Yoshikami: The China Brand Vacuum
Coca-Cola did it again. For the 11th consecutive year, the beverage company is ranked the "Best Global Brand" by Interbrand in its annual survey. Many other American brands led the pack, including Apple, Google, Microsoft, and McDonalds. And as is apparent if one travels internationally, US brands are still in demand overseas.
What stands out in the most recent survey is that Asian brands were few and far between with only just eight brands in the Top 100. Toyota was number 11, followed by Samsung and Honda making it into the Top 20. That's a very small slice of the pie. Not a single Chinese brand made it to the list and it is likely to take a while before they do given the Chinese focus on low cost as it competitive advantage.
True, China has come a long way. It is now the world's second largest economy and continues to lead in various growth figures and measures of market potential. But China's success as an economy and the strength of its manufacturing sector has not translated into success of a homegrown brand into the global arena. With the exception of Lenovo, which acquired the IBM ThinkPad property, there is not one local brand equipped to compete at a price premium in the developed markets of America, Europe and Japan.
China competes on price not brand.
The Chinese way of winning business is to compete on price and do things cheaper than the other guy.
In the long term, Chinese companies need to add value and grow profits along with revenues.
They need to understand that the only way to escape the downward pull of profit-destroying price competition is through customer loyalty.
Brands that matter to consumers is what will drive profits going forward. True, the largest and best contract manufacturers in China have customer loyalty with the companies they produce for. But brand loyalty needs to also trickle down to consumers as China attempts to make a global push forward.
China's growth has been impressive.
But growth brings challenges and no country's story can be told without its ups and downs. Structural changes are inevitable; a necessary by-product of economic growth. One of those necessary changes will be to embrace the concept of customer loyalty based on brand not price. China must move away from low-cost manufacturing as it's sole competitive advantage. Brand loyalty and awareness is the path towards even greater business wins.
Maybe the gloom about the future of the United States companies is too much shouting and not enough reality. China is playing catch up in the area of brand awareness and could take a lesson from American companies. Yes, maybe the United States still has a few lessons they can teach the world after all.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top 100 investment advisors in the United States for 2009 and 2010 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at email@example.com.