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«THE IMPORTANCE OF OVERCOMING CULTURAL BARRIERS IN ESTABLISHING BRAND NAMES: AN AUSTRALIAN COMPANY IN CHINA Mona Chung*, Wendy Smith** Abstract ...»

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Innovative Marketing, Volume 3, Issue 2, 2007 33

THE IMPORTANCE OF OVERCOMING CULTURAL

BARRIERS IN ESTABLISHING BRAND NAMES: AN

AUSTRALIAN COMPANY IN CHINA

Mona Chung*, Wendy Smith**

Abstract

Considering the importance of cross-cultural competencies in the context of rapid globalisation

and the growth of China in the world economy, this paper uses case study methodology, to document the difficulties encountered by an Australian multinational beverage company, Foster’s, in attempting to establish its brand in China’s rapidly expanding market economy. Many of these related to culturally distinct attributes of the market, the consumer base and retail practices. The paper analyses these in terms of key concepts in marketing and cross-cultural business theory, in order to provide guidelines on how to overcome cultural barriers when establishing a foreign brand name in China. It also discusses the impact of cultural differences on brand loyalty after the establishment of the brand and on the sustainability of that brand. In attempting to assist foreign firms to succeed in the Chinese market, this paper offers suggestions that will help marketers to first understand the importance of cultural differences and then to succeed with further recommendations. Being a complex market and a market that is different from the Australian market, this is extremely valuable for those foreign brands entering China.

Key words: China, Cross-cultural studies, international marketing, brand names, brand loyalty and brand image.

Introduction Due to the growing influence of global economic forces, international marketing activities are increasingly taking place across cultural boundaries. Although much interest is developing in crosscultural business studies, there are not nearly enough principles and guidelines being developed for the purpose of assisting MNCs (multinational corporations) to succeed in their international marketing activities. This paper examines the concept of brand names: their establishment, the development of brand loyalty and the sustainability of a brand in a cross-cultural setting. In doing so, it identifies some cultural differences between Australia and China in the arena of marketing activities. Using the example of an Australian MNC, we discuss how brands may be established and sustained in a foreign market such as China.

This paper focuses on Foster’s Group as a case study. Foster’s is the Australian largest beverage MNC and one of the largest Australian companies to invest in China. It also represents an industry, beer, which is very crowded with competitors and very sensitive to consumer preferences, hence one in which marketing is disproportionately important in ensuring the success of the firm. We take this case to argue for the importance of tackling cultural difference as a key factor in international business and for the need to estimate its impact accurately when marketing a brand overseas.

Foster’s Group began its China operations in the early 90s. In 1993, Foster’s entered the Chinese market with two joint ventures (JVs), one in Shanghai and one in Doumen, Guangdong. In 1995, Foster’s set up another JV in Tianjin. By 1997, the China strategy was reviewed and a decision was made to sell Tianjin and Guangdong JVs. By 1999 both were sold. To strengthen the focus on its China investment, Foster’s purchased all of the shares in Shanghai gradually and operated there as a wholly owned subsidiary till June 2006.

–  –  –

Cross-cultural Marketing and its Challenges Research shows that successful companies put aggressive marketing strategies at the top of their list of priorities. These companies believe that marketing should guide all their operations rather than play merely a functional role (Brooksbank, 1991). But when marketing strategies are not developed well and with the support of appropriate research, investment strategies cannot be implemented effectively. This area of research is well covered (Brooksbank, 1991; Siu, Fang, & Lin, 2004). Cross-cultural marketing has becoming an increasingly popular topic following the trend towards the globalisation of consumer markets. With the increasing significance of the Chinese market in the formulation of many firms’ direct foreign investment strategies, more research is needed to assist them with accurate knowledge about cross-cultural marketing factors within their decision-making processes.

The literature so far has covered a broad range of issues under the heading of “international marketing” but there is still only limited mention of cross-cultural factors in marketing (Czinkota & Ronkainen, 1994; Jacobsen, 2000; Keegan & Green, 1997; Reed, 2003; Stauble, 2000; Terpstra & Sarathy, 1997). Where it does exist, research tends to be into very specific areas of cross-cultural marketing, for instance internet marketing (Tian & Emery, 2002), consumer differences and preferences (Kim, Forsythe, Gu, & Moon, 2002; Lee, 2000; Li, 1991; Mick & Faure, 1998; Yau, 1994), cultural differences of a particular market (Chung, 2004b; Davidson & Harrigan, 1977;

Johansson, 1997; Smith & Raeynolds, 2002) as well as cultural difference as a factor in market entry strategies (Market Similarity and Market Selection: Implications for International Marketing, 1983; Alavarez-Gil, Cardone-Riportella, Lado-Couste, & Samartin-Saenz, 2003; Steenkamp, 2001). The literature on cross-cultural marketing, within the wider context of international business, is still in its infancy. We suggest that in order to understand consumers of different cultural backgrounds, their key cultural values should first be established (Lowe & Corkindale, 1998). Research shows that many organizations have failed to take culture into consideration in their international market research activities (Steenkamp, 2001). More alarmingly, the very limited available research has been largely based on Western cultural contexts which are fundamentally different from Chinese culture (Chung, 2004a; Chung, 2004b; Trompenaars, 1996; White & Haire, 2003).





The fundamental principle of marketing is the creation of customer satisfaction. Without understanding the specific characteristics of consumers in a particular market, this is difficult to achieve.

