In the first two segments, you learned that branding is becoming important in China, and why that is the case. You have learned how to build a strong brand in China. For example, you understand when it is a good idea to associate cultural values with a brand and when it is not. You have also learnt from Prof. Dongmei Li, an expert in brand building in China. She has shared with you how her research can provide important implications for branding in China. In this section, you will learn how Chinese consumers react to the entry of a foreign brand into China. When a foreign business enters China, they can capture a large market share by psychologically connecting its brand with the local culture. A good example is KFC. Today, KFC is a very successful business in China. It has more stores in China than in the US. As of 2015, there were around 5,000 outlets in China occupying a significant portion of market shares by brand. There are many factors that contributes to KFC’s success in China. A critical one is KFC’s success in making Chinese consumers feel that it is Chinese people’s KFC. They adapted their products to the Chinese’s taste buds, offer the KFC versions of traditional Chinese food, and positioned themselves as Chinese people’s restaurant. Another strategy to enter the Chinese market is to acquire or co-brand with a famous local brand. An example would be L’Oreal. In 2003, to move quickly into the Chinese skincare market, L’Oreal acquired a local Chinese brand - Mininurse, which was then one of the three skincare brands in China with 5% market share. Another strategy is to create novel, hybrid brands or products by integrating elements from Chinese and foreign cultures. An example would be the Haagen-Dazs ice-cream mooncake, which is a novel product created by combining a popular Western dessert with a famous traditional Chinese confection. These strategies have something in common. All of them involve the integration of local and foreign cultural elements. They bring together local and foreign cultural elements and present these elements to the consumers simultaneously. As a result, consumers’ attention may be drawn to the cultural significance of their consumer choice, and make culturally-motivated purchase decisions. In this lesson, we shall refer to these strategies as cross-cultural strategies and discuss how Chinese consumers respond to them. Globalization has resulted in the compression of time and space. Consumers are more likely than before to see products from traditional and modern cultures at the same time, and products from different cultures in the same space. Joint presentation of two or more cultures, can elicit different responses from consumers. Depending on several contextual variables, consumers’ responses to cross-cultural marketing strategies can range from very favorable to very negative. Let’s take a look at the following example. Starbucks opened its first store in 1999. When its business started to take off in 2007, one of their stores in Beijing became the target of online criticisms and closed down eventually. This is the Starbucks in Forbidden City or the Imperial Palace Museum. This is a 597-year-old cultural heritage site. Why did the Starbucks, despite highly localized store-front, attract severe cultural criticisms in China? We will come back to this later. Let’s take another example. The moon festival in mid-autumn is a traditional Chinese festival. To celebrate this festival, many Chinese consume mooncakes in family gatherings. A mooncake is a traditional confection that looks like this. It is a nicely baked pastry cake with lotus paste and egg yolks inside. However, the Starbucks mooncake is just a mooncake on the outside. Beneath its skin, you will find coffee chocolate fudge filling instead of lotus paste and egg yolks. Now, many American and European pastry and dessert shops like Starbucks and Haagen-Dazs in China carry mooncakes that are infused with Western ingredients. Let’s compare these two examples. Both of the examples we mentioned earlier involve Starbucks, but the Chinese consumers only like the Starbucks Coffee Mooncakes and not the Starbucks in the Forbidden City. Why is this the case? This is what Professor Carlos Torelli, a Professor in the University of Illinois at Urbana-Champaign, tried to explain in his research. Precisely, when do Chinese consumers embrace the mixing of cultures in a business and when do they reject it? One of his findings was: When consumers feel that cultural mixing threatens purity of their cultural heritage, they will resist cultural mixing. In the example of Starbucks in the Forbidden City, this Starbucks is seen as an American cultural symbol that contaminated the Forbidden City, a sacred space that symbolizes the Chinese cultural heritage. Chinese consumers cannot tolerate the presence of the coffee shop in the Imperial Palace Museum. This is the especially the case for Chinese consumers who strongly identify with the Chinese culture. An experiment carried out by Yang and colleagues in Beijing, supported this idea. Almost all Chinese consider the Great Wall to be a symbol of Chinese cultural heritage. When the researchers told the Beijing consumers that McDonald’s planned to open a store in the Great Wall, the Chinese consumers rejected the store after having seen an ad in which the logo of McDonald’s was superimposed on the image of the Great Wall, although they were perfectly ok with the business plan when the logo of McDonald’s was placed next to the picture of the Great Wall. Distracting the consumers’ attention to McDonald’s American symbol, by presenting McDonald’s as a restaurant also helped to lower Chinese consumers’ rejection of the business plan. However, the Chinese consumers accept the Starbucks Coffee Mooncake. Although mooncakes are a symbol of Chinese culture, it is not considered a sacred food symbol. Therefore, including Western ingredients in a mooncake is acceptable. Imagine, however, if non-halal ingredients (pork, alcohol) are included in a halal meal, devout Muslims will find such cultural mixing unacceptable. This is because halal is a sacred dietary culture in Islam. In my own research, I also found that Chinese consumers become more critical of cross-cultural marketing strategies when they feel that a foreign brand is a threat to their local brands. Let’s review what we have learned from the two Starbucks cultural mixing examples. Cross-cultural strategies can help foreign business connect to local consumers. However, these strategies can also lead to consumer rejections. The reasons for consumer rejections are: High identification with Chinese culture; and the perception of cultural mixing as a cultural threat. Can consumer rejections to foreign or culturally mixed brands be reduced? The answer is yes, according to our research. For example, in an experiment, we randomly assigned consumers to one of the two groups. Both groups read the same business case of cross-border acquisition. They learned from the case that a foreign brand attempts to acquire a local brand that is an icon of the local culture. To one group of consumers, we highlighted the cultural symbolism of the local brand, reminding them that the brand is an icon of their culture. To the second group of consumers, we highlighted the economic benefits of the acquisition. Based on what you have learned so far, you would expect that the first group of consumers to resent the acquisition and the second group of the consumers to like the acquisition. That was exactly what we found in the experiment. More importantly, the result showed that you can change consumer reactions to foreign acquisitions of a successful, iconic local brand by focusing consumers on the economic benefits of the acquisition and downplaying the cultural significance of the local brand. In summary, cross-cultural strategies can be used to create a new brand and to increase market share by connecting to the Chinese consumers culturally and psychologically. However, to use these strategies effectively, you need to know your consumers. For example, you need to know how strongly they identify with Chinese culture. This is very important given the rise of new nationalism in China. The Chinese government has started the China dream campaign. A major theme in this campaign is to “make my country great again.” This campaign can lead to a surge of nationalism in China, rendering the cultural significance of consumption more important than before. In this connection, you will need to assess how likely Chinese consumers would expect cultural mixing to have erosive effects on the Chinese heritage and work on your marketing communication to ensure that your marketing activities will not trigger culturally motivated rejection of your brand. Now, let’s hear from Professor Carlos Torelli. He is an expert in global branding, and he can tell you how his research work sheds light on global branding.
