If ever you needed proof that companies are increasingly viewing overseas markets as vital to overall company growth and profitability, the Ad Age Global Marketer’s survey should give you some idea of the importance of global markets.

The survey showed that the Top 100 global advertisers spent almost two-thirds (62%) of their measured-media budgets outside the U.S. last year, with much of the overseas spend going to China.  Of the 44 U.S.-based companies in the Global 100, a quarter relies so heavily on international sales that they allocate more than half their ad spend abroad.

Coca-Cola Co., for example, allocates just 16.5% of its $2.67 billion measured-media spending to the U.S. market but spends nearly three times that amount in Europe. Three-quarters of Coca-Cola’s sales come from outside the United States.

Procter & Gamble Co., which overtook Unilever in 2002 to become the world’s biggest advertiser, devotes two-thirds of its $9.73 billion measured-media spending to international markets, just slightly ahead of the 61% of P&G revenue that is generated from outside the U.S. P&G is the biggest advertiser in all regions except Latin America and Africa (where Unilever takes the top spot).

The biggest marketers are investing ad dollars wherever they can find revenue or potential for growth in a tough global economy – and increasingly, that’s deemed to be China. 39 of the Global 100 had measured-media spending in China last year, with five – Yum Brands, Pernod Ricard, Avon Products, Colgate-Palmolive Co. and P&G – already investing more than 10% of their budgets there.  Yum Brands, the parent company of KFC and Pizza Hut, spends 20% of its $1.41 billion worldwide measured ad spending in China and, in 2008, generated 31% of its global revenue from the country, with sales surging 36%.

Overall, China represents 3.4% of total advertising spend for the Global 100, with P&G emerging as China’s biggest advertiser at about $1.1 billion.

The Global 100 last year spent slightly more in Europe ($46.3 billion or 39% of their total) than in the U.S. ($44.4 billion, or 38%).  Yet, the United States seems to have appeal for a number of European and Japanese marketers. Six of the 56 non-U.S. Global 100 companies (of whom four are European pharmaceutical manufacturers, subject to more stringent European advertising regulations) spent more than half their media budgets in the U.S.  Unsurprisingly, U.S. pharmaceutical companies concentrate the bulk of their own ad spending in the U.S.

Overall, total measured ad spending for the Global 100 companies rose 3.1% to $117.9 billion in 2008, despite a 3.7% drop in the Global 100’s U.S. spending.

Over the years, B2B International has worked for several of the large global courier transportation companies.  It was, therefore, with interest that we read the following article in Media recently, which discusses the changes that have occurred in this sector within China in the last year or so:

SECTOR INSIGHT… ‘BIG FOUR’ EYE GROWTH IN CHINA DELIVERY MARKET

UPS, DHL, FedEx and TNT have been cutting Chinese adspend despite ambitious plans to expand.

It was hard to miss UPS at last year’s Beijing Olympics. Life-size cut-outs of brown-garbed UPS deliverymen sequipment from improbably small packages, while the slogan read ‘Nothing is impossible - UPS delivered everything and anything to the Beijing Olympics’.

As the event’s sponsor and official courier service, UPS used every opportunity to display its logo. Nielsen data shows UPS spent Rmb 404 million (US$58.6 million), or 61.4 per cent of the Rmb 655 million that courier services spent on TV and print last year. Its global rivals DHL and FedEx spent Rmb 128.5 million and Rmb 90.7 million, respectively, while TNT was, in terms of adspend, nowhere in sight. Besieged incumbent EMS, a subsidiary of China Post and officially named China Courier Service Corporation, spent a more modest Rmb 24.3 million.

A year later, things have changed. UPS has cut back so severely that it is no longer the top advertiser. During the first eight months of 2009, UPS spent just Rmb 74 million. The sector’s overall ad investment totalled only Rmb 253.8 million in those months.

One might suspect a post-Olympics hangover or the global economic downturn, especially since the latter resulted in a sharp drop in air cargo leaving China for the US and Europe.

Both certainly have influenced promotion budgets, but the decline in adspend actually began before the Olympics or the September collapse of Lehman Brothers. DHL slashed its budget from Rmb 367.2 million in 2007 to Rmb 128.5 million in 2008, and in September of that year announced a pitch involving no TV work. FedEx, which spent Rmb 260.6 million in 2007, cut its budget to Rmb 90.7 million in 2008, though interestingly FedEx is spending again this year.

The lull in advertising does not signal a change of heart for DHL, UPS, FedEx and TNT, all in their third decade in China.

China’s first courier express was EMS, founded in 1980 and in service by 1984, relying on the Universal Postal Union for overseas delivery. DHL, UPS, FedEx and TNT arrived in the mid-80s, establishing joint ventures as required by law, all of them choosing the largest logistics player, Sinotrans Group.

Today the ‘big four’ dominate the international express business. By 2006, EMS had seen its share shrink to around 20 per cent, while DHL claimed 30 to 34 per cent, FedEx 19 to 21 per cent, UPS 18 to 20 per cent and TNT seven to eight per cent, according to a 2007 study by Booz Allen Hamilton.

