John Tylee
Jun 27, 2014

The path from Asia to the world: A guide to going global

ASIA's TOP 1000 BRANDS: International ambition drives many Asian brands, but they must channel it carefully.

The path from Asia to the world: A guide to going global

The past couple of years have seen a flood of foreign adventures by Asian corporations. Suntory recently caused a stir with the purchase of Beam; Malaysia’s Genting Group, one of Asia’s biggest casino operators, is muscling into Nevada’s gambling scene; Weetabix, the UK’s best-selling cereal brand, has been gobbled up by China’s Bright Foods, while Manganese Bronze, maker of London’s black cabs, has joined Volvo in the stable of auto brands owned by Hangzhou-based Geely. And in April, China’s largest foreign retail investment to date concluded when Sanpower bought House of Fraser, one of the UK’s best-known department store chains.

The list of conquests appears unending. And although the recent pace of it was largely set by Indian companies such as Tata — owner of Jaguar and Land Rover, and which has adopted a dual strategy of organic growth and big brand acquisition — the Chinese are catching up fast.

Sir Martin Sorrell, WPP’s chief executive, having recently completed a 10-day tour of China meeting clients, says: “I was amazed by their understanding of technology and of their aspirations. These are people with big global ambitions.”

Nowhere more so than at Alibaba, the Chinese e-commerce giant that has opted for a flotation in New York rather than in Hong Kong. “Alibaba has a stronger platform than eBay, which it has seen off in China,” says Benedict Gordon, MD of Brand Union in Kong Hong. “Doing an IPO in New York sends a very strong message about its global ambition.”

“Asia is waking up to the realisation of just how much power and influence it has,” Rob Campbell, head of planning at Wieden + Kennedy Shanghai, suggests. Indeed, the acquisition binge is leading to speculation that the brand balance of power is shifting from West to East.

However, not every big Asian company has a need or desire to take their brands global. Eu Yang Sang, which specialises in traditional Chinese medicines, and Sincere Watch distributor, are among the smooth operations that eschew global experiments to concentrate on staying strong in Asia.

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“Asia has many largely untapped markets containing hundreds of millions of people,” Campbell points out. “There are big Asian companies that are perfectly happy to focus on these markets and run the biggest brands nobody has heard of.”

Also, only a limited number have the resources to do so. John Holton, partner at the Hong Kong office of the brand and marketing consultancy Prophet, puts the figure at no more than 50. True, there are lots of young and dynamic operations like Alibaba and Tencent, China’s biggest internet company and owner of the mobile messaging service WeChat.

But for every company like these, there are others that are ill-equipped to do so because of a bureaucratic legacy that comes from having been largely state-controlled for so long. Yet onlookers contend it’s more than youthful enthusiasm that unites Asian companies going global. All have huge domestic markets that provide the cash to bankroll their ambitions and all see going global as a means of maintaining credibility at home. Many are using their experience of building brands in less-developed, low-margin countries.

Along with strong customer propositions, many also have visionary and mercurial leaders. Zhang Ruimin, who turned Haier from a basket case into one of the world’s biggest white goods manufacturers is one. Alibaba’s Jack Ma, described by Holton as “the Steve Jobs of China”, is another.

A number have also taken advantage of the help offered by governments in countries like Korea, Singapore and Malaysia, which help companies achieve the scale to expand abroad. India’s high-tech industry owes much to government tax breaks.

Nevertheless, not even all this guarantees success on the global stage. For one thing, Chinese companies have a habit of flooding their overseas operations with Chinese staff, which can lead to serious cultural tensions. This can be exacerbated by introverted Asian characteristics that are often reflected in business practices and brand associations.

For another, Asian companies will likely have to work much harder than their Western counterparts to persuade consumers to try their products. Also, emerging Asian brands have persistent associations with poor quality, poor safety and, in some cases, unfair and unlawful labour practices.

