Ni hao – this category features any blog posts that relate to the People’s Republic of China, the Chinese communist party, Chinese citizens, consumer behaviour, business, and Chinese business abroad.
It is likely the post will also in other categories too. For example a post about Tong Ren Tang might end up in the business section as well. Inevitably everything is inherently political in nature. At the moment, I don’t take suggestions for subject areas or comments on content for this category, it just isn’t worth the hassle.
Why have posts on China? I have been involved in projects there and had Chinese clients. China has some interesting things happening in art, advertising, architecture, design and manufacturing. I have managed to experience some great and not so great aspects of the country and its businesses.
Opinions have been managed by the omnipresent party and this has affected consumer behaviour. Lotte was boycotted and harassed out of the country. Toyota and Honda cars occasionally go through damage by consumer action during particularly high tensions with Japan.
I put stuff here to allow readers to make up their own minds about the PRC. The size of the place makes things complicated and the only constants are change, death, taxes and the party. Things get even more complicated on the global stage.
The unique nature of the Chinese internet and sheltered business sectors means that interesting Galapagos syndrome type things happen.
I have separate sections for Taiwan and Hong Kong, for posts that are specific to them.
And we return to Munich migration back to Windows – it’s going to cost what now?! €100m! • The Register – interesting to see this war over Munich public sector computing still being fought in the background by Microsoft two decades later. I remember working at Edelman when its open source competitive de-positioning work was just taking off. I had to write a two page document explaining what open source was. Munich was seen as one of the key battle grounds back then
BBC StoryWorks unveils new tool which measures impact of branded content | Marketing Interactive – “In addition, the product showed that the creative execution succeeded in driving a clear uplift in subconscious association between Huawei and key brand attributes such as being innovative, inspiring, environmentally responsible, and high quality. Following exposure, audiences also had a high desire to engage with the Huawei brand; brand awareness rose by 216%, brand association went up by 23% and purchase intent increased by 19%”
Online
How the Chinese vs Western battle of internet giants will unfold | Analysis | Campaign Asia – over the next 12 months the Western big three will find themselves head to head with the Chinese internet giants, across ecommerce, brand partnerships and most notably AI. What’s not certain is who will come out on top and whether BAT can adapt to succeed in a different environment- at least in non-Chinese Asian markets
Daring Fireball: Marzipan – Gruber posits that Marzipan is a unified development environment that allows programmers to create apps optimised for iOS and macOS. Marzipan means that the only have to write the app only one time, rather than having to rewrite completely for each platform. It makes more sense than the original Guzman article on a future merging of iOS and macOS
Apple Took the Lion Share of Smartphone Industry Profits in Q3 2017 at Close to 60% – Patently Apple – there are many ways to cut this data. Apple is still doing well, Samsung has made big strides to get back into the game over the last year and the largest Chinese manufacturers are still living on thin margins of $15 per handset. Huawei’s numbers are likely to be mixed. The Honor handsets will have a much lower margins and so pull down Huawei’s aggregate value.
Consumer behaviour
The politics of social status: economic and cultural roots of the populist right – Gidron – 2017 – The British Journal of Sociology – Wiley Online Library – the answers may lie on the ‘supply side’ of political competition, where recent movements in party platforms have made the populist right more attractive to many voters. A convergence over the past three decades in the economic platforms of the centre-left and centre-right toward the right have reduced the appeal of the centre-left to the working class. In this context, many voters now complain that no one speaks for them. At the same time, parties on the populist right have moved their economic platforms to the left, making them more plausible providers of jobs and social protection. Moreover, in order to mount distinctive appeals at a time when the differences between parties on economic issues has narrowed, many parties have put more emphasis on identity or values issues, which often draw middle-class voters to the left but working-class voters to the right
The Most Expensive Mile of Subway Track on Earth – The New York Times – public officials have stood by as a small group of politically connected labor unions, construction companies and consulting firms have amassed large profits. – When does pork barrel politics start to look like organised crime?
Huawei executive detained on suspicion of taking bribes | HKEJ Insights – it is worthwhile bearing in mind that Huawei is a big ass company, so the odds of at least some employees being bent is a sure thing, just on the scale of numbers. It isn’t necessarily proof that the company is rotten. Huawei has its cultural foibles but corruption isn’t necessarily one of them
Over the past two decades the China marketing agency landscape had got used to go-go growth, just by showing up. The Xi-era of China has seen the end of the go-go years in economic growth in China. This economic maturation was one of the factors picked up on Arun Sudhaman’s analysis of Chinese marketing agency landscape changes, with a particular focus on PR services.
