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.

• China will need to buy 3,710 aeroplanes over the next 20 years, spending around US$390 trillion, said a recent forecast.  The growth of passenger and cargo air transportation will increase China’s aircraft fleet by more than three times to equal the current number of aircraft in Europe.

• China’s domestic aviation market has continued to grow during the first half of 2009.  At Beijing’s Capital International Airport, passenger volume from January to June rose by 20% over the same period last year.

• Taikoo Sichuan Aircraft Engineering Services Company has begun the construction of an Airbus maintenance base in Chengdu.  The plant is expected to become the biggest specialised maintenance base for Airbus in China, if not the whole of the Asian region, after its completion.

For more information on our aerospace market research services in China and Asia, please visit: http://b2binternational.com/China/b2bsectors/aerospace.php 

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

• College graduate in China are finding that expensive postgraduate degrees, especially MBAs, are no longer the fast track to riches, or even employment.  Workers are finding that even one-month courses in practical skills, such as basic computing, can persuade employers to hire or promote them over less-educated rivals.

• To develop its China staff, the Swiss pharmaceuticals giant Novartis has established a Sino-European Novartis University, offering an MBA to its employees.  The courses will include input from Harvard University business school.

For more information on our education market research services, please visit: http://www.b2binternational.com/China/b2bsectors/education.php 

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

Following our last blog post – a sector update on the Chinese automotive industry – we spotted an interesting article in last week’s AdAgeChina entitled “Great Wall is China’s Turtle in the Race to Build Global Car Brands” by Yang Jian of Automotive News China.

Great Wall Motor Co. is a small Chinese automaker. But its recent achievements provide some food for thought for its domestic peers who may be seeking to enter new or more developed markets such as Western Europe and America.

Between 2005 and 2007, a number of own-brand Chinese passenger vehicle brands – including Chery Automobile Co. and Zhejiang Geely Holding Group Co., Hebei Zhongxing Automobile Co. and Changfeng Motor Co. – displayed their vehicles at overseas auto shows.  In addition to participating in foreign auto shows, Shengyang Brilliance Jinbei Automotive Co. sent its vehicles for crash tests in Europe in 2006 and 2008, but the ratings received were very low.

After recognising the difficulties of meeting the stringent safety and emission standards of the European and American markets, most of these Chinese companies had, by late 2008, given up on any immediate-term plans to introduce their cars into these markets.  Some have this year looked into the possibility of merger and acquisition opportunities, which would effectively be a ‘short-cut’ to enter these new markets but, to date, no meaningful progress has been made in this area.

Great Wall, however, has adopted a different approach and strategy – one which can be summarised as more low key but more persistent – hence the article’s reference to ‘the hare and the tortoise’ fable.

Great Wall sold about 125,000 vehicles in 2008, with around half being exported to other developing markets.  It has yet to send its products to exhibitions in developed countries.

Instead, the company has been focusing its efforts on building, improving and upgrading its vehicles so they will meet the standards of these developed automotive markets.

In June of this year it began exporting three vehicles to Australia after certifying them for the market there.  In September it has managed to certify four of its models for the European Union – and with it has become the first domestic Chinese auto manufacturer to clear all the regulatory hurdles necessary to launch its vehicles within this market.  Great Wall has also, this year, begun preparations to design cars in line with U.S. safety and emission standards, with the aim of certifying them for the American market.

While its vehicles may be certified for the European market, Great Wall must still focus on building a suitable distribution network and put much effort into marketing before it can sell its products there.  But few would deny that with the slow, steady and solid progress it has been making of late, the company seems to be well ahead of its contemporaries in the race to crack Western auto markets.

For more information on our research experience in the automotive industry, please visit: http://www.b2binternational.com/China/b2bsectors/automotive.php

Environmental considerations are increasingly moving to the fore and now play a part in many of the market research projects we undertake.  Here is an update on recent environmental news stories from within China:

• The European Commission plans to establish an investment scheme, possibly a public-private partnership, to co-finance the design and construction of a power plant to demonstrate carbon capture and storage technology in China.  Funding of up €50m (£44m) will go into the construction and operation phase of the plant, which could cost a total of €300-€550m (£260-£480m).  The remaining funding is to be sought from China, EU and other European states and industry, said the Commission, inviting support.

