Home / Rohantha Athukorala/ ‘Made in China’ does not mean poor

‘Made in China’ does not mean poor

Comments / {{hitsCtrl.values.hits}} Views / Tuesday, 14 October 2014 01:56


Sri Lanka witnessed the 100,000th Chinese tourist coming into Sri Lanka the other day. Ha Yeon and Chen Yu Hua were welcomed at the BIA airport and apparently they decided to come to Sri Lanka upon seeing the bus branding in Shanghau, which made my mind track back to consumer attitude and its formation to source of origin                         Country of Origin – Korean At one time when someone said ‘made in Japan,’ it meant low price and poor quality. Only products manufactured in Germany were considered to be of high quality. However, with brands like Sony and Toyota setting the stage the country of origin ‘Japan’ became the standard of quality for electronic items and motor vehicles. Then came South Korean brands like Samsung and Kia that were referred to as cheap products and low quality in relation brands from Japan. But, once again the world saw how innovation and aggressive marketing converted consumer behaviour to move from Japanese products to South Korean and today Samsung is a $15 billion profit making venture whilst Sony is in the red on bottom line. South Korean origin Samsung is registering a sales turnover of $130 billion in 2012 from the humble $36 billion way back in 2002 whilst Japanese origin Sony which was $75 billion in 2002 is today down to $55 billion and profits at minus 0.8 b, which tells us how consumers are not interested in country of origin any more but purchasing a brand that meets one’s consumer requirements. Brand value If we were to forget the source of origin and just take a neutral denominator like brand value, we see that Sony which was valued at $ 8 billion in 2002 is today worth $ 32 billion whilst Sony that was $ 13 billion in 2002 has crashed to just a $ 9 billion, which shows the consumer shift to brands that meet consumer requirements rather than source of origin and heritage. ‘Made in China’ It was not long ago when if someone owned a ‘Made in China’ product it was termed cheap quality and poor but once again we see a shift in consumer behaviour just like the era of Japanese vs. Korean. Chinese brand Xiaomi, which is the number one brand of smartphones in China, hit the global market it is estimated that every five seconds there is a Xiaomi phone sold at a retail outlet. In fact, in India Hrithik Roshan and Sonam Kapoor are the brand ambassadors for the top Chinese brand in the Indian market, which has captured 6% of the market as against the 29% of Korean-owned Samsung. Even Indian brands like Kabonn and Micromax are now manufactured in China, which is an interesting revelation that the world is trying to get a grip on given that we always thought that the Indian supply chain was superior to the Chinese. But we see the reality changing once again. China: No. 9 If one takes the global list of Best Country of Origin brands, China is at No. 9 in the 2014 edition, which tells us that whilst we think China is very ethnocentric, the fact is that they aggressive and innovation-driven, which is resulting in a new class of consumers wanting to buy the country’s brands. If I am to single out brands like Lenovo, Alibaba and Xiaomi, they are helping ‘Brand China’ get into the top brand books in the world. But let us not forget that just five years ago Chinese companies were operating global brands with cheap quality products but over time with competition becoming more entrenched the brand owners became closer to the global consumers and hence the power to dominate has come to Chinese origin brands. Lenovo saga If we take Chinese origin Lenovo as a case in point, from PCs to laptops and tablets and now venturing into smart phones is the power of Chinese companies in driving trade and commerce to the global market. The latest research reveals that anything bought today can be traced back to China as the country of origin. It’s a very interesting dimension. I guess when the Chinese Premier visited India, Indian Premier Narendra Modi mentioning that India is no more a land of snakes but a land of computer mouses was an interesting theme. Now the challenge is how India adjusts to the 95 billion dollar investment that the Chinese Premier pledged last month in Delhi. Sri Lanka has not only moved the tables to making China the highest lender of finance but the new island off Colombo 1 is invested in by the Chinese at a cost of 1.4 billion dollars. It’s a very interesting development we see in our part of the world. I guess the proposed FTA with China will further increase the trade between our two countries, which will certainly change the brand proliferations in a typical retail outlet. Distribution strategy An interesting global marketing strategy of Chinese brands is that rather than setting up distribution networks, they opt for e-commerce portals to reach consumers. In India the strategy is to link with companies like Flipkart, whilst in Sri Lanka the brands enter into dealer network partnerships, which are interesting. In the former, the price can remain competitive given that it’s a direct way of reaching a consumer whilst the latter makes the price take the fat by way of the distributor margins. I guess there is a cultural connotation on the choice of distribution strategy. Sri Lankans always prefer the direct discussion with a sales person whilst tech-savvy Indians are more prone to purchasing brands off the net. Next steps Hence we see that the influence of Country of Origin to the purchasing process is getting weaker over time and the new ethos is more on value for money to a consumer, which also means that an established brand in a country can be under attack from new brands, if one does not continuously innovate. A classic example was Venival soap capturing almost 20% plus share from global multinational brands. Another is when Sudantha Toothpaste did the same on the dentifrice market. (The author is an award winning marketer and business personality who sits on many boards as Director in the private and public sector whilst also being attached to the global public sector. He is an alumnus of Harvard University. The thoughts expressed are his own and not the views of any organisation he serves in Sri Lanka

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