Literature on consumer behaviour is comprehensive; it examines such behavioural and cognitive issues as perception, attitudes, memory, decision-making and so on (Hoyer & Maclnnis, 2001;

Neal, Quester, & Hawkins, 2002). Yau (1994), Kim, Forsythe, Gu & Moon (2002) and Lowe & Corkindale (1998) suggest that in order to understand Chinese consumers and therefore be able to satisfy their needs and wants, it is important to first establish the central values of Chinese culture such as trust, face, reciprocity, respect for age and authority, harmony and time (Wu, 2000). For instance, one of the major challenges when conducting market research among Chinese consumers is to comprehend the importance they place on preserving one’s harmonious integration into the social fabric of the family as well as the institution in which one is working (Waldie, 1980; Yau, 1994).

Chinese consumers are also distinguished from other Asian consumers because of certain characteristics of the Chinese economy. Chinese consumers have had little exposure to a market economy and its values and practices in the past. They have had little choice in selecting products according to their needs and wants. Rather they had to choose from what was being produced and offered according to the government’s central economic planning. Therefore when they were first exposed to international brands, the attributes of memory, perception and experience played a less important role in influencing the decision-making of Chinese consumers (Arnould, Price, & Zinkhan, 2002; Blackwell, Miniard, & Engel, 2001; Lee, Fairhurst, & Dillard, 2002). Competition was not limited to the features of the product and its delivery but was also largely based on an added factor – educating consumers in order to establish the brand name and brand loyalty in the first instance. This challenge was not only faced by Foster’s but equally by the other international brewers in China. Without a thorough knowledge of the market and its consumers, establishing a brand name and brand loyalty could be a challenging task for foreign companies.

Innovative Marketing, Volume 3, Issue 2, 2007 35 The brand name is an essential part of marketing and it not only helps to identify a product but also creates value through consumers’ association with the brand (Kohli, Harich, & Leuthesser, 2004).

Cultural differences are therefore of major concern when managing brands in China (Brand Management in China, 1997). In general, successful brands create wealth by attracting and retaining customers (Datta, 2003). Brand loyalty can be a major factor in determining patterns of consumption and these behaviours are likely to be highly influenced by the cultural values of that group of consumers. This is a fundamental concept in strategic marketing (Datta, 2003). The increasing availability of consumer goods often means that consumers are bombarded with information on products and brands. This makes the process of building brand loyalty expensive (Datta, 2003).

Little research has been carried out to identify the level of influence of culture on brand loyalty,

whereas much research has been done on other factors which influence brand loyalty, such as:

demographics, especially age, and stock availability. In fact there are only a few recent studies which begin to look at branding in the context of Asian cultures. For instance, a few publications on brand names in Chinese mainly cover the linguistic components of brands (Chan & Huang, 2001).

The cultural factors behind brand preference among Chinese consumers are different from those operating in the case of Australian consumers. This is easily demonstrated in the area of perceived importance of product attributes (Delong, Bao, Wu, Chao, & Li, 2004; Zheng & Williamson, 2003). This was precisely the case for Foster’s products. In Foster’s corporate culture, ‘high quality’ and ‘consistency of quality’ are perceived to be important product attributes and the brand has been created around these. But the high and consistent quality of the product produced in China was based on high production costs including the use of imported ingredients such as barley and malt. This then led to the relatively high price of the product. Foster’s did not realize that Chinese consumers could not afford to place high value on products differentiated by quality when deciding which beer to purchase. In the early 1990s, when the level of disposal income in China was relatively low, this high quality and highly priced product was not able to be appreciated by the majority of Chinese consumers. As a result, the aim of establishing Foster’s brand name into the new market was not achieved.

Research methods A case study approach has been used in this research. We believe that this is the most suitable research method, due to the complexity of the topic. Three critical factors influenced the research design. These were (i) the lack of ‘cultural theories’ (Chung, 2006a) pertaining to cross-cultural factors in specific aspects of international business such as marketing, (ii) the cultural complexity and dynamics of the Australian-Chinese joint venture situation, and (iii) the size of Foster’s operations in China. In order to achieve the aims of the research, the design needed to be suitable for dealing with ethnic diversity among respondents, with real world events and with the factor of ongoing complex relationships between respondents.

In this study, we have utilized the following cross-cultural theories: Hofestede’s (2001) five dimensions of culture, Hall’s (1976) high and low context culture and Trompenaars’ (1993) seven dimensions of culture. Nevertheless, they are limited in assisting our understanding of the complexities of Chinese culture, especially given the dramatic changes in Chinese politics over the last six decades, and also in handling the cross-cultural dimensions in Foster’s’ operations in China.

No one precise theoretical framework will explain all the phenomena surrounding the establishment of a brand in China; hence the necessities for a case study. A case study also explains the causal links in real-life interactions that are too complex for a quantitative survey to cope with. It can describe an interaction in detail and the real-life context in which it occurred. It explores those situations in which the interactions being evaluated have no clear, single set of outcomes (Yin, 1994). Case studies can best capture the dynamics of a complex research situation (Gummesson, 2006; Morse & Richards, 2002).

Innovative Marketing, Volume 3, Issue 2, 2007 Seventy five depth interviews1 were conducted for a larger scale research project. The interviewees were senior executives, board members, managers including expatriates, overseas Chinese and local Chinese from the Foster’s Group Ltd. They were from different cultures, with different educational backgrounds, had different career experiences, and were based in different locations.

Depth interviews were conducted between 2002 and 2005 in Australia, Hong Kong and China.

Respondents were current and ex-staff of the organisation. This approach provided a broad spectrum of viewpoints about the operation and it was aimed at achieving an unbiased contribution from all parties.



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