< PreviousTHREE FORMULAS THAT RUN THE WORLD SALES PRICE = COST + MARGIN PREMIUM BRANDS RECOGNISE HIGHER MARGINS AND CAPTURE MORE VALUE BECAUSE OF THEIR STORY & CONTROL OVER BRANDING , DESIGN , & IP . & CHINA WANTS IN . MARGIN = SALES PRICE - COST COST = SALES PRICE - MARGINFor years this situation was the status quo. But, as time passed, as trade wars raged and as sanctions crushed Chinese companies, eventually the companies that had watched Apple grow fat wanted their own slice of the pie. So they started making their own moves. CHINA MAKES ITS PIVOT Already the global leader in cost efficient - but not necessarily cheap - manufacturing China began seriously prioritising value capture in the early 2010s through the development of their own branding, design, IP, and R&D initiatives which accelerated under the “Made in China 2025” strategy launched in 2015. A major priority for the Chinese Communist Party (CCP) these policies marked a deliberate pivot from China being seen as the world’s factory to being seen as a country that could build powerful domestic brands capable of rivalling global leaders, with the objective of generating new high value jobs and wealth for the country, and elevating China’s cultural, economic, and societal influence on the world stage. CHINA IS RISEN More than a decade on from the original policy changes and it can easily be argued that China and its companies are doing very well indeed - and they are only just getting started. BYD is crushing Tesla as the global number one in electric vehicle sales, DJI is dominating global drone sales, Huawei has dethroned Apple, with its devices, Google with its Harmony OS app store, and now has its eye increasingly set on being the “Intel and Nvidia of the East.” And, as for China’s Artificial Intelligence and technology sector they’re increasingly crushing the likes of OpenAI and are increasingly the envy of the US. How the tables are turning, and how ironic. And this transformation has all taken less than 15 years. Maybe there are lessons to be learned ... F OR MORE than two decades now the majority of value capture has happened outside of China who at its peak was manufacturing over a third of everything on the planet, with Apple perhaps being one of the best examples of how China was getting the thin end of the wedge. Since entering China in 2001 Apple has played a key role in helping the country develop its expansive high tech supply chains, manufacturing prowess, and skilled workforce, and has benefitted significantly in return. And, while it’s undeniable that Chinese companies and the economy have also benefited the fact that Apple realises 120% margins on many of their devices, such as the iPhone, while their manufacturers realise less than 5% has irked many people. Evidently in this situation it’s good to be Apple, but Apple could only capture this amount of value because they retain tight control of the design, distribution, IP, marketing, production, and support activities which they use to great advantage to influence and shape consumer buying behaviours. VALUE . NOW MADE AND CAUGHT IN CHINA . 41311institute.comWestern brands were “profiteering” by manufacturing products cheaply in China before marking them up, in some cases, by thousands of percent to consumers. The famous $20,000 Hermés Birkin Bags were an especially popular target of this behaviour with other brands, like Adidas and Nike, also in the cross hairs. In the case of the Birkin social media was flooded with factory owners showing the bags being made, providing detailed cost breakdowns, and offering the bags for sale direct to consumers for a fraction of the brands official RRP. The owners would then snark on the practise of brands “assembling” the final product - often by just adding a brand badge - in more “exotic” countries that were more in line with the brands image so as to avoid having to label their goods as being “Made in China.” Meanwhile, when it comes to brand take downs, other Chinese companies have taken a more traditional and less confrontational approach with companies such as BYD and Huawei cleverly targeting Western consumers with catchy and flashy social media videos that show their products superiority - a tactic that’s now being widely replicated by other Chinese companies across all manner of sectors. Step back a decade and these bold campaigns by Chinese companies were rare, but as China jumps up the value chain the dual practise of “exposing” and “one upping” Western brands, and others, will only become more commonplace - and it’s a knife fight in a phone booth that most brands are unprepared for. FAKE SNARKS As Chinese companies amp up their ambitions to dethrone market leaders and sell products though not everything is what it seems. While many Chinese brands are genuine in how they market their products in the case of the Birkin Bags the vast majority of factory owners were literally faking it. They weren’t the original OEMs, they were charlatans trying to convince consumers to buy their knock offs at inflated, albeit still cheap prices. So brands beware. A S GLOBAL tensions rise, as countries and companies increasingly vie to be top dog, and as China ramps up its ambitions to capture more of the global value chain, inevitably we’re going to see campaigns being waged that try to write new narratives - whether those narratives are written by established brands who are trying to re-position themselves in the new world order, or by the challengers who want to pull incumbents off their pedestals and usurp them. As tensions continue to boil Chinese companies especially are becoming increasingly brutal, imaginative, and sophisticated to win consumers hearts and minds and take share from Western brands. And companies should take note. KNIFE FIGHT IN A PHONE BOOTH As Chinese companies and brands suffered at the hands of American tariffs, which effectively embargoed trade between the world’s two most powerful nations, we saw this trend accelerate as Chinese manufacturers turned to social media in droves to “expose” how major CHINA’S BRAND TEAR DOWNS GO VIRAL. 42311institute.comDILUTE THE CORE MESSAGE EXPOSE QUESTIONABLE PRACTISES HIJACK THE NARRATIVE MIMIC BRANDING & MESSAGING REDEFINE THE CATEGORY SOW DOUBT & UNDERMINE TRUST HOW TO DESTROY A BRAND MATTHEW GRIFFIN 311INSTITUTE.comMATTHEW GRIFFIN 311INSTITUTE.com “ EVERY DAY IS DAY 1 . ” - Jeff Bezos, AmazonEXPLORER PROGRAM GET STARTED ... THE WORLD WON’T DISRUPT ITSELF .PROGRAM MISSION OBJECTIVES ... Create an Exponential Enterprise or country capable of discovering and adapting to new disruptive threats. Create an Exponential Enterprise or country capable of discovering and leading disruptive opportunities. Create an Exponential Enterprise or country capable of discovering and leading new industries and markets. Create an Exponential Enterprise or country capable of disrupting your competitors, incumbents, and existing industries. The mission of this program is to help you and your teams ... 46311institute.com“LONGEVITY IS ABOUT BEING ABLE TO REINVENT YOURSELF OR INVENT THE FUTURE.” - Satella Nadella, Microsoft MATTHEW GRIFFIN 311INSTITUTE.comBusiness leaders. Entrepreneurs. Governments. Students and Teachers.And everyone else who wants to make the world a better place ... Adventurers Crazy People Explorers Misfits Rebels Troublemakers We’ll just go ahead and say it, we designed this program for everyone ... Welcome! THIS PROGRAM IS DESIGNED FOR ... 48311institute.com“ AN ENTREPRENEUR IS AN INNOVATOR , A GAME CHANGER , A BUSINESS LEADER , A DISRUPTOR , AND AN EXPLORER . ” - Richard Branson, Virgin Group MATTHEW GRIFFIN 311INSTITUTE.comNext >