CITIC Securities: From low-end OEM to high-quality product exports. Branding to the European and American markets is optimal.

The app learned that CITIC SEC released a research report stating that in reviewing the history of local industrial belts going global in the past 30 years, Chinese companies have gone from low-end OEM to high-quality product exportation. In recent years, they have gradually transformed to brand globalization to obtain higher added value. Leading the way are not only traditional well-known companies, but also emerging forces. In terms of target markets, Europe and America are still the optimal markets for brand globalization. Southeast Asia and the Middle East are worth exploring, and Latin America offers significant opportunities for cost-effective brands. From an experiential standpoint, brands that become global companies often have flexible management structures, localized product matrices, omni-channel layouts, and refined marketing strategies. It is recommended to invest in companies with clear and advantageous global layouts. Current Situation of Globalization: Starting from OEM, brand globalization is beginning to take shape. In the review of the four phases of Chinese industrial belts going global, local companies initially started from low value-added OEM, and in recent years, with the enhancement of domestic supply chain capabilities and improvement in research and development systems, they have gradually caught up with international brands in product design and performance. Looking ahead, CITIC SEC believes that the core of enhancing added value for companies lies in establishing brand awareness, extending towards high-value segments of the industry chain, ultimately achieving brand globalization and increased profitability. However, overall, Chinese brand globalization is still in its early stages, with the international brand image continuing to develop. Opportunities and Target Markets: Europe and America are the best, Southeast Asia is the first stop for global expansion, and the Middle East, Latin America, Africa, and other high-potential markets are worth exploring. 1) Europe and America: Mature in all aspects, with large market capacity, strong consumer purchasing power, mature channels, and well-established laws and regulations, making it the current optimal choice. CITIC SEC believes that ultimate supply chain efficiency and strong brand-building capabilities are key to global expansion in Europe and America, although there may be some uncertainties in the US market, especially from a policy perspective. 2) Southeast Asia: Rapid growth in various sub-segments, making it a suitable first stop for brand globalization. However, each market has limited size, and there are significant cultural differences in Southeast Asian countries, requiring Chinese companies to localize their strategies accordingly. 3) Middle East and North Africa: Strong consumer purchasing power in the Gulf region, with significant opportunities in fashion segments for global expansion. 4) Latin America: Some categories such as consumer electronics, pets, cosmetics, etc., have seen continuous increase in penetration rates locally, with local consumers placing more emphasis on value for money. 5) Africa and Russia: High-potential markets with great opportunities, but also with relatively high difficulties and uncertainties in development. Experience Summary: From 0 to 1, from Chinese brands to global brands. 1) Product Strategy: CITIC SEC believes that there are significant opportunities in categories with high overseas education levels (e.g., outdoor products), clear structural opportunities (e.g., hair care), strong demand (e.g., wigs), or short R&D cycles and long product lifecycles (e.g., charging cables). Companies need to adjust their product matrices and pricing based on different markets. 2) Channel Strategy: Global brands ultimately need omni-channel layouts. Initially, they can enter online channels first, but eventually need to have a comprehensive offline channel presence, and deep collaboration with local partners can accelerate this process effectively. 3) Marketing Strategy: Global brands going abroad need to fully understand local cultures based on their own brand image and understand local consumer needs. 4) Organizational Structure Strategy: Global brands often adopt a matrix organizational structure and are predominantly managed by professional managers, with more flexible management structures; when it comes to employee utilization, it is important to recruit talent who identify with the company culture and gradually strengthen the hiring and development of local employees. Risk Factors: Fluctuations in overseas economies, lower-than-expected consumer sentiment; geopolitical and trade policy risks, and the resulting valuation suppression factors; exchange rate fluctuations; inadequate understanding of destination market policies, regulations, and cultural differences under internationalization strategies can lead to significant business risks or negative brand impact, etc.