Looking For McDonald's In China: Can Emerging Economies Build Global Brands?

Kungfu Fast Food in Shanghai
Kungfu Fast Food in Shanghai
Sylvie Kauffmann

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. Haier has 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.

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How China Flipped From Tech Copycat To Tech Leader

Long perceived as a country chasing Western tech, China's business and technological innovations are now influencing the rest of the world. Still lagging on some fronts, the future is now up for grabs.

At the World Semiconductor Conference in Nanjing, China, on June 9

Emmanuel Grasland

BEIJING — China's tech tycoons have fallen out of favor: Jack Ma (Alibaba), Colin Huang (Pinduoduo), Richard Liu (Tencent) and Zhang Yiming (ByteDance) have all been pressured by Beijing to leave their jobs or step back from a public role. Their time may be coming to an end, but the legacy remains exceptional. Under their reign, China has become a veritable window to the global future of technology.

TikTok is the perfect example. Launched in 2016, the video messaging app has been downloaded over two billion times worldwide. It has passed the 100-million active user mark in the United States. Thanks to TikTok's success, ByteDance, its parent company, has reached an exceptional level of influence on the internet.

For a long time, the West viewed China's digital ecosystem as a cheap imitation of Silicon Valley. The European and American media described the giants of the Asian superpower as the "Chinese Google" or "Chinese Amazon." But the tables have turned.

No Western equivalent to WeChat

The Asian superpower has forged cutting-edge business models that do not exist elsewhere. It is impossible to find a Western equivalent to the WeChat super-app (1.2 billion users), which is used for shopping as much as for making a medical appointment or obtaining credit.

The flow of innovation is now changing direction.

The roles have actually reversed: In a recent article, Les Echos describes the California-based social network IRL, as a "WeChat of the Western world."

Grégory Boutté, digital and customer relations director at the multinational luxury group Kering, explains, "The Chinese digital ecosystem is incredibly different, and its speed of evolution is impressive. Above all, the flow of innovation is now changing direction."

This is illustrated by the recent creation of "live shopping" events in France, which are hosted by celebrities and taken from a concept already popular in China.

10,000 new startups per day

There is an explosion of this phenomenon in the digital sphere. Rachel Daydou, Partner & China General Manager of the consulting firm Fabernovel in Shanghai, says, "With Libra, Facebook is trying to create a financial entity based on social media, just as WeChat did with WeChat Pay. Facebook Shop looks suspiciously like WeChat's mini-programs. Amazon Live is inspired by Taobao Live and YouTube Shopping by Douyin, the Chinese equivalent of TikTok."

In China, it is possible to go to fully robotized restaurants or to give a panhandler some change via mobile payment. Your wallet is destined to be obsolete because your phone can read restaurant menus and pay for your meal via a QR Code.

The country uses shared mobile chargers the way Europeans use bicycles, and is already testing electric car battery swap stations to avoid 30 minutes of recharging time.

Michael David, chief omnichannel director at LVMH, says, "The Chinese ecosystem is permanently bubbling with innovation. About 10,000 start-ups are created every day in the country."

China is also the most advanced country in the electric car market. With 370 models at the end of 2020, it had an offering that was almost twice as large as Europe's, according to the International Energy Agency.

Photo of a phone's screen displaying the logo of \u200bChina's super-app WeChat

China's super-app WeChat

Omar Marques/SOPA Images/ZUMA

The whole market runs on tech

Luca de Meo, CEO of French automaker Renault, said in June that China is "ahead of Europe in many areas, whether it's electric cars, connectivity or autonomous driving. You have to be there to know what's going on."

As a market, China is also a source of technological inspiration for Western companies, a world leader in e-commerce, solar, mobile payments, digital currency and facial recognition. It has the largest 5G network, with more than one million antennas up and running, compared to 400,000 in Europe.

Self-driving cars offer an interesting point of divergence between China and the West.

Just take the number of connected devices (1.1 billion), the time spent on mobile (six hours per day) and, above all, the magnitude of data collected to deploy and improve artificial intelligence algorithms faster than in Europe or the United States.

The groundbreaking field of self-driving cars offers an interesting point of divergence between China and the West. Artificial intelligence guru Kai-Fu Lee explains that China believes that we should teach the highway to speak to the car, imagining new services and rethinking cities to avoid cars crossing pedestrians, while the West does not intend to go that far.

Still lagging in some key sectors

There are areas where China is still struggling, such as semiconductors. Despite a production increase of nearly 50% per year, the country produces less than 40% of the chips it consumes, according to official data. This dependence threatens its ambitions in artificial intelligence, telecoms and autonomous vehicles. Chinese manufacturers work with an engraving fineness of 28 nm or more, far from those of Intel, Samsung or TSMC. They are unable to produce processors for high-performance PCs.

China's aerospace industry is also lagging behind the West. There are also no Chinese players among the top 20 life science companies on the stock market and there are doubts surrounding the efficacy of Sinovac and Sinopharm's COVID-19 vaccines. As of 2019, the country files more patents per year than the U.S., but far fewer are converted into marketable products.

Beijing knows its weaknesses and is working to eliminate them. Adopted in March, the nation's 14th five-year plan calls for a 7% annual increase in R&D spending between now and 2025, compared with 12% under the previous plan. Big data aside, that is basic math anyone can understand.
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