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HJEMMEOPGAVER, PROJEKTER, SYNOPSER M. MUNDTLIGT FORSVARHome Assignments, Project Reports, Synopses with oral defence

INSTITUT FOR ERHVERVSKOMMUNIKATIONDepartment of Business Communication

NAVN:Name

(If writing in groups, please state names of all group members)

Jacob Mohr Hansen (JMH)

Rasmus Bundgaard Larsen (RBL)

CPR-NR.:Danish ID-Number

(If writing in groups*), please state ID-numbers of all group members)

EKSAMENSNR. (PÅ STUDERENDE):Student Exam No.:(6 digits at the top left corner of you Student ID-card)

Student Id: 302233 (JMH)

Student Id: 401242 (RBL)

HOLD NR.:Class No.Ex.: U02

Class U03

FAGETS NAVN:Course/Exam Title

BA Thesis 2013

VEJLEDER:Name of Supervisor

Katrine Vanggaard Rasmussen

ANTAL TYPEENHEDER I DIN BESVARELSE(ekskl. blanktegn):Number of Characters in your Assignment(exclusive of blanks):

Total: 97.467

JMH: 36.968

RBL: 38.301

Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242

The Chinese middle-class

A Danish design perspective

How should the characteristics of the Chinese middle-class influence your marketing

communications as a Danish design company?

6th May 2013

Jacob Mohr Hansen

Rasmus Bundgaard Larsen

Aarhus School of Business and Social Sciences

Marketing and Management Communication

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Abstract

The purpose of this thesis is to investigate the characteristics of the Chinese middle-class and how

these should influence a Danish design companies’ marketing communications. Three research

questions have been formulated with the purpose of providing answers to the problem definition: How is

culture influencing the Chinese consumer? What characterises the Chinese-middle-class consumer-

behaviour? How do the culture and the consumer-behaviour of influence your marketing communication

Furthermore, this thesis includes numerous theorists and theories in order to establish a foundation for

answering the problem statement.

The cultural findings are based on Hofstede’s cultural dimensions, which function as a framework of

the cultural analysis. Next, the work of Michael R. Solomon, Gary Bamossy, Søren Askegaard and Margaret

K. Hogg is the main source contributing with theory throughout the chapter on consumer behaviour.

Furthermore, the chapter on marketing communication uses the 4 p’s, product, price, place and promotion,

suggested by Jerome McCarthy for discussion the cultural and consumer behaviour findings in a marketing

perspective. Lastly, it should be mentioned that the work of Tom Doctoroff, and Michael J. Silverstein,

Abheek Singhi, Carol Liao and David Michael function have contributed with data on the Chinese middle-

class throughout this paper.

Furthermore, this paper is conducted in accordance with the scientific method of philosophical

hermeneutics. The reason for this is that this tradition put focus on the receiver, and is appropriate when

dealing with culture and fields such as consumer behaviour, where the aim is not to find one true meaning.

The method of this thesis is to combine theory of culture, consumer behaviour and marketing

communications, in order to analyse the Chinese middle-class and what impact this should have on

marketing communication. Two qualitative in-depth interviews have been conducted as a method for

supplementing our conclusions based on secondary data, as well as gaining a recent and relevant

perspective.

The conclusions of this thesis have shown that there are many aspects to take into consideration when

dealing with China and Chinese middle-class consumers. Chinese cultural elements are heavily influencing

the consumers, and the consumers are difficult to deal with and satisfy as they require bargain prices, high

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242quality and the security of well-known brands. However, it is found that they are increasingly becoming

more individualistic and have begun to focus on hedonic needs and not only utilitarian needs. From a

marketing communication perspective, it is important to further limit your target group as the Chinese

middle-class is vast and vary both in terms of income, motivations and location. However, communicating

that your product can be consumed socially and will further your middle-class status, are two appeals that

have been found to be effective for the middle-class overall. Communicating that your product signals

status and will stand the test of time, while still having a great value price, is an effective strategy for aiming

at both utilitarian and hedonic needs. A mix between emotional and rational appeals are needed in order

to penetrate the market, as it reflects the consumption behavior of the middle-class, which is split between

the careful Confucian nature and the rising individualism.