“There’s a lot of negativity to be overcome,” Campbell says. “Much of it is fuelled by a Western media that loves to celebrate Asia’s flaws rather than its successes. That attitude is often borne out of fear and the need to feel superior.”

“How well companies like Alibaba and Tencent [fare] in Western markets will largely depend on how people perceive China,” Gordon says. “For example, Western consumers expect the kind of transparency that has caused companies like P&G and Unilever to take strategic decisions to be more visible. China has never been a very open society.” 

Nandani Lynton, who works on leadership development at Maersk, spent 19 years working in China. She says: “Chinese companies often don’t understand the importance of having a PR department when they become multinational. Building relationships with NGOs and good public awareness are not in their way of thinking.”

Moreover, some deep-rooted suspicions about the true motives of some expansionist Chinese companies remain. Last year, the US administration forbade its agencies from buying products from high-tech company Huawei amid security concerns. Seven months later, the Australian government followed suit. Yet it is Chinese brands that are most likely to be the catalyst for the global growth of others across the region over the next decade.

Joe Baladi, head of consulting at the Leo Burnett Institute of Behaviour, says: “If they can break the ‘Made in China’ code — and I think they will — the impact will wash all over Asia and impact a vast number of Asian brands.”

At the moment, however, the situation is not helped by some Chinese companies trying to bulldoze their way into Western markets rather than risk ridicule by failing. “Not losing face is very important,” Campbell points out. “That means they’ll try speeding things up rather than slowing them down.”

For Asian-based global wannabes like Jollibee, the largest food chain in the Philippines, establishing global credentials may prove difficult. Dismissed as a McDonald’s “me too”, it suffers from an unfocused and poorly executed expansion strategy. Its home country also lacks a reputation for good  food and is seen as corrupt and unprogressive. “McDonald’s is a US cultural icon,” one commentator explains. “A cheaper version of it won’t appeal to Western consumers.”

Holton says: “Asian companies have to remember they’re entering sophisticated, intensely competitive markets in which they’ll have to work hard to create the right value proposition. At the same time, a lot are having to make the transition from manufacturing to innovation. You can’t just turn up with a cheaper product. You have to have something different and innovative.”

All this may explain why companies looking at markets beyond Asia are entering through side doors rather than the main entrance. Sorrell expects more of them to target countries such as Turkey, Egypt and Russia as entry points because the competition there is less fierce. Qoros, the carmaking joint venture between China’s Chery Automobile and the Tel Aviv-based Israel Corporation, which plans to challenge European manufacturers on their home turf, will begin its push in Slovakia.

All that remains now is to see how many more Asian brands can follow the pioneering trail blazed by Haier which has bucked the trend among Chinese brands to rely on adaptation rather than genuine innovation. It has reaped spectacular benefits by breaking the Chinese mould of autocratic management, decentralising its structure and empowering its managers to take decisions. 

Some observers predict the pace will be set less by consumer brands and more by business-to-business operations such as Sany, the Chinese heavy machinery manufacturer, which has interests in Germany and the US. 

One corporation expected to be making more noise in future is Standard Chartered, which has embarked on a significant expansion programme, while its Western rivals have been cutting back. Analysts see the exposure from its US$30 million sponsorship deal with English Premier League football club Liverpool as emblematic of its intention to become a global brand.

Predictably, though, it is a high-tech brand that promises to cause the biggest global stir. Xiaomi, already on the way to becoming China’s market-leading smartphone maker by next year, confirmed in March that it would be entering the Indian market, the world’s largest after its domestic one.

Xiaomi, which Campbell characterises as “the lovechild of Samsung and Apple”, is seen as a true iconoclast with high-spec products at affordable prices. It already has a reputation for listening to what its customers want and changing products to meet their needs. A senior marketer who joined the company recently admitted that everything she’d learned during her career she had been forced to unlearn. “Xiaomi is the most incredible company I’ve ever come across,” Holton remarks. “Samsung, Apple and HTC had better watch out.”

 

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