October 6, 2015
In recent years, Chinese companies have been attempting globalization on an unparalleled scale. Yet for all their attempts at going global, these companies have been met with mixed success. There are a number of factors that can affect a company’s international expansion. Of course, it isn’t just Chinese companies that struggle when localizing — Western companies encounter issues of their own; however, their cultural expectations of success allow them to be persistent in foreign markets. For Chinese companies that can demonstrate patience during cultural adaptation, success should soon follow.
Chinese brands often fail to understand the necessity of quality cultural adoption or localization that better targets international consumers. Although they offer quality products that appeal to a broad range of consumers, companies prevent themselves from reaching outside markets by targeting only their local consumers.
Jianlibao Group, producer of what was once the number one beverage in China, decided at one point to expand in over a dozen international markets. Despite hiring Jack Shea, a beverage industry veteran, the drink producer was unable to gain popularity overseas because its brand name, Jianlibao, which targeted Chinese consumers, prevented it from connecting with the average Western consumer. On top of improper cultural adoption, Jianlibao also expanded overseas prematurely, with a budget insufficient to make the necessary promotional investments. Forced to return to China, the company watched as Coca-Cola succeeded where they could not. The Western company had already effectively connected with Chinese consumers, famously translating its Chinese name to “kekou kele,” which sounds similar to the original and translates as delicious happiness. Although Jianlibao had a high-quality product and both Chinese and foreign consumers enjoyed the taste, it lacked a sound globalization strategy, international experience, a strong translated brand name and sufficient marketing investments, all of which were necessary to establish its position across borders.
Another company that failed to understand the need for cultural adoption is the Chinese sports apparel company Li Ning. This company was named after its founder, one of China’s most famous athletes, who was hoisted up in 2008 to light the Olympic torch at the Bird’s Nest stadium — an image that most Chinese citizens will never forget. In the United States, however, Li is a far less familiar figure, so when Li Ning opened its first overseas store in Portland, Oregon, it lost the celebrity factor that drove brand popularity in China. Another issue that restricted Li Ning’s success in the US market was the lack of understanding of the US market and customer needs in the West. It was reported that Li Ning only actually employed 28 people for its entire US operations and continued to make the majority of the big decisions from Chinese headquarters. This helps to explain the lack of money and resources committed for effective cultural and language adoption.
Identifying the issues
So where are companies going wrong? There are several theories that address why Chinese companies are failing to successfully globalize.
One theory suggests that Chinese companies have grown impatient due to their expectation of quick success. Urbanization, modernization and industrialization were more rapid processes in China than they were in the United States. It is common for Western companies to have little to no expectation of making a profit in their early, start-up stages. Rather than expecting a quick return, they are prepared to invest time and money for some time before they turn a profit and experience success. Chinese companies, on the other hand, are used to the rapid speed at which China developed. Because they are accustomed to experiencing quick profits, they lack the longevity to wait out slower foreign markets. Companies that do not see quick success do not stick around to see the turn in profit that local companies patiently wait for, but rather, after targeting the Western market for a relatively short period of time, the companies deem their business venture a failure and return to China.
Another suggestion as to why Chinese companies are failing at going global is the different magnitude a mistake has on the reputation of a company in China and the West. In the United States, a big branding error or poor customer service can damage the reputation of a company beyond repair, while in China the consumers are much more tolerant to mistakes and allow the chance for these companies to recover. When Li Ning entered the US market they chose an NBA player to sponsor, but they selected a player who was less well known than the sponsor of their competitors. This was clearly a cheaper option than that of Nike and Adidas, which is to be expected for a newer brand in the market. However, the stigma associated with selecting a lesser-known sponsor can damage the company’s reputation beyond repair in the Western market, more so than it would in China. Because the Western consumer is less forgiving than Chinese consumers, it is difficult for Chinese companies to identify these branding errors as “errors.” They do not realize they are making mistakes that they may not recover from.
A third theory that attempts to explain why Chinese companies are struggling with globalization proposes that Chinese companies lack commitment to quality product localization. If senior management is not committed to investing in high quality localization, this may lead the brand to fail to meet local customer requirements. Product localization is the process of translating product branding and customer-facing content, such as user manuals and product packaging, into target languages to meet local customer requirements and taste. The end goal is to make the product appear as if it’s manufactured locally for local customers. However, many Chinese companies fail to realize the importance of quality localization. Instead, they employ non-native speakers or amateur linguists to produce subpar translations, which ultimately hurt the quality of the product that they are trying to market internationally. In many of these cases, the translation reflects on the product itself, projecting the image to international customers that, like the translation, the product is cheap or poor quality.
Problems from the West
Branding mishaps do not occur just from East to West, nor is it the only time that marketing strategies are called into question. In fact, even some of the largest western brands have made errors when entering the Chinese market.
KFC has experienced high levels of success in almost every country that they have targeted as they have expanded globally. They claim to be “a truly global brand with a local heart” with “growth ready franchisees around the world who understand their markets.” However, when they opened their first store in Tiananmen Square in Beijing back in 1987, their famous slogan, “finger lickin’ good,” was (according to popular legend) translated literally to “we’ll eat your fingers off.” This of course led to mass confusion surrounding the new mysterious American company entering China. Since then, KFC has invested substantially in quality localization and has adapted to the local market, which has allowed them to better their closest competitor in the United States, McDonalds.
Soft drink producer Pepsi faced similar translation issues with their slogan when bringing their product to China. While the slogan supposedly given to translators read “Come alive with Pepsi,” in China, due to improper translation, legend goes that Pepsi promoted their soft drinks with the slogan: “Pepsi brings your ancestors back from the grave.” Although in many cultures this innocent mistake could have been laughed off, in China, a country whose culture highly prizes ancestors, this mishap did not go over well with local consumers.
