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Western Companies Need to Adapt, Not Pander to China

By  +Follow June 30, 2014 6:00AM
Tickers Mentioned:

us stocks in china, best us companies in china, growth in china market, china consumers, chinese stocks in U.S.Time-honored investment theory dictates that markets are usually rational, limiting upside. It is when markets act irrationally that arbitrage opportunities surface, granting courageous, seasoned investors a window of unreasonable, but very real upside.

Western attitudes towards the Chinese market have been and will continue to be irrational, thanks to corporate media and the ingrained delusion that the Chinese constitute a monolithic, inscrutable, behind-the-times bunch. Those of us on the ground in China, who see the lines at Starbucks (SBUX) only two blocks away from another Starbucks, the middle-schoolers scrambling for authentic NBA gear from newly-crowned San Antonio Spurs, and most importantly, the epidemic quickness with which the Chinese have turned to their mobile devices and online shopping as an obsession, know better.

Chinese consumers are global consumers. Just like westerners, they define themselves by what they buy, and they want western quality goods whenever possible – be it apparel, furniture, even FMCG. Lacking physical upscale retail penetration into the 50 China cities with populations of more than two million, the online market will continue to be where such populations shop, driving big Chinese tech stocks, as well as the bottom line of western companies that manage the channel shift.

True, this market of which we speak is not an equity market, but is nonetheless tied intimately to equities through China’s Internet “BAT” troika: Baidu (BIDU) , Alibaba ($BABA), and Tencent (TCEHY) , and the many public western companies who rely on BAT to carve a larger share out of the market that will dominate our half of the 21st century.

The takeaway: western companies that communicate their brands authentically via BAT, rather than pandering to China by sino-fying their offerings, and getting squeezed out by China’s Internet consolidation, are positioning for long term growth and profits in the only country on earth right now with a consumer base already eclipsing the West’s largest, while still in its nascent stages.

Alibaba: Real Value Play

Another takeaway– Alibaba, by virtue of its property TMall, which owns more than 50% of China’s $300 billion B2C in 2013, is China’s value tech stock. Whereas Baidu has triumphed in no small part by contributing to Google’s (GOOG) excommunication from the mainland, whilst riding in the tail wind of Google’s R&D, Alibaba founder Jack Ma tamed the Wild East by offering consumers indelible comments, incorruptible ratings, and rock-solid return policies.

As a result, Alibaba’s brand equity is unassailable. Furthermore, its core mission of providing vendors the tools to position and advertise effectively against each other has proven effective enough that traditional online retailers such as JD.com and Walmart’s (WMT) 1mall are now forced to mimic them.

A quick case study: Pantone, the world’s leading color solution provider and a subsidiary of Fortune 200 Danaher Corp. (DHR) , has been laboring under the traditional mainland China distributor approach, with typically suboptimal results: diluted brand, and an ostensibly unbridgeable gap between brand and Chinese end user.

True, opening a Tmall flagship store was only the first step towards using the platform to advantage. After all, there were distributors - both quasi and official - already selling on Tmall. A flagship store is brand-verified, and grants privileges for positioning and advertising that must be exploited. If this sounds unfair, it does prevent brands from simply setting up and providing sloppy service, locking out more nimble vendors who can better serve shoppers.

In any event, Pantone is executing a full range of SEO & PPC style advertising within the Tmall ecosystem, as well as banner advertising on fashion sites. More importantly, however, it has taken steps to stamp its store with the imprimatur of brand authenticity, keeping design and offerings in line with that to be found on its home site. Even better, it has implemented the same color selector tool on its Tmall store that has simplified shopping on its home site, a step which instantly rocketed sales.

As a result, Pantone is implementing a slow, savvy channel shift away from its distributor model that will see higher margins, increased penetration, and sustainable growth in this must-win market.

Baidu Maintains Solid Revenues

As to Baidu, what it lacks in Google-esque depth of offering, it strives to make up in advertising revenue. It’s bad news for visitors, who lack the variety of organic results to browse, but good news for advertisers, upon whom visitors are therefore more compelled to click.

Knowing this, Leica Microsystems, another subsidiary of Danaher’s, employs a synergistic SEO and SEM approach on Baidu to scoop up the opportunities that its competitors are missing. It speaks to theme of western opportunity that Leica Microsystems has no Chinese competitors in this exploding segment of the China market, as only international brands are considered for high-end medical devices. Leica fully satisfies Chinese target customer demand for add-value information with ongoing localization of its information assets and upgrading of its web presence in China, which drives organic SEO results for its keywords.

