How do Chinese brand, Maotai, expand on a global scale?

      As one of the fast growing country, China is now under the spotlight on a global stage. There are a bunch of Chinese brands or companies, such as Chinese traditional liquor-Maotai, Wuliangye, which are well-known in domestic market however hardly expand on a global market. Compare to the popular European liquored brand, Martell and Royal Slute, Chinese famous liquor brands is almost unknown to most foreigners especially in U.S. and European market. Although the flavor of the liquor is different, Chinese famous liquor brand have to take its competitive advantages to compete in the global market.

Maotai original in Ming Dynasty, nearly 500 years history, and played an important role in Chinese literature and history. It is produced in the town of Maotai, in Guizhou province, Southwest China. Although is treated as a premium brand and promote successfully in China, it still needs to improve its performance on a global scale.

Actually, as other Chinese long history brand, Maotai own its competitive advantage: great flavor and premium quality, the cultural and historical brand image, traditional Chinese brand, and secretary formula. However, the price of Maotai US market is much cheaper ($20) than in China (about $118) and the brand image is the Chinese liquor rather than premium liquor. Its price is almost the same as Erguotou (Chinese low-end market liquor)  

     For my point of view, if Maotai wants to conquer its global market, it must change its current strategy. Under the strict quality control, the company should descript the brand as “prestige Chinese Antique” and the cultural and historical stories should be part of the selling point. Second, as a premium brand, Maotai should change its current price strategy in the US and European market. Targeting at the high-end market, Maotai’s current price is lower than its brand image, which will damage the further development. Third, the brand image needs to be delivered in a more effective way. Maotai can apply the social network webs to promote the webs by grouping its existing customer and develop new customer. Moreover, Maotai can expand its distribution channel in some duty free shop or famous bars to reinforce its premium image.

In order to expand successful, Maotai needs to deliver its brand to the target segmentation letting its customers know the brand. Only after know the brand and what kind of product it is, it becomes possible that customer will pay for the product.

Proctor & Gamble in China

When you sit in front of the TV and wait your favorite TV series in China, you can always watch various ads promoting P&G’s new products. Actually, as the largest consumer goods company, Proctor & Gamble successfully expands on a global scale and maintains its leadership in global as well as local markets. Since 1988 P&G entered Chinese market, it has tagged as the premium consumer goods, providing high quality products for Chinese consumers.

     How do P&G successfully enter Chinese Market? First of all, P&G’s clearly segmentation and marketing strategy contribute to the success. When P&G introduced its products to Chinese customers; they take the strategy of premium quality but relatively low price (even lower than domestic brand during those periods. This strategy made P&G’s product popular in a short term and quickly dominated the market. Moreover, P&G always target at the young generation and launch different activities to allure younger customers: appointing idols to the ads and holding competitions to select their new spokesman.

Second, P&G uses multiple promotion activities selling its different products to its targeted segmentations and localized its products and promotions. The CIM and POS also help P&G to track its sales record and customer’s preferences in a short response time. The company also developed exclusive products target only for Chinese consumers. Before they introduce a new product to the market, they will do a lot research for the customer requirements and take few cities as the pilots to test the consumers’ reflections and they made improvements on those products. When they introduced a new products exclusive for Chinese consumer, they also invite customers watch the new ads for and votes their favorite ads.

Third, P&G values its HR localization strategy. When they first enter Chinese market, most of the employees are lack of experience or knowledge of how to work in a foreign company that had different business culture. In order to establish is management structure, P&G took the strategy of localizing its employees. The undergraduates and graduates are selected as the potential manager, taking special programs. Until now, P&G still takes this strategy. It also sponsor some challenges or competitions, such as “SIFE” targeting talent college students who can be the manager in the future.

   Actually, the success of P&G is not only due to its superior products and fancy ads, but also due to its successful adaptation of its original business model to the Chinese market and knowing well about Chinese consumers.

Best Buy in China

     Best Buy is a well-known consumer electronics retailer in the U.S., which accounts 19% of the market. It also operates in countries outside U.S., such as Canada, Mexico, Turkey, and China. In the U.S. market, Best Buy wins the competition based on the successful customer oriented strategy and supply chain management. However, this operation mode failed in China. In Feb. 22, 2011, Best Buy announced closed all its 9 stores and the Chinese headquarter, integrating its retail business into Five Star Electronics(Chinese Brand)


    When the company established its headquarter in Shanghai to compete, there were 2 main players in the market: Gome and Suning. As one of the top 500 company, Best Buy owns a superior brand value and high quality services, which is its core competitive advantage, however, such advantages didn't prevent Best Buy  from losing the competition in China. Here are a couple of reasons.


     First, Best Buy failed to get the approval from the government to build its retail store at the primary stages. However, its main competitor grew at a fast speed and became the main player dominating the market.  In order to make up its previous mistakes on the expansion and gain the market share,  Best Buy chose to merge with a Chinese electronic retailer, Five Star, to continue its expansion. That is, Best Buy still managed its brand in the 1st tier city and co-operated with a local retailer in other cities, especially focusing on southeast China. Although this dual-mode operation helped the company attracts more customer, it still failed to grew at its competitors.


     Second, Best Buy failed to manage its lost its competitive advantage on the channel management. Unlike is wide spread store distribution in the U.S., Best Buy only had 9 stores in China and the distributed mainly in Jiangsu Province by Five Star. Moreover, Best Buy also take its supplier strategy: pay for the products from supplier first and then get the product. Thus, the supplier lost controls on the products and Best Buy sold those products by its sales staff, which is totally different from main local competitors. Since the poor performance on the distribution, and the supplier worried that the sales of Best Buy sold the products without any "bias", some of the suppliers also changed their cooperation strategy with Best Buy or provides limited variety of production or on a relatively high price.
    
     Third, Best Buy chose an unfit sells model in Chinese market. Best Best continuously applied its successful customer oriented strategy, providing product experience to its customer.  Unlike American consumer, Chinese consumers are more sensitive to the price. Although services is an important factor, the price is always the first priority to make the decision.  But  Best Buy can't sell the products at a competitive price  due to the supplier's reason (mentioned before). Therefore, most Chinese customers just consider Best Buy as an product experience place rather than the store. They enjoy the high quality service on products introduction, explanation and the experience,  but buy the products in another low price store. 


     Best Buy is not the only global company that lost its Chinese market. The main reason for such failure is because the unfit business model. If the company wants to run its business in China,  it must learn how to run business in Chinese environment rather than simply applying the original model to win Chinese market.
   

Educate Your Customers

During the global expansion process, companies pay more attention to educate their customers.

Well, superior products or services can help the company win the competition at the global market. However, customer's recognition of the superiority is more important to win the markets. Thus, how to education it customers is a key factors for the international companies to succeed.

Why is education so important? Let's take American movie as an example. As a segmentation of entertainment industry, American movie industry works well in Chinese market. Although there is a huge culture Gap between China and the U.S, the American movie, are tagged as the most popular and greatest movie by Chinese customers. They prefer to buy the tickets for 2 or 3 tiered movies produced by U.S.rather top tiered Chinese movie. Why? The reason is quite simple: Chinese audiences are well educated and persuaded that those movies are great movies even though the truth is opposite. Companies spend more money on build up the concept that movies come from U.S are high quality. All the marketing activities enforces such images and successfully deliver those information to the target audience. 

Thus, learn how to educate you customer to win global competition should be considered by all companies.