Brand Expansion: China’s Race to Conquer World Markets

Chinese firms have embarked on a quest to conquer the world market. Several have already done so, with the help of Western know-how. Established rivals are making the mistake of underestimating them — until it’s too late.

The Chinese government is encouraging the expansion of its companies because it wants to shed the country’s image as a cheap, low-tech manufacturing location and to turn it into a center of innovation. “Zou chu qu,” loosely translated as “go out,” is the message the country’s Communist planners are sending to the Chinese business community.

The firms need Western know-how to expand. Haier had Liebherr, while Pearl River Piano, now the world’s biggest piano maker, had Yamaha. Half a century ago the company from the southern Chinese city of Guangzhou made just four pianos a month. Now it’s 100,000. The company has a 15 percent market share in Europe. That was thanks to Yamaha. The Chinese entered a joint venture with the Japanese brand 20 years ago, and once they had accumulated enough knowhow, they dissolved the partnership. In 2000 they pushed their way onto the US market with low-cost pianos. Their instruments were around a third cheaper than Yamaha models.

But Pearl River Piano has been shedding its budget image. In 2005, it entered a cooperation with Steinway & Sons and now builds Essex brand pianos in Guangzhou for the premium American manufacturer.

In Germany, it bought the marketing rights of competitor Rittmüller and poached local piano builders.

Germany is an important focus of the Chinese offensive because it has scores of medium-sized businesses with valuable knowhow. Sany Group, the world’s biggest construction machinery maker, bought German concrete pump builder Putzmeister for €525 million in 2012.

The next aim is to build world-class cars. But the Chinese first need to work on the quality of their vehicles. They have already selected a German teacher: Daimler recently took a stake in BAIC, the car division of Beijing Automotive Group. There is much speculation in China about BAIC returning the favor by purchasing a stake in the German luxury automaker.

Full article: Brand Expansion: China’s Race to Conquer World Markets (Spiegel Online)

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