Newswise — Chinese manufacturers are attempting to expand by acquiring foreign companies, but a Purdue University international marketing expert warns that the Asian country's new companies will most likely struggle when it comes to creating global brand image and loyalty.
"The buzz right now is about China's recent and probable purchases of American companies and its investing of resources in new companies to create international brand forces," says Jay Wang, an assistant professor of marketing communication. "But buying or creating such companies is just a small step compared to establishing the brand with consumers around the world."
Wang defines international branding as products' capability to relate with consumers in different countries. Business Week magazine rates the world's top 100 brands in August. Last year's top 10 were Coca-Cola, Microsoft, IBM, GE, INTEL, Disney, McDonald's, Nokia, Toyota and Marlboro.
One limiting factor in China's international corporate development is the nation's communist political system that involves the government as a major stakeholder in its companies. A second is its non-democratic political philosophy. Both of these issues affect brand perception and connection, and might put off some customers, Wang says.
"Most Americans are comfortable buying U.S.-brand clothing made in China, but strategic international branding is a different game," Wang says. "If Chinese companies manage to brand strategically with consumers in countries with completely different political systems, this will prove we have entered a new frontier for branding and advertising.
"A case in point is Lenovo, a leading Chinese personal computer manufacturer which recently bought IBM's personal computer business known for its ThinkPad brand," Wang says. "The acquisition of ThinkPad is analogous to buying a piece of American heritage. It is yet to be seen whether China's Lenovo will build on that IBM-brand customer loyalty or pursue a different strategy."
There are also cultural issues to consider, such as how to name companies. For example, China's Haier, currently one company negotiating the purchase of Maytag, is a difficult name to pronounce in English, Wang says.
"If any Chinese company, such as Lenovo or Haier, is able to overcome the international branding obstacle and establish itself among the world's top brands, it will represent a significant achievement in business strategy that can cut across a truly global marketplace."