Flat world challenge

The "flat world effect", described by well-known author Thomas Friedman in his best-seller The World is Flat to describe the global market where historical and geographical divisions are becoming increasingly irrelevant, has also begun to undermine Western brands' dreams to become high-end brands in China.

"It is getting harder to position higher than the original positioning, because customers are getting more and more informed," says Tan from Days Inn.

"Twenty years ago, Western brands could position themselves at whatever level they wanted in China, since there was not too much of competition. Customers now know what brands mean and hence we cannot deviate too much from the original positioning. To gain their confidence we have to provide better quality and service," he says.

Jean-Michel Dumont, Asia chairman of Ruder Finn Public Relations, also has a similar view.

"As companies mature and invest in R&D, it is a logical step for them to target the more affluent segments and raise brand awareness," says Dumont, adding that launching this repositioning in a buoyant market such as the Chinese one makes absolute sense.

"However, as this market also strongly recognizes brand value, unless the rest of the world eventually follows, the brand repositioning is doomed to long-term failure."

According to Dumont, Chinese consumers, who often blend travel and shopping as they plan a trip abroad, are especially astute at researching in advance.

"As consumers get more exposed to global markets, either through international travel or the Internet, brands have to be consistent globally in both their positioning and pricing. Gaps in either one of these fields will destroy the credibility of the brand."

Unlike Western society that relies largely on branding and other business skills, China began to build its brands just 15 years ago, and not many of them have adopted professional management, Bastin at Nottingham University says.

"But Chinese brands are fast catching up," he says. "Once they gain trust from Chinese customers and start delivering the same quality of services provided by the foreign brands, they will become a force to reckon with in China."

Chinese consumers will mature much faster than what Western people imagine, he says. "By that time successful people will seek their exclusivity by buying private services, rather than big logos."

Preston at Nielsen estimates that an area that is highly underdeveloped is probably the service segment. "So a lot of services can still come to China and do well, like finance, after-sales and travel services."

wangchao@chinadaily.com.cn

(China Daily 08/17/2012 page1)