• One of the USA’s largest coal-burning power companies, Duke Energy Corp, has signed a deal with China’s largest utility, China Huaneng Group, to develop ways to cut greenhouse gas emissions.  The two countries currently account for 40% of the world’s total emissions.

• The Chinese government will offer retailers a 50% subsidy for using energy-saving lights, according to Taiyuan Bureau of Commerce.  Taiyuan is one of 10 Chinese cities that began a pilot project last year to promote energy savings in the retail sector.  Using energy-saving lights will allow Taiyuan’s retailers to save about £5.5m annually, it is claimed.

• China is turning from a 100% importer of power plant catalysts into the world’s largest supplier, reports the US analyst McIlvaine Company.

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

Coal

The European Commission announced that it would provide financing of up to Euro50m (£47m) to help China build a coal-fired power plant equipped with new technology to give it near-zero emissions.  Europe deems the carbon capture and storage technology, which is in its infancy, to be a key factor in fighting climate change, and a demonstration plant would be particularly significant in China, which produces and uses huge amounts of coal.

Oil

Tianjin’s municipal government announced recently that its Binhai New Area would be one of eight state strategic crude oil reserve bases.  China Petrochemical Corporation (Sinopec) will begin to build the bases within this year.

Power

China’s power generation rose 3.6% year on year in June, ending eight consecutive months of decline since October last year, according to the State Grid Corporation of China (SGCC).  The increase demonstrated a strong rebound, compared to a 3.5% fall in May.  The country’s total power generation reached 309m MW in June, according to the SGCC’s power dispatch centre.

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

In an article for the latest issue of China-Britain Business Review, Lord Davies of Abersoch, Minister of State for Trade and Investment, acknowledges that the global downturn has served to highlight the importance of emerging economies, insisting that their continuing development will prevent the world economy from entering a deeper recession this year.

There is no doubt in his mind – nor in that of many experts – that China will be a key driving force in helping the global economy to recover.  China is already the world’s third largest economy, ranks among the fastest growing, and still has massive potential for growth.  China has not and will not be completely immune to the effects of the recession, but in contrast to most countries, whose economies are expected to contract this year, even the most pessimistic projections suggest that China’s growth for 2009 will be over 6%.

From a UK perspective, China is the United Kingdom’s fastest growing major trading partner, with UK-China trade having grown at double-digit rates for the last decade.  In addition, British businesses are now the biggest European investors in China.

Britain and China have already developed excellent trade relations, and both countries and their respective economies will only benefit further from increased ties.

Market research specialists such as B2B International can conduct market entry and market assessment studies across both the UK and China – and indeed the rest of the world – which are tailored specifically to your company’s needs.  A number of organisations – UK Trade & Investment and China-Britain Business Council to name but a few – are also on hand to offer further general advice and information.

For any businesses interested in investing or expanding into China, or simply wishing to get some idea of the potential this vast country has to offer, why not contact one of our offices?

China: +86 (0)10 6515 6642, beijing@b2binternational.com 

UK: +44 (0)161 440 6000, info@b2binternational.com 

USA: +1 914 761 1909, newyork@b2binternational.com 

A recent article in China Daily reported that European companies in China remain optimistic and committed to the country, in spite of difficult economic trading conditions.

According to the survey conducted by the European Union Chamber of Commerce in China, most European companies (70%) represented in China have reported positive profitability for 2007.  62% expect to have remain profitable throughout 2008, when they look back at the end of the year.

The survey also indicated that SMEs in China tend to be more optimistic about future profitability than their larger counterparts. 

Joerg Wuttke, who is president of the European Chamber, commented, “This year’s survey re-confirms that the Chinese market is the most important emerging market for European businesses, and given the global slowdown it might actually rise in significance.”

It is growing domestic demand within China, rather than exports, which appears to be of fundamental importance.  More than 70% of respondents to the survey claim their principal focus is to produce goods or services for domestic consumption.  This compares with an equivalent figure of 49% two years ago.

 With two-thirds of the firms interviewed generating less than 10% of their current global revenue in China, it would appear that this country still offers massive growth potential.

However, it should be noted that the expected 62% profitability for 2008 is this survey’s lowest recorded figure, indicating that China, like so many countries, may be starting to see signs of the global economic downturn.

 Chamber members are thought to be anticipating slowdown in the automobile and services sectors, but European companies are generally positive about their prospects.