China Mo­bile, Ap­ple is a done deal, but what does car­rier get out of it?

Co-brand­ing will prove to level play­ing field for do­mes­tic firm

China Daily (Hong Kong) - - BUSINESS VIEWS - MIKE BASTIN The au­thor is a vis­it­ing pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics in Bei­jing and a se­nior lec­turer at Southamp­ton So­lent Univer­sity’s School of Busi­ness. The views do not nec­es­sar­ily re­flect those of China Daily.

It came as lit­tle sur­prise to many to read about the multi-year deal struck re­cently be­tween China Mo­bile Ltd and Ap­ple Inc. This deal ap­pears to have been un­der ne­go­ti­a­tion for the best part of the last six years.

Since the sign­ing, much me­dia cov­er­age has en­sued, most of which has dis­cussed the ben­e­fits of the deal for Ap­ple and the iPhone in China, the largest mo­bile phone mar­ket in the world with an es­ti­mated 1.2 bil­lion con­sumers.

But what about China Mo­bile? What im­pact will this deal have on China’s dom­i­nant wire­less car­rier brand? Have the long-term brand-build­ing im­pli­ca­tions re­ally been thought through thor­oughly?

Clearly, the deal helps both par­ties in the short term. Ap­ple, strug­gling in China amid in­tense com­pe­ti­tion and a rel­a­tively high-priced iPhone brand, gains im­me­di­ately with ac­cess to China Mo­bile’s 700 mil­lion-plus sub­scribers. China Mo­bile would ap­pear to gain also with the ad­di­tion of such an iconic, global brand to its net­work. But just how much?

The deal is char­ac­ter­is­tic of many in­volv­ing Chi­nese com­pa­nies’ tie-ups with fa­mous for­eign brands over the years, where the for­eign part­ner re­fuses to re­lin­quish an ounce of its brand eq­uity and sim­ply ex­ploits the Chi­nese part­ner’s mar­ket po­si­tion in China. No bet­ter ex­am­ple can be found than the car in­dus­try tie-ups in China with nu­mer­ous al­liances be­tween Chi­nese car producers and in­ter­na­tion­ally fa­mous for­eign brands, such as the FAW-VW part­ner­ship that dates back to 1991. Of course FAW and other Chi­nese com­pa­nies in sim­i­lar tie-ups con­tinue to ben­e­fit but only to a de­gree. FAW’s now 20-year-plus re­la­tion­ship with Ger­many’s VW proves a telling point; the for­eign brand ben­e­fits far more with sub­stan­tial en­hance­ment to its emo­tional brand im­age.

The Chi­nese part­ner plays no part in this brand-build­ing bo­nanza, merely pro­vid­ing low­cost pro­duc­tion and/or ac­ces­si­bil­ity to the mar­ket. FAW’s en­tire port­fo­lio, well-known to the Chi­nese pub­lic, has ben­e­fited lit­tle over the years from the VW al­liance. The same can­not be said of VW’s port­fo­lio, es­pe­cially the Audi brand.

In the same way as FAW has ben­e­fited, so will China Mo­bile gain from work­ing with Ap­ple. But this gain will also be lim­ited while no co-brand­ing takes place.

Co-brand­ing, where both part­ners present their brand names on the fi­nal prod­uct vis­i­bly to the mar­ket, might ap­pear merely a sub­tle al­ter­na­tive type of al­liance of joint ven­ture, but over many years, its ef­fect as a cat­a­lyst, cat­a­pult­ing the lesser-known part­ner’s brand, can be ex­po­nen­tial. Eric­s­son (Sony-Eric­s­son) and In­tel pro­vide demon­stra­ble ex­am­ples.

China Mo­bile’s brand re­mains dom­i­nant across China but still lacks the emo­tional ap­peal that Ap­ple and iPhone in par­tic­u­lar have es­tab­lished suc­cess­fully with their loyal cus­tomer base. China Mo­bile, de­spite rank­ing con­sis­tently high­est among the Chi­nese brands in many global brand rank­ings, also lacks in­ter­na­tional brand aware­ness and, there­fore, re­mains re­stricted in any global brand ex­pan­sion plans.

A co-brand­ing tie-up, rather than the re­cent arms-length deal, could pro­vide a golden brand­build­ing op­por­tu­nity for China Mo­bile. Such a deal would put the China Mo­bile brand name and/ or logo in a prom­i­nent place on Ap­ple’s iPhone brand and be­gin to build a far more pow­er­ful, emo­tional China Mo­bile brand.

Ap­ple’s cur­rent poor po­si­tion in the China mar­ket and China Mo­bile’s dom­i­nance should also pro­vide the Chi­nese player with suf­fi­cient power to in­sist on such a tie-up.

Such a re­la­tion­ship would also serve as a turn­ing point for many other Chi­nese com­pa­nies and their brand-build­ing as­pi­ra­tions.

China Mo­bile and Chi­nese com­pa­nies in gen­eral have so far been slow to em­bark on the brand-build­ing strate­gies,the sine qua non of mod­ern-day busi­ness suc­cess.

Only co-brand­ing, with fa­mous for­eign brands such as Ap­ple, will pro­vide the im­pe­tus and di­rec­tion needed to move China Mo­bile and Chi­nese in­dus­try in gen­eral on to the world stage.

If any­thing can, co-brand­ing can!

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