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Write a summary that discusses the importance of branding for companies, and how China Mobile Ltd.
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The text discusses the importance of branding for companies, and how China Mobile Ltd. has used it to become a global brand. It outlines Quelch's seven features of a global brand, and how China Mobile Ltd. has used them to achieve success.
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Give me essay based on the summary above.
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#China Mobile Ltd as a Global Brand Coursework
##Introduction
In the economic hard times, firms are confused on whether to reduce their marketing budget or continue investing more on brand building hoping that they could possibly gain a competitive hedge over other companies. Most companies are aggressively increasing their marketing expenditures so as to increase their sales.
The annual ranking that was done by BusinessWeek in 2008 showing the 100 Best Global Brands showed that US firms are keeping their marketing budgets steady and as a result have a steadily increasing income (BusinessWeek 2008).
However, no Chinese firm appeared in the top a hundred brands globally. Most Chinese companies have put in place strategic considerations to their brands while engaging little in global brand development as part of international marketing strategy.
China Mobile Ltd was ranked first in 2007 Best Chinese Brands (Interbrand China 2007, 7). According to China Mobile Limited (2011) in 2007, China Mobile had a brand value of 313,000 RMB millilion an increase of 11% from its brand value in 2006. Its operating revenue in 2010 was 485,231 RMB million, an increase of 7.3% from its 2009 operating revenue.
In 2010, it made a profit of 119,640 RMB million. According to Interbrand China’s Chief Executive Officer, Frank Chen, the brand value shows the discounted cash flow of the firms total earnings that it is expected to fetch to the shareholders in the coming fiscal years.
This implies that brands are among the company’s economic assets and therefore need serious management. A positive change in the company’s brand value comprehensively reflects an increase in performance that has been achieved by its management team through the application of various strategies.
Branding has become a major focus for Mobile China and it has produced abundant returns. The company estimated its customers to be about 584 million in December last year. In 2011 alone, it has had an increase of customer number by 16.824 million in the months of January to March to reach the 600 million mark (BBC 21 April, 2011). The company has voice business as well as new businesses.
Its voice business provides its customers with the opportunity to make as well as to receive calls using their mobile phones within the regions of its network coverage. Its services range from local calls to international roaming. The new businesses include data business as well as value-added services.
China Mobile Group provides its GSM international roaming service is in 237 countries while its GPRS roaming services is in 186 countries (China Mobile Limited 2011). China Mobile has put much emphasis on attributes that differentiate its brand from those of other companies as well as strengthening its relationship with its customers with an aim of ensuring present and future earnings.
Quelch’s seven features of a Global Brand
Brand development requires various marketing strategies. In order to achieve a global brand status, the company must have achieved the benchmarks which are considered universal features for the world’s top brands. Quelch (1999) considered seven features as being the benchmarks of the top global brands.
Strong in home market
China Mobile Limited has a very strong market base in China which has mostly supported the growth of its brand value. Its strong market base has made it occupy the top position in terms of the best brands in the Chinese market for the past few years. According to Quelch (1999, 5) companies have to be strong in their home markets so as to be successful in the international market.
According to China Mobile Limited (2011) the company’s is China’s leading mobile services provider. It has many subsidiaries which it refers to as Group which operate in China. The company has been doing well in the Stock Exchange of Hong Kong Limited since its incorporation in 1997.
It also entered the Shanghai Stock Exchange in early 2004 and has since established itself in the Shanghai stock market. In 2010, the company received awards for Best Overall Investor Relations which were awarded by Large Gap, Sector, Asia Pacific and a Hong Kong Company.
In 2009, it was awarded for Best Corporate Social Responsibility as well as Most Committed to a Strong Dividend Policy. In 2010 for example, the company’s dividend per share was HK$3.014 (China Mobile Limited 2011).
According to China Mobile Limited, achieving large customer base in China and its other countries of operations has involved improving network quality and customer service, expanding its 3G business and promoting cost efficiency as well as effectiveness of its operations. China Mobile also has special services that it offers specifically in the Chinese market.
According to Panda Phone (2007)Shenzhen Mass Card was introduced by the company to serve the Chinese population. The system is a pre-paid card that allows customers to recharge money through scratch cards or other means such as electronic recharge tickets and aerial recharge. It is applicable around China particularly in Hong Kong, Macao and Beijing China.
In 2010, the Groups overall customer base increased by 11.8% to reach 584 million (China Mobile Limited 2011). It has continued to maintain its leading position in terms of market share with net additional customers of about 61.73 million in 2010 (China Mobile Limited 2011). Its major market segment focus has been the rural as well as the migrant markets in China.
It offers information which particularly targets the rural population. Some of these services include Agricultural Information Service through the use of the internet as well as mobile phones. Its corporate customer base in China has also continued to grow. Its corporate customers have included government as well as various industries in China such as manufacturing, energy along with the finance industry.