On the PPC front, Leica outflanks competitors with fast-loading landing pages hosted in-country, and custom dashboards to close the loop between form fills and sales, dramatically cutting lead times and boosting ROI on its campaigns into the 1500% range. Sales in this channel are robust enough that more resource intensive, less targeted channels are made unnecessary.

Conclusion: western companies who understand their brand advantage in China, and how to exist with China’s internet giants in symbiosis, are positioning for sustainable 21st century growth.

By Ernie Diaz, a director at Web Presence In China, a full service digital marketing agency headquartered in Beijing. 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for BIDU
China Stock Research
25 Oct 14 06:01:03
We have some detailed info on $WUBA $SINA $SOHU $BIDU to help investors looking at longer term prospects http://t.co/o5QREYznTZ
25 Oct 14 06:00:04
Popular Stock Picks By Consensus: $COV $NKE $BBBY $MRK $GILD $BIDU $BRCD $NLY $ATVI $T $SYMC $AXP $MET $EMC $CMCSA http://t.co/Vv2VEn80mr
Carolyn B Miciano
25 Oct 14 05:16:49
All about index corelation http://t.co/qNUxWBdxvH $CMG $TSLA $BIDU
25 Oct 14 04:41:41
RT @bored2tears: Barron's: Why Baidu's headed up and rival Qihoo isn't. http://t.co/t6Gx95ir2H $BIDU $QIHU #China #Internet #stocks
A. Vespasian
25 Oct 14 04:34:12
RT @bored2tears: Barron's: Why Baidu's headed up and rival Qihoo isn't. http://t.co/t6Gx95ir2H $BIDU $QIHU #China #Internet #stocks
25 Oct 14 04:33:59
Barron's: Why Baidu's headed up and rival Qihoo isn't. http://t.co/t6Gx95ir2H $BIDU $QIHU #China #Internet #stocks
Carolyn B Miciano
25 Oct 14 03:12:18
Free guide to mastering standard deviation http://t.co/4KprMOXcMf $CMG $TSLA $BIDU
Carolyn B Miciano
25 Oct 14 02:19:57
Roadmap to become an #options expert http://t.co/roZ9Y7TKBz $CMG $TSLA $BIDU
Pivot Point Trading
25 Oct 14 01:12:12
25 Oct 14 00:32:33
Our Penny Stock Alerts Gained 371% In 2 weeks! Sign Up For Free Text Alerts For Our New Pick: http://t.co/Wsu24zYrur $DTV $ADP $BIDU
Kym L
24 Oct 14 18:28:53
24 Oct 14 18:28:17
best ones to trade all next week: $BIDU $LNKD $NFLX
24 Oct 14 18:00:05
Popular Stock Picks By Consensus: $COV $NKE $BBBY $MRK $GILD $BIDU $BRCD $NLY $ATVI $T $SYMC $AXP $MET $EMC $CMCSA http://t.co/Vv2VEn80mr
toby smith
24 Oct 14 17:48:09
RT @Williamj54: Stocks with estimated earnings growth acceleration next yr vs. this yr: $BABA $MBLY $PANW $TSLA $MELI $DSKY $LNKD $Z $BIDU …
Carolyn B Miciano
24 Oct 14 16:43:34
Are Options riskier than stocks http://t.co/fRtuZrMDX5 $CMG $TSLA $BIDU
24 Oct 14 16:09:41
24 Oct 14 16:02:03
Nasdaq100 #Stocks Performance $KLAC $MXIM $GILD $STX $CELG $CTXS $VOD $CTRX $BIDU $MSFT $CA $CHKP $CERN more@ http://t.co/YdSIjG11yN
24 Oct 14 15:09:38
Our Penny Stock Alerts Gained 371% In 2 weeks! Sign Up For Free Text Alerts For Our New Pick: http://t.co/Wsu24zYrur $DTV $ADP $BIDU
Samuel Brown
24 Oct 14 14:30:47
$BIDU Options Check-Up: Advanced Micro Devices, Inc., Baidu Inc (ADR), and Himax ... http://t.co/kCTt1ZrTwK
Volatility Implied
24 Oct 14 13:17:11
RT @CBOE: Options expected to be active next week @ CBOE: $TWTR $FB $BIDU $BWLD
Steve Turrise
24 Oct 14 13:15:51
RT @CBOE: Options expected to be active next week @ CBOE: $TWTR $FB $BIDU $BWLD
Momentum Stocks
24 Oct 14 13:14:45
