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Wake-up Call to Chinese Firms on Power of Brands
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The ongoing dispute between France's Danone and China's Wahaha has helped sharpen Chinese entrepreneurs' focus on brand value.


Much has been said in recent years about the importance of brand value at various seminars and business forums. But the message has been slow to reach Chinese entrepreneurs, preoccupied as they are with quick and easy profit.


Too many Chinese companies are seen to be ceding control of their brand names to joint venture partners in order to gain fresh capital, economies of scale, management expertise and, eventually, market share.


But some of them have belatedly realized the price they paid for the advantages afforded by their joint-venture partners was their brand identities and independence.


Most Chinese entrepreneurs must have realized by now the importance of brand value. The question is, how many of them are willing to invest time and money to create value for their brands, when manufacturing under contract for foreign companies is so profitable.


But such business models have fallen behind the times as the supply of land and labor is becoming less plentiful and the cost of production is on the rise. Also, competition from other low-cost manufacturing bases in South America and other parts of Asia is bound to intensify in coming years.


Although the going has remained good thus far, Chinese entrepreneurs have been urged to step back and take a longer-term look at their future development.


In their relentless pursuit of short-term gains, they run the risk of missing the potentially bigger opportunities arising from the explosive growth of the domestic consumer market as a result of the rising income and expectations of the people, especially in the urban areas.


Retail experts have noted that in a maturing consumer market like China, branding counts more than in the US or Europe.


In China, the best known brands in a wide range of consumer products, including clothing, electronics, processed food, beverages and cosmetics, are mostly foreign-owned. Only, perhaps, in white goods, or consumer durables, can Chinese manufacturers claim some success in the branding game.


But it doesn't have to be so. There has been an increasing number of small manufacturers in the Pearl River Delta industrial powerhouse in Guangdong Province that have distinguished themselves with high-quality products in the domestic and international markets.


Their brands command the same respect as the best in the world and their products are selling at premium prices.


These Chinese entrepreneurs, though few in number, know the power of brands and are setting a shining example for others.


(China Daily April 10, 2007)


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