Building Consumer Good Brands in China

Table of figures

Introduction

PART I Current Western and Chinese brand culture in China

1 Fast-moving consumer goods
1.1 Foodstuffs and beverages
1.2 Cosmetics, toiletries and cleaning detergents
1.3 Alcohol and tobacco

2 Durable consumer goods
2.1 Household appliances and consumer electronics
2.2 Communication and transportation items
2.3 Household items, furniture and leisure items
2.4 Apparel, footwear and sportswear

Summary of Part I

PART II China’s existing and emerging consumer segments

3 Preface
3.1 Values in the context of societal changes
3.2 Regional differences in consumption

4 Consumer profiles according to socio-demographic segmentation
4.1 Labour class
4.2 Salary class
4.3 Emerging middle class
4.4 Economic elite

5 Consumer profiles of selected in-groups
5.1 Children
5.2 Women

Summary of Part II

PART III Brand building in China

6 Identity, positioning and image
6.1 Status quo: identity-based positioning
6.2 Possible positions of foreign brands in China

7 Branding Triangle: Brand naming, brand logos and packaging
7.1 Brand naming and brand name translation
7.2 Brand logos
7.3 Product packaging

8 Brand communication
8.1 Relationship building between brands and consumers
8.2 Relationship communication in the Chinese context
8.3 Tools for relationship communication

Summary of Part

PART IV Final summary and conclusion

Appendices
Appendix I: General map of the PR China
Appendix II: List of interviews and discussions
Appendix III: List of Chinese brand names
Appendix IV: Chinese purchasing behaviour, sales channels and the challenge of distribution
Appendix V: Foreign brands and Corporate Citizenship in China
Appendix VI: China’s Most Valuable Brands 2001-2003

References

List of contents of Multimedia CD

Table of figures

Fig. 1: Possession of major durable consumer goods

Fig. 2: Urban consumer group segmentation

Fig. 3: Basic budget for a primary school child

Fig. 4: BMW Brand Identity

Fig. 5: Multi-dimensional positioning

Fig. 6: Pampers logo in Europe and China

Fig. 7: Types of logos

Fig. 8: Formal integration of brand names into logos

Fig. 9: Old and new packaging of Shanghai Lao Jiu

Fig. 10: The process of brand-consumer relationship building

Introduction

Research question and motivation

Against the background of the Western world’s saturated and fatigued consumer goods markets, the evolving of China’s new consumerism is probably among the most thrilling developments of our days. While the run of foreign companies for China is going on uninterruptedly and many are still struggling with distribution and manufacturing difficulties, the market competition is already entering the next stage, the competition of brands. The growing group of Chinese who can afford consumption beyond their daily needs is becoming more sophisticated and discerning by the day. Not only do domestic brands and trademarks enjoy high awareness and the advantage of real consumer insights, they are also becoming increasingly adroit at using marketing tools to make their ways into the minds and hearts of the consumers.

This thesis explores the challenges and options for foreign brands in the evolving consumption world of China. It examines the conditions of competing brands and developing consumer segments that foreign brands will encounter when setting foot into the Chinese consumer good markets. This thesis takes an explorative approach to find out what measures foreign brands can sensibly take in order to secure their long-term success and assure stability from the beginning.

The findings of this thesis will confirm that brand building in China is indeed a strenuous operation which requires continuous efforts and careful consideration. Despite of possible set-backs, the maturing domestic competitors and the complex market surroundings, the undeniable lead of foreign brands in brand development experience and expertise gives good reason to take an optimistic attitude. It will become clear in the course of this thesis that comprehensive, foresighted and creative brand building strategies based on brand substance and close consumer relationships can lay the foundation to developing strong brands with sustainable brand equity in China.

Scope and limitations

This thesis exclusively focuses on Mainland China; accordingly, the term “China” refers to the mainland area alone. Although Hong Kong, Macao and – from the perspective of Mainland China - Taiwan are part of the People’s Republic, there are major differences in economic and societal development which make it sensible to deal with their respective cases separately. Assuming that the vast economically undeveloped rural and interior areas of China are not relevant for Western brands as yet, the main focus is on major urban areas. That includes the metropolises Shanghai and Guangzhou, the area around Beijing and Tianjin in the north, and second-tier cities such as the provincial capitals Chengdu, Wuhan, Nanjing and Hangzhou. The locations can be looked up in the general map in Appendix I. The term “foreign” brands as used in this thesis refers to brands from economically developed Western countries, i.e. North America and Europe.

Methodology and structure

Extensive desktop and internet literature research including over two hundred scientific and anecdotal articles was done to provide a reliable basis for the investigation of this topic. In addition, this author conducted a number of half-structured interviews and free discussions with retailers, importers, academics and other relevant conversation partners in Shanghai and Beijing in November and December 2003, and via e-mail. The findings from these interviews were supplemented by personal observation and informal conversations with sales staff in the area of Shanghai and Zhejiang province. Impressions and anecdotal evidence from this author’s earlier visits to China were called as illustrations where appropriate.

This thesis is organised into four parts with eight subchapters.

Part I will lay out the basic situation of China’s main consumer product markets in terms of overall market conditions, market trends and Chinese respectively foreign brand dominance. The major brands in each field of fast-moving consumer goods and consumer durables will be introduced with their names and the deciding factors for their success.

Part II focuses on the Chinese consumers. A preface will introduce the Chinese concept of values in the context of ongoing societal changes as well as important regional differences in consumption. This first chapter lays the basis for further investigating and understanding the Chinese as consumers. Subsequently, the urban Chinese will be segmented into four major consumer groups according to socio-demographic factors. They will be introduced by their living conditions, lifestyles, hopes and values. The roles of children and women as two consumer groups with decisive power on brand consumption will be further highlighted.

Part III is concerned with the measures of brand building, that is brand positioning, branding and brand communication. It is essential to see these three elements as parts of a comprehensive and multi-staged concept. Therefore a holistic approach will systematically introduce each element, including the state-of-the art techniques and tools from Western brand development concepts, and discuss how they can be implemented and adapted to the requirements of the Chinese consumer and market environment. The findings from Part I and Part II will serve as starting points to make practical and sensible recommendations on the approaches to be taken. Relevant examples from the current brand scene will illustrate these recommendations and suggest creative starting points for further exploration.

Part IV will briefly summarize the findings from this thesis and draw a final conclusion. It will also suggest questions of interest for future investigation into this and related topics.

PART I Current Western and Chinese brand culture in China

In recent years, the Chinese central government is attaching great attention to the development of strong domestic brands and fostering a base of one hundred Famous Chinese Brands^[1]. Propaganda in the media and Famous Brand Fairs shall enhance the brand consciousness of enterprises and consumers. While “branding” becomes a new magic word in Chinese business, the borders between mere trademarks and brands are often unclear. It is important to note that the Chinese distinguish between grown, long-lived “brands” (品牌pinpai) and fashionable, not necessarily long-lived “famous brands” (名牌mingpai)^[2]. The distinction between brand, famous brand and trademark will not always be possible in the following chapters.