Keywords China, the growing Chinese middle-class, Danish Design, culture, consumer behaviour, market

research, marketing communications.

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Table of contents

Abstract............................................................................................................................................................3

1. Introduction (JMH & RBL).........................................................................................................................7

1.1. Context.............................................................................................................................................7

1.2. Research problem definition............................................................................................................8

1.3. Method and structure......................................................................................................................9

1.4. Theory of scientific methods..........................................................................................................10

1.5. Delimitations..................................................................................................................................11

1.6. Theoretical framework...................................................................................................................12

1.6.1. The work of Geert Hofstede...................................................................................................12

1.6.2. The work of Michael R. Solomon, Gary Bamossy, Søren Askegaard and Margaret K. Hogg. . .12

1.6.3. The work of Michael J. Silverstein, Abheek Singhi, Carol Liao and David Michael..................12

1.6.4. The work of Tom Doctoroff.....................................................................................................13

1.7. The Chinese middle-class and Danish design..................................................................................13

2. Cultural theories (JMH)...........................................................................................................................14

2.1. Hofstede’s cultural dimensions (RBL).............................................................................................15

2.1.1. Power distance (JMH).............................................................................................................15

2.1.2. Individualism versus collectivism (RBL)...................................................................................16

2.1.3. Masculinity vs. femininity (JMH).............................................................................................17

2.1.4. Uncertainty avoidance (RBL)...................................................................................................17

2.2. Critique of Hofstede’s cultural dimensions (JMH)..........................................................................17

2.3. Confucianism, Face and Guanxi (RBL).............................................................................................18

2.4. Chinese middle-class culture anno 2013 (RBL)...............................................................................19

2.5. Sub-conclusion (JMH).....................................................................................................................20

3. Consumer behaviour analysis (JMH).......................................................................................................21

3.1. Consumption cultures (JMH)..........................................................................................................21

3.2. The self, face, needs and wants (JMH)............................................................................................22

3.3. Consumption of foreign products (JMH).........................................................................................25

3.4. Decision making processes (RBL)....................................................................................................25

3.4.1. Types of consumer decision (RBL)..........................................................................................26

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3.4.2. Stages in consumer decision making (RBL).............................................................................26

3.4.3. Critique and update on the five step consumer decision-making model (RBL).......................27

3.5. Sub-conclusion (RBL)......................................................................................................................28

4. Interviews...............................................................................................................................................30

4.1. Research approach and design (RBL)..............................................................................................30

4.2. Findings...........................................................................................................................................31

4.2.1. A qualitative in-depth interview with Lily Yan (JMH)..............................................................31

4.2.2. A qualitative in-depth interview with Karina Trebbien (RBL)..................................................33

4.3. Critical perspective on interviews (RBL)..........................................................................................36

4.4. Sub-conclusion - interview findings (RBL).......................................................................................36

5. Marketing communications (JMH).........................................................................................................38

5.1. The 4 p’s (JMH)...............................................................................................................................38

5.1.1. Product (RBL)..........................................................................................................................39

5.1.2. Price (RBL)...............................................................................................................................39

5.1.3. Place (JMH).............................................................................................................................40

5.1.4. Promotion (JMH).....................................................................................................................40

5.1.5. Critique of the 4 p’s (JMH)......................................................................................................41

6. Discussion (RBL)/(JMH)...........................................................................................................................42

7. Conclusion (JMH & RBL).........................................................................................................................45

8. References..............................................................................................................................................48

8.1. Books..............................................................................................................................................48

8.2. Journal articles................................................................................................................................49

8.3. Internet articles..............................................................................................................................51

8.4. Others.............................................................................................................................................51

8.5. List of abbreviations/acronyms.......................................................................................................51

9. Appendices.............................................................................................................................................52

Appendix 1 – Comparison of the cultural dimensions of Denmark and China............................................52

