Articles
1. „Launch a New Car Brand in China, Whether You Like It Or Not“
How Government Officials Push Auto Marketers to Add 'Indigenous' Brands. Mike Dunne, 12.04.2011, http://adage.com/article/global-news/china-officials-push-car-makers-add-indigenous-brands/226949/
2.China's motor industry - Stepping on the gas
Apr 24th 2012, 8:33 by P.C. http://www.economist.com/node/21553327

Articles
Asia and South-America are the most rapidly developing regions in the world. With the biggest population – China – still being #2 in the biggest economy ranking, but they are gaining up and pretty soon are going to be at top place. Therefore that region is full of opportunities and that’s why it is attractive for enterpreneurs and corporations. But where are opportunities, there are threats and weaknessess as well (SWOT).
At this time the car industry in China is mainly held by well-known car producers. They are co-operating slightly with local enterpreneurs and corporations, but the brandname and the intellectual rights are only theirs. General Motors (joint with SAIC-GM-Wuling), Honda (joint with Guangzhou Automobile Group Co) and Nissan are the exceptions. By now Volkswagen, Hyundai and Toyota are also creating and expanding joint ventures. And there are lots of others going to do the same. The logic behind this is simple – China wants, that on their local market they would have local, not international brands. That’s the reason to pressurize big brands to create joint ventures with local ones. In return to this „request“, the government is more compliant with all kind of bureaucracy and industrial permits.

So local brands are probably going to grow and move on towards the worldwide markets. (In Estonia they have sold Chinese car – Brilliance – but at the moment the quality is still rubbish and there isn’t marketplace for them in Europe. But improved quality would give them massive advantage and soon they will become threat to all over carproducers throughout the markets. In capital world it is the largest threat to the big boys nowadays – how we will keep being the force in industry. What should our diplomacy in China look like. Can’t get further without China, but don’t want to ruin the current position by strengthening local car producers. What to do?

For a student, intercultural marketing is a tough topic. Orienting in this field needs experience in marketing field as well as knowledge of intercultural communications and different cultures. Estonian market for example is a small bond compared to most of developed countries and that’s why we lack the knowledge and practices. And that’s why we should travel around to gather the experiences and knowledges of different people to become more fulfilled.
Now returning back to the articles if a company wants to enter a new market or industry in a foreign country the one helpful tool is PESTLE analysis - Political, Economical, Social, Technological, Legal, Environmental
After gathering these inputs it would be good to have SWOT analysis, which will help comparing the pros and cons for etnering. In this case with China I can draw out the following (this is my basic and interpreted knowledge on China, for a proper anaylsis the material gathering and processing is the key factor): 1. Political – communist, but stable ; censorship 2. Economical – large local market; growing economy (a little cooldowned) 3. Social – largest population, but communist and deeply stratified society – big procentage of people below the poverty line. Number of educated people is growing rapidly and the level of education is high, but it is not available for everyone – it depends on the position of the family 4. Technological – logisticly developed and growning infrastructure; technological skill is high; problem is that development doesn’t reach the demand 5. Legal – as we know from the communist philosophy – you give some, you get some 6. Environmental – lots of resources; large territory; as a developing country the environmental safety is not a big issue yet
If we look at these parameters, then we can see a lot more pros than cons. Therefore it is reasonable to produce in China, where demand is large and costs are low. Well the political situation makes you caution, but as it is profitable for both sides, Chinese are supportive for foreign investments and new foreign factories settling down over there..
In China it is an „unofficial rule“, that if a foreign company wants to start producing in China, they create a joint venture with local businessmen. This is a „tax“ for entering the market. The local guys will deal with the bureaucracy to get property and workers and the essential contacts, while the so called parent company will provide know-how and the equipment needed.

For the last 30 years Chinese economy policy has been on gathering the know-how and knowledge of the western production. Like an apprentice and then later become a master. But this tactics hasn’t gave them any advantage as 70% of the car market is under the copntrol of western brands. Consequently they started the new course by pressurizing the big corporations to fund joint businesses with local companies or businessmen. The ultimate aim is to create strong worldwide Chinese brands.
This kind of policy is strange to our western paradigm, but as this is business and the possibility to earn big bucks is huge, it doesn’t stop the corporations. Everyone knows, that Chinese market is enourmous and vital for growth, so the rules can be bent. Got to find the best balance for doing business there – the one that is sustainable in a long run.
Creating a local brand is nothing new in marketing studies. One brand may have different image across cultures and the brandname is on of the most important components. We’ve all heard of stories, where foreign brandname means something stupid in the local language. To avoid the misunderstanding, it is better to launch a independent brand for a new market. Okay, in car industry this logic doesn’t apply that simply, but it might still be reasonable in some cases. Depends largerly on the strategy of the company. And in this case, where the market place is huge and the western values aren’t cherished like in Europe or the States, it should turn out alright. Also, you are more likely to get the local governement support your enterprise.
Lexus is the best in example in the car industry. Lexus is actually Toyota, just more luxurious. It is highly valued in USA. At first they meant to name it Toyota Ultra but luckily for them they understood the value of the name for a brand. This helped them position Lexus in luxury segment rather than just a Toyota with some extra whistles. Also Nissan’s luxury brand Infinity is growing and the same goes for Honda’s Acura, but they are still way behind Lexus.
Growing economy lifts all the standards of life, so it means that more people will be able to get themselves a car. Developments in telecommunications help marketing opportunities to grow and create even more production. So why not have a joint business with Chinese, where the wallet is in the hands of the parent company? Well the biggest threat is that the local brand will grow to be a strong one and then the only way for growth is to expand to other markets. That means, that they are going to compete with all the other car brands that are sold. Big brands are going to lose their market share and this will boost the Chinese even more.
The political situation in China and their importance for others gives them some extra moves in business. For example a story of a company called Fellowes, which produced paper shredders. Most of their production was done in China and they held the biggets market share in shredders. One day, when a worker from the company (not a local, a representative), he discovered, that the factory’s maingate was locked and big trucks were parked in front of the gate. Few days later, all the production lines and other equipment were stolen, so the factory stopped working. Locals put all the things up somewhere else and probably started producing the same shredders just under a new name. Fellowes won’t be able to compete against the same product with a much lower price. And there is no authority to go to and say, that we were robbed by our Chinese business partners. The car industry should be alert as well, this can happen to them also. (and is happening somewhat by copying the design of western car brands)
Overall China is really attractive for car producers and for all other corporations. But everything that glitters isn’t gold. Low production costs and huge local market are big advantages, but the political situation and pressurizing makes it harder to cope. It is a land of opportunities, just as USA is for its image of evergrowing economy. We have to wait and see. The sure thing is, that Chinese will become the biggest economy and by the prognosis, they should achieve it by 2020. And we know, that money makes the world go!