Michigan Ross Professor Explores Multinational Brand Building Challenges in Developed Markets

What do you think of Temu’s Super Bowl ad “Shop like a billionaire” that received quite negative feedback in the U.S.?

Personally, I think it’s a good ad. It effectively communicates Temu’s message of offering incredibly low prices, which is particularly relevant given the current economic challenges in the U.S. Many Americans are facing high inflation and economic pressure, making affordable shopping options more appealing. I especially like the fact that it repeats Temu’s name so many times, which leads to a high brand awareness. The goal of any ad is to lead to the next step in the purchase process. In this case, somebody who sees this, may google Temu and end up on its website or downloading the App. The ad has a very single-minded focus and it’s well done.

Many EMNCs including Temu have successfully leveraged their advantages, such as low cost and flexible supply chain to enter developed markets. But when it comes to brand building, it remains a significant challenge for them. What strategies can they employ to build a brand that resonates with their target customers?

Building a strong brand typically requires significant investment in brand awareness. Many EMNCs don’t have big budgets, so the first challenge is how do you build brand awareness on a small budget? Some EMNCs have done it successfully. For instance, in the business to consumer space, building awareness among end consumers can be formidable as it requires substantial financial resources. In its early days in the United States, LG Electronics used the majority of its marketing investments to build brand awareness not directly with consumers, but with trade intermediaries. It did so by investing in incentives, contests and training for the floor salespeople that their final customers rely on for brand recommendations.

The second challenge is overcoming perceptions of unreliable product quality and lack of consumer trust. EMNCs need to build high quality products, effectively communicate this quality to consumers and establish a leadership position in their minds. This process requires long-term investment and commitment. Some research has found that when perceptions lag reality, it can take consumers as many as six years to raise their quality perceptions to bring them in line with objective quality levels.

Chinese multinational corporations now also face regulatory challenges in developed markets. Is there anything they can do to mitigate risks from a branding and marketing perspective?

An effective strategy is to minimize the damage to local economies, so your firm gets less resentment from local consumers and local regulators. This approach extends beyond marketing and branding—it encompasses strategic decisions about location and sourcing. For example, BYD’s initiative to establish manufacturing plants in Hungary is a step in the right direction, as it creates local employment opportunities rather than shifting jobs to China.

What about companies like TikTok?

For companies like TikTok, the challenges are more complex. The controversy surrounding TikTok revolves around concerns that it may be collecting data from global users to send back to China. Despite denials from TikTok, public skepticism remains due to reports of data storage requirements in China and complaints from TikTok U.S. employees about autonomy issues. Concerns surrounding data collection, use and storage significantly impact Chinese companies in this category, hindering their overseas expansion efforts for the foreseeable future.

How can EMNCs compete with strong incumbents in the developed markets?

EMNCs should identify and focus on market segments that incumbents overlook or choose not to pursue, usually due to a perceived lack of sufficient revenue potential or a requirement for agility they cannot offer. By concentrating on these niche areas, EMNCs can use these segments as safe spaces to better understand their new customers, enhance their business capabilities, increase their operational scale and master the subtleties of international business practices.

A notable example of this strategy is the Brazilian aircraft company Embraer, which became one of the largest commercial passenger aircraft manufacturers in the world. Embraer achieved this by targeting the less contested small and midsize jet market segments, thus avoiding a direct clash with the industry giants like Boeing and Airbus, and steadily building its brand and presence in the aerospace sector.

This article was originally published in Michigan News.