Appendix 2 – Transcription of interview with Lily Yan................................................................................53

Appendix 3 – Transcription of interview with Karina Trebbien..................................................................56

Appendix 4 – Model on consumer decision making...................................................................................66

Appendix 5 – Translation of the article “Dansk Design hitter I Kina”..........................................................67

Appendix 6 – Ministry of foreign affairs Denmark (2012) Sector analysis: Furniture and Design...............69

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1. Introduction (JMH & RBL)

1.1. Context

As growth in Europe and the United states is slowing, marketers are looking for other places of opportunity

– and one country seems to be on everyone’s lips: China. The vast size of the country, the gradual loosening

of trading politics and not least an immense potential for further growth, is making China a market you

simply cannot overlook. At current growth rates, China is expected to beat the United States and become

the world’s largest economy by 2029. Just looking forward to 2020, the average annual per-capita income is

expected to rise from $4.400 to $12.300. That is nearly a tripling of income in the world’s most populous

nation. It is no wonder that China is every marketer’s wet dream. (Silverstein et al., 2012)

What makes China increasingly interesting, is, that it is not only new millionaires that are contributing to

the immense growth China will see in the coming years. The number of middle-class households will,

according to the Boston Consulting Group (Silverstein et al., 2012), increase from 109 million households in

2010 to 202 million households in 2020. These households will have an average income of $9.900 to

$31.300. This means that China is moving away from only being a place for cheap sourcing and production,

and where Western luxury goods are sold to the few who can afford it. It is becoming a grand consumer

market with varied needs. The prize is there, but it is not just up for grasps. As this thesis, and research

both old and new, points out, the differences between China and a Western country like Denmark are

many. It is a world much different from ours, as Tom Doctoroff states in his book, “What Chinese want”

(2013 p. 3):

“China is modernising, but it is not becoming Western... In order to establish a productive relationship with

Chinese people, we – business people, students, and tourists - must reorient ourselves to engage with a

profoundly different worldview.”

A statement which the authors of this thesis, who have recently returned from five months exchange stay

in China, can nod in agreement to.

This thesis aims to investigate the booming middle-class of China in terms of culture and consumer-

behaviour, and it tries to answer what this all should mean for your market communication efforts. Further,

the thesis takes the perspective of a fictional Danish design company, in order to investigate the potential

of this product category within the Chinese middle-class. German cars, French wine and shoes from Italy

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242have all become strong status symbols within the Chinese upper class (Silverstein et al., 2012), and perhaps

Danish design is a great fit for the Chinese middle-class. An affordable luxury.

In order to answer these questions, this thesis uses cultural, consumer behaviour and marketing theories.

As Doole and Lowe (2008) argue, social and cultural factors greatly influence consumer behaviour, which in

turn is central to the developing of international marketing strategies. The interaction needed between

these three areas in order to answer one general problem statement, is an interesting aspect in the eyes of

both thesis authors. Within the marketing framework of the RABOSTIC model (Pickton & Broderick, 2005),

the scope of this thesis is mainly the RA – research and audience. It should be seen as an exploratory thesis,

which also comments on what the findings means in a marketing communication perspective.

In addition, this thesis aims to use as many recent sources as possible. The Chinese middle-class is a

relatively new consumer group and an even newer target for marketers. This means that not much is

written about it – especially if you contrast how much is written about China and luxury goods

consumption. Further, China is developing rapidly both economically and culturally (Solomon et al., 2010;

Silverstein et al., 2012; Doctoroff, 2013), which means that, what was close to the truth in 2005, might not

be so close any more. As Professor Russell Belk argues in Solomon et al. (2010 p. 46):

“From a consumer behaviour perspective China may well be the most interesting place on earth”

1.2. Research problem definition

How should the characteristics of the Chinese middle-class influence your marketing communications as a

Danish design company?

In order to investigate this research problem definition we have focused on the cultural and the consumer

behavioural aspects of the Chinese middle-class, including examples from the “real-world” to support our

theoretical findings. Marketing communication theory has been used in order to present and combine the

findings in a relevant manner.