Due to distribution difficulties and the provincial governments’ regional protectionism, Chinese brands are traditionally regional or local^[3]. Many develop by accident rather than on intention^[4]. In terms of brand equity and awareness Chinese brands cannot yet compete internationally. With exception of a few masterfully lead brands like Haier or Legend^[5], China’s greatest brands are unknown abroad and worth only a fraction of the strongest global brands. This is not surprising as many Chinese companies have no marketing departments, not to mention brand experts. “Chinese companies are now trying to learn building their brands, but they are still far away from the mature brand competition stage”^[6]. However, a few old names^[7] like Tong Ren Tang and young players like Broad or Legend are increasingly skilful in brand development.

The following chapters give an overview of the status-quo and trends in the main consumer goods markets and will introduce the relevant brand name players and their key success factors.

1 Fast-moving consumer goods

1.1 Foodstuffs and beverages

With overall improvement of living conditions, the Engel coefficient^[8] has significantly decreased, food consumption is becoming more diversified and moving from staple foods towards packaged and processed goods. This tendency is less pronounced in rural areas.^[9] As China has many different regional cuisine and eating habits, the foodstuffs and beverage markets are also strongly regionally diversified^[10].

Domestic trademarks dominate sales in all traditionally available processed foodstuffs. A number of larger brand-name enterprises has emerged recently, for example Bright Dairy^[11], Yili Milk from Inner Mongolia, White Rabbit toffee, Oishi snacks and Shazi sunflower seeds^[12]. Foreign brands will usually find it difficult to compete in terms of regional food expertise. Some global players e.g. Danone, Unilever and Nestlé localize and gain access to regional distribution networks via acquisitions of shares or complete domestic brands^[13]. US-food giant Pillsbury’ gained popularity by making Chinese dumplings, traditionally a labour-intensive homemade food item, accessible as a packaged convenience-food item^[14].

Foreign brands lead the sales of non-traditionally Chinese foodstuffs such as chocolate, biscuits, dairy products^[15], chewing gum, coffee and ice-cream^[16]. Sales-leading and recognised brands include Nestlé, Unilever’s Wall’s, Maxwell House and Lipton, Danone, Cadbury, Dove, Effem, Wrigley’s and Alpenliebe^[17]. Imported items are expensive^[18] and consumed as special treats or presents, whereas domestic-produced dairy products are slowly becoming part of the daily diet of urban residents^[19]. 60% of Chinese consume dairy products; school milk programmes educate children in nutrition behaviours^[20]. Western-style and Taiwanese foods are in fact more popular than obvious but suffer from distribution problems^[21] and the Chinese consumers’ and distributor’s ignorance of the product use^[22].

In terms of sales, imported and foreign-invested brands occupy 61.6% of the beverage market^[23]. The domestic production is strongly fragmented^[24] but the top ten enterprises account for only 26.71% of the total output^[25]. Recognised trans-regional domestic brands are Lolo, Jianlibao, Coconut Palm and Wahaha. Brand preferences are strongly regional^[26].

Carbonated soft drinks are the by far largest market segment and quasi-monopolized by Coca Cola, Sprite and Pepsi Cola. Past domestic cola imitations failed to provide originality and acceptable tastes. Wahaha’s “Future Cola” survives and claims a 15% market share but is a mere copy of Pepsi’s and Coke’s names and designs^[27]. The market for bottled drinking water is fiercely competitive and moving from purified water toward mineral water. The best-selling brands are Robust, Wahaha and Nongfu Mountain Spring. There are renowned high-quality regional brands e.g. Qingdao Laoshan Mineral Water. Expensive foreign brands such as Evian and Perrier have virtually no market shares^[28].

Fruit-juice and fruit juice drinks is a young market. Chinese producers suffer from shortages in raw material; resulting low juice content and high production prices do not allow to keep up with US and Brazilian producers^[29]. An exception is Coconut Palm’s popular coconut milk drink that draws from abundant local sources^[30].

The tea drinks market is young and competitive. Taiwan’s President and Kangshifu and domestic Xurisheng dominate the urban sales. Almost every major beverage brand has launched at least one tea drink, e.g. Jianlibao, Huiyuan and Wahaha^[31]. Foreign brands from non-tea-drinking countries will find it difficult to position themselves credibly.

Other kinds of beverages such as plant protein drinks, milk drinks and sports drinks are very new in the market^[32] and little information is available.

1.2 Cosmetics, toiletries and cleaning detergents

The still relatively small product range and the absence of drugstores like Britain’s Boot’s or Germany’s dm suggest the overall immaturity of the Chinese personal care product market. The rural areas are expected to see a substantial growth in basic toiletry products^[33]. Some urban market segments are maturing and specialised products e.g. for different skin types or age groups are coming out^[34]. The whole market is strongly fragmented. Procter & Gamble (P&G) is the only brand with a large market share of 13.5%; other multinationals such as Unilever and Amway and domestic producers such as C-Bons have 2% or less. C-Bons is China’s top cosmetics manufacturer, with popular brands such as Slek and S-Dew. Other popular domestic brands include 566, Shanghai Jahwa’s Liushen, Maxam and Herborist series and the traditional toothpaste brands Darlie, Liangmianzhen and Fangcao. P&G generates most sales from the locally manufactured Olay, Rejoice, Pantene and Safeguard ranges^[35], while Unilever pursues a localisation strategy by running traditional and popular brands such as Zhonghua toothpaste^[36]. The key factor for the success of foreign brands is the perception that foreign products are of higher standards and quality^[37].

The entire urban cosmetics market is dominated by foreign brands with high brand equity such as Maybelline, Clean&Clear, Avon, Kose and Shiseido. Most of them hold a few key cities or product segments^[38]. Four out of the five top facial skin care brands are international brands^[39]. National sales leadership is distributed evenly among domestic and foreign brands^[40], probably because foreign brands are not available in rural areas^[41] and domestic brands offer larger package sizes^[42]. The Global Cosmetics Industry magazine predicts good opportunities for brands with novel attributes, for instance specific ethnic, natural or ethical brands. Some popular domestic products include Traditional Chinese Medicine (TCM) herbs^[43]. Domestic Yue-Sai successfully markets specific ethnic products for Asian consumers^[44].

Although awareness of the underdeveloped sub-markets for baby care and male grooming is still low, they should hold good opportunities for foreign brands with high product and brand expertise. Johnson & Johnson and Shanghai Henkel-Kemeng Cosmetics have reached high awareness in baby care with educational programmes for parents^[45]. Several brands recently launched men’s personal care product lines, e.g. Shiseido, Adidas with Yue-Sai/Coty and overseas-Chinese funded Mentholatum^[46].

Popular regional and local cleaning detergent brands in east coast areas include Kami, Liby, Eagle and Shanpai^[47]. Many rural families do not have washing machines and therefore use washing soaps rather than washing powders. Amway, Unilever, P&G and domestic Nice and White Cat show a strong nationwide presence in urban markets and have adapted to local requirements, e.g. with disinfectant washing powders and washing soaps for manual laundry^[48].

1.3 Alcohol and tobacco

The whole national alcohol market is covered by fiercely competing Chinese brands. Traditionally, the market is very local although best-selling brands like Moutai and Wuliangye have a nationwide reputation^[49].

Although not a traditional alcohol, beer has become one of the most popular alcoholic drinks. The market is growing at strong rates and might overtake the US as the greatest national beer market^[50]. The market is extremely fragmented and small brands are dying due to price wars and regional protectionism; Yanjing Beer from Beijing and Tsing Tao Beer are clearly the best-selling brands. Foreign breweries are increasingly entering co-operation with domestic producers^[51].

