China Mfrs Lack Skills Needed To Create Brands - McKinsey
Monday October 13, 12:47 PM
BEIJING (Dow Jones)--China's manufacturers still lack the marketing skills to create and sustain branded names in major markets such as the U.S., Europe and Japan, according to a report by consultants McKinsey & Co. Inc.
While China dominates global manufacturing because of its low labor costs, most Chinese companies have been content to supply the world's biggest brands and private labels with products, rather than develop their own brands, the report published Monday says.
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Only a few companies, such as appliance maker Haier Group, which has some assets listed in Hong Kong as Haier-CCT Holdings Ltd. (1169.HK), and computer maker Legend Group Ltd. (0992.HK), have begun to establish themselves as global brands.
While China can make the grade in product quality, the question remains whether it can develop market strategies, the McKinsey report says.
"Creating and sustaining brands in developed markets is complex, expensive and uncertain," the report says. "The biggest obstacle is the Chinese manufacturers' lack of vital marketing skills."
The lack of overseas distribution channels, service networks and little promotional or advertising know-how will also make it difficult for Chinese companies to develop branded products with designs and features preferred by western customers, the report says.
Chinese companies most likely to succeed in establishing brands are those that have a track record in low-cost, high-quality manufacturing and show marketing prowess at a local level, the report adds.
Despite these challenges, the report says China's appliance and consumer electronics manufacturers have little choice but to go global, particularly as the local market continues to open to foreign competition.
"Just getting into the branding game though will require a combination of attractively priced products, good service and first-rate technology," it says. "To stay there, the Chinese will have to build or buy a wide range of new skills."
If they can do that, then Chinese companies selling branded products might eventually capture the price premiums enjoyed by some of their competitors in Japan and South Korea, the report says.
Company Web Site: mckinseyquarterly.com
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