6 ways Xi Jinping’s power grab will impact foreign brands

Xi’s personal Chinese Dream is expected to dominate every aspect of Chinese development, and will have a profound impact on the business environment of foreign companies working in the country.

Recently China announced a proposed constitutional amendment to end presidential term limits in China. Despite widespread discontent expressed online, the Communist Party now claims that the amendment is the will of the people.

If there were any doubt before, this statement make it all but certain that the amendment will pass before the conclusion of the “Two Sessions”, the annual meetings of the national legislature and the top political advisory body in Beijing.

The move, which received praise from U.S. President Donald Trump, is a significant shift toward a more autocratic regime. It also represents a formidable consolidation of power by Xi, who has just completed his first five-year term as President. In the past five years, Xi has developed a more nativist, nationalist ideology that aims to increase China’s strength in the world and the party’s lock on political power.

Xi’s personal Chinese Dream is expected to dominate every aspect of Chinese development, and will have a profound impact on the business environment of foreign companies working in the country. In a time of considerable uncertainty, here are Jing Daily‘s six predictions for how Xi’s power grab will impact the luxury industry in China.

1. More surveillance and censorship

Surveillance and censorship are widespread in China, and that will only increase. More and more foreign brands have been penalized for “misbehaviours” in their communications in China and abroad.

Cases from Victoria’s Secret, Estée Lauder, and Harper’s Bazaar illustrate the risks of working with celebrities (both international and domestic), referencing foreign subcultures (such as hip-hop and anime), and having a global digital presence, where comments in other countries and other languages are increasingly scrutinized.

Furthermore, the Chinese government is likely to demand access to all website data, online customer information, personal communications, and more.

Attempts to circumnavigate surveillance and censorship will slowly be snuffed out. Since October 2017, domestic VPN providers have been required to register with government agencies in order to provide their services legally in the country. Foreign VPNs are likely next. (See “What if China closes the VPN window in its ‘great firewall’?”)

2. More emphasis on Chinese heritage

The ongoing clampdown on foreign cultural influence will give rise to more foreign brands referencing or co-opting traditional Chinese culture in their communications. As a matter of fact, a great number of brands are already doing so. RTG Consulting Group found that adopting traditional Chinese cultural elements is one of the politically safest and most effective ways to engage with a diverse Chinese.

Selected aspects of traditional Chinese culture have been nurtured by the state in recent years, helping them to resonate more with the younger Chinese generation, especially Generation-Z.

3. More competition from home-grown brands

With the Chinese government calling for domestic innovation and design to meet the growing needs of consumers, the spring of the domestic Chinese fashion brands is coming. However, with the ideological restrictions placed upon Chinese fashion designers, fashions may begin to diverge away from global trends.

Nevertheless, we believe it will be more and more easy for domestic fashion brands to achieve commercial success inside China in the current social and political context. The success will belong to brands who comply with contemporary nationalist values, such as sportswear brand Li Ning, whose triumphant debut at New York Fashion Week captured the attention of Chinese millennials and was praised widely on the country’s major social media sites.

4. More limits on conspicuous consumption

The anti-corruption campaign that President Xi initiated back in 2013 will continue to affect the consumption behaviours of an estimated 112 million government personnel, including officials, civil servants and the so-called ‘in-staff’ personnel who enjoy the same wages, social welfare and healthcare standards, a group that constitutes the core of China’s rising middle class. This will have a profound impact on certain industries, including the travel and tourism sector, as officials must seek permission to travel abroad, and the luxury goods sector, as officials are discouraged from flaunting their wealth.

5. More ambiguity for Chinese brands abroad

Aside from rejuvenating national pride, Xi also has a grand vision of China’s role on the international stage. In recent years, a slew of Chinese companies have ventured abroad, enjoying significant freedom to operate globally, unless of course they fall foul of the regime. Wanda Group, HNA, and Anbang Insurance Group are three prime examples whose falls have had great repercussions for their foreign partners. Foreign brands will have to carefully evaluate the risks and rewards of working with big Chinese companies like Alibaba, Tencent, Huawei, and Fosun.

6. Less interest in foreign intellectual property rights

In the proposal to get rid of the presidential term limit, the Party also suggests abandoning “rule of law” to fully embrace “rule by law”. This has profound legal implications for foreign brands that have long suffered from IP infringement in China. The change is likely to make it harder for brands to protect themselves from Chinese copycats.

Source: Jing Daily/campaignasia.com; 9 Mar 2018

Millennials want to buy from companies led by outspoken CEO

Nearly half of millennials (47%) believe CEOs have a responsibility to speak up about issues that are important to society, far outpacing the sentiments of Gen Xers and Boomers (28% each).

An even larger six in 10 millennials (56%) say that business leaders have a greater responsibility to speak out now than in years past.

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This is according to CEO Activism in 2017: High Noon in the C-Suite, a report commissioned by Weber Shandwick in partnership with KRC Research.

“When dozens of CEOs spoke up about the new administration’s decisions regarding issues like climate change and travel to the US from select countries, for example, social media ignited, protests erupted and media attention exploded. Navigating how to communicate a company’s point of view in this environment is becoming increasingly complex and important. Future generations will only pay closer attention to how companies communicate around their values when it comes to deciding where to work or who to purchase from,” said Andy Polansky, CEO of Weber Shandwick.