One third of the hard liquor market is occupied by Moutai, Wuliangye and Jiannanchun, the other two thirds by local brands. A decrease in the industry has already eliminated many producers. Lately inexpensive high-quality spirits like Jingzhi White Spirit have become popular and there has been an upsurge for liquor advertisements^[52]. In fact, Jingzhi’s trademark was impounded through a court order to pay for debts from overt advertising spending^[53]. There seem to be no foreign brands in the traditional hard liquor market. Western liquor-cum-soft drink brands like Bacardi Breezer or Rigo could possibly be introduced as lifestyle products to younger consumers.

Wine includes fruit wine, yellow rice wine and millet wine. All segments are dominated by domestic brands. Rice and millet wines are widely unknown in Western countries and under the firm grip of domestic brands like brand leader Moutai. The three grape wine giants Great Wall, Zhangyu and Dynasty account for two thirds of the sales incomes of the whole domestic wine industry. In international comparison they bear the image of inferior products^[54]. Western wines seem not to have significant market shares whatsoever, probably because they are too expensive for such a relatively unpopular product.

There are an estimated 350 million smokers in China^[55] and the tobacco market is growing at considerable 12.23%, with a particularly strong momentum in east China^[56]. The market is regionally fragmented among ca. 150 inefficient, small-scale producers of 2,500 low to medium quality cigarette brands^[57]. The top eight producers account for only 26% of the market^[58]. Hongta Group (owner of China’s second-most valuable brand Hongtashan) is the sales leader^[59].

Two old brands Zhonghua and Hong Shuangxi are particularly popular in rural areas; thanks to their red package and positive names^[60] they are part of local wedding traditions^[61]. The relatively expensive Zhonghua cigarettes are even popular among young smokers and smoked as status symbols for festivities and other special occasions^[62].

While light cigarettes are preferred in Western countries, flue-cured, high-tar-level and heavily-fragrant cigarettes still take great market shares in China^[63]. Some domestic brands contain herbal TCM ingredients and are believed to relieve some diseases^[64]. There might be opportunities for flavoured special editions of foreign brand cigarettes in this pre-conditioned market. All foreign brands together have a 3% market share^[65]. As tariffs on tobacco are falling from 70% to 20% in 2004^[66], foreign brands are trying to enter the market. Hongta Group recently started production of “West” cigarettes for Imperial Tobacco in China, while Imperial Tobacco will market Hongta’s brands overseas^[67]. The government is trying to consolidate the market and prepare for the run from abroad by deleting small producers and merging the rest to three to five large corporations^[68].

2 Durable consumer goods

2.1 Household appliances and consumer electronics

For the time being, Chinese brands dominate the whole market for household appliances. Former Liebherr partner Haier is China’s most valuable brand and the giant in household appliances. Under its CEO Zhang Ruimin, Haier has made itself a name as rigorously providing the very best quality and unbeatable services at any time^[69].

The four leading domestic brands Haier, Rongsheng, Xinfei, Meiling and Xiangxuehai (the latter owned by Samsung) hold almost 80% of the market for refrigerators. Samsung, Electrolux and Siemens as the strongest foreign brands together account for less than Haier’s market share. Their failure is attributed to a lack of product, service and marketing localisation and to insufficiently adapted design and technology. Attempts of these three and other foreign companies e.g. General Electrics, Whirlpool and Matsushita to re-enter the market via the acquisition of domestic brands in the late 1990s were not successful^[70].

Domestic Little Swan and Little Duck are the trans-regionally best-selling washing machine brands^[71]. In the last years foreign brands with product localisation strategies, e.g. LG, Siemens and Whirlpool have gained 42% of the nationwide market for fully-automatic washers. They now target the growing middle class in small cities^[72]. As the trend is shifting from Asian-style washers to European hot-water tumblers^[73], European brands could use their technological advantage. At the moment Haier occupies 70% of this niche market^[74].

There are more than 200 air conditioner manufacturers, but the top ten domestic brands hold over 85% of the overall market. They include Gree, Midea, Kelon, Haier, Changhong, Shinco, Galanz and Little Swan. Reasons for their success are brand adapting and attractive pricing^[75]. Fierce price wars have already eliminated many inferior brands^[76]. A few international brands such as Korea’s LG and National are now trying to gain a standing^[77]. Domestic Broad takes a special role as a nationally and internationally leading brand producer of high-quality gas-absorption air-conditioners^[78].

From its historical role as “a dumping ground for Sony's older products”, China’s market for consumer electronics has become a technically advanced and highly competitive market^[79]. Sony still has the most-highly regarded name in all audio-visual products, but Samsung has a more modern and emotional image with younger consumers as it turns technical gadgets into fashion accessories for a broad public^[80]. All over Asia, Samsung is reaping market shares from Japanese, US and European giants in various high-tech businesses with hard-to-beat combination of innovative designs, cutting-edge technologies, aggressive marketing and a good understanding of consumer buying behaviour^[81]. We can say that Samsung is on the way of becoming a “new Sony”. In the lower price segments of all audio-visual products local and regional trademarks compete with inferior quality but competitive prices^[82]. Western brands seem to play a minor role.

The sales of colour TV sets are dominated by recognised domestic brands such as TCL, KONKA, Changhong, SKYWORTH, Panda, XOCECO, Hisense and Haier^[83]. The market is very competitive and has seen fierce price wars in recent years^[84]. Innovative brands survived, like TCL who set the trend for large-screen TVs^[85].

All top ten camera brands are foreign-funded. Canon, Kodak, Fuji, Olympus, MINOLTA and Samsung lead the sales^[86].

2.2 Communication and transportation items

With over 243 million subscribers^[87] and annual growth rates of 20%^[88], China is the world’s largest mobile phone market and extremely competitive.

Foreign brands like Motorola, Nokia, Siemens and Samsung have stronger brand names^[89] but are less present in remote areas. Some foreign brands neglected or were late in picking up mass trends, e.g. the Chinese preference for “clam shell” handsets^[90]. The share of market leader Motorola halved from 33% in 2002 to 16,2% in 2003^[91]. The top domestic handset makers Ningbo BIRD and TCL now occupy 11.6% and 9.4%; all domestic brands together, including newcomers from the home appliance sector like Haier, Amoisonic, Konka, Hisense and SKYWORTH, hold about one half of the market^[92]. Assembling their models from western-made, high-quality OEM parts allows them to concentrate on speedy design changes, aggressive marketing and the creation of new consumer trends like immensely popular fake diamond-studded handsets^[93]. Samsung provides similar cutting-edge designs and novelties but from own technology and development^[94]. Western brands now pick up the trend, e.g. Siemens markets its Xelibri line as high-priced fashion accessories^[95].

Foreign brands also face strong domestic competitors in the new generation of CDMA-mobile phones, e.g. Huawei and ZTE. According to Martin Lehnich, Vice President Operations of Alcatel Shanghai Bell, these domestic companies are technically at least as competent as the foreign ones and very price aggressive^[96].