Arun also noted dirvergence in fortune of domestic and multi-national firms.
Here are some of my thoughts on China marketing agency landscape changes.
Digital disruption affecting China marketing agency landscape
Multi-national PR agencies often led with corporate communications and public affairs expertise. This meant that their businesses were led by leaders who paid lip-service to digital at best. My experience trying to sell digital internally was one of the most painful processes that I have ever done. It was one of almost insurmountable cultural differences: not Irish-Chinese, but analogue-digital.
To be fair many corporate and public affairs specialists in London are still trying to get to grip with what digital means. They know it’s important, but they don’t have a clue how it all comes together.
That mean’t that they didn’t really get social media beyond being a publishing platform. Chinese KOL (key opinion leader) work whilst effective, is paid media. PR agencies generally don’t have the depth of tools and analytics to provide comprehensive planning and execution for KOL projects. It is hard to get management teams to invest adequately in tools and talent.
Change in legal and regulatory environment
Premier Xi has changed the landscape for public affairs practitioners. The government is less flexible, it feels that it no longer needs to be. China is on the ascendence in the face of western existential crises and America in rapid retreat from the world stage. Hence, new laws that discriminate against foreign technology companies as part of its wider approach to cyber sovereignty. Public affairs still has a place in terms of research to provide understanding, but their foreign multinationals won’t like what the results will likely tell them.
Digital media landscape
Digital has hit the industry hard. It moved at an accelerated pace compared to other industries. Unlike the west were television isn’t in decline but has stopped growing, Chinese TV isn’t undergoing the golden age that we are seeing in the west. The government has made it less entertaining – which has only helped the acceleration of digital marketing channels in China. Government control of television content has meant less reality shows or remakes of Korean drama stories and more content extolling Chinese Communist Party values. Worthy content, but not particularly engaging.
Disintermediation and displacement
In China, the major digital platform companies try and go direct to clients for social media advertising cutting out the media buying agencies. This gives media and digital agencies extra incentive to go and grab the paid engagements of key opinion leaders. These are often performance-related deals with directly attributable online sales or online-to-offline voucher redemption. Digital and media agencies are better equipped to handle influencer relations than their public relations peers. It is less about influence and more about performance.
Changes in the client boardroom
Multinational PR agencies also have problems with their established client base of international brands. Under Premier Xi we have seen a more confident China. This confidence is manifested in Chinese board rooms. The way strategy and goal-setting works in Chinese companies illuminates this difference:
Big board meeting where outrageous unrealistic targets are set by the Chairman
Planning department turns the ridiculous goals into plans
Management goes to arrange funding
The business then goes to staff up and do whatever is needed. They will build massive conglomerates – what is known as building the eco-system – something that is frowned up in the West as being bad for shareholder value
Chinese entrepreneurs care about market share more than profitability. And sometimes they fail spectacularly like LeEco or Evergrande, collapsing under the weight of their own debt.
A lot of it reads like bubble-era corporate Japan. While it seems insane to outsiders, corporate China is much more closely knitted into the government than the keiretsus ever were. Corporate China may go pop in the future, but it won’t happen at the moment.
Multinational clients struggling
By comparison, multinationals are worried about activist shareholders and meeting their quarterly numbers can’t be as aggressive in comparison to their Chinese peers. This type of aggressive pursuit of growth would also be an anathema to the likes of WPP, Omnicom, Publicis and IPG who suffer from a similar risk of activist shareholder shenanigans as their multinational clients.
Which is why Chinese brands have been blowing up across sectors. 91 percent of smartphones now sold in China are from domestic brands. Apple has somewhere around 7 per cent share. Foreign FMCG brands are being slaughtered, even Amazon has only a few percentage points of market share.
Quite simply, multinational PR firms have generally bet on the wrong horse. China is the one market were American scale and capital actually diminishes in impact over time as the Chinese domestic market picks up. Multinationals in strategic business areas were always going to lose over time.
