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Friday, Sep. 28, 2012

Rewards of a national brand

Special to The Japan Times

TIANJIN, China — Here in China's fourth largest city, just a 33-minute high-speed bullet train ride from Beijing, occasional signs of Chinese protests against Japan and Japanese businesses could still be found last week. A driver had covered the Toyota logo on his car's trunk with a small Chinese flag. Another Chinese flag adorned the car's antenna.

Perhaps that driver shared sentiments — and fears — with the owner of the car in Beijing featuring the sign, "Japanese vehicle, but Chinese heart inside."

Amid reports of temporarily shuttered Japanese factories and restaurants, the message was clear: Don't trash my car even if a business from Japan made it.

Contrast this with the welcome in Hong Kong and elsewhere in Asia of the latest smartphone from the iconic American company Apple. In a now familiar ritual, Apple fans queued for hours last Friday in Australia, Hong Kong, Japan and Singapore to get their hands on the latest iPhone. The much anticipated Apple launch in these four key markets will be followed by the official arrival of the iPhone5 in some 20 more countries around the world in the next few weeks.

The response to that Toyota in Tianjin and the Apple iPhone5 could not be more different. What links them, however, are the notion of "soft power" and the risks and rewards of being identified as one of a given nation's leading companies.

"Brand Japan" has long benefited from the strength of Japanese companies in industries as diverse as automotives and music, or "J-pop." The recent situation in China shows how that close association can also hurt businesses when nationalist sentiments go against them.

As big businesses — fairly or unfairly — become the short-term targets of populist politicians running for election or nationalist crowds driven by sensational media reports, policymakers from Tokyo to Washington should not lose sight of the long-term reality that companies and their products and employees are very much a part of a nation's brand and "soft power."

With anger toward Wall Street fading, the United States, in particular, has a tremendous opportunity to extend its shift in focus to Asia by better supporting and leveraging America's corporate brand strengths. Essential to this will be recognizing the U.S. business community as an independent but critical partner in this "pivot." From a U.S. commercial perspective, a significant U.S.-Asia economic foundation exists that can be built on, particularly in Southeast Asia, where 2011 U.S. exports exceeded $76 billion. The U.S. also already has more than twice as much investment in Southeast Asia as it does in China.

In global rankings of corporate brand value, U.S. brands such as Google, Microsoft, Coca Cola and McDonalds routinely dominate. Essentially, these U.S. "brand leaders" have been adept at winning over the "hearts and minds" — and wallets and pocketbooks — of the region's growing middle class. This "brand gap" between the top U.S. companies and their competitors reflects positively on the U.S. and its culture of innovation and openness, and an ability, echoing one Apple campaign of years past, to "think different."

Just as some Wall Street firms became a symbol of financial excess, Apple is in many ways a symbol of continued U.S. strengths in innovation, technology and marketing.

American politicians would be wise to do more to recognize and value the "soft power" contributions of American companies to "Brand USA." This would include putting an end to rhetoric criticizing U.S. business leaders for making the tough decisions that come with deciding where to manufacture and how best to sell and distribute a product profitably.

The reality is that part of Apple's success has been its global supply chain and ability to assemble its products in China and elsewhere.

One country that is aggressively trying to close this brand gap with the U.S., and with Japan, is China. In August, Chinese Vice Minister of Industry and Information Technology Yang Xueshan stated that China plans on having 100 "globally influential" brands and 1,000 domestically renowned brands by 2015. With "Brand China" too often associated with counterfeit goods, shoddy products or aggressive business practices in Africa or elsewhere in the developing word, the rationale for this focus is understandable.

Developing global brands also will allow Chinese businesses to move up the value chain, and help China further transform its economy from one based on cheap labor and managed exchange rates into a more knowledge-based one. This move also should help Chinese businesses reap a larger share of profits.

Chinese companies may well have a hard slog in duplicating the success of U.S. and Japanese brands given existing perceptions of Chinese business practices and products. The world and China are, however, changing rapidly.

As with any brand, a strengthened Brand USA will require investment and reinvestment. This will mean a Washington that does more to ensure U.S. companies are treated fairly abroad, that intellectual property rights are protected and that U.S. tax policies do not disincentivize business success, whether in Asia or in America.

The U.S. also must do more to return to a business friendly environment that fosters entrepreneurship, and nurtures small and medium enterprises. From their ranks will come tomorrow's brand leaders.

Some of Apple founder Steve Jobs' first products were famously crafted in a garage in Silicon Valley. Other iconic American brands of today may likewise have begun as an idea captured on a napkin on a California kitchen table or as a pet project in someone's basement. All that too is part of Brand USA. It is also something that America's pivot to Asia should fully embrace.

While there is no guarantee that nationalist sentiments in China won't be directed against America's best companies, as they seemingly were recently against Japanese firms, the contributions in soft power to a nation's reputation by its leading businesses should not be ignored.

Curtis S. Chin, a senior fellow and executive-in-residence at the Asian Institute of Technology and a managing director with RiverPeak Group, served as U.S. Ambassador to the Asian Development Bank (2007-2010). Jose B. Collazo is a frequent commentator on Southeast Asia and can be followed on Twitter at @josebcollazo.

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