Domestic Legend (known as Lenovo outside of China) is China’s most popular and best-selling desktop PC brand. Legend holds 27.2% of the market, followed by domestic Founder with 9.1%^[97]. Both brands ousted domestic non-branded “white box” computers by aggressive low-price strategies and better quality^[98]. Legend offers top customer services^[99] and has an excellent nationwide distribution network^[100]. The company is quick in outsourcing and importing what it cannot economically make on its own^[101] and has a good standing with the government^[102]. These qualities are difficult to beat for foreign brands, but global players such as IBM, Hewlett-Packard and Dell are regaining market shares^[103]. Legend’s and Founder’s shares fell from 32.7% and 10.4% in 2000^[104], while Dell grew from 3% in 2000^[105] to 5.8% in 2003^[106]. Dell is now designing products specifically for China and operates an assembly plant there^[107]. New entrants as Haier are putting further pressure on the margins for low-end hardware^[108].

In the notebook market, Legend and IBM are competing for the market leadership^[109]. In 2003, Legend, Founder, IBM, Toshiba and Dell held a combined 65% share^[110]. In addition, Samsung is entering with a well-established brand image in the consumer electronics business (see above) and new technology such as Centrino processors^[111].

Although large hardware makers like Legend and Founder pre-load legal software on their PCs, the Business Software Alliance reported a 94% piracy rate in 2000. This is probably related to the high royalty prices of legal software. Although the government promotes the use of Linux^[112], most users prefer Microsoft Windows applications because they find them more user-friendly^[113].

The automobile market is known to have been dominated by foreign brands from the start. The Santana of historic first-comer and long-term brand leader Volkswagen (VW) is actually perceived as domestic by most consumers^[114]. With the VW Jetta, VW Santana, Xiali and VW Santana 2000, three of the four currently best-selling brands are foreign and expensive compared to Chinese cars^[115]. Foreign brands and particularly VW strongly appeal to the emotional incentives that drive Chinese car buyers^[116]. Less expensive than other Western brands and typically used as taxis, the VW brand is positioned as the “people’s car^[117] ” with obvious success. However, with increasing purchasing power, more exclusive brands such as BMW and Mercedes-Benz will be more desirable for car buyers in the long run. Domestic brands like Geely and Xiali are improving in quality and quite successfully target the lower price segments^[118]. The Chinese government is striving to assemble the currently more than a dozen state-run automakers into two to three strong groups that shall cover 70% of the market by 2005^[119]. BMW and Daimler-Chrysler are already co-operating with domestic automobile manufacturers^[120]. A peculiarity of automobile brands is their local distinction by attributing their respective production places to their brand names, for instance Shanghai Buick or Shenyang BMW.

With the expansion of the private car market, the bicycle market is shrinking. The bike is still a utilitarian vehicle for most Chinese, but slowly turning into a sporting good: 60% of sales in 2002 came from lightweight and mountain bikes^[121]. Most of China’s 500 manufacturers are brand-less OEM companies; as Taiwanese bike manufacturers with high brand equity such as the Taiwanese two top brands Giant and Merida heavily invest in the market, many locals have started co-operation with them^[122]. The strongest mainland-funded manufacturers are the traditional names Sunrise, Forever, Phoenix and Flying Pigeon^[123]. According to Chan and Huang^[124], the so far very conform market should hold good opportunities for localising brands with creativity and brand strategy. No information was available on Western brands.

2.3 Household items, furniture and leisure items

The market for small household items is Chinese dominated^[125] and very regional^[126]. Foreign brands like Germany’s Zwilling are entering the urban upper market segments. Among the less affluent, utilitarian values and appealing design seem more important than brand names.

According to a market study by Fiducia Management Consultants^[127], local furniture in the lower and middle price segments has significantly increased in quality and is still popular. Consumers increasingly demand for high-quality products that reflect their higher standard of living. Between 1993 and 1997, more than 70% of consumers purchased brand name furniture. Foreign brands like IKEA and Italian Vita Furniture^[128] are positioning themselves as life style brands in the metropolitan upper price segments.

The wristwatch market is far from saturation^[129]. Consumers are increasingly paying attention to decorative aspects. Cheap domestic fashion brands with quickly changing designs for less than RMB 100/item^[130] appeal to students and low-incomers. Medium-priced (<RMB 200/item) domestic brands such as Rossini and Fiat (sic!) offer decent quality and modern designs to the salaried class. Most higher-priced watches (several hundred up to RMB 1,000/item) e.g. Citizen, Seiko and Rado are imported and successfully target white-collars. Luxury brands like Rolex cater to the small rich elite^[131].

China is among the world’s leading toy producers and has more than 1,000 manufacturers^[132]. Most toys are not branded, 80% are low or medium grade and many do not meet safety and quality standards. Established domestic brands include Chicco, Good Baby and Kegao^[133]. Domestic-produced foreign brands such as Lego, Duplo and Techno have been available since the mid-90s^[134]. Along with Disney, Hasbro, Doraemon and other imports, they are popular but considerably more expensive than domestic equivalents^[135]. E.g. a real Barbie doll costs > RMB 130, whereas a Chinese imitation named “Cindy” comes at RMB 13^[136]. Educational toys for their children, decorative and computer toys for adults are expected to become very popular^[137].

2.4 Apparel, footwear and sportswear

There are 8,000 fiercely competing domestic trademark apparel manufacturers which form regional conglomerations specialized in different product segments, e.g. down wear production in the Ningbo/Hangzhou area^[138]. Erdos from Inner Mongolia is China’s most valuable apparel brand^[139] and the worldwide leading producer of cashmere clothing^[140]. The largest trans-regional labels are Hongdou, Boston and Youngor^[141]. East-coast labels with high market-awareness include FIRS, Conch, Kaikai, Peace Bird, Baoxiniao, and youth-label Meters’bonwe. Western-style male suit makers like Baoxiniao are considering expansion to Europe because their home market cannot absorb their high-quality, high-priced suits. Fashionable youth brands like Hong Kong’s Baleno and Giordano, GAP, MNGO and Australia’s JeansWest thrive in east-coast cities. Most other foreign brands target the high-end market and are mainly seen in less frequented up-market locations or on street markets for fake goods.

One half of the market for children’s wear is dominated by a few high-priced foreign brands such as US-invested PacLantic^[142], Mickey Mouse and Snoopy (>RMB 200/item). The other half is covered by numerous cheap, mostly brand-less domestic producers. Established Chinese brands include Yixiu, Good Baby, Boshiwa and Lazy Cat. Although the market was expected to grow at 8% to about 10 billion sold items per year by 2003, it has been underestimated by domestic producers so far and should hold good opportunities for brand name products^[143].

The sportswear market is polarized between domestic Li-Ning, and Nike and Adidas. Li-Ning reaps higher profits by selling more items for lower prices^[144], whereas Nike and Adidas have a higher brand equity but lower turn-over. According to Nene Leung, founder of Champion Projects sports consultancy, high-priced Nike and Adidas are regarded as premium designer labels, whereas Li-Ning - named after its founder, China’s former gold-medallist Li Ning - scores as a down-to-earth, value-for-money brand. In terms of sales all the other producers, including a number of regional trademarks, are far behind^[145].

