While Chinese brands strive to expand their global footprint, they still face several challenges related to overseas expansion. Ogilvy China has published a report presenting how and why Chinese companies go global, identifying main trends in Chinese outbound marketing, and offering recommendations to overcome pitfalls and accelerate success.
Titled "Globalising in a New Economic Reality: Making Chinese Brands Matter Globally", the report builds on interviews with 40 CMOs of major Chinese companies and insights from Ogilvy experts in Chinese and global brand management.
The main motivation found for Chinese businesses to expand overseas reads the same as everywhere else: growth. About four out of five executives (79%) interviewed cited “new markets for growth” as the primary motivation for entering foreign markets, while domestic competition and the acquisition of advanced tech/skills ranked second (both 32%).
Hoping to expand overseas, half of the interviewees said they preferred building a new presence from scratch rather than acquiring an existing brand, while 30% chose a mix and match combination of both methods.
The report says that building from scratch in a foreign country, "can show a company’s long-term commitment to the market and demonstrate that it has something valuable to offer". Growing an overseas business from the ground up can benefit local markets, while the company builds trust with stakeholders in overseas markets, recruiting top talent, and creating strong local demand.
After planning to expand overseas, Chinese businesses' branding effort needs to be strengthened. According to the report, for most of the Chinese companies going global, branding is an afterthought.
Only one-third of the companies interviewed said that their overseas branding work is part of a global strategy, whereas half are either in the foundation set-up stage or planning phase.
"However, we believe that an early focus on branding and a clear understanding of its impact on various parts of a business is the key to success. A strong brand does not only help attract consumers or customers, but it also paves the way for better government and media relations, helps attract talents in local markets, and helps to forge partnerships with distributors and suppliers," the report said.
A brand must be crafted carefully, should resonate across all stakeholders, and position the company as the embodiment of a set of values. It also should deeply affect how a company operates: a strong brand is not just defined by a top-down vision, but about how this vision permeates the organisation as a whole and
brings the brand to life through its products, services, and people.
Chris Reitermann, chief executive of Ogilvy Asia and Greater China, said that companies must serve a larger purpose.
"A company has to answer questions like what do they bring to the world that matters, and how do employees, customers and governments benefit from what they do," he said. "This needs to be more than a lofty ambition, but a belief that is tied to the overall business goal. Most importantly, it must be differentiating and believable."
A brand also needs to own a narrative, according to Reitermann, as it helps avoid crises in the first place and allows it to bounce back faster if negative issues arise. Investing for the long term and elevating a brand strategy are also crucial to a successful overseas expansion.
Talent and culture is another main issue for Chinese companies. A lack of talent, local policies, and cultural differences were the top three challenges faced by companies on their overseas expansion journeys.
Asked about specific talent challenges, 57% of respondents highlighted cultural differences, while many also struggled with talent attraction and retention.
"Companies should hire overseas brand leaders with experience in multiple markets, who understand multiple cultures and communicate proactively and openly to overcome differences," said Peter Cappelli, professor at the Wharton Business School.
Wang Huiyao, founder and president of Centre for China and Globalisation, said Chinese companies must move away from relying solely on Chinese employees to go global. "Chinese companies with global ambitions must recognise international talent as a key driving force for sustainable overseas business growth," he said.
When it comes to local policies, Scott Kronick, chief executive of PR and Influence at Ogilvy Asia defines license to operate as much more than just clearing the legal requirements to operate a business.
"Before a brand can exercise influence, before any relationship can form between a company and an audience, before stakeholders can be engaged, companies must establish trust," he said.
Kronick explained that trust is not built through physical presence, nor financial dealings, but from an intimate understanding of culture, history, and communication. Trust is what gives brands full license to operate and it serves as a shield, helping companies navigate political tensions and unforeseen crises.
Public relations professionals play an important role in building a trustworthy brand. 89% of respondents said they had worked with public relations and public affairs professional before.
Understanding local norms, nuance, and context, developing a story that resonates, along with localising the brand are the points that a company should do before gaining trust and reputation.
The report also unveiled that the total investment in overseas branding and marketing among Chinese companies was low. Only 14% of the companies spent more than 20% of their total marketing budget overseas.
However, when Chinese companies took a hand to overseas branding and marketing, about two-thirds (65%) of overseas brand management was handled by headquarters, which made the decisions far away from local insights, leading to inefficiency and missed opportunities.
Engaging the international audience is another challenge for Chinese companies. 46% of interviewees said they didn't know or did not apply digital media to grow their brands overseas.
"To lead in the digital world, brands must adopt a digital strategy consistent with the brand’s identity, differentiate with strong digital experience design, and integrate globally with a central command force," said Allen Xu, managing director of Ogilvy Consulting in Shanghai.
As China's digital environment is different from other countries, success in overseas markets requires a deep understanding of the major global digital platforms like Facebook, Google, and Twitter, as well as local market characteristics.
Asked what qualities when they valued most in a marketing communication agency, 75% said they looked for local execution capability, while 68% of respondents said they needed local market insights. A global network was ranked third, as half of them thought that it's the most important quality.
Last but not least, measuring success in branding is a pain-point among Chinese brands. A few companies had more sophisticated measurement systems than merely tracking revenue. Some track global brand rankings, reputation, innovation capabilities, or the number of partners. Others looked at output metrics like the number of trade shows hosted or the number of Twitter followers. But none of these metrics go very far to inform branding work.
Ogilvy China advised that to maximise and accelerate progress in overseas markets, Chinese companies should prepare a global brand tracking scorecard with input from all local markets. It should be aggregated and shared not only across marketing teams but also management teams.
“We believe Chinese brands have tremendous growth potential globally. An early commitment and focus on a brand strategy that guides all overseas efforts will enable Chinese brands to develop a more sustainable business abroad," concluded Reitermann.