As a result of China Mobile’s huge market share that it has been able accumulate in the Chinese Mobile Communications Market, it has been able to achieve considerable economies of scale that enables it earn significant returns while providing great value as well as service to its customers.
Geographical/balance in sales
Mobile China is an international company that boasts of having the largest market share among mobile phone services providers in the world. In terms network scale, China Mobile is ranked first. Mobile China has several large brands which include M-Zone and Go Tone which are leading GSM digital mobile service brands; Shenzhen Mass Card among others.
China Mobile provides international roaming services in 237 countries and GPRS roaming services in 186 countries (China Mobile Limited 2011). According to China Mobile (2011) the company has the most sophisticated GSM International Roaming Services.
According to Quelch (1999, 6) an international company must have a minimum level of global recognition, awareness as well as sales in order to achieve the status of a global brand. The company entered the New York Stock Exchange back in 1997 and has had an average performance since then.
Investors in the US who are interested in the company business are therefore able to invest in it by buying shares through the New York Stock Exchange. The total number of China Mobile’s customers in the US is about 1.9 million. The company also operates in Pakistan.
China Mobile has launched two major joint-ventures aimed at expanding its market shares in other countries. China Mobile has agreed on a joint-venture with Nokia Corporations and Siemens AG to develop a mobile internet technology which is faster than the present 3G network.
They also agreed a partnership with South Korea’s SK Telecom which is the largest telecommunication firm in the country in order to develop modern wireless technologies. These joint-ventures and partnerships helps China Mobile increase its sales by using other brands as well as their marketing network to make sales. China Mobile today uses Nokia and Samsung brands.
Address similar consumer needs worldwide
According to Quelch (1999, 6) the physical products and services that a company with a global brand offers should be the same throughout the world so as to serve the widely-held human needs. Mobile China provides voice and data services, it has introduced the use of broadband in mobile communications, mobile internet, promotes mobile handsets and also integrates mobile handsets in the daily lives of people.
It also promotes mobile TV as well as other businesses. The company standardizes its marketing throughout its various markets. It develops brands that adapt its marketing across cultural as well as socio-economic settings. Mobile China provides standardized services and products to its customers worldwide.
For example, the company has developed standardized internet products like Access Card for Machine as well as Remote Video Monitoring Service. In addition, it has developed Access Module for Sensors as well as other industry application templates.
The company has also established International Information Hubs which have standardized centralized operations aimed at achieving economies of scale (Duffy & Medina 1998, 241). Its mobile phone services as well as products for internet applications for individuals as well as corporate customers have remained the same throughout its countries of operations.
It is only the brand names that may change to reflect the country’s culture and language. Services such as voice calls, wireless connections, SMS delivery have remained the same everywhere. Standardization also occurs in other aspects such as business modelling and processes as well as construction regulation. It is also done in equipment configuration in order to ensure similar consumer service.
Consistent Positioning
A global brand should maintain similar set of values throughout the world. China Mobile is widely known for its innovations. China Mobile attributes its outstanding economic performance to its network capability, customer service as well as its business innovation capability. The company has been committed to innovations in the mobile communication.
It has agreed on partnerships and joint-ventures with international communication companies to develop new technologies in mobile communications. For example, it 2006, it partnered with STAR Group Limited and News Corporation to develop long-term wireless media. It has maintained its wireless efficiency for the last five years.
It has also maintained high efficiency levels for its voice service provisions, and according to a comparative study done by Ding and Zhang (2008) to establish the operational efficiency of telecommunication operators in China, Japan, US and South Korea, China Mobile has improved its voice service efficiency within a short time to become DEA efficient in 2007.
In 2010, it agreed on partnership with South Korea’s SK Telecom to build new wireless technology. It is committed to developing wireless platform that will enhance the application of internet tools as well as products; facilitate social informatization and help incorporate mobile communication services into the various sectors of the economy.
It also agreed on a joint-venture with Nokia Corporations and Siemens AG to build mobile internet technology that is faster than its TD-SCDMA 3G network. The company also maintains high quality network by ensuring constant technological innovations as well as network optimization to resolve the main technical issues that occur in the network.
According to China Mobile (2011) the company’s 3G customers rose to 20.7 million becoming the leading market share in the sector. McIntire (2002, 1) believes that continuously delivering quality or service promise helps maintain customers.
Quality promotes satisfactory customer experience making them likely to patronize the business always. The company has developed and put into operation innovative services such as alert before debiting as well as centralized inquiry that ensures customers are adequately informed.
