Looking For McDonald's In China: Can Emerging Economies Build Global Brands?
It is a variant of the classic East-West confrontation. And in the conflict pitting Samsung against Apple, the Asian technology giant versus the American one, you ain’t seen nothing yet.
Apple won the first round when a Californian court sentenced Samsung to pay more than $1 billion of compensatory damages for infringing patents. But the following day, the South Korean company fought back. This time in Seoul – on more familiar ground - a court convicted both Apple and Samsung of mutual patent infringement. And then on August 31, a judge in Tokyo cleared Samsung and convicted Apple.
A dozen other legal actions have begun in other countries. Global competition knows neither borders nor mercy.
Samsung Electronics is the world’s biggest smartphone seller. Apple, with its iPhone, falls just behind. Both combined, these giants account for more than half of the smartphones sold worldwide. Yet, next to this market lies another very promising business: tablet computers. In this particular market, it is quite the opposite: the American firm is still the leader.
Samsung and Apple are two powerful global brands with very different backgrounds.
The Samsung group was founded in the emerging world, although it was established in 1938, long before Steve Jobs created Apple in the Silicon Valley in 1976. It is South Korea’s largest chaebol, a family conglomerate company with numerous activities. The electronics department, obviously more recent, has risen spectacularly since the smartphone boom. The irony lies in the fact that the Asian firm has managed to outsell Apple thanks to another American giant: Google. Samsung telephones use Google-made Android browsers.
Samsung is what every emerging country’s economies dream of: a global brand able to compete with one of the most prestigious giants of the Western world. It is proof of power and success – the soft power of economy. In his book entitled China in 2030, Hu Angang, professor at the School of Public Policy and Management and director of the Center for China Studies at Tsinghua University in Beijing, explains what fuels such ambition: “At the heart of the rise of a country," he said, "there is the growth of powerful companies enjoying world class reputation.”
A Chinese McDonald's?
But where are these emerging-world powerful companies? How many Microsofts, Toyotas, Coca-Colas, Volkswagens and Louis Vuittons have emerging-countries got? Will there ever be a Chinese McDonald's?
Some companies have already succeeded. Chinese computer firm Lenovo was the 2008 Beijing Olympics official supplier. It is now supplying the NFL. Huawei has recently become the world’s top telecommunications manufacturer, outselling Swedish firm Ericsson. Haierhas also topped the international ranking as the world's number one major appliance brand.
Taiwan has Acer (computers) and HTC (cell phones). India has Tata Motors, which recently bought Jaguar. Wipro (high-tech) and Mahindra & Mahindra (automobile) are also Indian. Brazil has aircraft manufacturer Embraer and cosmetics firm Natura. Turkey has Arçelik (appliance).
What brought world fame to Lenovo was its acquisition of U.S. firm IBM’s PC business in 2005. Most of the other brands still lack the size and the prestige of big western companies. There are many explanations for this: if Huawei, a true global company with annual sales of $32 billion and 140,000 employees in 140 countries throughout the world, fails to break through in the United States and Australia, it is not because its name is impossible to pronounce for locals; it is due to the fact that the company is suspected of maintaining close links with Chinese intelligence services.
As for Huawei, some see the firm as a Trojan horse able to launch cyber attacks and act like a digital spy - which obviously slows down its expansion.
ZTE, another Chinese telecommunications giant, was accused by the FBI of selling technology to Iran.
How to build brands worldwide
Like Samsung, HTC, which was founded in 1997 and topped sales in the U.S. in 2011, has partly succeeded thanks to its partnership with Google-Android. Haier’s founder ($23 billion of annual sales) has done so well that he was named alternative member of the Chinese Communist Party’s Central Committee in 2000. But abroad, Haier has the image of being low quality and struggles to gain a foothold on the fragmented European refrigerator and washing machine market.
A recent book entitled The New Emerging Market Multinationals should help these brands improve their situation. The three writers – all professors – Amitava Chattopadhyav from France’s INSEAD business school, Rajeev Batra from the University of Michigan and Aysegul Ozsomer from Koç University in Istanbul, offer “four strategies to disrupt markets and build global brands.”
To succeed, companies need “the vision and the confidence to be global players,” they write. Then, these companies will “aggressively develop or acquire skills in technology, innovation, design and marketing that will allow them to be treated with the same respect that multinational companies from the USA, Japan and Europe enjoy”.
Created in Shanghai in late 2010, luxury brand Shang Xia is expected to open its first store in Europe by the end of the year. In Saint-Germain-des-Prés, Paris, of course! As always, the reality is a little more complex: the Shang Xia brand was created in China... by Hermès.