...................................................................58
2.4 Control and adaptation of brand decisions.....................................65
2.4.1 Brand control...........................................................................65
2.4.2 Brand adaptation......................................................................69
3 The who is who of Chinese branded companies.................................71
3.1 Domestic brand management experiences......................................71
3.1.1 Landscape of Chinese brands..................................................71
3.1.2 Chinese consumer behaviour towards brands..........................81
X Contents
3.1.3 Chinese organisational behaviour towards brands..................91
3.2 Experiences with developed markets............................................102
3.2.1 Learnings from multinationals in China................................103
3.2.2 China’s presence in developed markets.................................112
3.3 Brief evaluation of both areas of experience................................125
4 Hypotheses – How to enter developed markets................................129
4.1 Aims of global brand building......................................................129
4.2 Strategic brand decisions when going-international.....................130
4.3 Operative brand decisions when going-international...................135
5 Empirical study...................................................................................143
5.1 The global household appliances & consumer electronics
industry...............................................................................................143
5.2 The case studies............................................................................156
5.2.1 Case study 1: 海尔集团 Haier Group....................................157
5.2.2 Case study 2: TCL 集团 Corporation....................................186
5.2.3 Case study 3: 海信集团 Hisense Group................................211
5.2.4 Case study 4: Lenovo Group联想集团.................................234
6 The Chinese way of international brand management...................269
6.1 Cross-case comparisons................................................................269
6.1.1 Aims of global brand building...............................................269
6.1.2 Strategic brand decisions when going-international..............274
6.1.3 Operative brand decisions when going-international............282
6.2 Test of hypotheses........................................................................296
6.2.1 Aims of global brand building...............................................296
6.2.2 Strategic brand decisions when going-international..............297
6.2.3 Operative brand decisions when going-international............299
6.3 Development of a descriptive model............................................303
7 Summary and future research...........................................................313
Appendix.................................................................................................317
List of abbreviations..............................................................................331
Glossary of Chinese terms.....................................................................335
References...............................................................................................339
1 Introduction
1.1 Problem statement
1.1.1 Chinese companies in changing business environments
For years the People’s Republic of China1 is the largest growing market in
the world. The gross domestic product (GDP) increased on average 8.4%
between 1984 and 2005 (EIU 2006). This is faster than the US and Japan
grew during their early stages of economic development, and China’s rapid
growth is projected to continue through the next decade and beyond
(Xinhua 2005). Besides rapid economic growth, China also means an
enormous market size. 1.3bn inhabitants or one-fifth of the world’s entire
population live in China. They are not only considered a low cost labour
force, but also an attractive customer base (Zeng/Williamson 2004;
McGregor 2005; French 2006). No global corporation therefore dares
strategise without taking the country into consideration (Grant 2006). As a
result, China has attracted hundreds of world’s largest companies and in-
vestors, and has obtained immense amounts of foreign direct investments
(FDI). In 2004, contractual value of foreign fund was US$153.5bn, up by
33.38% compared to 2003, and actual utilised foreign fund value was
US$60.6bn (MOFCOM 2006c).
But, not only foreign companies have been attracted by the large Chi-
nese market place, also domestic Chinese companies have benefited from
the Chinese open door policy and increased market-economy environ-
ments since 1978 (Chai 1997, 2000; Zhang 2003). They have achieved
leading positions in the domestic markets and have become the world’s
second largest exporter after the USA with an export volume of US$593bn
in 2004 (EIU 2006). However, at least since China joined the World Trade
Organisation (WTO) in the end of 2001 the competition with foreign com-
panies has increased dramatically. Chinese companies are forced to organ-

1 The People’s Republic of China is hereinafter replaced and equally used by the
expression of ‘China’. According to usual practice (e.g., MOFCOM, UNCTAD
reports), the regions of Hong Kong and Taiwan are excluded if not explicitly
indicated otherwise.