One of the biggest challenges for Asian companies apart from the prevailing trading mindset is the “Made In” tag in order for them to build and sustain strong brands. The differences arising from the Asian countries and their associations have a significant impact on brands. Japan, South Korea, and China are three Asian countries that represent the developed-developing spectrum very well.
Quite early on Japan had managed to build a very positive image as a country – a country of high productivity, high quality and high technological prowess. This positive country of origin effect gave a significant boost to brands that emerged from Japan. “Made in Japan” became a considerable asset and Japanese companies leveraged this to the hilt. True to the outside perception of Japan being a quality and technological powerhouse, many companies such as Honda, Toyota, and Sony introduced breakthrough products and made a mark in the US and the world market.
Korea had to struggle with its association with the Korean War to create an alternative positive country image. The Asian financial crisis of mid 1990s came as a blessing in disguise to Korean companies. Many Korean chaebols (conglomerates) were highly diversified businesses with no strategic focus.
But the financial crisis forced these chaebols to prune their businesses and to focus on quality and design to extract a premium. Samsung led the pack and with its single minded focus on world class design, quality and technological superiority, Samsung broke the glass ceiling and became the first Korean global brand. The presence of a strong governmental support and enforcement of stringent intellectual property laws have facilitated a conducive brand and business atmosphere.
China on the other hand has had many obstacles to overcome in its on-going attempt to emerge as a branded giant. China was isolated from the rest of global economy for a long time because of the state controlled economy. When China did decide to open up its economy gradually, it had to counter the negative perception of “Made in China” tag. To add to this is the huge counterfeit market that is thriving in the country. The lack of intellectual property right protection, lack of supporting infrastructure outside the big cities, lack of transparency in business deals, interference of the government have all been highly detrimental to China’s aspirations to become a branded giant. A handful of companies though have managed to break the glass ceiling and emerge in the global market such as Lenovo, Haier and Huawei with many others to come.
As is evident from these examples, challenges to building brands in Asia can be fairy idiosyncratic to individual countries. There are huge challenges for the many aspiring companies from these emerging economies to create resonating brands.
Emerging economies with its many countries, cultures, business practices and customer segments is much more complex than other any other region in the world. The clusters are made up of certain highly developed countries such as Japan, South Korea, Taiwan, Singapore and Hong Kong with ultra urban and modern consumers with deep pockets. China, India, Malaysia, Thailand and others have consumers willing to experiment with new products and eager to seek out brands.
Unlike the markets in US and Europe where markets and customers have reached a certain level of understanding and sophistication, these markets still demonstrate branding infancy. The mindset, the complexity of business structures, the diversity of demographic composition and the huge geographic extant requires certain unique brand building efforts. Here are some essential steps:
Create a strong differentiation: In many of the still developing countries, Western brands are still looked up to as people in these countries aspire to own the global brands. With many local companies striving to create similar products at lower prices, the Western brands would do good to create a strong differentiation by leveraging their brand equity. Similarly, local brands that aspire to make it big must tap into the unique cultural associations and local myths to weave the brand into the societal fibre.
Establish a strong distribution network: India and China, which constitutes two of the biggest economies of the emerging block are very vast countries and distribution in these countries holds the key to success in many industry sectors. A major percentage of the population lives in rural areas which are not usually covered by the major brands. But with an increased migration of consumer from the rural side into main stream economy, success in these rural areas will prove critical. Some major brands such as P&G and Unilever have benefited from such a focus in India. Coca-Cola has also recognized this emerging phenomenon and has expanded beyond the urban cities of Shanghai, Guangzhou and other cities into the heartlands of China.
Glocalize: As the emerging economies mature gradually, they start developing a strong sense of individual consumption identity. This is evident from the increasing demand for products which are localized to suit the local preferences of customers. Global brands which enter these markets must retain their brand identity at the strategic level but localize the tactical implementation such as the communication, product offerings and so on. This combination of global brands with local products will allow the global companies to weave their brands into the fabric of the local society and make the brand a part of the community. Similarly, local brands must leverage their knowledge of the local consumer must create a brand identity that not only appeals to the customers but also crates pride about the origins of the brand.
Leverage cross-border synergies: In spite of the many differences between these countries, companies can leverage the scale of operations and supply chain across borders to optimize profitability. The relatively lower cost of production offers companies a fine platform to serve the entire region. By standardizing the major part of the product and fine tuning the final offering to suit the local tastes, companies can minimize cost and gain scale.
Recognize and respond to the unique regional markets: Asia is a mosaic of cultures and rich heritage. Each country has a unique pattern of consumption. Companies should be careful not to generalize across them as a homogenous region by ignoring the glaring regional and national uniqueness. Managers aspiring to participate in these booming markets need to have a good appreciation of the above challenges. As each country is fast evolving and integrating with the global economy, none of these challenges and market situations are static. Businesses should develop the flexibility to quickly react to the changes in the market and adapt their strategies to successfully compete and survive.
Collaborate and co-create: Many global and regional companies entering these new markets have collaborated and leveraged the resources of the local companies. The combination of strong brand equity, financial prowess and the business acumen of the global brands and the local networks, established distribution channels and the strong knowledge of local customers of the local companies would offer a winning scenario. Such collaboration would not only facilitate a quicker entry into the market but also would allow the entering company to learn the nuances of the local business market.
Leverage the unique Asian culture: Companies that plan to build brands in these emerging economies must leverage the unique local culture to relate to the customers. Each country in thee cluster has a very strong history and heritage that has for long influenced the local cultures and practices of both companies and consumers. Companies should tap into these specific details and incorporate them in their brand personalities and identities so that customers can be offered an authentic experience.
For example, many Japanese brands have collaborated with Indian brands to enter the Indian market and have been highly successful. Kawasaki’s collaboration with Bajaj (Indian motorbike brand) and Honda’s strategic alliance with Hero (Indian automobile brand) is very successful.
Both Kawasaki and Honda entered the Indian market long before the current boom in the Indian market, a time when the Indian market space was still an enigma for many foreign brands. By strategically leveraging the capabilities of local brands of Bajaj and Hero respectively, the Japanese brands gained an instant access into the complexities of the Indian market, the distribution channels, and the Indian consumer mindset.
This partnership has also benefited the Indian brands which rode high on the equity of the Japanese brands which have traditionally been recognized for the technological prowess and high quality.
The changing market conditions have morphed branding from being a luxury for an elite few to a strategic necessity to all businesses that wish to survive and thrive in the long run. Companies across Asia are gradually starting to understand that if they want to emerge as serious contenders on the global scene and integrate with the developed economies, they will have to invest in strong brand equity.
The dominant economic model of the previous era of closed economies no more operate in the present day. Countries across the world are increasingly becoming connected. Given such changing rules of the global economic landscape, emerging economies cannot merely rely on established models of business and be complacent about their strategies.
Asian companies have taken the lead among emerging economies to show that changing from the old to the new is possible. For a very long time, Asian companies managed to do business without building resonating brands due to a number of factors such as government protection from global competition, localized markets, and low cost advantages. But with the raising economic power of China and India in the global scene, the confidence levels of many Asian companies are growing and more companies are aspiring to venture into the global market.
The addition of billions of people from these emerging economies is bound to change the underlying character of the global business landscape. The integration of such new producers and consumers into the main stream economy combined with capitalistic economic policies, globalization of trade and breaking down of trade barriers will bring about an enormous change in the global business order.
If companies in Asia realize the tremendous opportunities that lay in times to come and embrace branding as a strategic tool in order to exploit such the tremendous opportunities, the next generation of the most powerful and profitable global brands may very well emerge from this region.