Brand Expert Interview 'The Chinese Have the Necessary Vision'

Twenty years ago, China exported six cars. Last year it exported a million. Marketing expert Nirmalya Kumar speaks to SPIEGEL about the impending global ascent of brands from emerging economies.

A Haier factory in Qingdao in northern China's Shandong province.
AFP

A Haier factory in Qingdao in northern China's Shandong province.


SPIEGEL: Professor Kumar, in your recent book, you predict the breakout of future world brands from emerging markets, particularly from China. Are you not a bit premature? Even in Asia, the newly rich prefer Western brand icons like Apple or Armani to cheap local labels.

Kumar: If I had told you 25 years ago that South Korean brands like Samsung or Hyundai would successfully enter Germany, you would have called me crazy. However, now the Chinese, too, are on the advance. The Germans should take care in order not be caught off guard like in the past by the offensive of Japanese camera makers.

SPIEGEL: The advantage of the Chinese has long been in their cheap labor costs. German producers, on the other hand, stand for quality. Are they not well prepared for advances from the East?

Kumar: Chinese brands like Haier follow the same strategy as Toyota did: The Japanese automaker first produced in its own country, then it built factories throughout the world as well as bases for research and development in central markets. Finally, it also attacked in the luxury segment -- with the "Lexus." To be sure, Chinese car makers still lag behind, but they are slowly catching up, especially in the emerging markets. Twenty years ago China exported six cars, last year it exported one million cars.

SPIEGEL: Does this mean we have to be concerned about BMW or Mercedes?

Kumar: These brands are alive primarily thanks to China's growing market. There, they are adapting to the needs of their customers. BMW and Mercedes remain relevant as luxury brands. Relatively, however, the balance will shift -- in favor of new brands from the emerging markets.

SPIEGEL: And why haven't the Indians moved ahead with global brands?

Kumar: Indian companies face much higher barriers than Chinese ones: In order to make your brand known to Western customers you have to invest a lot of money in advertisement. The Chinese have the necessary vision and they have a home market which is four to five times as big as the Indian market. Profits generated in the domestic market finance their global offensives. What is more important, however: China is the only emerging market that has the ability to produce world class products. The Chinese produce for Bosch, for Apple, for Ericsson. But when they want to develop their own brands, they only have to put their own label on it.

SPIEGEL: Or they just buy Western brands. How important are brands still as a tool for consumers to judge products? Jaguar and Land Rover, for example, once stood for British tradition; now both brands belong to the Indian Tata group.

Kumar: Brands are not being defined by their country of origin any longer. Of course, if I market champagne, the country of origin still plays a role. However, if you buy an iPhone from Apple you don't think "Made in China." And if you drive a Jaguar or Land Rover you don't care about its Indian owner Tata or that the CEO of Jaguar Land Rover Automotive is a German. What matters to the consumer is whether the brand keeps what it promises.

SPIEGEL: Still, Western consumers are still skeptical when they see "Made in China" written on a product.

Kumar: Sure, during the past 40 years China defined itself by the cheap label "Made in China." In the coming 30 years, however, the world will more and more define itself by the label "Owned by China." China will own many global companies and important resources across the world.

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paullang 01/09/2014
1. tarrifs?
One hundred years ago it was thought necessary to protect American Manufacturing. The McKinley tarriff was imposed on imported products being dumped in the US market. To keep industry robust, and keep wealth at home, nothing beats a protective tarriff. It raised revenue, and levelled the playing field when dealing with a country that had no labor standards, no social security system, no income taxes etc.
fung.pee 01/09/2014
2. The 'C' in China does not mean Cheap
Too many people mentally associate China with poor quality, mass produced goods, as was the case many decades ago with Japan. The fact is you get what you want to pay for. If Western customers would get up the energy to actually examine the manufacturers data tags on equipment they buy they would find some of the finest pieces of equipment with Western names on them are actually made in China. I source electronics in China and the products I purchase are both top quality and best priced - way below that of manufacturers in the West. Another thing China has learned is keeping to production and delivery schedules. The reason the Apples and Samsungs of this world use China is an indicator others would be well served by remembering. Just as Germany enjoys a well-earned reputation for excellence in engineering so, too, will China in the future.
bearbear 01/09/2014
3. optional
even if china owns foreign brands like Tata does now, even if the world one day realize there are lots of "owned by china" out there, it still won't help the country when she is busy trying to keep up what the brand promises -- which is, originally, defined by another country, representing another culture. i hope one day she can tackle the skeptics from western world, but also build up brands that truly represents itself-- at least in that way, for good or for bad, she fights her own war.
lsasmh@yahoo.com 01/11/2014
4. China already produces quality products for Western brands
China has already produced quality products for overseas sellers like Honeywell, Olympus, Bosch, Sony, HP, Dell, etc. Western countries can profit from China's low costs and vast educated manpower by forming long term companies, not limited-term joint ventures, owned by different countries like EADS, AgustaWestland( UK + Italy) , etc These companies also gain guaranteed easy access to world's biggest or second biggest market, that is, China.
verbatim128 01/13/2014
5. Hardly the brands that matter
China dominates the production and export of consumer goods, the bread and butter of trade. As of a few days ago it seems they have surpassed the US in trade volume, claiming the number one place. It is already too late to cry over spilled milk, the greed of the US and other companies which moved production to Communist China has done the trick.
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