Must Read Monday: China Should Change Its Perspective From Engineer To Marketeer

From an engineer's to
a marketeer's perspective,
one bridge too far?
Photo: Danny Friedmann

Malcolm Moore wrote a great article for The Telegraph about China's challenges to transform its industries from the world's manufacturers to the world's innovators, and how this good be a boon for some British companies. Read here.

Mr Moore wrote about the challenge suppliers to foreign companies, such as Foxconn, face:

"These Chinese companies are more confident, but they are led by engineers," said Geoff McCormick, the head of Alloy, a design firm that has been active in China for decades. "These firms are now being asked to be brands and not just engineering-led. But they have no track record at creation.They are happy to spend money, but only if they think there will be a return. So these are very difficult decisions for Chinese chief executives to make," he said."

And of course foreign companies will not be amused when their supplier starts to make their own competitive products under their own trademark. In some law firms there is the phenomenon of applying so called Chinese walls (information barriers), to separate one part of the firm which is representing one party from another part of the firm which is representing another party with contrary interests. It is highly doubtful whether Chinese walls can effectively be applied during the manufacturing process of a supplier/competitor.

For all foreign companies that complain about bad intellectual property in China. As long as Chinese companies copy the products of foreign companies, their problems are quite limited and can be solved or mitigated by using the enforcement routes effectively. The real challenge starts when they offer a better designed product under a more attractive brand. Legitimate competition is the real challenge.

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Must Read Monday: Bye Bye Shanzhai, Hello Mainstream Smartphones

Photo: Close Encounters
To Migrate or not. A wildebeest's dilemma:
"Starvation if I stay,
or risk of being eaten by a crocodile if I go"

Shen Jingting wrote an excellent article for China Daily about the epic migration taking place within the Shenzhen mobile phone industry.

Shen is distinguishing three phases: 

• Production of Shanzhai phones and focus on emerging markets, such as India and Nigeria and delivering to the domestic market.
• Transform into a legitimate supplier with good relationships with operators in emerging markets, also because when a Shanzhai producer is acquiring a high profile it will be vulnerable for IP lawsuits (as happened to "G'Five International Ltd, a Shenzhen-based handset supplier that mainly sells phones in Asian and African countries, and was sued by Nokia in India for alleged infringement of intellectual property rights."). Or working for international brands such as Motorola or Samsung. 
• Follow the Taiwan-based HTC Corp. strategy, that has succeeded in entering profitable markets in Europe and North America. 

There is enough ambition to reach the third phase. Huawei even expects to be a top five global mobile phone supplier by 2014. And ZTE wants to become one of the world's top three mobile phone vendors by 2015.

Read Shen's article here.

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Must Read Monday: "Shan Zhai Ji" in Google.cn Most Searched List

Sky Canaves and Juliet Ye of the Wall Street Journal's China Journal Blog dealt with the top ten lists of Google.cn 2008. Although most Chinese use Baidu, and Google is used by some of the higher educated Chinese, the most searched terms can give an indication of what is hot and what is not in China. Read the China Journal article here.

In the category "Most asked questions": Number 1. , unsurprisingly, given the enormous impact on China's society, was: What is melamine? Interestingly also on number 8 another question had also to do with substandard, counterfeit products: What is Shan Zhai Ji?

Ok, everything that shows up in a Google top ten is a trend. But what does this trend mean? So what means Shan Zhai Ji 山寨机? This is literally: Mountain Bandit Machine, and is a a knickname for cell/mobile phones with copied design and functions of branded cell/mobile phones offered for a much lower price, without permission of the brand owners.

According to Candy Yang and Lisa Li of China Youthology, which is "catching the pulse of Chinese youth", Shan Zhai Ji has developed into a subculture which can be defined as:

• Enjoying technology for a low price;
• Satisfaction with the level of technology and innovation of small bandit factories, which meets Chinese youth need to experience new technology and new functions and some humour;
• Pride for unpretentious, low quality low price products.
• Shan Zhai Ji might look vulgar and ‘out-dated’, but are considered cool and interesting by some youth.

Ms Yang and Ms Li did an informal survey about who is buying these Shan Zhai Ji products. The outcome is: creative youth, technology geeks and guys. In marketing terms the important group of early adopters. In other words: the opposite of brand chasing as the title of the article rightly put is, read the China Youthology article here. Conclusion: counterfeit trademarks and pirated copyright in China is not only caused by supply but also by demand. Brand holders need to work on both sides.

An example of a Shan Zhai Ji, you can see below a video of the iOrange, oops iOrgane. It has some extra functions compared to those of the iPhone.

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