ZTE to be case study for Chinese brands eyeing US market

Chinese companies will closely watch smartphone-maker ZTE as it continues to expand into the US, communications professionals with extensive experience in China tell PRWeek.

Chinese companies will closely watch smartphone-maker ZTE as it continues to expand into the US, communications professionals with extensive experience in China tell PRWeek.

If ZTE is successful, it could spurn other China-based brands to make an aggressive push into North America, a marketplace that Chinese executives feel is difficult to crack because of a bias against their products.

Last month, ZTE USA picked Atomic to handle its PR and social media accounts. In a November interview with PRWeek, Atomic Los Angeles SVP and MD Rachel Rogers said ZTE will focus on increasing awareness of the company among US media and consumers.

Andrew Elliott, senior director of strategic marketing at ZTE, declined an interview request for this article.

ZTE, which is quickly gaining market share in the US prepaid smartphone category, is one of only a few Chinese-headquartered companies that have aggressively expanded in the US.

Margery Kraus, founder and CEO of APCO Worldwide, says Chinese companies' hesitancy about the US market is because their executives assume the worst.

“They feel there is a tremendous bias against them; it is very confusing for these companies to separate what they hear as policy rhetoric at a national level – the China-bashing that goes on – versus what individual states are doing to attract [foreign] business,” she explains.

This belief has not been helped by media attention on Chinese brands that recently retreated from the US. This spring, Huawei said it had given up on its quest to become a leading telecommunications equipment-provider here after repeatedly having to defend itself against claims by US officials and politicians that it is a threat to national security.

“We are not interested in the US market anymore,” Huawei EVP Eric Xu reportedly said.

PRWeek reached out to a number of other Chinese brands with footprints in the US, many of which declined to speak on the record. Some said the US market is no longer a focus for them.

A few years ago, Chinese sports-apparel-maker Li Ning increased its distribution and marketing in the US. However, the company, founded by the Chinese Olympic gymnast of the same name, shut down the e-commerce section of its US website in March.

In a statement to PRWeek, Siobhan Xiaohui Zheng, Hong Kong-based associate partner at Brunswick Group, says that “[Li Ning's] current main focus is on the transformation of the business and the US market being an important but not a core market at this point.” Brunswick Group handles Li Ning's investor relations.

Yet Kraus says that if a product or service is up to standard, the preconceived opinions of investors and customers can be overcome. She points to the success of one APCO client, China Ocean Shipping Company, which has operated in the US for more than a decade. Kraus says its success is due in part to the company not operating like a Chinese company, by working to get the support of state and local officials.

“They came here – and like most foreign companies had some initial difficulties – but they put in charge one of their senior executives who had lived in North America for a long time and who was willing to solicit advice,” she explains. “They employed local people, worked with the local communities, and abided by the rules. If you go to Long Beach, CA, or Boston, where they have ports today, the company is welcome in those communities.”

In fact, it may be easier for Chinese companies, particularly those in manufacturing, to come to the US now because a brand's origin has become less important to consumers, Kraus adds.

“If you think about a car today, what is an American car versus a Japanese one? If it is manufactured in Tennessee with Mexican parts and partially assembled in Canada, is it still a Japanese car?” she asks. “As we become a global marketplace, some of these [national] distinctions will be blurred anyways.” 

Daisy King, MD and global head of the US-China Specialty Group at Burson-Marsteller, says interest in the US is high among Chinese companies. She points to Chinese corporations' IPOs on US stock exchanges. Five listed on NASDAQ this fall, including lottery-service-provider 500.com and Android app developer Sungy Mobile.

However, she agrees that “there is still a lot of hesitancy about the US because of the challenges and whether or not the timing is right.” King says that is particularly true among companies in energy, infrastructure, and technology – industries that are considered important to US national security. For instance, in addition to Huawei, ZTE was recently cited as a security concern by a congressional panel over cyberattacks traced to China.

Yet for companies in other industries and non-state-owned enterprises, the US is more welcoming, says King, adding that Chinese companies are by nature often quiet about telling their stories and have a hard time adapting to the American media environment.

“They need to tell their story in a way investors will understand,” she adds. “They have to think of themselves as a newborn baby in the US.”

King also notes that Chinese companies that enter the US market through acquisition often struggle because they fail to culturally integrate the two entities.

“They do all the right things on the financing and accounting side, but fall on the internal communications side,” she explains.

Lyndon Cao, director of the global China practice at Ogilvy & Mather, concurs that many Chinese corporations are interested in the US. Many are first “developing their skills and capacity in emerging markets where their products and brands are much [more likely] to be accepted than they are in North America.”

Cao, the former GM of China Daily, also notes that brand-building initiatives are cheaper in emerging markets, and many Chinese companies hope their experiences there will springboard them into the North American market. Chinese companies see this as an important move not just for international growth, but also to be successful as a global brand.

“China is set to become the largest consumer market, and so there are now a lot of international brands – from Europe, South Korea, and North America – in their home country,” he explains. “So they'll have a major battle to fight in China, but the feeling is if they can succeed in the US, they'll be able to compete anywhere.”

There are few major success stories, such as Beijing-based computer manufacturer Lenovo, which owns IBM's former PC business. For inspiration, Chinese companies are also looking to Korea and Japan because brands such as Samsung and Hyundai have, over time, flourished in North America.

“Chinese brands will be looking to follow what South Korean brands did in the 1980s and 1990s,” Cao says. “And it is just a matter of time before they start to make inroads.”

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