Furthermore, to provide answer to our problem definition, three sub questions have been formulated

below.

- How is culture influencing the Chinese consumer?

- What characterises the Chinese middle-class consumer behaviour?

- How do the culture and the consumer behaviour of the Chinese middle-class influence your

marketing communications?

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1.3. Method and structure

This thesis includes four main parts which all together constitutes the background for answering the

problem statement. One of the interesting aspects of international marketing communication is that it is

impossible to work with, without combining different fields of theory. It binds together cultural theory,

consumer behaviour theory and marketing communication theory in order to provide the best possible

framework for business decision making. The use of cases and articles helps to relate the general

theoretical framework to the specific subject of this thesis, and provides an up-to-date perspective with a

focus on the Chinese middle-class consumer.

The first main part of this thesis deals with culture. It includes a definition of culture in order to introduce

the subject, and continues to use Hofstede’s cultural dimensions as a stepping stone for explaining and

understanding the Chinese culture in broad terms. In addition, the social concepts of “face”, “guanxi” and

“Confucianism” are explained, as they are paramount in order to understand how the Chinese culture

differs from ours. Further, the limitations of the general cultural approach are discussed.

The second part investigates consumer behaviour in China, and delves further into the specifics of

the middle-class. The analysis of consumer behaviour is based on many different sources and theorists,

with the work of Solomon et al. (2010) contributing the most. It aims to examine the underlying motives

and decision making process for buying high-involvement products, such as design products. Various

theorists are used in order gain an understanding of the consumption culture in China, and how the self,

“face” and utilitarian and hedonic needs are influencing the Chinese middle-class consumer. In addition, a

section discusses the consumption of foreign products, as this is relevant in connection to selling Danish

design products in China. Next, this part discusses the decision making process in relation to high-

involvement consumer decisions. It then uses the five step decision-making model to provide a framework

for creating a model specific to the product category and the Chinese middle-class market.

The third part includes two qualitative in-depth interviews, done in order supplement the

conclusions based on the research of secondary data, as well as providing an opportunity of gaining further

insights relating to Denmark, Design and the Chinese middle-class. The interviews have been conducted in

accordance with the theory of Daymon and Holloway (2011).

The fourth part focuses on marketing communications, and includes theory of the 4 p’s suggested by

Jerome McCarthy, and appeals and executions by Pickton and Broderick (2005). Furthermore, the

marketing communication theory seeks to recapitulate the findings of this thesis, and explain and clarify

how these should influence your marketing communications as a Danish design company.

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1.4. Theory of scientific methods

This paper is based on philosophical hermeneutics put forward by Hans-Georg Gadamer, who built on the

tradition of historical hermeneutics presented by Wilhelm Dilthey. The approach of philosophical

hermeneutics has been chosen as it focuses on the receiver, understanding texts and social actions, and

concludes that meaning is produced by the receiver (Nikolaj Kure, 2010, lecture on philosophical

hermeneutics). In accordance, this thesis investigates the characteristics of the Chinese middle-class mainly

in terms of culture and consumer behaviour. It seeks to produce meaning and understanding through the

people of the Chinese middle-class, their behaviour, cultural background, tendencies and opinions. In

addition, the philosophical hermeneutics states that a person’s own presuppositions are of paramount

importance and without these presuppositions it is impossible to gain understanding (Gadamer, 2006). In

other words, meaning is constructed when an individual apply their own presuppositions and prejudices in

the process of interpretation. An individual’s presuppositions and prejudices are also referred to as an

individual’s horizon of understanding (Nikolaj Kure, 2010, lecture on philosophical hermeneutics)

In addition, the tradition of philosophical hermeneutics emphasise that there is not one true

meaning of a social phenomenon, but that each social phenomenon includes a great potential of different

meanings (Nikolaj Kure, 2010, lecture on philosophical hermeneutics). This is also explained by the

hermeneutic circle by Schleiermacher (Palmer, 1969). The hermeneutic circle explains that everyone gain

their own understanding on the basis of prior knowledge or experiences. Our knowledge and experiences

are in our minds divided into systematic categories, which altogether constitute the hermeneutic circle. In

this way we gain our own understanding based on the different parts in our own hermeneutic circle. This is

also in accordance with the purpose of this thesis, as our research aims to investigate how individuals of

the Chinese’s middle-class gain their understanding of a social phenomenon, and this thesis does not seek

to find one true meaning.