Commented on StockTwits: $SPY might gap up on Monday. I sold puts on $BIDU $SPX $NFLX; worked out great. http://t.co/odD41CmC0M
Quantpost Technology
24 Oct 14 13:14:07
$TWTR $FB $BIDU News: "Options expected to be active next week @ CBOE: $TWTR …" https://t.co/jdCKe1Bp1U Board view: https://t.co/QCbzpY31V0
Volatility Implied
24 Oct 14 13:14:04
10/24/2014 $EPI $FB $TSLA $INTC $BABA $MSFT $BIDU $HAR $BAH $UA $SMH $TQQQ $UUP $TBT *SHORT $GC_F IN SIZE!! #crude http://t.co/iiwRHy4CFX
24 Oct 14 13:14:03
Options expected to be active next week @ CBOE: $TWTR $FB $BIDU $BWLD
24 Oct 14 12:59:49
Nasdaq100 #Stocks Performance $KLAC $MXIM $GILD $STX $VOD $CELG $CTRX $BIDU $CTXS $MSFT $YHOO $CA $ORLY more@ http://t.co/YdSIjG11yN
Lord Νιcholas
24 Oct 14 12:54:21
$BIDU Looking pretty damn good. http://t.co/jldfuriVQp
24 Oct 14 12:38:24
Commented on StockTwits: $regn & $celg too...yes $yy $vips $bita all hav juce, as $bidu helg $200 http://t.co/wAzbnLxesr
Mitchell Warren
24 Oct 14 12:37:44
Notable earnings for next week: $MRK $AMGN $TMUS $TWTR $AET $PFE $FB $GILD $X $BIDU $FFIV $V $COP $K $MA $MOS $GPRO $SBUX $XOM
Mark L. Brock
24 Oct 14 12:03:30
@punkcap Yahoo!Finance has a $1,611.46 (1 year) target on $BIDU...I could take that run!
24 Oct 14 11:49:02
$BIDU it's going up again! Monday we will see $225
24 Oct 14 11:31:06
some interesting #earnings plays NEXT week: $TWTR $FB $LNKD $GPRO $BIDU
Fátima López
24 Oct 14 11:23:53
Algún #FTR1 sabe qué está pasando con $BIDU? Por qué está bloqueada la emisora? #FTR1
24 Oct 14 11:06:38
$BIDU may be out of gas
Ben C. Banks
24 Oct 14 10:52:15
$BIDU, $FRGI, $HTH, $SSNC, $ZAGG = Current stocks on my watchlist
The Daytrade
24 Oct 14 10:39:43
$BIDU uptrend held through mkt dips, expect continuatino to $225 possible into the close
24 Oct 14 10:39:25
$BIDU beast mode
24 Oct 14 10:39:23
Our Penny Stock Alerts Gained 371% In 2 weeks! Sign Up For Free Text Alerts For Our New Pick: http://t.co/dLDRavoCi4 $DTV $ADP $BIDU
Samantha LaDuc
24 Oct 14 10:27:21
@RTNRTN @smartertrader @sspencer_smb I have no feel for $BIDU on EPS but maybe hedge w a $SINA short?
Carolyn B Miciano
24 Oct 14 10:09:01
All about index corelation http://t.co/LPS36xrkO8 $CMG $TSLA $BIDU
Keebler Elf
24 Oct 14 09:57:40
$BIDU -showing strength should set up to tke out 224 next week.. http://t.co/rt6HQ6EMJ3 http://t.co/RQnUkeucIo #stockcharts
24 Oct 14 09:45:30
$BIDU hindsight had me covering short @ 10ema and reversing Oh well a little lazy and slow today
Carolyn B Miciano
24 Oct 14 09:39:47
Construct a Bull Put spread with probability http://t.co/wpecbKYH97 $CMG $TSLA $BIDU
24 Oct 14 09:34:55
$BIDU rockin
Suketu Patel
24 Oct 14 09:31:00
$BIDU showing great relative strength today!!
Bob L.
24 Oct 14 09:18:33
@CramersShirt Tell that to happy $BIDU shareholders.
Carolyn B Miciano
24 Oct 14 09:04:34
Free guide to Volume profile http://t.co/qT0STZib5F $CMG $TSLA $BIDU
China Stock Research
24 Oct 14 09:00:31
Another #China web giant goes to Hollywood: #Alibaba heads to LA in search of content http://t.co/O5wZ6CWP1R $BABA $BIDU $QIYI $SOHU
24 Oct 14 08:50:37
$BIDU looks great for higher highs
24 Oct 14 08:38:22
@JohnBonini $BIDU is reporting earnings for Q3 2014 on 10/29/14 – http://t.co/aRhBDH9sJo
By  +Follow June 30, 2014 6:00AM



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