In the Hutong
Enjoying the quiet
One of the reasons I like reading Shaun Rein’s stuff is that he does his homework. I don’t always agree with his conclusions, but I respect him deeply for going and getting the data first. You don’t get a lot of that in China, and you especially don’t get it often from people who know what they are talking about.
Shaun did a piece for Forbes where he rebutted a Harvard Business Review article by a leading U.S. management consultancy. Said consultants urged multi-national corporations operating in China to go for the low-end of the market in order to compete with domestic companies. Shaun’s point is that competing on price in the short term burns your brand in the long term.
Anyone who has followed the long, painful saga of a phenomenon known as “The China Price” knows that while engaging mostly state-owned Chinese companies in a game of price-chicken may bump the sales in the near term, in the long term all it does is wipe out profits, erase the stature of your brand, and eliminate any hope for rebuilding that brand in the future when the market goes upscale.
Ask the guys at Volkswagen (if they will level with you) about how difficult a time they are having in their home city of Shanghai trying to get people to see them as anything but a low-end auto brand.
Ask the guys at Dell whether diving down into the battle for the low-end of the computer market was a good idea.
On the other side of the equation, ask the guys at Li-Ning what they would give to swap their “brand of the people” image for a market position that would put them on a par with Nike or Adidas.
IF, on the other hand, you MUST dive into the low-end of the market, do it with a better experience, better customer value, AND halo products that will keep you firmly entrenched at the high end.
None of this is rocket science – it is Al Reis/Jack Trout Positioning 101 stuff.
Unfortunately, there is a crop of people out there who are still touting the idea that China is so different that the basic rules don’t apply. They’re wrong, and take with a healthy dose of skepticism anyone suggesting that the rules in China are any more than about 5% different from anywhere else.