Moreover, Gadamer explains that philosophical hermeneutics has no methodology and that the

receivers are never “tabula rasa”, meaning that the receivers are always influenced by their own horizon of

understanding and are never objective (Nikolaj Kure, 2010, lecture on philosophical hermeneutics). With

this in mind it is possible to gain deeper insights from the interviews as the interviewees are not able to

take the position of being fully objective, meaning that we are able to get their own answers.

Furthermore, the tradition of philosophical hermeneutics emphasise the relationship between text

and receiver (Skinner, 1986). This is also in agreement with the purpose and method of this thesis, as it

aims to research the characteristics of the Chinese middle-class, in order to gain knowledge and an

understanding of the consumers that can provide advice for your marketing communications to the

Chinese middle-class seen from the perspective of a Danish design company.

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1.5. Delimitations

We acknowledge that this thesis includes many generalisations as the topic at hand includes analysis of

cultural, behavioural aspects analysis as well as two qualitative interviews. All these areas tend to give rise

to generalisations, as working without these make it more or less impossible to work with due the scale of

the topics.

We are aware that this thesis includes theorists and their theories that have been criticized by many.

Despite the critique, the chosen theorists and theories have been used, as they have been implemented in

such way that the focus is on their advantages, and thereby fulfil the purpose of contributing to the

problem statement. In addition, it should be kept in mind that the field of culture, consumer behaviour and

marketing communication includes numerous theorists and theories, but only the most relevant and useful

have be chosen in relation to the problem statement of this thesis.

We are conscious that our research on the topic of the Chinese middle-class and their influence on a Danish

design company’s marketing communications are limited due to the scale of this paper. Moreover, it is

important to note that we are limited in our research, as we are not able to look at Chinese literature on

the topic, as our mandarin language skills are insufficient.

We acknowledge that the two interviews conducted include many limitations. Firstly, the number of

interviews is limited to two, which is a very small number in order to provide answers that can be believed

to account from the broader population. Additional limitations concerning the interviews are explained

further in section 4.3.

In this paper, statistics and theory based on the United States have been included, and have been applied

as the US is believed to reflect tendencies and attitudes of Denmark and the Western world. This has been

implemented, as the research and theory on Denmark is very limited.

In the same way, certain information and theory of the Chinese consumers have been applied onto

the Chinese middle-class consumers, when it is argued to fit this specific target group. This has been done

as the information and research on the Chinese middle-class is rather limited. Additionally, the growing

Chinese middle-class is a relatively new segment in which many are interested, but not much has been

written or extensive research conducted.

Furthermore, theories and research on the topic of luxury consumption have been included, but there is

only little agreement among authors on this topic, of what luxury exactly is. The term luxury is very

undefinable and it holds the potential of being misinterpret, which should be kept in mind as a limitation of

this paper and theory on “luxury”.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242We are aware that the findings of this thesis primarily have been based on findings of others, as this thesis

only include its own data collection in terms of the two interviews, which means that this thesis is mainly

based on secondary research.

This thesis is also limited by the fact that we do not focus on specific parts of the Chinese middle-class. It

has been found that the middle-class varies greatly, especially in terms of income, geography and age. A

focus on certain geographical areas, or an even more specific income group, could arguably have been

beneficial to the findings of the thesis.

1.6. Theoretical framework

This paragraph has been included in order to present the most important parts of the theoretical

foundation of this paper. This thesis takes in work from numerous theorists and authors in order to create a

theoretical foundation that can provide answers to the problem definition. Only the most contributing

theorist and authors have been included below, and they are only briefly presented as the purpose is to

gain a theoretical overview.

