Saturday, August 23, 2008

Olympics put Chinese brands on a new starting line

CHINA Knowledge

Olympics put Chinese brands on a new starting line


Chinese products have long been associated with cheap labour and unreliable quality. However, it may not be the case now. Chinese producers are trying to move up the value chain and make high-quality and economical products. Yet, Chinese manufacturers may lack one more key factor in this transformation, that is, awareness of branding.

For instance, Haier, the largest white-goods producer of China, has very low recognition outside of the domestic market, but in the United States the Chinese company has more than a 30% market share in bar refrigerators and 50% in wine coolers, according to a Haier report.

In fact, hundreds of thousands of Chinese producers are facing the similar problem - high product acceptance with low global brand recognition. Luckily, the Beijing Olympics might be a perfect opportunity for Chinese brands to change consumers' minds.

When many are eager to calculate economic benefits of the two-week sporting extravaganza that ends tomorrow, we feel the economic impact might be exaggerated, and worries about a post-Olympics economic slowdown are misplaced. Instead, it is more important to evaluate the Olympics' impact on Chinese brands. They may just be a new starting point for Chinese products.

A record 63 companies have become sponsors or partners of the Beijing Olympics. Specifically, they are divided into worldwide partners, Beijing 2008 partners, sponsors, exclusive suppliers and suppliers.

At a cost of US$65 million, the country's biggest PC maker, Lenovo, is the first and only Chinese company to have obtained the top level of worldwide sponsorship for the Beijing Olympics. Clearly, the company intends to leverage the global event to elevate the homegrown brand to a worldwide one.

The company acquired IBM's laptop business in 2005. At the end of the first half of 2008, it ranked fourth in the world, with a 7.9% global market share.

However, it is still not easy for Lenovo to shrug off westerners' typical notions about China-made products, which prompted the Chinese company to work toward building itself into a global brand.

Following the global strategy of Samsung, which began growing from a domestic Korean appliance producer to a top-class global brand through its association with the 1988 Seoul Olympics, Lenovo is gaining momentum from the games and is well on the track of being recognised as an international brand.

While Lenovo is spending tens of millions of dollars to grab the golden opportunity for branding, the sportswear producer Li Ning Co Ltd was offered a shortcut to fame by the event.

Although Li Ning lost to Adidas in the bid to become the Games' official sportswear supplier, the company has risen to become China's premier sporting goods manufacturer. Li Ning is sponsoring four Chinese national teams - table tennis, diving, gymnastics and shooting - to wear its sportswear during the games. The four teams are the driving forces for obtaining gold medals for China. They won 14 of the China's 32 gold medals in the 2004 Athens Olympics.

Besides, Li-Ning apparel will be worn by the Spanish, Swedish and Argentine national basketball teams, the Tanzanian track and field team, Sudanese marathon runners and the US table tennis team.

The Argentine men's basketball team won gold at the 2004 Olympics and is a strong contender again this year. Therefore, every game it played has been a showcase for Li Ning's products. It is not difficult to see that Li Ning's awareness of the importance of branding is as strong as that of Adidas and Nike, which isn't a sponsor either but sponsored some of the most visible athletes.

What's more, by lighting the Olympic torch in the opening ceremony watched by billions worldwide, Li Ning, a former Olympic gymnast as well as the founder and chairman of the company that bears his name, has exerted a huge impact on his brand, and narrowed the gap with other global sportswear giants. Indeed, it is unlikely that a company could find a better stage than the grand opening ceremony to promote its products.

Although he wore the Adidas torchbearer uniform during the event, Li Ning himself, rather than the white torchbearer's uniform, is the "brand" everyone will remember.

The Olympics have set the stage for a global marketing push for Chinese brands. From Haier's air-conditioners, refrigerators and washing machines in the Olympic media village to Lenovo PCs and Li Ning sportswear, Chinese companies are taking the opportunity to bolster their images and expand further in the world market.

While people may think China is developing and using sports in a political way, through the Olympics, Beijing could well be telling the world a different story.

The contributor is the Research Director and Managing Consultant with China Knowledge Consulting. The firm provides corporate services, financial advisory, marketing strategy and recruitment to foreign businesses seeking business opportunities in China. Opinions expressed are her own.

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