It isn’t simply mistranslations that lead to issues regarding expansion. This was quickly discovered by Starbucks when they expanded to China and looked for ways to attract the Chinese consumer. It is common knowledge that China has, and always has had, a very large tea drinking culture. China also promotes a culture in which sitting and relaxing in a comfortable environment can last for hours on end. This created an interesting dynamic for a Western coffee company promoting the “grab and go” style interaction used to get a quick caffeine boost. It raised the question of whether Western coffee companies would ever be able to become successful in China. It was only in 2010 that Starbucks adapted its stores and product line to suit the needs of the local consumer. They changed their store layouts to feature more seating space, and in addition placed nine different types of tea on the menu. After years of failing to adapt, their new localization efforts have proved successful, and Starbucks continues to expand in China, opening more stores around the country.
While many Western companies have made errors and faced issues, these multinational companies managed to succeed internationally. Perhaps this is due in part to the fact that it is easier to recover from reputation damaging mistakes in Asian markets. The biggest reason behind their continued success, however, is that Western companies understand that due to cultural and linguistic differences, they won’t be immediately successful in the Chinese market and they demonstrate the persistence required to achieve success. Each company has spent massive amounts of time and money on their localization efforts, demonstrating how imperative correct localization is to succeed in a foreign market, a concept that is still being developed within many Chinese companies.
However, one Chinese city is leading the way in terms of changing their mindset and aiming to become a truly international city.
China’s Silicon Valley
There is a positive mood that seems to surround China’s Pearl Delta River megacity, Shenzhen. Those visiting the vibrant city are quick to label the general atmosphere as similar to that of the pre-boom of the internet in the late 1990s: a flurry of elation and a handful of good ideas.
It is hard to believe that just 30 years ago, this metropolis was a scarcely populated fishing village, a virtually nonexistent city. Now home to over 15 million people, it has become the go-to place for the world’s hardware startups, and has already been dubbed China’s Silicon Valley. World-renowned companies such as Google, Facebook and Apple have purchased hardware companies there with billion dollar variations in the last year.
Shenzhen’s manufacturing prowess combined with its engineering talent makes it the ideal ground for hardware startups. Shenzhen Special Economic Zone (SEZ) was established back in 1980 by Chinese revolutionary Deng Xiaoping and was the first SEZ in the People’s Republic of China. This combined with its close proximity to Hong Kong have been the key contributors to the city’s financial success.
The potential of this up-and-coming city was not overlooked by Tencent, the parent company for well-known Chinese online brands QQ and WeChat. The company, which employs over 25,000 globally, provides a workspace for over 12,000 team members in its newly built twin tower headquarters in Shenzhen. Tencent’s mobile app, WeChat, has quickly grown in popularity in both China and overseas. WeChat boasts 550+ million active users worldwide, 70+ million of whom are users from outside China. Following this success, the company has adopted a localization strategy of hiring celebrities as part of its marketing efforts. Internationally renowned soccer player Lionel Messi has appeared in an advertising campaign run in 15 countries including Brazil, Italy, South Africa and India. The tech giant has also designed emoticons featuring local big names. In India, popular Bollywood actors Parineeti Chopra and Varun Dhawan star in an emoji, a cause for frenzy in the country. WeChat is also establishing connections with brands globally, including Chang, a well-known beer company in Thailand. The playful features of the app, combined with strong marketing efforts, have sent the app’s popularity soaring across global markets.
As a city, Shenzhen has recognized the need for localization. Most of the companies located there have the advantage of being well developed technologically and they are also more advanced in terms of their international cultural understanding. It is a growing, innovative and exciting city that shows no signs of slowing down any time soon.
Last year, CSOFT International, Ltd., announced its partnership with the Shenzhen Municipal Government for the creation of a China-wide, four-week “Global Etiquette” public service campaign. The program aims to explore the mindset and etiquette required for a truly international city. The creation of this campaign suggests that the city will continue to lead the way for China’s expansion into more sophisticated markets. As China has begun moving away from cheap manufacturing and focusing instead on innovation and technology, this kind of program has never been more crucial. Tang Lixia, director of the foreign affairs office of the Shenzhen Municipal Government, reflected on the impact that each citizen of Shenzhen has on the city and their efforts to improve the reputation and quality of Shenzhen citizens and to continue to expand their minds. By providing its inhabitants with as much global know-how as possible, the local government is promoting this growth through educating locals.
Localization is still fairly uncharted territory, and for most Chinese companies it remains a relatively new concept. Although Western companies do not always have initial success at going global, their cultural tendencies toward persistence in terms of time and money often allow them to make crucial adjustments that allow eventual success. In order for Chinese companies to grow and expand internationally, it’s crucial that they learn to be patient while waiting for a profit, that they invest in quality translations that focus on attention to details and that they continue to research the necessity of localization. There is still a lot of work to be done. However, with forward thinking minds in cities such as Shenzhen, there is hope for a bright future for the globalization of Chinese companies as they journey down the road of innovative thinking, market research and cultural adaptation.
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About CSOFT International
CSOFT International Ltd. is a world leader in localization and globalization consulting services, providing turnkey solutions for companies facing the challenges of engaging customers and markets across linguistic and cultural barriers. Recognized as one of the Top Innovative Companies in 2011 by IDC we have an award-winning international team. In 2012, the company’s CEO was named one of Fortune Magazine’s 10 Most Powerful Women Entrepreneurs and a Tech Disruptor by CNN Money.