China’s over 1,300 leather shoe manufacturers^[146] offer a wide range of styles for prices from as little as RMB 30 to several hundred per pair, which makes leather shoes affordable for most urban consumers. The quality and styles of trans-regional brands like Daphne, Le Saunde or Gold Lion are comparable to European footwear brands^[147]. To a large part of China’s population leather footwear remains a luxury, and cloth or plastic shoes from regional fabrication are a common sight among the less affluent^[148]. No information on foreign brands was available.

Summary of Part I

Foreign Western brands are found in strong positions in the upper and premium price segments of western-originated, technology- and capital-intensive industries, including automobiles, telecommunication, personal care products and western-style foodstuffs. Japanese telecommunication and consumer electronics brands are partly losing ground to Samsung and domestic brands. Chinese brands and trademarks cover the middle and lower mass market segments of labour-intensive and traditional industries in whole China. Thanks to excellent services, attractive price/quality ratios, consumer insights and the visions of strong-willed company leaders a few strong domestic brands are gaining market shares from Western and Japanese brands. Some have already taken leading positions in their respective markets. Some foreign brands lose attractiveness and the customers’ trust due to a lack of consumer insights and failure to deliver competitive service quality.

PART II China’s existing and emerging consumer segments

Branding is closely connected with the understanding of consumer’s physical living conditions as well as their culture values and societal backgrounds. Domestic companies have a unarguable advantage in understanding both and make all effort to get deeper insights^[149]. Foreign companies therefore must pay even more attention to get a thorough understanding of the Chinese consumers’ physical and mental inclinations. The following part of this thesis accounts for both aspects. Chapter 3 provides elemental information on culture values in the modern Chinese context, and on regional differences in consumption. Chapter 4 and 5 examine the specific physical living conditions, lifestyles and trends of the respective consumer segments more closely. Due to the increasing heterogeneity of urban consumers, socio-demographic segmentation as made in Chapter 4 is not sufficient any more^[150]. Chapter 5 therefore focuses on consumer groups in terms of their in-group membership. Children and women are selected as consumers with decisive influence on brand consumption.

3 Preface

3.1 Values in the context of societal changes

Like all cultures, Chinese culture is not static. China is seeing a new era of conflicting tendencies brought about by recent economic, political and societal changes. The following paragraph shall lay out which values and concepts^[151] have been preserved - or rekindled - throughout these tensions and can be referred to when branding towards consumers in China today.

Continuance of Confucian values

Matthews^[152] argues that merely the appearance of basic Confucian values like filial piety, respect for traditions, humility and protecting one’s face^[153] has been adapted to the requirements of the political state. These “cornerstones of Chinese morality” still extant in the rural community^[154]. Urban Chinese, while increasingly embracing modernity and individuality values^[155], still appreciate traditional values for moral education and life guidance^[156]. A 1998 study by Chiu et al.^[157] found Chinese businesspeople, i.e. the economic elite of China, to actively live Confucian values like harmony, modesty, courtesy, self-control and conflict-avoidance. The Confucian ideal of education and the belief in the malleability of man manifest in parental spending on children’s education and the rise of adult education^[158].

The emergence of conspicuous consumption might derive from the intertwining of modern and traditional values: Collins and Sun^[159] suggest that symbolic consumption actually stems from a “blend of Confucian values associated with appropriate consumption behaviour according to social status, and Western cultural values of materialism and hedonism”. As social status has increasingly become associated with wealth and achievement^[160], conspicuous consumption of luxury products and high-profile brands expresses the ability to behave accordingly to one’s status.

Modernising, not westernising

A look at Chinese history reveals a century-long tradition of adopting useful ideas and assimilating foreign influencers rather than being assimilated. According to Bond and King^[161] this allows the modern Chinese to adopt foreign values and concepts as they wish, while simultaneously preserving traditional values. Examples are the Hong Kong Chinese^[162] and MTV China’s western-educated front-woman Li Yifei^[163] who adopt and utilize Western skills and but retain their distinctive Chinese values. Li Yifei: “All these years, China has provided me emotional comforts while the US gave me my professional skills."

Collectivism is no contradiction to modernity, as can be seen in deeply collectivistic, ultra-modern Japan. In China, the importance of the individual and individuality is increasing among the younger well-educated urbanites, as a content study on advertising by Zhang and Shavitt^[164] shows. Due to ongoing social stratification further individualization can be expected. The individual’s self-concept is nevertheless mainly determined by his or her social identity, which derives from social group membership^[165]. This has influence on brand consumption insofar as Chinese consumers choose and recall brands in order to express similarity with others, rather than uniqueness and individuality^[166]. The collectivistic background also means that Chinese generally use informal information sources and word-of-mouth recommendations to a higher extent than consumers in most Western societies^[167]. The Chinese self-concept also reflects in the concepts of maturity and freedom, which cannot be applied to branding in the same way as in Western countries. Maturity in Western countries means “[…] to be free from the constraints of what other people think…“^[168]. In China maturity is “the ability to socially integrate”^[169]. Thus, peer pressure and image consciousness remain high among modern young Chinese. Freedom in China does not mean the right on self-determination and withdrawal from relationships. Personal freedom as idealized in Western countries has the negative connotation of being devoid of relationships^[170].

The family as a constant in life

Like other highly collectivistic societies, the Chinese clearly discriminate insiders (zijiren 自己人) and outsiders (wairen 外人) of social groups. Their social interaction is built in layers from inside to the outside. Insiders include family, friends and all those someone is connected with in a social relationship^[171]. In terms of membership groups, the family or kin group is the most central, most important and longest-lasting. Closely connected with the Confucian precept of filial piety and reverence to one’s ancestors, the role of the (extended) family as a refuge “against the indifference, the rigours, and the arbitrariness of life outside”^[172] is a constant throughout Chinese history^[173]. Outsiders in foreign places cluster with fellowmen from their home province or town as a family substitute^[174]. Advertising depicting filial reverence and parental affection strike an emotional chord, for example a recent TV commercial for washing powder featuring a little girl washing the laundry for her exhausted mother. Songs of gratefulness to the mother are frequently sung with heart-felt expression at karaoke rooms. These expressions of family values seem to be cherished even the more under the weakening influence that modernisation in form of nuclear families, urbanisation and increasing labour mobility exerts on traditional family relationships^[175]. Under the stresses of modern life, familial dysfunctions, extramarital affairs and divorce rates are rising. Family values, stability and the desire for belongingness and closeness will be some of the strongest emotional appeals usable for branding.

New Nationalism vs. enthusiasm for foreignness

Contemporary China shows a conflicting attitude between a “diffuse nationalism” and enthusiastic welcoming of foreignness^[176]. Longing for respect and recognition from the world, cultural pride and a feeling of deprivation are common sentiments throughout society. The central government utilizes these sentiments and the revival of Confucian values to promote a new national feeling^[177]. Many Chinese reject high-priced Western style consumption as a “devious plot” to invade China culturally^[178]. At the same time, party officials are known to send their children abroad and consumers happily welcome symbols of foreign cultures: Kentucky Fried Chicken, fake Louis Vuitton handbags and Mont Blanc pens. Anthropologist Prof. James Watson of Harvard University: "It's maybe not for the older generation, but there is a feeling that if their child can eat at McDonald's then he can go out in the world and succeed."^[179].

Young intellectuals and office workers are particularly polarized and instable in their attitudes^[180]. They are a promising target group for brands, so branding companies should be aware of these issues.