DHL has retained its partnership with Sinotrans until today, while UPS, FedEx and TNT realigned themselves with local players, through acquisition or partnerships, to build their domestic networks - a new opportunity since China’s entry into the World Trade Organisation in December 2001.

That is where the future lies. Domestic coverage of China is still limited to the coastal tier-one cities, but it is rapidly expanding inland, and the big four are pouring billions of dollars into the construction of logistics hubs and ground fleets. Already, the domestic courier, express and parcel (CEP) business is twice the size of the international business.

This is likely to lead to renewed marketing activity. UPS recently hired Ogilvy & Mather to handle its global ad account, with China earmarked as a key Asian market. What’s more, Malcolm Sullivan, VP marketing for Asia-Pacific at FedEx, says that the company will resume spending on ads to back its investment in lower tiers. “As the economy expands beyond the coastal areas, we are investing in infrastructure in tier-two, three and four cities,” he says. “Our marketing communications will follow, and potential users will see more advertising in these areas.”

Sullivan adds that FedEx’s activity extends beyond advertising. It sponsors the China Badminton Team, and renewed its contract in August. He adds: “By activating this sponsorship through events, we extend our brand presence and broaden our community relations in the country.”

To find out more about the market research work we do in the transport sector, please go to:

http://b2binternational.com/China/b2bsectors/transport.php

China’s biggest Airbus maintenance base is to be constructed in Chengdu.  The project of Taikoo Sichuan Aircraft Engineering Services Company will target domestic and foreign markets.  Taikoo hopes it will become the largest Airbus maintenance base in Asia, as well as providing an immediate boost to Chengdu’s aircraft industry.

Sources: CBBC, Xinhua, Financial Times, Wall Street Journal, FCO Country Updates and other news sources. 

As international market research specialists, we have experienced first-hand the many differences – cultural, linguistic, economic, etc – of different countries and markets around the world.  Sometimes the extent of these unique ‘quirks’ can be greater that many people realise, influencing the way we conduct our market research in any given country, and sometimes impacting on the findings and conclusions we uncover.  While we have written widely on some of the differences we have encountered around the world, we are always very interested to hear about other people’s research and experiences.  In the following article –

Dragons of different hues – which featured in the July/August 2009 Association for Qualitative Research magazine, Irwin Hanks contrasts qualitative research in two very different countries: China and Japan.

Let’s start with a little history

Japan has a strong market research culture going back to the early 60s, led by the rise of post-war manufacturing and exporting. Formal research agencies grew from what was, initially, an internal activity among large Japanese companies. Many are now over 40 years’ old and national household names.

China, by contrast, despite its astonishing recent economic and MR growth, had few formal agencies in this field until around 17 years ago, before which few capitalist businesses were around to buy research.

Initial industry growth was fed by the ‘conversion’ of State economic and statistics gathering units into quasi MR units. More significant, however, was the advent of investment by foreign agencies, driven by awakening interest in China’s market potential from their own clients.

So what affects the two countries’ MR industries?

The Economy

The contrast between both markets is currently huge. China, even if it has taken a well publicised hit in the export-driven low-cost manufacturing sector, remains in growth mode. Major clients remain reasonably robust domestically, and there is little decline in foreign interest.

In Japan, unfortunately, it’s a different story. Companies are, for the first time, laying off workers, consumers cutting spending, and the Government has lurched from one crisis to another recently without any effective remedial action. Worse, because the Japanese MR industry depends far more on domestic clients than international, business is seriously down. Qual is doing better, but only because it is seen to be cheaper.

Professional skills

In China, the strongest skills set agency-side is found mainly among the first wave of a small group of (now senior) managers from the late 80s/early 90s. More recently, they’ve been joined by a wave of imported expats. The latter, though professionally skilled, usually rely very much on local staff for cultural input and language. Qual is growing in China and takes a far larger slice of the ‘pie’ than in Japan. This is fuelled by sophisticated clients who want to gain deeper insights, and those less sophisticated who like qual because it is fast, cheap and they can ‘see it with their own eyes’.

Japan now has a broad base of trained and skilled market researchers (although biased towards quant), and a research culture which has long since spread to service sectors and government related organisations. Generally, professional standards are high, and ethics are strong within the context of Japanese business society.  The typical Japanese client, however, places far more faith in numbers, including those from the ubiquitous group interviews than from true qualitative.

Awareness

This affects how one sells, how one recruits and in some ways, even how one interviews. In Japan there is generally a well absorbed understanding of the benefits and uses of MR among business people, despite a strong preference for numbers rather than ‘feelings’. Even the general public is familiar with the concept of taking part in MR studies and are also well informed about issues like privacy and rights.

In China, however, the picture is rather different. Aside from perhaps the top 12 Chinese companies and the many joint-venture and foreign-invested ones there is little understanding among business owners of the benefits of MR, let alone of qual. Among the general public the picture is very varied. The urban elite in major cities may now be familiar with surveys, but elsewhere we often spend as much time explaining what we are doing as actually doing it.

