International Brand Recognition: Going Global

Let’s say you want to purchase a product that is not made in China; you probably have to look twice as hard. That’s just the way things are. Many of the things we use, eat, and drink are either made in China, assembled in China or increasingly so, have been bought out by Chinese companies. But as to the extent of the international awareness of Chinese brands, there’s definitely room for improvement. From a Western consumer perspective, if everything is made in China, and big Western companies are expanding into China, why are Chinese companies so intent on expanding West? Do they really crave overseas brand recognition?

“Qing jinlai, zou chuqu” (请进来，走出去) is a Chinese phrase which literally means ‘welcome in, going out.’ This is the name of the government policy encouraging both foreign direct investment in China as well as motivating Chinese companies to expand overseas. We’re going to explore the reasons behind the ‘why’; naturally, these reasons vary from company to company, but we’ve outlined four fundamental factors:

1. Expansion is logical, right?
   The first reason is usually down to expanding West being the next logical step; it just makes sense. Having already conquered the Chinese market, companies set their sights on bigger Western horizons, just as the Japanese and the South Koreans did in the past. Companies such as Huawei have enjoyed huge success domestically, but particularly for the technology industry, can you really feel like you have truly succeeded if your products and your brand is one that is unheard of outside of China and Asia?
2. Too many cooks spoil the broth.
   Another reason for the move overseas is the increased level of competition domestically. Walking on the streets of Beijing you can find three different real estate agents and several different launderettes on the same street—sometimes even next door to one another—so one can only imagine the competition faced by large companies. In the construction industry, two of China’s biggest and brightest companies (Sany and Zoomlion) are literally neighbors; both are headquartered in Changsha, Hunan Province. Having one of your main rivals operating a stone’s throw away from your front door probably isn’t the most conducive environment to work in.
3. A short-cut to success
   A third reason is the desire to get your hands on both technology and experience through acquisition of an established Western company thus taking over their pre-existing clients, reputation, staff and resources. In 2005, Lenovo acquired IBM’s PC division; almost instantly it went from being a $3 billion Chinese company to being an internationally recognized $15 billion company. But Lenovo’s story of mergers and acquisitions is by no means the norm, with up to 70% of cross-cultural M&A deals failing. Acquiring a company gives you a pre-existing foothold in the Western market, but the difference in business practices not to mention communication issues can mean it is ultimately impossible for two companies to successfully integrate into one.
4. Why not?
   The final main reason—that is perhaps the most persuading of the bunch—is the temptation of Chinese governmental initiatives. Due to large foreign reserves, the Chinese government is sponsoring and facilitating the move for many Chinese state-owned enterprises (SOE) to make the journey West—an offer which can be too good to refuse. By providing low-interest capital to SOE’s and facilitating their overseas investments, China’s ‘zouchuqu’ policy allows domestic companies to make the leap into both emerging and developed markets sooner than they may have done organically.All in all, it seems that the lure of the West is just too irresistible; the desire for overseas brand recognition both from the company and government perspective is almost reason enough to put everything on the line. What remains to be the challenge for Chinese companies expanding west is how to differentiate themselves from their pre-established Western competitors. For a company to have any chance of success in the Western market, they need to have a firm purpose—with the Why of going global as the backbone. Without a good enough reason and a strong enough desire, there’s every chance the companies will come scuttling back home with their proverbial tail between their legs…

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