Mon, Dec 19, 2005 page11

• The business of brand building

  MONEY SPINNER It isn't something that can be achieved overnight, but as two local goliaths have shown, establishing a brand is well worth it in the long run

  • By Jackie Lin / STAFF REPORTER IN TAICHUNG AND CHANGHWA
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  Brand building is a long and winding process that involves huge financial investments and continuous efforts to fine-tune marketing strategies in a bid to attract public attention.

  Although most companies know about the importance of building brand value, only a handful succeed in becoming international brands. Some people even say it takes a bit of luck.

  Whether Lady Luck smiled upon them or not is unknown, but Cheng Shin Rubber Industry Co (正新橡膠) and Giant Manufacturing Co (巨大機械) have made decades-long efforts to reap what they have sown.

  

  Cheng Shin Rubber Industry Co president Wally Chen says he is confident in his company's brand development as they have attracted many loyal customers through research and development and careful marketing.

  PHOTO: JACKIE LIN, TAIPEI TIMES

  The power of the Cheng Shin and Giant brands again received recognition on this year's list of Taiwan's Top 10 Global Brands unveiled by the Taiwan External Trade Development Council (外貿協會), ranking sixth and seventh with brand values of US$264 million and US$253 million, respectively.

  Cheng Shin

  To most Taiwanese, Cheng Shin may sound a bit unfamiliar, but its tires marketed under the Maxxis brand have made their way into the US, European and Japanese markets, with sponsorships offered to popular athletes and sports teams to strengthen customer loyalty.

  "Seventy to 80 percent of American kids are aware of our Maxxis brand because it's everywhere -- from bicycles, motorcycles, karts, to all-terrain vehicles and automotives," said Wally Chen (陳榮華), president of Cheng Shin, in the company headquarters at Tatsun Township (大村) in Changhwa County.

  Spending its money wisely, the company invests 70 percent of its marketing budget on sponsoring tire-related activities such as car racing and another 30 percent on public exposure, Chen said.

  "We view the brand as an intangible asset that also requires branding technology to flourish," he stressed.

  Established in 1967 as a contract tire manufacturer, Cheng Shin set up Maxxis International in Atlanta, Georgia, in 1989, marking its intention to target high-end markets with own-brand products.

  "If you become No. 1 in the US, the most competitive market with strong rivals against which to hone your expertise, naturally you're No. 1 around the world, be it in sports or finance," Chen said.

  Cheng Shin's export destinations have expanded to include 120 nations with research and development (R&D) centers spread throughout the US, the Netherlands, China and, soon, Taiwan.

  "Branding and R&D are the two wheels for corporate development. A good brand needs good products to back it up and a brand cannot be built in one day," Chen said.

  Therefore, the company has sponsored a wide array of sports events as it sees racetracks as fast-paced laboratories, which allow companies to rapidly upgrade technology and boost publicity, he said.

  Chen stressed that building an own-brand helps companies gain full control over their business operations and strengthen employees' loyalty because there is a clear and definite goal to work for.

  Currently, Cheng Shin devotes more than 70 percent of its production lines to manufacturing own-brand products.

  Citing an elevator philosophy, Chen said that if a company only targets the low-end market -- like, for example, the discount giant Wal-Mart Stores Inc -- there is little room to maneuver, let alone make profits. But if a company develops a brand with added value, it's like taking an elevator upward -- the sky is the limit.

  Hence, although the price of crude rubber has skyrocketed from US$600 per tonne to over US$1,600 per tonne over the past two years, seriously eroding its profits, Cheng Shin remains confident of recording a 20 percent increase in sales this year, which Chen said is quite unusual in traditional sectors.

  The company reported NT$13.6 billion (US$410 million) in revenue last year.

  To mitigate down-cycle risks, the tire company is adopting a dual-brand strategy with Maxxis catering to high-end segments and Cheng Shin to lower-priced markets.

  "Cheng Shin is like Toyota and Maxxis is like Lexus. The number of Lexus cars might only account for 2 percent of Toyota's total sales, but its profits contribute to a whopping one-third," Chen said.