Lower professional standards in China, along with a tendency for many city dwellers to seek easy money by any means, have however had one unfortunate consequence. Professional respondents have become a nightmare, far worse than in the West. They even use different names and multiple ID cards, an activity with which less reputable agencies connive.

In Japan, while professional respondents exist, western clients can expect few issues if screening protocols are explicitly agreed. The stereotypical view of Japanese honesty is, generally, fairly valid. Many Japanese MR companies do, however, use people called ‘monitors’ who are recruited for surveys regularly. That’s why clients need to specify if they want ‘fresh’ respondents, or at least place restrictions on how recently they participated.

Lifestyle and Culture

Along with differences, there are also similarities. Focus groups can be difficult to conduct successfully in both countries. Other forms of qual, in particular individual depth interviews, are often much more effective.

The Japanese find it extremely hard to express feelings or opinions, particularly to strangers. ‘Warm ups’ take much longer here and very good (cross-cultural) moderators are needed as so much of the ‘truth’ from groups here is the unspoken.

Furthermore, the Japanese are taught from a young age that for every situation or occurrence there is essentially a right or a wrong response, with nothing in between. So when asked ‘why’, many are left groping for a response. Different techniques to those used in the West or even other Asian markets are often needed.

In China, qual receives a much higher proportion of spend, but some of the same problems surface. While the Chinese don’t have quite the same communications problems in public as the Japanese, their character is still reserved and introverted. In addition, 50 years of post-revolutionary rule means that for older respondents, formulating independent opinions is problematic. Under this circumstance, the ability of moderators is crucial. Unfortunately, the industry’s meteoric growth means that many moderators don’t have such capabilities. The good ones are world class, but there are too few.

So, very different markets and challenges. Which is why, in China and Japan, choosing an agency with true cross-cultural abilities is so very critical.

Irwin Hanks
Copyright © Association for Qualitative Research, 2009

B2B International, through its Asian headquarters in Beijing, conducts b2b market research projects across many industry sectors, markets and geographical locations throughout the Asia-Pacific region.  Its qualitative and quantitative research specialists are fluent in many Asian languages, including Mandarin, Cantonese, Japanese, Malay and Korean, as well as English.  In conjunction with its European and North American offices, the group is able to conduct multi-country studies across the world.  For more information on any of our offerings, please call +86 (0)10 6515 6642 or email beijing@b2binternational.com 

To read some of our international market research white papers, please click here: http://www.b2binternational.com/library/whitepapers/

PetroChina, the Shanghai-listed arm of state-owned China National Petroleum Corporation (CNPC), and mainland China’s biggest producer of oil, recently became the largest company in the world.

Following a stock-price rise of 3%, taking its total market value to some $336 billion, PetroChina is now the most valuable company in the world.  It is worth approximately $100 million more than fellow Oil & Gas giant, United States-based Exxon Mobil.  Industrial Bank of China (Banking), China Mobile (Telecommunications) and China Petroleum (Oil & Gas) are three further Chinese companies which rank among the biggest in the world.

China’s overall economy became the third largest in the world earlier this year, now resting behind just the U.S. and Japan.  Many economists expect China to overtake Japan within the next few years to gain second spot.

In the latest issue of Asia Research, Alaric Fairbanks, General Manager of B2B International in Beijing, talks about setting up and running a market research company in China.  Over the next three blog posts, we will serialize his interview:

Tell me about B2B International

As the name implies, we work in b2b markets and are international.  We are a specialist business-to-business market research company, with our group headquarters in the United Kingdom and subsidiaries in New York and, of course, Beijing.  Our focus is exclusively b2b, and although we cover all b2b markets, we have particular strengths in chemicals, pharmaceuticals, engineering, construction and financial services.  In terms of services, our main focus is on full service research, covering market assessment, segmentation, customer satisfaction, new product development, competitor analysis and pricing studies, and our major clients are multi-national firms engaged in b2b markets.  In Asia we also complement our full service work with data collection.

What were the main challenges when you first set up the business?

We set up permanently here in 2006 and in many ways the challenges we faced when setting up in China were similar to those that many foreign-invested businesses in China, including some of our clients, face.  These include recruiting staff, adapting and integrating systems and working styles into the local conditions, and on a practical level finding reliable partners or suppliers, particularly in areas such as IT and financial services.  I regard these as important challenges to deal with, but the primary issue from day one was, and remains, generating business and delivering quality work.

Look out for Part 2 of the interview in our next blog post.

Mr. Alaric Fairbanks talks about the practical suggestions to Chinese white collar on how to deal with the global financial crisis in a recent print media interview, called Rich Weekly.  

He explains that the reasons caused the financial crisis in western markets also indicated the best way to avoid the crisis. He suggested:” Do not buy things you do not need and can not afford.”

Alaric, is the general manager of B2B International China operation. He has been living and working in China since 1994.                  

B2B International, specialist business-to-business market research agency, is 10 years old.

Founder Nick Hague has found it an exciting decade. “Planned and sustainable growth has been key to our success. It’s interesting to look back at some highlights - becoming a global agency with the opening of an office in Beijing in 2007 and one in New York this month; managing over 1,000 market research projects per and recently welcoming our 1000th employee!”