Comments on Experience Not Logic - 不经一事，不长一智: The Growth of Chinese Brands

In regards toward Tata buying Land Rover and Jagua...

2008-04-22T19:42:00.000-07:00

In regards toward Tata buying Land Rover and Jaguar, I think you give Tata too much credit. Ford needed to find buyers for both of them since Ford's business was going down the crapper. Nobody else really wanted Jaguar or Land Rover. If I remember correctly, one of them is bleeding like a stuck pig and the other is just turning itself around.

As for Chery, I don't know. I see just way too many obstacles in the future for a Chinese car manufacturer to become a global brand. I can see it dominating China on the lower end of the product line, but I don't think it will ever become a global player that rivals Honda/Toyota, GM, Renault. Here, if the day it ever comes where Chery makes it big, globally big, I'll buy you the most expensive steak dinner in Shanghai. Hopefully by then I'll be a very rich and successful lawyer.

I just don't know that it is a good idea to place brands as a top brand because of their future sales. Especially if those brands belong to state owned enterprises like in China. The lack of domestic competition brings into question the true value of those brands.

The compiled data was used to value the brands by ...

2008-04-22T14:54:00.000-07:00

The compiled data was used to value the brands by their total future earning potential. For example they valued Google at 86,057 ($M), which means that according to their data Google will return $86.057 billion in profits over the life of the brand. China Mobile is at $57.225 billion, ICBC $28 billion, CCB $19.603 billion, and BoC $19.418 billion. PetroChina's motorfuel brand is only $1.373 billion. The number is so low because the oil company does not have a brand that sells a product, but the motor fuel arm of PetroChina does. Here's the link to the full report by MB Optimor.

I think Chery only has room to grow, especially as their capital base increases. We just saw Tata of India buy Land Rover and Jaguar which is amazing in itself and would've seemed like a joke a year or two ago. Of course Tata is a diversified company with a lot of capital, or at least credit-assets, but considering their quick emergence on the world stage I wouldn't be so quick to dismiss Chery.

Hmm..I do find something eerily disturbing that th...

2008-04-22T11:25:00.000-07:00

Hmm..I do find something eerily disturbing that the most recognized Chinese brands are owned primarily by the Chinese state. Petrochina, China Mobile, the banks, have the majority of their shares owned by the state. Somehow I feel that the lack of true competition (assuming that as majority owner, the state has quite the incentive to monopolize the industry the brand is in) should detract from the value of the brand. These brands were not created out of the crucible of competition, and the businesses behind the brands have not been truly tested.

This is not to say that there are no China brands worth mentioning as a top brand. Huawei and Lenovo, if they can weather the international competition, will come out stronger. Chery, I don't know. They make cars right? Who's going to buy Chinese cars? Chinese in China I guess, but they like American cars anyway. But that just makes Chery a domestic brand. Even if they do go international who is going to buy Chinese made cars? China made an SUV that had the worse safety test records of any car of all time. True that was just the first of many, but I tend to think Chinese businesses like to cut corners when and where they can.

Cutting corners lead to the main point I want to make. Cutting corners is something that all businesses do. In China, its cool if its cutting corners on materials for textiles and shoes and other manufacturing light products. But when businesses in heavy manufacturing and high end electronics start cutting corners, the end result is a bad business and people getting hurt in various ways.

Of course I am assuming that Chinese companies cut more corners than normal. That is just the feeling I get since I can't think of any objective data from the top of my head. But I must admit that my experience with China does not make me feel very confident about the way business is done there. Of course I know I am talking out of my ass. My gut feeling is that all the top brands are driven by the massive growth of the Chinese economy in recent years. The hump is coming, and growth will have to be driven by better business plans and operations instead of depending on sheer massive growth of the economy. But I am sure the government will step in if a big guy fails, so why have better plans.

But I think this article is confusing me. What is a top brand? It seems that in my mind a top brand is a brand with international standing and recognition. A purely domestic business cannot have a top brand in my opinion. Perhaps this paragraph should have come at the beginning of my comment.