Consumers value country-of-origin
Quelch (1999, 7) believes that the country-of-origin or what he referred to as COO effect which implies country-of-design, country-of-corporate-ownership as well as country-of-assembly has an influence on the customers’ perception and behaviour towards the brand image. China Mobile is majorly owned by China Mobile Limited which is the Chinese government with about 74.21% shares. Its headquarters is in Hong Kong and most of its product developments are done in China making it a Chinese company. Although most products that enter international market with “Made in China” have been perceived to be of low quality and cheap (Li, Murray, & Scott 2000, 126), China is currently regarded as the fastest growing and among the most advanced in telecommunication technology and services. According to World Economic Forum (2011) The Global Information Technology Report 2010-2011 showed that Taiwan China is ranked 6 th globally just behind the US and Hong Kong China 12 th. The country’s high profile as well as high-involvement in information technology has played symbolic functions in helping China Mobile market its global brands. Being the leading telecommunication company in China, most of these advancements are attributed to its continued innovations and developments. At the close of 2010 fiscal year, the company had attained 20.7 million customers for its 3G usage. It became the leading in the 3G market internationally. This means that China Mobile has been able to make customers overcome the “Made in China” perception on its brand image. Currently, China Mobile provides more developed mobile phone communications than telecommunication firms in the US. They have also benefitted from consumer cosmopolitanism as a section of consumers would always want to try products and services from different regions and countries (Bauer, Bronk & Exler 3).
Product category focus
It is usually very difficult for a company that deals in diverse product categories to become a global leading brand and this has been the challenge that most Chinese firms are facing (Quelch 1999, 8). It is normally difficult to make positioning and also develop a coherent brand message using the same corporate name for diverse product categories.
China Mobile deals in mobile phone communications and associated products and services only (New York Times May 7, 2011). Its businesses are voice and new business. Voice business offers long distance calls both in the local and domestic market as well as international long-distance calls. It also provides inter and intra-provincial roaming as well as international roaming.
Voice value-added services as well as data business are the services offered by the new business. Voice value-added services include call conferencing, call forwarding as well as caller identity display among other services while the data business include WAP, Java Applications, Multimedia messaging service and many more.
The company therefore focuses its efforts on developing and improving technologies, infrastructural networks, transmission facilities as well as support systems that enhances its mobile phone communications provision such as mobile internet, 3G technology, WLAN, TD-LTE as well as wireless technologies. These are meant to boost its brand image across the globe.
Corporate name
China Mobile acknowledges that a strong corporate name is very important in achieving global brands. The company applied what Kohli and Suri (2000) refers to as creating inherently meaningful name that is able to convey relevant information for products and or services that the company deals in.
The name China Mobile reinforces the products and services offered by the company and also emphasizes on the attributes of the products and services. All its subsidiaries use the name China Mobile… to make them easily identified with the corporate name. The country name makes them identify with the country.
This makes it easier for Chinese customers to identify with the brand image and also enable the company conquer the Chinese telecommunications market considering China’s huge domestic market and large population. According to Bauer, Bronk and Exler (2) customers tend to prefer local brands since local brands are designed to meet or operate in the cultural setting of the population.
The company is the largest telecommunication network in China and has the highest number of customers in China. The corporate name also helps the company benefit from China’s great reputation in advancements in information technology. This helps improve its brand image across the globe which has enabled the company to have the highest number of customers in the global telecommunications market.
##Overview
China Mobile today provides international GSM as well as GPRS roaming services across the world in 237 and 186 countries respectively as a result of its global brand status.
Its total number of customers has continued to grow such that in 2010, it achieved an 11.8% boost in its total number of customers to reach 584 million customers across the globe becoming the most subscription efficient and the largest in terms of customer base in the telecommunications industry.
As a result the total voice usage increased by about 18.6% that made the company to achieve 3,461.6 billion minutes in voice usage for the year 2010. Value-added business customers also increased by 12.9%. Its mobile internet usage also increased to 103.1 billion megabytes.
The global brand image status helped the company achieve the highest customer growth in the 3G business with its 3G customers making 20.7 million across the globe. It is now the leading in terms of market share in the 3G market.
Due to its development standards in the TD-LTE, the Chinese ministry of telecommunication has granted it the license to develop 4G network. The company has also received several awards including the Best Overall Investor Relations awarded by the Asia Pacific Association.
Why Chinese firms are looking outward
Many Chinese firms today prefer joint-ventures where they are able to acquire majority stake with an aim of expanding overseas (Brennan & Wilson 2003, 76). Some Chinese companies also make overseas acquisitions. Chinese firms look outward in order to get closer to the target markets.
Joint-ventures, acquisitions and mergers helps Chinese companies increase their sales and in turn their world market share (Aspelund, Madsen & Moen 2007, 1426). It makes it possible for Chinese companies to use the brands of those companies as well as their marketing network.
It also enables these companies own highly efficient manufacturing centres in all their partners’ major markets whether in Europe, Asia or America. Some Chinese companies go outward to acquire the world’s state-of-the-art technologies. They are keen to enter the most technologically powerful economies so as to overcome the problem of country-of-origin perceptions.