Loss of stability

The central government’s gradual retreat from social welfare, global competition in the aftermath of China’s accession to the World Trade Organisation, and unequal economic development mean enormous pressures and a loss of stability for many Chinese. A large-scale survey found many urbanites concerned about medical care, social welfare, social security, employment, housing and education^[181]. This shows in a new health boom^[182], high savings rates and rising sales of life insurances throughout all social strata^[183]. Pressure is particularly high on the so-called “lost generation” of 40 year-olds. Many of them were deprived of education in the past political turmoil and are put at a disadvantage in the increasingly competitive labour market. In addition they face the double responsibility of caring for their ageing parents and providing education to their children^[184]. Corresponding to the zeitgeist, brands can represent stability, self-assertiveness, trust, a responsible but positive attitude, and retreat from worries.

3.2 Regional differences in consumption

Consumption behaviour varies greatly according to regions, social class, education, income levels and occupational types^[185]. The Chinese market is not one entity, but an array of highly diverse regional sub-markets: "Except politically, China is by far not one nation," Quinn Taw of media agency MindShare in Beijing^[186]. Garry Titterton, D’Arcy Masius Benton & Bowles Asia-Pacific CEO even states that “There's a huge ignorance of the complexity in China. China is more complex than Europe”^[187]. This chapter can lay out only basic regional consumption differences. Companies obviously need to do deep-going, finely targeted consumer research when entering a Chinese market.

A Gini coefficient^[188] of 0.456^[189] indicates wide differences in income distribution. The rural-urban divide is the most significant difference. Average monthly incomes in urban areas totalled RMB 681, with Beijing, Shanghai and Zhejiang province reaching over RMB 1,000^[190]. This compares to a monthly per capita cash income of RMB 246 in rural areas^[191]. The present consumption level of rural residents in central and west China can be compared to that of urban residents in the late 1980s^[192]. The developmental gap also shows in the choice of shopping channels in rural and urban areas^[193]. Average annual household consumption is over two times higher in urban than in rural China (RMB 6,796 compared to RMB 1,927 in 1999^[194] ). Fig. 1 illustrates this gap at the example of the possession of major household durables.

Fig. 1: Possession of major durable consumer goods (in number of items/100 households at yearend 2001)

Abbildung in dieser Leseprobe nicht enthalten

Source: CSY 2002, assembled from pp.326, 328, 350, 351

There are also regional differences in consumer reaction to marketing and consumption behaviour. Cui and Liu^[195] identify seven geographical regions with different stages of market and economic development, consumer lifestyles and consumption behaviours. For example, northeast Chinese are described as relatively active and open to most contemporary products and consumption behaviours; but as more conservative and less foreign-oriented in their consumption than consumers in more affluent areas^[196]. Comparing China’s metropolitan consumers, Beijing people are said to be relatively sober and serious in their spending, whereas the Shanghainese are fashion conscious and love bargaining and the hunt for good value; Guangzhou residents are described as more lively and materialistic with a tendency for impulsive spending^[197]. Details on regional differences in brand preferences, product and brand ownership, willingness to pay and purchasing intentions of consumers in major cities according to different product categories can be obtained from analysis of the IMI Consumer Behaviours & Life Patterns Yearbooks.

4 Consumer profiles according to socio-demographic segmentation

The demographic factors show China as a rural, relatively young society with increasing urbanisation. 64% of the population live in rural areas. The female-male ratio is 48:52. 23% of the population are younger than 14 years, 70% are aged 15 to 64 years and only 7% are older than 65 years. 74% of the 15 to 64 year-olds are married. Life expectancy at birth is 71 years. Illiteracy is moderate at 6.7% but the overall education standard is relatively poor. Over two thirds of the adults receive nine years of school education or less. Only 11% complete higher middle school and an elite of 3.6% enjoys university or higher education. Women’s average education level is significantly lower than the men’s; illiteracy rates are higher in the countryside than in cities^[198].

All information in the following subchapters is based on the urban socio-demographic segmentation pyramid by Cui and Liu^[199] (see Fig. 2) and the 2001 IMI Consumer Behaviours & Life Patterns Yearbook Vol.1^[200]. As no segmentation was possible for rural areas, information on rural consumers is filled in where possible; additional data is indicated as such.

Fig. 2: Urban consumer group segmentation

Abbildung in dieser Leseprobe nicht enthalten

Source: generated by author according to Cui and Liu 2001

4.1 Labour class

The term labour class^[201] refers to families whose annual household income does not reach RMB 10,000^[202]. They represent 55% of the urban population and the vast majority of rural residents. Most are married couples in their forties or fifties who seldom afford more than one child^[203]. Labour class people typically receive middle school education or less. Most of them are workers in state-owned enterprises, some retired or unemployed^[204]. The group also includes about 80,000 migrant workers who earn RMB 300 to RMB 500 a month^[205]. About 37 million citizens live in poverty, not counting the suburban and migrant population^[206].

Most families face difficulties in making their daily lives and many feel that their living conditions are actually deteriorating^[207]. The working poor own less durables than others and spend a high part of their incomes on essentials; they are also the least socially active group and ideologically conservative. A basic life value of the working poor population is their strong belief in stability and family; this mirrors the role of the family as a constant throughout the difficulties of life, as depicted in the Chapter 3.1. Their general attitude can be described as “work hard get rich”, but as they are trying to make ends meet in daily life, they do not have a lot of enterprising spirit^[208]. However, they are willing to invest a large proportion of their incomes into their children’s education in order to give them better chances for life^[209]. The young are more interested in fashion and product information and a little less price-oriented than the older generation^[210].

Due to their low spending power, the working poor are not brand-conscious and greatly unattractive for all but price policy-based brands. They purchase cheap domestic brands if not commodities. In the rare cases where they do purchase brand name products, they might be receptive to lower-priced brands who bring a little happiness and carefree ness into their daily lives, to brands that promise to simplify life and make up for physical labour and hardships. As most parents hope for their children to do better in life, nurturing and educative brands who support the children’s healthy and fast development should be well received.

4.2 Salary class

About one quarter of the urban population belongs to this class with lower-grad office jobs and annual household income of RMB 10,000 to RMB 20,000. As for rural areas, there are few office jobs below township-level but a number of small business owners (“getihu”) should be counted into this category^[211]. The incomes of unmarried younger members are significantly higher^[212]. Typical members are married couples in their forties with one child. Most hold degrees from higher middle school, some also technical school qualifications. As they are more likely to work in government offices, their social status is higher than the status of working poor and maybe even somewhat higher than the emerging middle class.

They usually own the traditional essential durables^[213] such as refrigerators and colour TVs but not necessarily luxury items like air conditioners. They attach great importance to quality and may occasionally seek brand name products, even foreign brands if affordable. The salary class are a conservative and idealistic group and probably more likely to be influenced by official opinions and policies due to their work at government offices. They spend more time on reading and leisure activities and lead a relatively health-conscious life. Typically, the younger generation is interested in fashion. The married and older ones are quite family- and stability-oriented^[214]. For the young, their greatest concern is decent housing, for the middle-aged major worries are the high cost of their children’s education and caring for their parents. All are quite concerned with medical care, employment and social security^[215]. In an overall perspective, these consumers represent China’s bourgeoisie in their attitudes and beliefs. They seem quite happy with their lives and seek to enjoy it in the bounds of their possibilities.

