Welcome to our third Special Report of 2010. Following research on US Tourist Attractions and Super Bowl advertisers, this quarter we've focused on the largest importers into the US from China. China's move towards a global dominance was underscored in the second quarter of 2010 when it overtook Japan as the world's second-largest economy. Over the last decade, a seismic shift in the financial power balance has already had serious repercussions for the US economy. These are now set to deepen. The US has strong existing import and export ties with China. In 2009, the US exported almost $70bn of goods there, while consumers and businesses here at home purchased almost $300bn of goods manufactured in China. The US is witnessing the impact of China's commercial strength, from car design to energy consumption. Even through the global recession, exports to and from China remained relatively constant.
For many US marketers this presents an opportunity and a threat. For those working with US consumer electronics companies with contracts in China, it's both payday and an alarm call to mitigate this newfound competition. Meanwhile those seeking out new clients for their services can find subsidiaries of Chinese powerhouses now being set up across the US, intent on enticing US consumers away from their home-manufactured products.
Branding for these Chinese companies entering the US is under scrutiny as traditional eastern branding holds negative as well as positive connotations for consumers. Entrant strategies involve revamping brands to reflect western company names or focusing on favorable values behind the brand, such as technical know-how, large production lines and massive cost efficiency. Some companies present the market with a balance of Chinese and western qualities - goods designed in China but manufactured in the US.
To pitch support for Chinese businesses seeking to grow in the US it's vital that marketing agencies understand their entry plans and the stage they're at with the market. In some cases we've noted US marketing communications being run by Chinese employees based at home, while other brands are opening manufacturing plants and headquarters here and hiring large teams of US employees. One constant across these businesses is that their US marketing challenges differ significantly from those experienced in their home country.
Though the monetary reward for successfully engaging with Chinese companies is clear, there are a number of issues to take into account in doing this, and these are not just limited to the eastern customs for doing business. Take for example the limited telephone connectivity in mainland China, making it difficult to sustain an easy dialogue. There is also the historical baggage that feeds competitive issues between east and west and still provides tensions and barriers for those looking to compete on a level footing in the US market. Political tensions, for example the ongoing arms embargo, have led to failed acquisition attempts due to worries over technologies falling into Chinese hands.
Many acquisitions have been successful, however, and these also provide entrant opportunity for Chinese companies. Rather than building their brand in the US from scratch, some simply acquire major US brands. Examples are Lenovo's acquisition of IBM's PC business, TCP purchasing US branding rights from GE and Geely acquiring Volvo America. We've spoken to marketers in all three about how they're leveraging these US brands, their rights ownerships, and their plans for employing marketing agencies to develop them.
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