Last year, a total of 79 per cent of respondents, most of them foreigners, answering an online survey said that identifying a product as "Made in China" hurts Chinese brands. The same respondents in the survey by international branding expert Interbrand were asked to provide three words representing their perception of Chinese brands. They listed negatives like cheap, poor value, poor quality and unreliable, says Martin Roll in an interview with China Business Weekly.

In the aftermath of the Interbrand survey, some questions are worth answering, such as why China is challenged when it comes to branding. Several explanations as well as some ideas for what Chinese companies can do to confront these negative perceptions are provided by branding expert Martin Roll. He is author of the international best-seller Asian Brand Strategy How Asia Builds Strong Brands.

Branding means business

Roll believes that China lacks internationally recognized brands. Of the Asian brands known outside Asia, like Sony, Honda, Banyan Tree Resorts and Samsung, not one is Chinese. In the league of well-known Asian brands one Chinese company is found, the Hong Kong-based bank HSBC.

Asked why other Chinese companies should make building brands a priority, Roll explains: "It is quite simple. Starting with the external factors, companies can increase their profitability, get a better cash flow, and become more competitive if they use branding seriously since it is a way of fencing off the competitors.

"From an internal point of view, branding can be used as a management tool to broaden the company vision and create an internally strong corporate culture. Branding also functions on the strategic level to set goals. Basically, branding creates the foundation and direction for leadership of a company."

Roll calls for drastic steps. He insists: "Companies need branding to differentiate themselves from others and make sure they are relevant. In order for that to succeed changes must happen, since numerous Chinese boardrooms are filled with technocrats. They lack boardroom-level marketing people.

"At this point, marketing people are placed in the third layer of the organization, virtually without connection to the management level. The necessary step is for marketing to be at a central level, making the marketing director accountable and cross-functional, which will only happen, when the marketing director rises to a level equal with the CEO and the CFO. The newest development in management is the rise of the chief marketing officer. This is the latest trend in Western boardrooms and lately Samsung is an Asian case in point."

One of Rolls' main points is the necessity for branding to be taken seriously starting at the highest level, and to distinguish it from advertising campaigns. "This is not cardboard and scissors; branding is not marketing people cutting out new logos or corporate identity programs. I often take part in educating companies that marketing is a leadership issue, that is, preparing companies to become more competitive," he says passionately.

Not just a logo

Roll admits that branding can become a worn-out concept, since business-people may think it merely comes down to advertisements. He thinks it is time to take the discipline seriously. "Sometimes people think they are working with branding, when actually they do not create added value. They are just making new logos. This is very often the case in China," he says.

One example of a Chinese company that works well brand-wise is Lenovo. Its leadership, unlike traditional Chinese conglomerates, excels in focusing strictly on its core business, electronics. In contrast, conglomerates in China and elsewhere in Asia have a tendency to spread thin, which is not conducive to brand building.

According to Roll, the biggest current challenge for businesses in China is giving up the mindset of trying to be the cheapest by selling large volumes at small margins. Low cost alone no longer provides a significant advantage, and cut-throat competition results in tremendous pressure on margins.

This Asian mindset is based on trading rather than branding, preferring a short-term gain over long-term strategic competence, and tangible assets over intangible wealth. But since the financial crisis in Asia in 1997, necessary changes have been on the way, Roll says.

One tangible financial incentive for building original brand products is seen in the sphere of mobile phones. An OEM (original equipment manufacturer), who makes parts for other companies, earns a 15 per cent profit. This is doubled by a brand mobile producer, who will earn a minimum profit of 30 per cent.

Roll emphasizes: "If you want to be serious about being 'Made in China,' you cannot be a copy-cat. Chinese should not be trend followers. They must take the bold step to become trend-setters, which involves a change of mindset among CEOs. However, it requires a strategic company fundament for marketing and also requires more focus on areas like innovation, patents, customer service and distribution."

The importance of intellectual property is proven by remarkable numbers provided by Roll: Five to seven per cent of world trade is counterfeited products, equalling US$450 billion yearly.

What's in a brand?

Roll questions whether some Chinese brands are really brands or merely products with a high degree of recognition primarily within China. The key to a brand is strong promise and strong delivery. Part of the traditional definition of a brand is also that people must be willing to pay 10 to 25 per cent more for the product; it must be associated with quality; and the company must connect the product with a strong and resonating story.

Another challenge, highly relevant for Chinese companies, is how to get their brands known outside China. Before achieving success outside the mainland, they need to ensure leadership within the organization and put in place professional brand management systems and processes.

"The Western world has spent almost 30 years in getting to know China, which indicates how big a challenge it has been. I think that China will get just as big a challenge from trying to expand its brands outside China. But at this point, China does not get first mover advantage, so the Chinese have to do things in a smarter and different way if they want to succeed.

"It will become the toughest challenge for Chinese business leaders in the coming years and they desperately need professional assistance to avoid all the pitfalls of globalizing their businesses. Being well-known and admired at home is no guarantee for success when expanding abroad and many businesses fail."