Following is an extract from chapter 1 of Asian Brand Strategy which is written for boardrooms and corporate management teams. The book is aimed primarily at Asian business leaders and Western observers. It is written by Martin Roll who is a Business & Brand Strategist, and Senior Advisor at Martin Roll Company, Singapore.
A strong brand can differentiate a company from its rivals, make it stand out from the competition, successfully influence consumer purchase decision, build customer loyalty, and boost the company’s financial performance. Asian Brand Strategy explores these issues, with a focus on the Asian market environment and on attempts to build Asian brands.
“A journey of a thousand miles begins with a single step.” – Confucius
The face of business in Asia is changing faster than one can blink one’s eyes. Asian companies that used to be back- end workhorses, manufacturing consumer goods cheaply for Western companies, are slowly realizing the benefits of branding. In China, a smartphone manufacturer established in 2011 was able to overtake Apple to become the nation’s dominant mobile phone maker.
By nearly replicating Apple’s processing power and design while improving distribution and manufacturing, some say the mobile industry’s future will no longer be decided in Silicon Valley, but in the Beijing headquarters of Xiaomi. Even Apple co-founder Steve Wozniak has admitted Xiaomi is “good enough to break the American market.” However, Chinese mobile brands like Xiaomi will face bumpy roads ahead when they expand globally due to patent disputes, user concerns over cyber spying, poor brand recognition, strong branded competition, and other challenges.
In a market where competition implies slashing prices on unbranded products, Asian businesses are slowly realizing the power of brand identity in capturing consumers and returning larger profits on their investments. Asian boardrooms are realizing that instead of wearing themselves down on razor- thin margins to compete with the next supplier, they could increase returns through brand investment and differentiation.
Starting with a ladies’ footwear store in Singapore in 1996, brothers Charles and Keith Wong observed that while selling wholesale shoes provided a cost advantage, the lack of uniqueness meant limited growth. This made them realize the potential of creating a brand that consumers could identify with – leading to the creation of the Charles & Keith brand. Today, it is well- known among fashion- conscious shoppers for its distinctive designs and quick in- season turnaround that offers 20– 30 new designs in stores every week. Charles & Keith has expanded its product range to include bags, belts, shades, tech accessories, and bracelets, evolving from a footwear brand to a lifestyle brand. The group has also created Pedro, a line of men’s footwear and accessories. With the sale of a 20 percent stake in the company to L Capital Asia in 2011 – a private equity group sponsored by the LVMH Group and other investors – the world is taking notice of Charles & Keith.
With more than 500 stores across Asia, Eastern Europe, and the Middle East, Charles & Keith is looking to conquer China, the US, and Western Europe to become a global aspirational fashion brand by utilizing the expertise of L Capital Asia and their sponsors.
Sometimes, successful branding means doing the opposite of what is fashionable. Japanese clothing chain Uniqlo has become Asia’s biggest clothing retailer, thanks to its “Made for All” brand philosophy. Often mistaken as a fast fashion brand, Uniqlo’s strategy is to “totally ignore fashion” by not chasing trends.6 Instead, they focus on basic, affordable items that transcend age, gender, and ethnicity so that every individual can create his unique style. Uniqlo now has more than 800 stores worldwide and an ambitious CEO, Tadashi Yanai, who intends to make Uniqlo the world’s largest clothing retailer by 2020. The firm has learned much from its first failed attempt at expanding overseas. After opening too many stores too quickly in the UK in 2002, only eight remained open by 2006. Executives have admitted that they did not do a good enough job establishing a brand identity in new markets.7 With seven stores in the US, Uniqlo’s planned expansion of 1,000 locations in America will surely rely on their commitment to branding at the boardroom level.8
Most Asian firms, however, still view branding as advertising or logo design. If firms are to benefit from branding, they must recognize that it impacts the entire business – the structure, goals, attitude, and the very outlook of those in the boardroom. Managers will need to see branding not as an appendage to the ongoing business, but rather as an infusion that seeps through the very spirit of the organization, driving healthy return on investment (ROI). It will require a shift in focus and priority for every functional aspect of the organization.
Before branding can be implemented, it is important to understand its implications, its various shades and hues, its forms and practices, its purpose, and its advantages. It is indeed a paradigm shift that executives must undertake across Asian boardrooms. How this change in thinking can be analyzed, captured, and managed by Asian boardrooms and corporate management teams forms the core of this book.
Lack of Value Creation
Goldman Sachs has forecast that, by 2026, China will have overtaken the US economy in size to become the world’s largest economy. The Indian economy would be larger than Japan’s by 2028. China and India are indeed leading Asia’s growth path, with implications for industries and companies all over the world.9 The changes in the Asian competitive environment are driven by several factors: the rapid development of China and India, increasing deregulation and trade liberalization, and the emergence of new demographic and social trends throughout the region. These changes involve entire value chains in manufacturing and services, issues related to efficiencies in operations and productivity gains, innovation and design, and a reduced focus on broad diversification – which has been the prevalent structure of Asian businesses, particularly within family businesses.
The Eroding Low-Cost Advantage
A large part of Asia’s economic development can be attributed to low-cost advantages which enabled Asian companies to gain market share from other suppliers. In the past two decades, Asian countries have slowly but surely attracted many industries: light manufacturing in Guangdong, electrical equipment in Guangxi, and software development in Bangalore. But Western companies, by buying these Asian firms or aggressively outsourcing their operations, are already streamlining their cost structures. Low-cost alone no longer provides a significant advantage. The cut- throat competition in many industries, resulting in tremendous pressure on margins, has forced companies to look for additional measures for survival and growth. One example is mobile phones, where brand owners can reach gross margins up to double that of contract manufacturers.
(to be continued……)
About the Author
Martin Roll is the founder of Martin Roll Company, a global advisory firm. He delivers the combined value of an experienced global business strategist, senior advisor, and facilitator to Fortune 500 companies, Asian firms, and family-owned businesses on how to build and manage strong, global brands as well as leadership of high- performing, marketing- oriented businesses. Martin can be reached at : www.martinroll.com
Image courtesy: “Tokyostreetentrance” by brown_colour – 寒假 bukit bintang. Licensed under CC BY 2.0 via Wikimedia Commons
