Hon Hai Precision Industry has been listed as the world's second largest company in the technology world, Business Weekly magazine reported recently. But when will Taiwan see its own brand names listed among the world's largest?
Why do I ask such a question? Because the world's manufacturing industry has transformed from an era of microtechnology to one of nanotechnology.
Besides, the rising Original Equipment Manufacturing (OME) industry in China is threatening Taiwan's market. Thus, we are concerned about how long Hon Hai Precision Industry's ranking as the world's second-largest company will last, since it is primarily an OEM corporation. Now should be the best time for Taiwan to graduate from OEM to brand marketing.
Why is this so? The reasons are two-fold. First, now is the opportune moment. Taking Japan as an example, it went through a period of OEM and imitating Western industry in the 1970s to creating successful brand products in the 1980s. As a result, Japan has posed a direct threat to brand products made in the West.
Subsequently, South Korea followed Japan's lead by initiating its business transformation from OEM imitating Japan's in the 1980s, to the creation of its unique brand products in 2000; thus, it posed a threat to the dominant position of Japan's brand products.
Let's return the focus to Taiwan. Two decades of OEM have given Taiwan sufficient experience, and now should be the best time to create proprietary brands.
Second, a potential market for Taiwan has emerged. From the past experiences of Japan and South Korea, we find that targeting a large market is crucial to promoting a brand name. In the 1980s, Japan targeted the US and Southeast Asian markets for the promotion of its brands. As of 2000, South Korea has entered the Chinese market by increasing the exposure of its brand names. The South Korean government once said that South Korea would use the Chinese market as a springboard to acquire a market advantage superseding that of Japan. Because of the rise of economic markets in East Asia, be it in China or Southeast Asia, these markets will serve as the best touchstone for Taiwan's brand marketing.
In the past, some people thought that Taiwan's inability to create its own global brand names was because of Taiwan's limited market and a lack of effective support from the government. But by looking into the success stories of brand marketing in other small nations, we see the examples of Finland's Nokia, the Netherlands' Philips as well as Samsung, LG and Hyundai Motor in South Korea, whose hinterland is not much bigger than that of Taiwan but which still has managed to create a Korean-products fad in the world.
Given the mentioned examples, the primary factor of Taiwan's inability to promote its brand names internationally is a lack of the government's effective support. In this article, I will consider the example of South Korea, and analyze the crucial role played by the South Korean government in creating the recent international clamoring for its brand products.
Put simply, South Korea's success in creating brand names is because of the following three reasons.
First, the transformation of the industrial sector. There used to be a Korean adage that "Samsung is with you from the cradle to the grave." Following the Asian financial crisis of 1997, however, the government carved up the different sectors and allotted them to the major manufacturers. Thus Samsung was made responsible for electronic goods, Hyundai for the automobile industry and LG for domestic appliances. This enabled the companies to elevate the status of their products and reinvent themselves as brand names.
The second factor was financial support. We know for a fact that the efforts of a given enterprise alone are insufficient to create and market a brand: It also requires the backing and financial support of the government.
After the financial crisis, the South Korean government set up a national economic planning committee headed by the vice-premier to grapple with the development of each industrial sector, with the Ministry of Finance and Economy joining forces with the banks to provide the backing needed to transform local brands into global ones.
Finally, there is the marketing of the brand. Brand names in smaller countries require a foreign market in which to promote their goods and South Korea was quick to seize the opportunity afforded by the rise of China's economy. From there, they expanded further into the global market.
Far from being afraid of being sucked into China's vast market, the South Korean government followed the principle that there was no danger of their own industry being undermined, as long as it owned the brand name. An example of this was the co-operation between Hyundai and a local Chinese car manufacturer, which came to be the No. 1 car brand in north China. After this success it was marketed in Southeast Asia and Central Asia.
South Korea's experience demonstrates that a small nation like ours needs more than simply having companies of sufficient scale and an adequate market for its products if it wants to successfully produce brand names: It also needs strong backing from the government.
In the past we have always thought that Taiwanese industry for the most part consisted of small and medium-sized businesses, and so there was little chance of producing a global brand. However, with Hon Hai becoming the world's second-largest hi-tech company and with the huge emerging markets for our goods in China and Southeast Asia, the government surely no longer has any reason to hold industry back.
At the moment, all the conditions for creating a truly global brand are in place, the only question is whether the government is willing to provide crucial support in this endeavor. Taiwan cannot pass up on this opportunity to transform its economic fortunes.
Tsai Zheng-jia is an assistant research fellow at the Institute of International Relations, National Chengchi University.
TRANSLATED BY LIN YA-TI AND PAUL COOPER
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