1.6.1. The work of Geert Hofstede

Geert Hofstede’s theory of cultural dimensions has been implemented as these help to gain a basic

understanding of the culture of China and the Danish culture. The cultural dimensions are very useful when

comparing and identifying national cultures. However, this theory has received massive criticism over the

years from several theorists as the cultural dimensions generalise, and therefore has Tony Fang’s critique of

Hofstede’s cultural dimensions been included as well.

1.6.2. The work of Michael R. Solomon, Gary Bamossy, Søren Askegaard and Margaret K.

Hogg

The book “Consumer Behaviour, A European perspective” includes theory of all aspects of consumer

behaviour, basic as well as more thorough theories. It illustrates and explains the theory using models,

thorough descriptions, discussions and real-world cases. It provides the work on consumer behaviour in this

thesis with many theoretical elements and key arguments. It helps to frame the concepts of self, face,

needs, as well as contributing with theory and models within the field of consumer decision making. In

addition, it contributes with point and arguments throughout the consumer behaviour analysis.

1.6.3. The work of Michael J. Silverstein, Abheek Singhi, Carol Liao and David Michael

A plethora of books about China already exists, so why use this one? As Silverstein et al. (2012) argues,

there has yet to be a book that looks at the new consumer in this country, and how to captivate this

enormous potential. The book tries to provide a full picture of the new consumer groups in China and India.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242All authors are employed at the Boston Consulting Group (BCG), a global management-consulting company,

including the heads of the China and India consumer-practice. The information in the book is based on

hundreds of interviews with consumers and business leaders in China and India, consumer studies made by

BCG, economic data from sources such as Euromonitor and not least the authors’ extensive on-ground

experience. The aim of this book fits very well with the problem statement of this thesis. There is much

weight to their argumentation and it is well backed by sources. The main argument against using this book

is that half the focus goes to India, but the authors are aware of this and have made it very simple to

distinguish between which of the markets they are discussing. The knowledge presented in this book is

generalisations based on both qualitative and quantitative data, as well as personal experience, and can

generally be seen as positivistic in nature. The book has been used as one of the main sources for current

information about China and the Chinese middle-class, and have proved quite valuable to the authors, even

though it arguably have some popular literature tendencies.

1.6.4. The work of Tom Doctoroff

Tom Doctoroff, the author of “What Chinese want”, has 20 years of experience dealing with the

intersection of culture and commerce, much of this time spent in China. The knowledge presented is

generalisations based on his personal experience in China. He argues that his theories are not bulletproof,

but that Westerners need the courage to formulate operating hypotheses in order to survive in China. The

way of posing hypothesis from observations, as well as noting the falsifiable nature of these, is arguably a

positivistic approach. Still, the theories presented are believed by the authors to be valuable and relevant

to this thesis. There are arguably few Western people with as much hands-on experience with China from a

marketing perspective. Further, his book is one of the most recent larger works, from 2013, written about

China. Additionally, his fascination with culture, and how it affects the Chinese consumer, is relevant to

many parts of this thesis.

1.7. The Chinese middle-class and Danish design

This paragraph serves the purpose of clarifying what is meant in specific, when the terms of the Chinese

middle-class, Danish design products and design are being mentioned in this thesis.

The very essence of this paper is as mentioned to investigate the Chinese middle-class, and there exist a

vast number of definitions on who the Chinese middle-class is (Silverstein et al., 2012; Doctoroff, 2013).

According to Euromonitor International define the Chinese middle-class as all the households with an

income between RMB 60.000 to RMB 500.000 per year (cited in Doctoroff, 2013), which is around 55.000

to 460.000 DKK. In addition, it is estimated that the Chinese middle-class will count more than 700 million

people in 2020. On the basis of this, it is obvious that the middle-class in China is very broad. However, this

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242thesis generally focuses on the Chinese middle-class as one entity.

