Chinese brands: the build or buy considerations

Abstract

This paper discusses the strategic motives, the markets entered, the methods used and the challenges faced by Chinese companies building their own brand or buying one to expand globally. We present a regression model enabling the analysis of recent Mergers and Acquisitions (M&A) activities and the successes and failures between the Chinese and foreign target companies. The developed model considers the strategic motives to globalise, the type of country and acquisition. By using the Monte Carlo resampling methods, we can draw conclusions about the probability of success of the outbound M&A success. Our results show that brand-motivated acquisitions are more likely to be completed than resource-based acquisitions both in developed and developing markets. Our research found that all branding related acquisitions are in developed countries. However, the numbers of resource based acquisitions were evenly split between developing and developed countries, where in the developed countries, they were more likely to fail than in the developing ones. Nationalistic sentiments seem to be heightened by these resource-based acquisitions and were much more common in developed countries than in developing ones. It also seems that Chinese companies build brand recognition in developed countries by buying readily established brand names and are more likely to build their own brand in developing countries.