  Giant

  In a different approach, Giant Manufacturing has claimed fame with the super brand "Giant" both at home and abroad, to the extent that some Taiwanese actually think that it is a foreign brand.

  In terms of sales, Giant is the largest bicycle manufacturer in both Taiwan and China, second in the US and among the top three in Europe. It is also the biggest bicycle importer in Japan, Australia, the Netherlands and Canada, Giant spokesman Jeffrey Sheu (許立忠) said.

  "Our revenue scale might not surpass those of high-tech companies, but we've obtained a stronger image," he said.

  Developing in a similar way to Cheng Shin, Giant was established in 1972 at Tachia Township (大甲), Taichung County, as a contract bicycle maker before setting up another company in Taiwan in 1981 to develop its own brand.

  Giant's overseas branches have expanded to Europe, the US, Japan, Australia, Canada and China with 5.8 million units produced last year and marketed in over 50 nations, raking in revenues of NT$21.7 billion (US$654 million).

  The company expects a 10 percent growth in sales this year, Sheu said.

  To maintain its edge, Giant invests 2 percent of sales in R&D and 5 percent in marketing, including sponsorship in the famous Tour de France. It further adopts a "Global Giant, Local Touch" approach to meet different market demands.

  For example, as the Dutch often ride bicycles on camping vacations, the bikes tailor-made for this European market are equipped with several bags in the front and behind, featuring a weight-bearing design.

  As for China, Giant's second-largest potential market after the US, the manufacturer has devoted it resources to developing electric bicycles, a major means of transportation in China's first- and second-tier cities, where local governments ban the use of motorcycles for environmental protection.

  "With their salaries growing in the long term and the influence of the Olympic Games in 2008, Chinese people's demand for higher-priced or sports bikes is expected to soar," Sheu said.

  In Taiwan, where bikes are more often used for recreational activities, Giant has targeted the rental business in sightseeing spots, including Danshui's riverbank park, Hualien's Liyutan Reservoir (鯉魚潭) and Kaohsiung's Chichin (旗津).

  "Our ultimate goal is to make Taiwan a famed bicycle island with cycling paths linked across cities and counties so that Taiwanese and foreign tourists alike can enjoy the pleasure of cycling," he explained.

  Currently, Giant is developing its secret weapon to be launched in March -- a series of bicycles and relevant accessories targeted at women, specially designed in response to women's requests, needs, tastes, color preferences and practical requirements.

  "We'll make those who do not currently ride bikes feel eager to cycle," Sheu said.

  Government Support

  Looking back on their brand-building acheivements, both Chen and Sheu lamented that it was a lonely road to travel, with no one to advise them along the way and little encouragement from the government.

  Chen suggested that the government offer incentive measures, such as low-interest-rate loans proportional to brand value, to give quality companies a boost.

  In fact, the development of global brands has become increasingly important for domestic companies to survive in the global marketplace amid declining profit margins for contract manufacturing. To achieve this goal, the Ministry of Economic Affairs has recently come up with a proposal to boost domestic brands.

  In a statement released on Dec. 12, the Bureau of Foreign Trade said Taiwan needs to develop world-reknowned brands in a bid to differentiate itself from China and avoid being marginalized by the development of regional trading blocs.

  To this end, the proposal will include measures such as establishing a network to offer the private sector the necessary assistance and consultation for brand promotion, providing a platform for exchanges of brand knowledge, and helping companies to obtain credit-guaranteed loans for brand building.

  The prelimiary goals are to create a legal framework favorable to brand development, assist private enterprises to cultivate 200 professionals specialized in global brand development, and help at least 20 domestic companies to push their brands first onto the regional market, and then the Greater China market, and, finally, the international market.

  Sheu said that Giant is glad to see that more and more companies are now working to develop their brands and that the government has been raising awareness of the importance of branding.

  "As we're also increasing exposure of Taiwan's image in international markets, we hope the government can offer tax-preferential schemes to brand developers if it does not violate the spirit of the WTO," Sheu said.
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