HONG KONG (AdAgeChina.com) -- Scott Markman is an unlikely trailblazer in the creation of Chinese global brands, as he is not Chinese and has never lived in China. But Mr. Markman, an American based in Chicago, has found a niche in helping grow manufacturing companies in China's second and third-tier cities run by entrepreneurs with limited education and overseas experience.
His company, The Monogram Group, helps them achieve a goal on the mind of nearly every Chinese company: how to turn a strong domestic business into a thriving global empire.
The idea of helping Chinese businesses enter the U.S. market -- by developing new brand names, marketing plans and distribution channels -- first came to him in late 2004. He put his idea into action 18 months later after reading Thomas Friedman's bestseller on the global economy, "The World Is Flat: A Brief History of the Twenty-First Century."
He hired Chinese experts in the U.S., hopped on a plane to China and began seeking out local companies looking for opportunities to expand in the U.S. market, such as tractor-maker Dongfeng, textile giant Wensli Group, GPS navigation device provider Changzhou Asian Endergonic Electronic Technology Co. and Green Ship Flower Pots.
He recently spoke about his experiences with Ad Age China Editor Normandy Madden.
Ad Age: What's your biggest challenge?
Mr. Markman: Doing business with Chinese entrepreneurs often requires incredible patience, creativity, open-mindedness and time spent trying to find middle ground. In America, there are different kinds of lawyers [because] one lawyer can't handle all corporate needs -- one for IT, one for contracts, one for trademarks, etc. That's not the way things work in China. Also, Chinese have a blind spot about paying for professional services or buying things they can't touch or feel.
Ad Age: How do you get around that blind spot, and have you ever had trouble getting paid?
Mr. Markman: So far, all the checks we've been given have cleared. Part of our standard operating procedure is money upfront, and we invoice as we go for services. So far, I've had no issues.
At the end of the day, I don't have a formulaic answer to the first part of your question. It's an ongoing challenge. I think in five years, enough companies will have plunked down money for professional services that it will pave the way for others. There are just not enough examples of it now.
It's a culture thing. There's very much a do-it-yourself mentality and Chinese are so risk-averse, they only want to work on sure things that are guaranteed. The whole idea of agreeing on a strategy and investing long-haul, knowing returns may not be immediate, is something they recoil from, but entrepreneurs who don't pay for advice are going to fail, more often than not.
There are some positive signs. We recently signed a deal with a tractor manufacturer near Changzhou. They want to create a global brand and are investing in smart things like product design, manufacturing. Now he's talking with dealers.
Ad Age: What has surprised you most about China?
Mr. Markman: A lot of the Chinese manufacturers did not grow up with marketing being a centerpiece with how you succeed and may or may not have gone to college, or maybe they have an engineering degree and have only studied that. Their understanding of marketing is very, very low. They are successful because they're good at sourcing, negotiating and production, but their understanding of what I do is very low for someone as rich and successful as they are. That works against me when I'm trying to get them to hire me.
I've also been surprised at the fractured nature of what they do. Take a tractor company. If a U.S. manufacturer wants to expand their footprint, they'll probably go into lawnmowers or motors, or motorbikes. The Chinese tractor manufacturer may go from tractors to hospitals to real estate. They are very opportunistic and make decisions based on friendships, not whether it makes sense and relates to what they know how to do. Where does a brand fit into that? They don't think that way. For them, a brand is not a strategic asset or opportunity, it's just a name on a box. They don't see it the same way Americans do yet.
Ad Age:What surprises Chinese manufacturers most about the U.S.?
Mr. Markman: There are two ways they consider entering America, green fielding or through mergers and acquisitions. The M&A pathway is a lot more developed, but what Chinese don't understand is that they're often buying distressed businesses that aren't doing well for all kinds of reasons. They're cheap for a reason and are inheriting someone else's problems. A lot of these deals don't end up working out.
Ad Age:Are Americans ready to trust new Chinese brands from companies they've never heard of?
Mr. Markman: A Chinese brand has two strikes against it, unless the product is associated with what China is good at, like making soy sauce or tea. The brand has got to be Western in some way for foreigners to want to buy it. Another problem is that their names are weird-sounding to Americans, sometimes in ways that would invite ridicule. There are built-in cultural biases. China is seen as a place with a lot of baggage, like making shoddy products and taking work away from Americans, so we often tell Chinese companies they need to get past those issues with a new name, so no one realizes they are buying a Chinese-owned brand. The trick is to make the brand sound American and not even get into whether it's Chinese or not.