Business / Opinion

A knowledge economy that works with ideas

By Cecily Liu (China Daily) Updated: 2014-04-14 07:12

Gregory says often Western brands become uncompetitive because they lose the scale of production because sales volume is small. But if the Chinese partner cultivates a new customer base for the brand in China's domestic market, then the scale of production can grow again and the Western brands acquired will flourish.

The Western brands will manage to retain their value because often customers do not realize there has been a change of ownership for the brand. So the brand has not changed in their minds.

He gives an example with Chinese carmaker SAIC's purchase of MG Motor Co Ltd, a British brand that dates back to the 1920s but eventually went out of production after losing competitiveness. "The MG brand is iconic. People may have forgotten it, but now if you can breathe life into it, then it is a good buy."

At the same time, he says Chinese buyers should be able to distinguish between good and bad acquisition targets by analyzing how the brands have failed initially.

"If the company failed because of poor quality, then you're buying a damaged brand. But if you're buying a brand with which the owner cannot make sufficient margins, causing it to fail, then the brand may still be great," he says.

Gregory is optimistic about the process of Chinese companies internationalizing, whether through organic growth or acquisition.

He believes success is just a matter of time, referring to the fact that Apple Inc started business only 38 years ago, but China's reform and opening-up has only been in place for about 30 years and many Chinese brands are still young.

A knowledge economy that works with ideas

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