Chinese firms, including Wenzhou-based cigarette lighter producers, the biggest telecom operators and domestic oil giants, are talking about"Go Global," which means to expand business and seek opportunities in the international market.

The key questions facing these Chinese firms are how to expand globally and how to prevent unexpected risks in the process.

Under the slogan of"Go Global", high-tech companies were pioneers among Chinese firms. Their names are well recognized internationally, such as Lenovo Group Ltd, Huawei Technologies Co Ltd, China Mobile and TCL Corp.

The pioneers, however, used different means to expand in the world.

Lenovo, China's No. 1 personal computer maker, spent US$1.25 billion to acquire International Business Machines Corp's PC business two years ago to become the world's third biggest PC maker with a market share of more than 7 percent. The acquisition has created a new global rival for leading firms like Dell Inc and Hewlett Packard Inc.

No. 1 TV maker

TCL, a Chinese electronics giant, established a joint venture in 2003 with French-based Thomson to create the world's No. 1 TV maker. TCL held the controlling stake in the venture.

China Mobile, the country's No. 1 mobile phone operator, plans to use US$5.3 billion to acquire global carrier Millicom. The deal, if successful, will become the biggest overseas takeover by a Chinese firm by deal value.

On the other hand, Huawei and ZTE Corp, China's leading telecom equipment makers, invest heavily on research and development annually. They used self-developed products, sold at one-third or half of the international average price, to penetrate the foreign markets. With their power and presence, Chinese equipment makers have made their presence felt and forced giants like Nokia, Siemens and Ericsson to cut costs.

Besides the direct acquisition and self-innovation means, another way for domestic companies to globalize is through large-scale exports, riding on the Chinese mainland's low labor costs and strong manufacturing capability.

One such example is Ningbo Bird Co, the No. 1 China-brand mobile phone vendor. It exported 2.8 million phones in the first five months this year against 1.9 million a year ago, said the Ministry of Information Industry.

Industry officials are, skeptical whether a Chinese firm can directly purchase overseas companies.

"It is a dream that you can succeed in overseas markets through the acquired company's brand," Meng Fanchen, Siemens Shanghai's general manager, said."It is a tough way with few successful cases in the world."

Direct acquisitions could result in high promotion and advertising fees for Chinese firms, culture and language misunderstanding and the departure of core talents, according to Meng.

In the first quarter, Hong Kong-listed Lenovo posted a loss of HK$903 million(US$115.7 million) due to job cut costs when it merged IBM's PC business worldwide.

"Lenovo's US operation(formerly IBM's operation), which accounts for 29 percent of sales and 24 percent of operating profits, will likely see more pressure from Dell in the next one or two years," Citigroup said in a recent research note.

TCL's joint venture had also lost money over the last two years.

Meanwhile, direct acquisitions could also face unexpected political barriers, such as China National Offshore Oil Corp's failure to acquire US-based Unocal. The US government departments refuse to use Lenovo's products because of"national security concerns."

Chinese firms will also face the challenge of rising labor costs and negative brand image.

"It is clear from this very first question that Chinese brands suffer from negative perceptions, and perhaps, negative realities," brand consulting firm Interbrand said in a report.

Invest more

Ningbo Bird, which produces on a large scale but lacks self-developed technology, posted a loss of 100 million yuan(US$12.5 million) last year.

China's brand image conjures up perceptions of cheap, poor value and low quality. Chinese firms urgently need to invest more for"true innovation" in the products, according to Interbrand.

Huawei, which owns the most patents in the Chinese high-tech industry, expects its overseas revenue to hit US$4.6 billion in 2006, a 34 percent growth year-on-year.

"Research and international talents are essential for the Chinese companies to go global," Meng said.

International talents are required to have global vision, ability to operate global distribution network and deep understanding of local market, Meng said.
 
New logo, retailer links to promote brand image overseas

Chinese firms are using various means such as logo change and partnering retailers to build and boost brands overseas, but they first have to change the brand image in foreigners' mind.

Among all Chinese firms, Lenovo, Huawei and Haier represent aggressive entities that understand the economic advantage offered by well managed brands.

In 2003, Legend changed its brand name to Lenovo, taking the "Le" from Legend to honor its roots and added "novo," the Latin word for "new," to represent the innovation at the core of the company.

In December 2004, Lenovo acquired IBM's worldwide personal computer division, helping to put it on the global map.

Huawei Technologies Co, China's biggest private telecommunication equipment maker, changed its logo in May to ensure easier recognition by overseas clients.

Logo revamp

The new logo's introduction will help Huawei develop more steadily in an international and professional direction, and focus increasingly on customers, Huawei said in a statement.

Telecommunication giants, like China Mobile and China Telecom, will probably change or revamp their logos as China Mobile was reported to bid for overseas assets and China Telecom will expand from fixed-line phones to mobile phones, said Monica Lee, Shanghai general manager of Enterprise IG, a brand recognition and management unit of Ogilvy Public Relations.

China Unicom has changed its blue logo to a more aggressive color: red.

Retail ties

Haier, a manufacturer of major appliances and electronic equipment, now has 62 distributors and more than 30,000 outlets around the world. In the United States, Haier products can be found at Wal-Mart, Best Buy, Home Depot, Office Depot and Target.

"Haier's ties with these retailers boost its brand image," brand consulting and management firm Interbrand said in a report. "The company's strategic plan calls for the creation of a localized brand name in all markets in which it intends to compete."

Chinese firms will become more competitive once they inject personality and emotion into their products and services, Interbrand said.

The consulting firm also said the Chinese companies need to take time to win trust from foreigners by improving quality.
 
Editor: Yan