Millennials’ buying decisions influenced by CEO activism

CEO activism positively affects millennials’ purchase decisions, according to the survey. Half of millennials (51%) say they would be more likely to buy from a company led by a CEO who speaks out on an issue they agree with. This rate has increased since 2016 (46%). This form of “voting by wallet” is not to be ignored as companies fiercely compete for customers. By comparison, CEO activism is less likely to affect the purchase decisions of Gen Xers and Boomers.

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The risk of silence

This survey also asked consumers what they think the risks are of not speaking out. Half of Americans (47%) believe the biggest risk of a CEO not speaking out on a hotly debated issue is some form of criticism, whether it comes from the media (30%), customers (26%), employees (21%) or the government (9%). Top perceived risks do not differ by generation.

“For companies looking to increase sales, recruitment, innovation and word of mouth, millennials’ bias toward CEO activism should not be overlooked. This generation is heavily purpose-driven and is already changing the game when it comes to how we work and where people want to work,” said Leslie Gaines-Ross, chief reputation strategist of Weber Shandwick.

Source: marketing-interactive.com; 1 Aug 2017

Chevron Lubricants creates new units to align with regional growth strategy

Chevron Lubricants is creating two new business units following the retirement of Farrukh Saeed as vice president, Asia Pacific Region on 31 July 2017, after more than 34 years with the company. The formation of the two new operations will support ongoing expansion and sales growth in the broader Asia Pacific region.

Chevron Lubricants did not comment to additional queries by Marketing at the time of writing.

The new units are said to be in alignment with its regional growth strategy. The Thailand, Sri Lanka, Pakistan, Philippines, Vietnam, Malaysia, Singapore and Indonesia operations will now be part of a new Asia/Pakistan lubricants business unit. In addition, the Greater China business unit will be responsible for China, Taiwan and Hong Kong finished lubricants operations including the growing e-commerce activity in these countries.

Rochna Kaul has been appointed to serve as general manager for the Asia/Pakistan Lubricants business unit, based in Singapore. Kaul previously served as general manager, Chevron International Products, based in South Africa.

On the new Asia/Pakistan business unit, Kaul said: “We have experienced steady growth in our Asian markets. We will continue to drive our full portfolio of lubricant products across the region. Our focus is to be a reliable partner and to invest in our strategic brands.”

Baomin Guo has been appointed general manager for the Greater China Lubricants business unit, based in Beijing. Guo was previously advisor to the president, Chevron Lubricants.

“Our new business unit signals the increased strategic focus we are placing on the Greater China market,” said Guo. “Chevron’s relationships with leading companies and OEMs has grown steadily and we have quickly established new digital sales channels for the passenger car segment with China’s leading e-commerce and online-to-offline (O2O) platforms.”

Source: marketing-interactive.com; 2 Aug 2017

Achieving a digital state of mind

Digital isn’t merely an add-on; it’s a way to think differently about business models, customer journeys, and organizational agility.

Companies that successfully adopt digital technology don’t view it as an extra; digitization becomes central to what they are because they transform their value propositions and evolve every level of the organization so that it becomes data driven, customer obsessed, and highly agile. In this episode of the McKinsey Podcast, recorded in November 2015, principals Karel Dorner and David Edelman talk with Barr Seitz about why, decades into the digital revolution, companies are still trying to define what digital really is and struggling to make the most of it. An edited transcript of their conversation follows.

Podcast transcript

Barr Seitz: Hello and welcome to the McKinsey Podcast. I’m Barr Seitz, global publishing lead for McKinsey’s Marketing & Sales and Digital practices. I’m very happy to introduce my two guests, Karel Dorner, a partner in McKinsey’s Munich office and a leader of the McKinsey Digital Practice, and Dave Edelman, a partner in our Boston office and global leader of our Digital Marketing Group. Karel and Dave are also the authors of “What ‘digital’ really means,” one of the top articles published this year on mckinsey.com. I’ll be talking to Dave and Karel about the meaning of digital, why knowing the meaning is important, and how leaders can use that understanding to help transform a business at its core rather than at the edges.

Click here for the full transcript

Source: mckinsey.com; Feb 2016

A billion-dollar digital opportunity for oil companies

Making better use of existing technology can deliver serious returns—by increasing production, streamlining the supply chain, or reducing engineering time.

The computers in the offices of the average big oil company can find an additional $1 billion in value, if you let them.

Modern advanced-analytics programs are able to diagnose, sort, compare, and identify cost savings, or opportunities for increased production, in a manner beyond the capabilities of the average employee. The tools that allow you to do this have been available for several years, but adoption by the oil and gas industry has been slow. This is partly the result of the recent crash in oil prices, but competing internal IT projects and organizational reluctance to put in the effort required are also factors.

In this article, three stories are told. In each story, the average big oil company (AB Oil Co.) could realize $1 billion in cost savings or production increases by deploying technologies that exist today.

Click here for the full article

Source: mckinsey.com; March 2016