Knowledge and business transfer
Where Chinese brands have wanted to expand globally, they have taken on foreign PR agencies. Part of this process was knowledge transfer. If one looked at an organisation like Huawei, you can see how they have learned and built internal capability with Chinese characteristics in their corporate communications function over time. It would be a similar process in other companies.
Even foreign luxury brands have struggled to be as agile as their Chinese customers. Between the crackdown on corruption and the rapid development of experienced luxury consumption – the only constant in the luxury market has been change. It is only a matter of time before China has its own answer to Michael Kors or Christian Dior. Western luxury brand problems will affect the agencies that work with them with massive fluctuation in marketing budgets.
A second transfer of capability from foreign to domestic is the move of multinational agency talent into local agencies. You combine that Chinese entrepreneurship and foreign agencies look vulnerable. Clauses that have kept western agency staff in check from plundering clients and talent don’t hold up as well in China.
Unilever moves global comms planning to Mindshare from PHD | Media | Campaign Asia – huge win for Mindshare and a move away at the global level between planning guidance and media buying. It would be analogous to investment managers to go back to taking advice from sell-side analysts. I guess part of the problem is trying to get global guidance to be implemented at a country level
China’s Tariff Cuts Won’t Hurt Daigou Business For Now | Jing Daily – China plans to reduce tariffs on 187 consumer goods, including cosmetics, apparel, health supplements, food, and pharmaceuticals. The new policy will go into effect on December 1. The average tax rate will drop to 7.7 percent from 17.3 percent.
China’s Toutiao Tried to Buy Reddit — The Information – One reason was general skittishness among Reddit’s investors about selling to a Chinese internet company whose user and revenue numbers were tough to assess – and there is the burn
Apple: Chinese Buying Huawei et. al. but Sticking with iPhone, Says Morgan Stanley – Barron’s – The Jigaung data also highlights that in the 4 weeks ending October 22nd, more “switchers” left their Chinese branded smartphone for an iPhone than iPhone users left for a Chinese branded smartphone, across all local vendors. In fact, Apple’s net switching rate, or the net amount of switchers gained/lost as a percentage of all brand switchers increased to 7.6% in the latest 4 week period, up from 6.7% in the prior 4 week period ending October 8th. Comparatively, Vivo was the only Chinese smartphone vendor to gain “net switchers”, albeit at a significantly lower rate. We expect this trend to only accelerate as future data sets will include the period after the iPhone X first began shipping.
Inside Speedfactory: Adidas’ Robot-Powered, Shoe Production Facility | WIRED – Adidas Speedfactory interesting explorations in automation and customisation in manufacturing. Speedfactory would also allow manufacturing to be moved closer to where the product will be sold. Speedfactory could have an impact on globalisation if commercialised.
Consumer behaviour
3 Must Know Trends of Affluent Millennials In Shanghai | Jing Daily – The post-90s generation is also eager to engage in experience-based shopping, and many are adventurous FIT travelers. According to the report, 56 percent of their travel expenditure is on overseas trips, and their overseas spending has increased more than 40 percent in the past two years – at the expense of e-commerce
WPP stalls supplier payments ‘to boost year-end results’ – DecisionMarketing – An internal email leaked to the newspaper read: “Cash balances are one of the most important indicators there are of the health of a business and so every year WPP looks to maximise its cash position reported in the year-end accounts.” It went on to ask for help chasing cash owed to WPP and “slowing down payments to our creditors”. – I wonder if they are slowing down the paying of staff OOPs?
McKinsey on digital marketing: Personalization is not what you think | ZDNet – The first thing [is] that people, when they talk about personalization, often confuse it with targeting. Absolutely every client that I talk to and every person in the industry, we all want to do better targeting. I think personalization has a piece of that, but I think of personalization as really helping manage a customer through their journey. That could include advertising. That could include experiences, both physical and digital. But it’s that end-to-end view of helping the client, the customer, get through that journey in a thoughtful way
Media
Facebook explains ad policies to users, but industry wants more | Advertising | Campaign Asia – the post is focused on empowering users to take action, leaving them with the onus. The post, she continues, acknowledges that Facebook does not have the ability to police and manage the content that is produced and shared in its different environments, and requires a concerted effort from end users to brands to their agencies and beyond. “Does that address the demands asked of Facebook to take greater responsibility for the content on their platform? Unlikely,” she said. More Facebook related content here.
