Faulty Products Could Thwart the Expansion Plans of Chinese Brands

Marketers May Struggle to Convince Rest of World Their Goods Aren't Bad

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BEIJING (AdAge.com) -- Most Chinese products have earned reputations among U.S. consumers as being cheap but decent, much the way Americans once regarded products made in Japan -- that is, until now. The continuing news about faulty products made in China is posing a major threat to the expansion of Chinese companies -- not just in the U.S. but in other global markets.
Li Ning: Brand, which uses Shaq as an endorser, could be hurt by recent news.
Li Ning: Brand, which uses Shaq as an endorser, could be hurt by recent news.

Unless China's budding brands ensure their compliance with the strictest quality and safety standards in the world and start making substantial investments in their own reputations outside of China, "they will find themselves lumped together in consumers' minds with the producers of melamine-laced cat food and lead-lined toys," said David Wolf, president-CEO of Wolf Group Asia, a Beijing-based communications advisory firm. "That may not hurt immediate prospects, but it will leave them much weaker when negotiating for space on America's shelves."

Brands Blind to China Crisis

Japanese and South Korean brands such as Sony, Toyota, Honda and Samsung have evolved into global brands, so history suggests Chinese companies following in their footsteps by focusing on quality and innovation are likely to prosper over time. But to do that, they must overcome widespread concerns about safety.

"The safety scandals are definitely a hurdle," said Tom Doctoroff, JWT's CEO-China in Shanghai. "They have raised questions about the basic reliability of Chinese products and brands, and the spate of problems will ensure that this perception is a lingering one."

Companies affected
Companies that could be affected include Lenovo Group, the world's third-largest personal-computer maker; Haier, which produces household appliances; sportswear manufacturer Li Ning Co.; China Mobile Communications Corp., the world's largest mobile-phone operator based on subscriber numbers; and electronics manufacturer TCL Corp.

Apart from Lenovo, which jump-started its expansion by acquiring IBM's PC division in 2004, most Chinese firms moving overseas have been building their reputations organically.

Li Ning, for example, sells its shoes and apparel in Southeast Asia, Spain and Russia, and Haier's refrigerators and air conditioners are sold throughout the U.S. at retailers such as Wal-Mart.

"The near- and midterm prospects of these and other branded Chinese producers will depend on them being more proactive and distancing themselves from the tarnished reputation of 'Brand China,'" Mr. Wolf said.
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