4.3 Emerging middle class

The emerging middle class^[216] represent an urban minority of 15% who have at their disposal annual household incomes of RMB 20,000 to RMB 40,000. Equivalent to ca. € 2,000, this would qualify them for lower class status in Europe; in China these people have attained a “level of moderate prosperity”^[217]. Their number is much smaller in second- and third-tier cities than in metropolises, but still considerable^[218]. Members are usually married and some afford two children. Almost one fifth are singles and they are a little younger in average than the salary and labour class. There are also more high school graduates and 2-3 year bachelor holders than in the lower income groups. Like the salary class, the middle class typically do administrative work in government offices, but the proportion of getihu and employees of private enterprises in technical or professional positions is higher. There are quite a few managers in the younger generation.

[...]

^[1] One national and seven regional committees award the status of “Famous Brands” to selected enterprises and goods. See China Famous Brand Net www.chinamp.org.cn and related homepages

^[2] interview Zhou 2003

^[3] Yoon 2002

^[4] For abundant evidence see Dumont and Gilmore 2003

^[5] Value in 2003 ca. 5.3 billion, respectively 2.6 billion Euro. For official lists of China’s Most Valuable Brands 2001, 2002 and 2003 see Appendix VI

^[6] Wang 14 January 2004

^[7] So-called百年老字号, 100-year old names

^[8] The Engel coefficient is an internationally acknowledged index that shows a nation’s living standards. It indicates the proportion of food expenditure in total consumption. Numbers were 37.9 in urban and 47.7 in rural areas in 2001 (China Statistical Yearbook 2002)

^[9] China Statistical Yearbook (CSY) 2002, pp. 326, 329, 350

^[10] Dumont and Gilmore 2003, p.219

^[11] The original Chinese brand names used in this thesis are listed in Appendix III

^[12] 2001 IMI consumer Behaviours & Life Patterns Yearbook Vol.3 (henceforth: IMI 2001-3) p.10; Schlevogt 2000

^[13] n.n. 1999a; IMI 2001-3, p.698

^[14] Hui and Zhou 2003

^[15] According to Wang (14 January 2004), with the exception of regionally produced fresh milk

^[16] IMI 2001-3, pp.10, 14, 19; China Markets Yearbook (CMY) 2004, table 1411

^[17] CMY 2004, table 1411; Dumont and Gilmore 2003, p.117; IMI 2001-3, pp.10, 13

^[18] E.g. a 300g package of imported Dove chocolates costs around rmb 43 (ca. € 4.30), equivalent to a complete meal for two persons at an average restaurant

^[19] IMI 2001-3 p.14

^[20] n.n. 1999a

^[21] For an introduction in the challenges of distribution in China see Appendix IV

^[22] Hatfield 2002. Hatfield gives evidence of a German children's cereal brand being put in the pet foods section because it had cartoons of animals on the box

^[23] All China Business Information 2001

^[24] All China Business Information 2001

^[25] IMI 2001-3, p.691

^[26] IMI 2001-3, p.692

^[27] IMI 2001-3, p.691 f.

^[28] IMI 2001-3, p.696 ff.

^[29] IMI 2001-3, p.700

^[30] Information derived from this author’s visit to the Coconut Palm factory in Haikou, Hainan province in July 2002

^[31] IMI 2001-3 pp.693, 699 f.

^[32] IMI 2001-3, p.693

^[33] Euromonitor 2003

^[34] for details see Hendarwan 2002 and Euromonitor 2003

^[35] Euromonitor 2003

^[36] Asia Bridge 2001b

^[37] Euromonitor 2003

^[38] The Economist Intelligence Unit 2001a

^[39] Hendarwan 2002

^[40] CMY 2004, table 2685. Having said that, all domestic brands where in fact at least partly foreign-controlled

^[41] The Economist Intelligence Unit 2001a

^[42] Hendarwan 2002

^[43] Hendarwan 2002

^[44] for a case study see Dumont and Gilmore 2003, p.195-206

^[45] Euromonitor 2001

^[46] Hendarwan 2002; this author’s observation

^[47] this author’s observation

^[48] CMY 2004, table 2681

^[49] IMI 2001-3, p.1022 f.

^[50] Access Asia 2003

^[51] IMI 2001-3, p.1020-1022

^[52] IMI 2001-3, p. 1022-1024

^[53] Wattanavitukul 2002

^[54] all information from IMI 2001-3, p.1024-1026

^[55] n.n. 2004

^[56] IMI 2001-3, p.1027

^[57] n.n. 2004; Weissman 2002

^[58] n.n. 2004

^[59] CMY 2004, table 1620

^[60] Red is considered a lucky colour. Zhonghua 中华is China’s literary name. Hong Shuangxi means Red Double Happiness．Double Happiness is a traditional wedding-symbol depicted as the double character喜喜

^[61] interview Yao 2003

^[62] Skaria n.d.

^[63] Weissman 2002

^[64] IMI 2001-3, p.1026

^[65] n.n. 2004

^[66] n.n. 2004

^[67] China Daily 6 January 2004; n.n. 2004

^[68] n.n. 2004

^[69] e.g. Dumont and Gilmore 2003, p.63-78

^[70] all information from Ding 2000

^[71] IMI 1997/98 in The Economist Intelligence Unit 1998; interview Yao 2003

^[72] Dolven 2003b

^[73] Wang Xuan 2003

^[74] Wang Xuan 2003

^[75] Ya 2003

^[76] Ya 2003; Luo 2003

^[77] People's Daily 5 June 2002

^[78] Dumont and Gilmore 2003, p.135-136

^[79] Guth and Chang 2003

^[80] Guth and Chang 2003

^[81] n.n. 2003

^[82] information from local sales staff, Guangzhou, July 2001

^[83] People’s Daily 5 June 2002; Müller and Preisner 2003, p.172

^[84] People’s Daily 5 June 2002

^[85] Dumont and Gilmore 2003, p.89 ff.

^[86] CMY 2004, table 4254

^[87] Guth and Chang 2003

^[88] Müller and Preissner 2003

^[89] Guth and Chang 2003

^[90] Müller and Preissner 2003

^[91] Müller and Preissner 2003

^[92] Müller and Preissner 2003; People’s Daily 5 June 2002; Ramstad 2003

^[93] Müller and Preissner 2003; Ramstad 2003

^[94] Lui 2003

^[95] Wozniak 2003

^[96] Müller and Preissner 2003, p.174

^[97] Edmonds 2003

^[98] Dedrick and Kraemer 2001

^[99] Dedrick and Kraemer 2001

^[100] Flannery 2002

^[101] Flannery 2002

^[102] Dedrick and Kraemer 2001

^[103] US brands dominated the market by their technological prowess in the early years of computers but failed to localise their products

^[104] IDC Asia/Pacific Consulting in Dedrick and Kraemer 2001

^[105] Flannery 2002

^[106] Edmonds 2003

^[107] Flannery 2002

^[108] Flannery 2002

^[109] compare Li 2001 and n.n. 2003

^[110] Beijing-based CCW Research in n.n. 2003

^[111] n.n. 2003; the Centrino technology was state-of-the-art at the time the cited article was published

