Building Global Brands for Chinese Private-Owned Enterprises: Strategic Paths to Upgrade the Value Chain

Abstract

While most private-owned enterprises (POEs) in China are engaged in subcontracting or do not own the product brands, the number of POEs with their own brands has increased rapidly, while some are even globally recognized. Since these POEs face high opportunity costs for own branding, given their dominant presence in the global subcontracting community, their own branding actions require contextual understanding of doing business in China. This study starts with the notion of how these POEs shift from subcontracting to own branding, and explores their respective own branding paths. We interviewed seven Chinese POEs in the fashion industry in Zhejiang Province: Babei, Baili, Sunrise, Aokang, Youngor, Kangnai, and JNBY. The case studies suggest how these firms built their brands in the global market, and why their trajectories differentiated in the course of own branding. Our study configures three types of own brand models for POEs: the competitive subcontracting, the toehold, and the home-linked organic models. POEs can continue subcontracting in their core business, while implementing own branding through diversification. Alternatively, they can segregate markets, pursuing own branding in one group of countries, while subcontracting elsewhere. In addition, they may establish wholly owned enterprises, and introduce their brands in a way that preserves their home market advantages. We identify two stimuli for Chinese POEs’ global branding choices. Global branding strengthens domestic position as it becomes a signal for reputation. As the online platform reduces costs for global branding, and becomes popular, POEs are more likely to pursue global branding to become more competitive in the domestic market. Many POEs also continue to collaborate with the previous customers through strategic inter-dependence, such as distribution channel exchange.

ICTs in the transformation of rural enterprises in China: A multi-layer perspective

“…Much literature has examined how governments in different countries have intervened to help firms upgrade their capabilities. For example, the Chinese government required state-owned telecommunications operators to deploy Internet infrastructure to every village, which has created a better business environment for farmers to transform from farming to e-commerce and participate in the international market (Leong et al, 2016;No & Kwak, 2018). In Taiwan, based on the national innovation system that offers strong government support to SMEs to help them transform, some SMEs have moved from OEM into ODM.…”

“…Dodgson, Gann, and Salter (2006) presented a case that a suite of new ICTs for data mining, simulation, prototyping, and visual representation supported open innovation. No and Kwak (2018) found recent advances in ICT infrastructure has facilitated some private firms in China to actively use e-commerce as a marketing channel and transform from subcontractors (OEM) to their own brands (OBM) in the global market. Li et al (2015) noticed that an intra-firm communications platform has helped latecomers engage in learning and catch up with forerunners.…”

“…It gave the small and medium-sized enterprises (SMEs) with a disadvantage in the market competition a better opportunity to transform their business and enter into the global market (Fuller-Love et al, 2006). For example, through case studies, Grimes (2000) demonstrated how rural SMEs leveraged ICTs to access market information so as to develop innovative products, improve effective marketing, and enhance the learning capacities; No and Kwak (2018) observed how some SMEs used ecommerce as a marketing channel and achieved branding success in the overseas market.…”