They therefore buy off the companies in order to possess the technologies. They also buy the brands of these companies especially those in developed countries in order to achieve global brand status quickly. Joint-ventures, mergers and acquisitions as well as greenfield investment help them in dealing with customs duties.
Other objectives or aims of the Chinese companies looking outward are to achieve geographic growth and to build a global profile as well as reputation (Wengang & Yuanfei 2007). Achieving global brands and diversification of their products and services have been some of their reasons for looking outward. Some expand to other countries as a response to a government directive (Wengang & Yuanfei 2007).
Most companies feel that intellectual property rights and trade secrets are not adequately protected in China thereby discouraging innovations and development of technologies. The Chinese government requires that every company including foreign companies submits its manufacturing techniques and other aspects of its business including the processes involved in the production.
Some Chinese companies therefore maintain their name brands from China but register their trademarks in other countries so as to acquire Independent Intellectual Property Rights (Meltzer 2009). Huawei Technologies is one such company that has achieved the status.
Chinese firms’ trends of looking outward have also been enhanced by free trade agreements. China is a member of the World Trade Organisations and therefore enjoys free trade benefits among member states. It is also a member of the ASEAN plus 3 and the China-South Korea-Japan trading partners. Chinese firms therefore have the advantage of operating in many countries without much regulatory difficulties.
Most Chinese firms have also preferred Asian countries for their outbound investments. The Chinese government also introduced the Going Global Policy to enhance internationalisation of Chinese companies (Wengang & Yuanfei 2007).
According to Meltzer (2009) the reality behind the push out from China by companies is the need to continue to grow while acquiring more market share in the Chinese market which has become unrealistic. Most of the successful Chinese companies have achieved the optimum market share for their services as well as products such that obtaining more market share is even unrealistic.
The only option they have for market growth is through domestic diversification. Many Chinese companies have been in this situation for over 10 years. However, diversification of various product categories using the same brand name is usually difficult and Chinese companies have therefore not been successful.
Chinese firms also face fierce foreign competition locally since the Chinese government’s trade and economic reforms allow and encourage foreign investments. This increases direct competition between the successful domestic companies and foreign companies. Since the economic reforms began in 1978, China has received over $500 billion as direct foreign investment (Meltzer 2009).
It has also reviewed the regulations that required foreign companies to enter the Chinese market through joint-ventures and today permits wholly-owned foreign firms to operate in China (Meltzer 2009). The WTO reforms also further pushed China to open its market to foreign companies.
Which internationalisation process theory best applies to Chinese firms engaged in internationalisation
There are several theories that explain the internationalisation of Chinese firms. However, the best theory that explains the various reasons why Chinese firms expand their businesses abroad is the Electric Paradigm (OLI model) as explained by Dunning (1981, 54; & 1988, 107-108).
Electric Paradigm categorizes three key factors of Foreign Direct Investment as the determinants of the pattern, form as well as extent of an organisation’s international production.
They are classified into location, ownership as well as internalisation. According to the paradigm, a company’s internationalisation can be stimulated through consolidation of the ownership advantage that it has accumulated in the home country; that is, asset exploitation.
This is advantage is the O in the OLI model. The ownership advantage is both tangible and intangible and may include capital, resources, managerial capabilities as well as technological advantage among others.
Using the foreign direct investment (I), companies can internalise their specific advantage which may include controlling production as well as distribution through foreign subsidiaries with an aim of lowering transaction costs. According to the theory, the host country provides location-specific advantages (L) which enables the company achieve superior market as well as opportunities for valued inputs at cheaper costs.
Electric Paradigm explains the outward investment of Chinese firms as being the result of ownership advantages such as capital, resources, and technology as well management capabilities that they initially obtain in China.
They then use the outward foreign direct investment to build their own firm-specific advantages through their foreign subsidiaries which they acquire through joint-ventures, mergers, acquisitions as well as Greenfield investment to lower the transaction costs.
Chinese firms are also driven by location advantages in the host countries as per the theory with the prospects of gaining superior market share and cheaper inputs which may be as a result of low transport cost due to the nearness to the resources.
##Conclusion
Chinese firms have many distinct characteristics which makes them weak in the global market. Most Chinese firms take advantage of the huge domestic market that results from the country’s large population. Most of them have not focused on the global market and therefore puts less emphasis on achieving global brand image.
Although some of them are leading globally in terms of market share and capital base that they achieve through focusing on the domestic market and foreign direct investment respectively, they are not able to expand their market share by developing global brands.
China Mobile is one of the companies that has seen the need to expand its market share by developing its global brands through various strategies particularly by providing consistent improved quality and developing a strong home market base and many more strategies.
It has made acquisitions in other countries with an aim of expanding its market share globally. The company’s focus on developing a global brand has made it the largest company in terms of customer base in the global telecommunication market.