China, Inc. bids for a new US export: global brands
Tags: Communication, Marketing, Branding, Brand
Today's newspapers (the Los Angeles Times, the New York Times, the Wall Street Journal, to name a few) are abuzz with CNOOC's $18.5 billion bid for US oil company Unocal. China is going shopping for US companies, no question. Last year's purchase of IBM's PC business by Lenovo and Haier's bid for Maytag this week have just laid the groundwork. But why does China want these businesses that US companies have chosen to put on the block?
I believe that China has recognized an undervalued American export: global brands.
Today, despite manufacturing most of the world's low-cost goods, China has no easily recognizable global brands. It has only a few well-known national brands. But rather than trying to start from scratch and build its own brands, China has taken a page from the west and decided to buy its brands from someone else: The US.
And why not? According to research published by Business Week and Interbrand about The Best Global Brands, in 2004, US brands accounted for 71% or $706 billion out of the nearly $1 trillion business value for the top 100 brands. Further, my own company, Blackfriars Communications, notes that US businesses will spend nearly $1.1 trillion on marketing in 2005 , much of which is targeted at building brands. No other country in has built as much value in global brands nor does any other country in the world spend nearly this amount on marketing; the United States is truly THE brand economy.
The deals we've seen so far show that China's businesses understand brand value. The $1.75 billion takeover of IBM's PC business by Lenovo gave it access to the IBM brand, valued by Interbrand and Business Week at nearly $54 billion in 2004. Haier's $1.3 billion bid for Maytag would give it $400 million in brand value for brands like Amana, Jenn-Air, and Magic Chef -- the business itself would cost less than $1 billion. These bids and deals show that even when US companies don't feel they can thrive in specific markets, the brands have real, marketable value.
The US thrived during a manufacturing economy from 1900 through 1980. When Japanese and other Asian tigers took over manufacturing leadership, It thrived again through with a service economy in the 1980s and 1990s. The rise of a brand-hungry China offers the US an opportunity to turn the 9% of GDP it invests in marketing into exportable brands. We just need to recognize that exporting American brands may become a bigger business than Microsoft exporting software -- and require just as much US business expertise and know-how.
Today's newspapers (the Los Angeles Times, the New York Times, the Wall Street Journal, to name a few) are abuzz with CNOOC's $18.5 billion bid for US oil company Unocal. China is going shopping for US companies, no question. Last year's purchase of IBM's PC business by Lenovo and Haier's bid for Maytag this week have just laid the groundwork. But why does China want these businesses that US companies have chosen to put on the block?
I believe that China has recognized an undervalued American export: global brands.
Today, despite manufacturing most of the world's low-cost goods, China has no easily recognizable global brands. It has only a few well-known national brands. But rather than trying to start from scratch and build its own brands, China has taken a page from the west and decided to buy its brands from someone else: The US.
And why not? According to research published by Business Week and Interbrand about The Best Global Brands, in 2004, US brands accounted for 71% or $706 billion out of the nearly $1 trillion business value for the top 100 brands. Further, my own company, Blackfriars Communications, notes that US businesses will spend nearly $1.1 trillion on marketing in 2005 , much of which is targeted at building brands. No other country in has built as much value in global brands nor does any other country in the world spend nearly this amount on marketing; the United States is truly THE brand economy.
The deals we've seen so far show that China's businesses understand brand value. The $1.75 billion takeover of IBM's PC business by Lenovo gave it access to the IBM brand, valued by Interbrand and Business Week at nearly $54 billion in 2004. Haier's $1.3 billion bid for Maytag would give it $400 million in brand value for brands like Amana, Jenn-Air, and Magic Chef -- the business itself would cost less than $1 billion. These bids and deals show that even when US companies don't feel they can thrive in specific markets, the brands have real, marketable value.
The US thrived during a manufacturing economy from 1900 through 1980. When Japanese and other Asian tigers took over manufacturing leadership, It thrived again through with a service economy in the 1980s and 1990s. The rise of a brand-hungry China offers the US an opportunity to turn the 9% of GDP it invests in marketing into exportable brands. We just need to recognize that exporting American brands may become a bigger business than Microsoft exporting software -- and require just as much US business expertise and know-how.
posted by Carl Howe at
10:32 AM
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