chapter  5
Price leadership or branding strategy for Chinese firms
ByXI CHEN, ZUOHAO HU, PING ZHAO
Pages 13

With globalization and the rapid development of China’s economy, an increasing number of Chinese firms are carrying out export marketing activities to explore the international market. According to statistics from the Ministry of Commerce of the People’s Republic of China, China’s export volume amounted to US$969 billion in 2006, with US$405.2 billion contributed by Chinese firms (and the rest US$563.8 billion by foreign-funded firms). This indicates that Chinese firms are conducting international operations mainly through export, which belongs to the early stage of internationalization.1 Currently, there are two views regarding Chinese firms’ export strategies. The first view advocates price leadership strategy (PLS). According to the PLS, many Chinese firms do not possess adequate international marketing experience or sufficient international resources (such as technology and capital). Consequently, these firms should adopt the OEM (original equipment manufacturing) mode to explore the international market based on cost advantages (Jin, 2004). The other view supports the adoption of branding strategy. According to branding strategy, Chinese firms should enhance technology and R&D capabilities and develop high-quality products and implement differentiated international marketing by the virtue of private brands. Only by establishing powerful brands can Chinese exporters gain higher profits in the international market and lay a solid foundation for international operation and long-term growth (Nie & Wang, 2006).