China has emerged as a political and economic superpower, but the country is still learning how to deal with Westerners, just as the West is still trying to understand China. Misconceptions remain common on both sides.
Tom Doctoroff, JWT's North Asia Area Director & Greater China CEO, spoke with "Thoughtful China" about China's recent rise and the myths and misunderstandings that exist between American and Chinese companies, as well as what foreign marketers still don't get about Chinese consumers. (Scroll down to see the full episode.) Mr. Doctoroff this year put out his third book, "What Chinese Want: Culture, Communism and China's Modern Consumer."
What impresses you about Chinese companies?
A few things pop up as really Herculean in ambition. The Chinese ability to manage scale is extremely impressive, and so is their ability to create order from chaos across broad swaths of space across different city tiers. This, of course, also leads to economies of scale leading to a pretty good price -- value equation across a broad variety of goods. Chinese do know how to make things and distribute them in a very efficient way.
What do Chinese see as their biggest challenge?
One of the things that many people forget is that the Chinese are, first and foremost, concerned about what is happening here in China. Although there are many Chinese companies that are reasonably well distributed in emerging markets in South America, Latin America, India, still the main game for the majority of Chinese companies is here domestically as the lower-tier cities come into purchasing power.
When you take a look at what Lenovo was capable of doing in terms of penetrating the hinterland, it's extremely impressive. The automobile manufacturers are impressive, too, in terms of their reach and their ambition of scale. So the ability to manage scale and bring benefits to a large swath of the population is very impressive.
How have U.S. companies adapted China's rise in the global economy?
Over the past 14 years that I've been here I have noticed a lot of multinational companies making less egregious errors. When it comes to product categories, due to the importance of Chinese consumers, there is much more of an effort to truly understand how products fit into consumers lives, so they are not making the big mistakes.
What were some of the big mistakes before?
Well, very basic. For example we had one ... how do I put this without being impolite to a client? ... a food product manufacturer where many of the products are consumed before noon. And they launched with cereal, a breakfast cereal. Chinese don't like to crunch in the morning. The role of breakfast in the morning is fundamentally different than in America. This is a protective society; mothers' fundamental role is to protect their children with love as opposed to enable them to go discover their dreams. So breakfast in the morning should be soft, it should be reassuring, it should be comforting.
So this company had trouble recognizing that their lead product couldn't be what it would be in the United States. To own the morning would require a fundamentally different business model and through that they have tried to have relationships with an acquisitions strategy with domestic companies
Where Americans have not gotten appreciably better, I believe is this unquantifiable need to generate trust by signaling that a foreign company is in fact safe. That the foreign company does not pose a threat. That there's transparency. And also, fundamental respect for the Chinese and the Chinese challenges that are confronted in the Chinese world view. The Chinese are very pragmatic; the Chinese do want to establish productive partnerships, but in order for them to move forward they first need to feel secure.
I do feel like America has not yet really gotten China.
As the economic power balance has shifted over the past decade, are some of the newer American companies coming into China fearful of Chinese companies and need to build trust with local consumers? Absolutely, trust is the $64,000 dollar prize. The assumption that Chinese companies and Western companies, that the Chinese nation and Western nations, are natural competitors and should be feared is a misperception that feeds on itself.