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China is coming out into the world, and despite the financial crisis, it is a rapidly growing market with a critical mass of 290 million middle/upper class people. Learning about the Chinese consumer profile and how to position western brands in the market is essential today. The ESADE Alumni Marketing Club and the ESADE Alumni Global Business Club looked at the business options this great market offers in this round table.

Over the last few years there has been a transformation in China – a major transformation. It has changed from being a country seen as the world’s cheap mass-production factory, to one that is coming out into the world and becoming interested in marketing and western brand management. It is also a huge potential market for foreign businesses attracted by a consumer with growing purchasing power. These are some of the conclusions of the joint research by ESADE and China Consultants presented at the round table, chaired by Juan Cortina, President of the ESADE Alumni Global Business Club. The research focused on the various consumer profiles in China, the main challenges in marketing management and the key points to include in a marketing plan aimed at successfully positioning western brands on the Chinese market. As well as the presentation of these findings, there was an actual case; that of Grupo Lenovo, an innovative Chinese technology company, which has become part of the western business landscape.

Differentiated Brands are what is wanted
“China is a big country with huge regional differences, and more opportunities than we might think", said Ivana Casaburi, Professor of the Department of Marketing Management at ESADE, who opened the conference. She also tried to answer the question: “In what segment of this huge market can a foreign brand be competitive?" The answer is in the 280 million middle class individuals who value quality and a brand name, and the ten million from the upper class who use western brands as a means of differentiation. This is a middle/upper class expected to double over the coming twenty years. That, warned Casaburi, is why competitiveness and differentiation are needed by western brands, “To sell, you need to bring in more value than the local brand, to offer something more, because taken on equal terms, these consumers prefer Chinese brands".

Once the profile of the critical mass of the Chinese consumer had been described, Ivana Casaburi turned to the first of the four key variables of the marketing mix that the research had been looking at: distribution policy, communication policy, price policy and product policy. Breaking into such a large and complex market is a real challenge, which can be dealt with in two ways: by buying a Chinese company (as in the case of L'Oreal) or by finding a distributor. The latter is more accessible for businesses, but more difficult to pull off. “Factoring the Chinese distributor into market strategy is complicated, beginning with reaching an agreement, then checking and then implementing it", she said. “Change is progressive, but everything comes to he who waits", she concluded, giving as an example four real cases of western brand distribution in the Asian country: Bodegas Torres wine; Casa Módena prosciutto; a leading Spanish olive oil and the Piazza Italia shopping mall.

Efficient Marketing Management, with Chinese characteristics
“Without a winning product or service, you can forget about breaking into this market", and after 22 years living in China, Manuel Sánchez Monasterio knows what he is talking about. The China Consultants Marketing Strategies Director in Beijing added that as well as a winning product, “You have to be backed by maximum resources, a solid marketing budget, and have a very clear vision of China as a medium and long-term market, related to volume, and never as a short-term market related to profitability". Sánchez Monasterio then went on to address the other three variables of the marketing mix applied in this case to the Chinese market.

On the subject of communication policy, he emphasised the importance of correctly translating the brands into Chinese, bearing in mind the language’s peculiarities, meanings and phonetics. This is something that some leading brands have done very successfully, like Coca Cola which translated as “many mouths, very happy". Turning to price policy, he said, “Not everything is a question of segmentation. You need to think carefully about the profitability of selling on the Chinese market". A very common solution, he said, is “Outsourcing production to China, thereby gaining competitiveness in the price variable". Talking about product policy, he warned: “Never take it for granted that a best-selling product here will be a best-selling product over there". Finally, Sánchez Monasterio ended his contribution reminding us that, “The key is efficient marketing management in China, but using Chinese characteristics".

China invests in the world
Technological company Lenovo is a clear example of this great Asian country’s desire for internationalisation. Isla Ramos Chávez, Director of Strategy & Biz Optimization and COE Lenovo Europe, Middle East & Africa, presented this case of corporate innovation. The story started on the 8th December 2004, when Chinese company Lenovo bought the personal systems division of American company IBM. Isla Ramos still remembers what a surprise this was for the workers employed there and the buyers’ long-term strategic vision. “The strategic plan they showed us is still in place", she said. People immediately began to wonder what the reason behind this purchase might be, and they found the answer in the search for synergies. “IBM was an internationally renowned brand and that was one of the most important points for Lenovo. They were trying to get themselves a quick position in the market through a top brand".

After that, the buyers looked for synergies between a very strong brand in services and laptops, as IBM is, and Lenovo, which was very focused on small and medium-sized companies and a top brand in information technology in China. Lenovo decided to strengthen the IBM brand in order to position the product on the basis of quality. “Lenovo focuses on innovation as a business strategy", she reminded the audience: not only in technology, but also in operations, in the business management model and in people management and talent management policies. As for their product policy, “It centres on the way consumers buy", she said “It is not because things are difficult that we do not dare; it is because we do not dare that things are difficult", Isla Ramos chose this quote from Seneca to end her presentation, urging the audience to see China not as a threat, but rather as an opportunity for investment and professional development.