^[112] Microsoft’s entry to China was perceived as imperialistic and stressed out the programme’s development in Taiwan

^[113] all from Dedrick and Kraemer 2001

^[114] Maurer and Hüssen n.d., p.27

^[115] Lienert 2001

^[116] for details see Hoffe, Lane and Miller Nam 2003

^[117] Both the original German and the translated Chinese brand name (大众) conform with the brand positioning

^[118] Hoffe, Lane and Miller Nam 2003

^[119] Lienert 2001

^[120] Fiducia Management Consultants 2002

^[121] Xinhua News Agency 2003c

^[122] Chen 2003

^[123] Chen 2003

^[124] Chan and Huang 2001

^[125] interview Chung 2003

^[126] CMY 2004, tables 3483-3155

^[127] Fiducia Management Consultants 1999

^[128] Homepages http://www.ikea.com.cn; http://www.vita-furniture.com

^[129] 3-5 items/100 inhabitants purchased annually, compared to 12items /100 inhabitants in other developing countries

^[130] RMB is used as an abbreviation for the official Chinese currency unit Renminbi Yuan (人民币). Currency exchange rate as of 23 February 2004: 1,00 RMB = 0,0962 EURO (€)

^[131] ChinaBig 2001a

^[132] CMY 2004, table 2440

^[133] ChinaBig 2001b

^[134] Davis and Sensenbrenner 2000, p.67

^[135] ChinaBig 2001b; ChinaBig 2001c

^[136] Davis and Sensenbrenner 2000, p.67

^[137] ChinaBig 2001b

^[138] CMY 2004, table 1810; China Fashion Information Net 2003

^[139] See Appendix VI for official lists of China’s Most Valuable Brands 2001-2003

^[140] Dumont and Gilmore 2003, p.167-180

^[141] CMY 2004, table 1810

^[142] Details about PacLantic brands see http://www.lawlandee.com

^[143] Luo and Hu 2002

^[144] This very typical strategy is dubbed “薄利多销” (small margin but high turn-over)

^[145] People's Daily 6 August 2003

^[146] CMY 2004, table 1921

^[147] this author’s observation; Skaria n.d.

^[148] this author’s observation; CMY 2004, table 1830

^[149] see Dumont and Gilmore 2003

^[150] e.g. Cui 1999, Schmitt 1997 in Cui and Liu 2001

^[151] To account for the practical approach of this thesis, theoretical frameworks by Trompenaars, Hofstede and other culture critics will not be introduced in full but referred to where necessary

^[152] 2000, p.121

^[153] For short introductions of Confucianism see Schütte and Ciarlante 1998, p.17-19; Tauber, Reisach and Yuan 1997, p.285-287

^[154] Matthews 2000, p. 20 f

^[155] Zhang and Shavitt 2003

^[156] Marshall Matthews 2000, p.121

^[157] in Marshall Matthews 2000, p.121-122

^[158] Xinhua News Agency 13 August 2003; Davis and Sensenbrenner 2000; n.n. 2003c

^[159] 2002, p. 41

^[160] According to Collins and Sun (2002, p. 41), in Confucian tradition, scholarly merits and refinement indicated a high social status

^[161] Bond and King 1985, in Marshall Matthews 2000, p.123

^[162] Bond and King 1985, in Marshall Matthews 2000, p.123

^[163] Xinhua News Agency 2003b

^[164] Zhang and Shavitt 2003

^[165] Marshall Matthews 2000, p.123

^[166] Schmitt 1997

^[167] Chan and Lin 1992, p.44; anecdotal evidence from this author

^[168] Waldie 1980, in Sun and Collins 2002, p.41

^[169] Yau 1994 p.68–93, in Sun and Collins 2002, p.41

^[170] Reisach, Tauber and Yuan 1997, p. 249

^[171] This also results in a lack of civil courage and altruistic engagement for society in general

^[172] Bond 1991, p.6

^[173] Herrmann-Pillath 1998, p.59

^[174] Hermann-Pillath (1998, p.70) terms this a “Zhejiang Village” as an equivalent to the China Towns abroad

^[175] Marshall Matthews 2000, p.122. For the changing generation and role patterns in nuclear families see Chapter 5.1

^[176] Müller-Hofstede 1998, p.547

^[177] Müller-Hofstede 1998, p.547

^[178] Gluckman n.d.

^[179] in Gluckman n.d.

^[180] Müller-Hofstede 1998, p.545

^[181] People's Daily 6 January 2004

^[182] n.n. 2003c

^[183] Cui and Liu 2001

^[184] China Today 26 April 2003

^[185] Cui 1997, Li 1998, Wu and Wu 1997 in Chow, Fung and Ngo 2001

^[186] in Simons 2003

^[187] in Yoon 2002

^[188] The Gini coefficient is based on the Lorenz curve. It measures inequality in numbers between 0 and 1, with 0 representing perfect equality. The critical level is 0,4. Japan’s Gini coefficient is 0.25, the USA’s 0.41 (Bundesamt für Politische Bildung 2003)

^[189] as from 2001, in China aktuell 2001

^[190] March 2003, National Bureau of Statistics of China 2003a

^[191] first quarter 2003, National Bureau of Statistics of China 2003b. This figure reflects monetary income and neglects the prevalence of self-supporting agriculture or animal husbandry in some provinces

^[192] Sang 2003

^[193] see Appendix IV

^[194] CSY 2002, p.68

^[195] Cui and Liu 2000, in Hui and Zhou 2003

^[196] Cui and Liu 2000 in Hui and Zhou 2003

^[197] Schütte and Ciarlante 1998, p.131; interview Yao 2003; interview Zhou 2003

^[198] All information as of 2000. China Internet Information Center 2000; World Bank 2000

^[199] Cui and Liu 2001

^[200] 2001 IMI Consumer Behaviours & Life Patterns Yearbook Vol.1, p.80-85

^[201] “Working Poor” in Cui and Liu 2001

^[202] RMB 10,000 is a benchmark for the ability to make a secure living

^[203] Violation of the one-child policy in cities leads to high monetary sanctions

^[204] There are about 25 million laid-off urban workers and at least 150 million excessive rural labour force (Zhang 2002)

^[205] Zhang 2002

^[206] China aktuell 2002

^[207] People's Daily 6 January 2004

^[208] IMI 2001-1, p.85

^[209] Xinhua News Agency 2003a

^[210] IMI 2001-1, p.85

^[211] For an extensive study on the consumption patterns of small business owners see Chow, Fung and Ngo (2001)

^[212] IMI 2001-1, p.84

^[213] According to Fan (2000), developing countries show the phenomenon of a “consumption ladder” as a measurement for improved living standards that can be climbed with rising incomes. In China, the first step prior to economic reform were the “four big items” sewing machine, watch, bike and radio. The second step in the late 1980s were the “six big items” colour TV, refrigerator, camera, electric fan, washing machine and tape recorder. The third step since the 1990s are luxury items like air-conditioner, consumer electronics and computers. Cars and real estate would be next.

^[214] IMI 2001-1, p.85

^[215] People's Daily 6 January 2004; China Today 26 April 2003

^[216] “Little Rich” in Cui and Liu 2001

^[217] The so-called xiaokang (小康) status, meaning “small comfortableness”

^[218] interview Chung 2003