In a small sports store in a second tier city in Argentina, volleyball shirts emblazoned with the “Li Ning” brand are prominently displayed. And they sell well, says the owner. But Li Ning is far from being a Nike, despite being available so far from home turf.
In the next few years, this might change.
Li Ning is one of many Asian brands – once virtually unheard of – that now has some global presence.
Other Southeast Asian countries have their own star brands too. Malaysia has Petronas and Maybank. Hong Kong has Cathay Pacific and Shangri-La Hotels – although the latter opened its first property in Singapore.
Young girls around the globe love Hello Kitty. San Miguel beer, from the Philippines, is common but can’t quite match up with Red Bull, from Thailand. Singapore’s Creative Technologies makes SoundBlaster sound cards that are a standard for PCs around the world. Lee Kum Kee condiments, originally from China, are spicing up food around the world, often side by side with Indonesia’s Maggi sauces.
Japan, South Korea and Australia are ahead of the game and many of their brands are already well established, especially in the automotive and electronics field.
Australia’s Woolworths, worth $4 billion, may be Asia’s most valuable brand, according to Interbrand, an international brand consultancy that puts out an annual report on the most valuable brands.
Uniqlo, the Japanese retailer, has an aggressive expansion plan in place that will soon see it compete with American and European powerhouses such as Gap, Zara and H&M on an equal footing. Worth $2.6 billion, it is the second most valuable Asian brand.
Among Interbrand’s most valuable 100 brands in the world, Japan’s top brands are worth $85.3 billion, South Korea’s $29.4 billion while Taiwan’s HTC raised its total to $3.6 billion.
Brands from the US, worth almost $800 billion, still lead the pack but Asian brands now account for 10 of the top 100.
Toyota (ranked 11) is worth more than $27.7 billion, Honda (19) $19.4 billion, while Canon, at 33, one behind HSBC, is worth $11.7 billion. Sony is worth $9.8 billion, Nintendo $7.7 billion, Panasonic $5 billion and Nissan $3.8 billion.
South Korea’s Samsung, at number 17, is worth $23.4 billion. Hyundai, at 61, is worth $6 billion. Taiwan’s HTC, worth $3.6 billion, is now the third largest smartphone maker in the world.
Uniqlo, for instance, has already taken Asia by storm. As of October, it has 93 stores in China, where it plans to expand aggressively, and opened its first store in Malaysiain November last year. Stores are also being planned for Vietnam, Thailand, Indonesia, and the Philippines.
In the developing countries of Southeast Asia there are half a billion people living in 11 countries. This creates plenty of regional opportunities for brands that want to use the region as a springboard to launch their products globally.
And, by sheer numbers, China’s brands are likely to make up the next wave of global brands, even if they have yet to gain an international following.
In fact, several Chinese brands have already made in roads overseas. Drive down the streets of Braziland you’ll find Chinese-developed Chery cars. Go to college dormitories in the US or Canada and Chinese-made Haier fridges are likely there, full of beer and stale pizza.
Lenovo computers are hardly a rarity, even if they are nowhere near holding a majority share of the market. Other brands like Li Ning, TLC, Huawei, Geely, Tsingtao and even Bank of China can be found abroad.
Typically, Chinese brands have had more success in emerging markets, where they can convert low prices into significant market penetration.
Many are already expanding across Asia’s emerging markets to more developed – and more profitable – markets in North Americaand Europe, following the path pioneered by Japanese and South Korean brands.
The driving force behind this brand expansion is growing participation in international trade that began in earnest in 2001, when China joined the World Trade Organization (WTO).
“The WTO has benefited trade in Chinaand it has helped open more markets. Different buyers come from all over the world to look at the products that Chinahas designed and manufactured,” said Tommy Wong, president of Global Sources’ Exhibitions.
Global Sources is an international company that links buyers with suppliers.
In the 1960s and 1970s, there were virtually no Asian brands abroad. Then the Japanese manufacturing boom started and its companies expanded globally. Same goes for South Korean brands which were virtually unknown through the 1970s and 1980s. Both countries joined the WTO in 1995.
Back in 2001, China started liberalizing its markets after joining the WTO; in turn it gained access to other markets around the world.
In 2010, Chinese companies invested $68.8 billion abroad, a 21.7 percent annual hike that put Chinese’s foreign direct investments in fifth place around the world, according to the Ministry of Commerce.
Some 13,000 companies have invested in 178 countries.
“Exports of electronic products to the UShave been (steadily) increasing after China’s accession to the WTO. Ten years ago, companies in Chinaonly produced products for overseas brands as Chinawas seen as a manufacturer,” says Wong of Global Sources.
China complemented its participation in the WTO with a growing series of bilateral trade agreements, most significantly one with the Association of Southeast Asian Nations (ASEAN) that quickly gave its companies access to 10 markets in the region.
To spur economic links both within the region and internationally, members at the recent Asia-Pacific Economic Cooperation Forum have agreed that they would refrain from raising new barriers against investment and trade in both goods and services or implement any measures inconsistent with WTO’s strategies.
Some brands are already using closer regional trade links to expand their market base.
In China, the erosion of subsidies and the slow but steady liberalization of its domestic markets are pushing the country’s more successful brands abroad in search of new customers. The choice is to expand or face increasing competition at home from international brands that are steadily making inroads into the vast Chinese market.
TCL Corp, the maker of mobile phones and flat screen TVs is one company that is using Asiaas a stepping stone and has been very successful. In the first three quarters of 2011, TCL’s sales of flat screen TVs in emerging markets (mostly Asian) jumped 136.4 percent while revenues from overseas markets rose 12 percent year on year, according to Yang Dongsheng, the company’s chairman.
Li Ning, on the other hand, is leveraging its strong image at home to compensate for its relatively small size overseas. In China, Li Ning has some 8,000 stores and is very well known. Elsewhere however, its products are only available online or through a few retailers. For the time being, international operations – mostly from Southeast Asia– account for less than 2 percent of the company’s revenue, which was about $1.5 billion last year.
TCL, Li Ning and most other Chinese brands also have to fight deeply rooted perceptions that Chinese branded products are inferior in quality. This was a similar perception that successful Japanese and then South Korean brands, initially, had to face and overcome.
At the same time, a chronic shortage of creative talent makes it difficult for them to compete on even footing in more sophisticated and potentially profitable markets.
“Their (China’s) predominant strength is price. Their weaknesses – quality, reliability and so on,” said Thomas Isaac, commercial director at TNS Hong Kong. TNS is a global market research and consultancy.
“The tragedy for some of these companies is that they are producing world-class products but they are dragged down by the (negative) perception of Chinese products,” said Isaac.
When TNS did a survey in 29 countries last year for the Association of Accredited Advertising Agencies and the Hong Konggovernment, it found advertising industry executives expect Chinese brands to play an increasingly important role in some sectors, particularly electronics and home appliances.
The survey also found that products made in Chinafor overseas brands are generally better regarded than products for local brands. The fact that most of the products for foreign brands are, at some point in the supply chain, likely to be produced in Chinadoes not seem to matter.
But the sheer size of Chinese-designed-and-manufactured products will inevitably make its way into myriad consumer markets. Already, most products under foreign brand names are made in China. The trick will be for Chinese companies to shift gears and market their own products under their own brand names.
The climb out of obscurity for Chinese brands is likely to take years, but it is almost certain that they will eventually be in the spotlight.