Furthermore, this thesis focus on Danish design, and Danish design refers to furniture and interior

design of a high quality, which is luxury products to a certain extent. Laurent and Dubois explain that there

is little agreement on how to define a luxury product (cited in Adams, 2011). Dubois and Czellar relate

luxury to comfort and sumptuary consumption (cited in Adams, 2011). Moreover, Berry states that luxury is

everything that is unnecessary as such (cited in Adams, 2011). The Danish design in this thesis refers to

“luxury” as somewhat unnecessary products that the Chinese middle-class consumers can afford. These

products are not necessarily in the highest end of the price scale.

2. Cultural theories (JMH)

The purposes of this chapter are to define culture, and look into the Chinese and Danish culture in general,

and map some of the biggest difference between the two. It is very important for companies to be aware of

the underlying reasons for people’s behaviour in terms of thinking, and why they value what they do

(Varner and Beamer, 2011). Moreover, this chapter will investigate which implications these cultural

differences might have, seen from a marketing perspective.

Furthermore, it is important to note that this chapter is making use of many generalisations as these are

helpful when comparing cultures (Varner and Beamer, 2011). In addition, these generalisations include

making stereotypes, which are simplified generalisations with the purpose of making it easier to

understand people. In connection, it is also important to be aware of the fact that these cultural

generalisations are putting the members of a culture into boxes. Meaning that the generalisations seek to

predict how a whole culture acts and thinks in general, and thereby explain how each individual behaves.

Even though, every culture on an individual level has several members who does not behave as the

generalisations of the culture predicts (Varner and Beamer, 2011).

A definition of culture (JMH)

There exist numerous definitions of culture and discussions on what culture is (Fang, 2005; Guirdham,

2005). One of the definitions is put forward by Varner and Beamer (2011), and they define culture as

“Culture is the coherent, learned, shared view of a group of people about life’s concerns, expressed in

symbols and activities, that ranks what is important, furnishes attitudes about what things are appropriate,

and dictates behavior” (p. 6). Hereby, it is explained that culture creates a kind of framework, a background

and a set of values that people can share and gather around. This definition provides us with an

understanding of the overall term culture, and leads us to bring China and Denmark into focus. Overall, the

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242cultural theories of Hofstede’s and Lewis will help this thesis to investigate the Chinese and the Danish

culture, and map the differences and their impact on the marketing processes.

2.1. Hofstede’s cultural dimensions (RBL)

Geert Hofstede was one of the first researchers to collect data on the characteristics of national culture:

From 1966 to 1967, he collected data from IBM managers around the world and in 1980 his framework and

dimensions were published (The Hofstede Centre (THC), 2010). The original paper posed four dimensions,

and in 1991 a fifth was added in order for the model to better fit none-western cultures. The dimensions

and the country scores have been revised over the years, latest in 2010, and does hence still have value in

this century. These dimensions have since been used for many purposes and in many studies, also studies

involving international marketing (e.g. Soares, Farhangmehr & Shoham, 2007; Jobs & Gilfoil, 2010). Even

though the dimensions are lacking in areas, and will be critiqued further in the paragraph 2.2, they are a

great stepping-stone for learning about and understanding culture in specific countries. All aspects of

consumer behaviour are culture-bound to some extent, and Hofstede’s dimensions can be used to explain

differences in consumer behaviour as well as guide towards increasing the effectiveness of international

market communication (Solomon et al., 2010; Varner & Beamer, 2011; THC, 2010). It is hence a logical first

step to answering our problem statement. The dimensions will be described below as well as put in a

marketing perspective.

2.1.1. Power distance (JMH)

Firstly, if we look at the biggest differences between Danish and Chinese culture within the cultural

dimensions, the most relevant ones that stand out are power distance and individualism versus collectivism

(THC, 2010).

Power distance defines to what degree unequal distribution of power between two persons is

accepted, and tolerated of the least powerful one of the two (Hofstede, 2001).

THC (2010) rates China’s power distance to be more than four times as high as the Danish power

distance. The high power distance means that the Chinese society for instance believes that inequalities

amongst people are acceptable, whereas the Danes are advocates of for example independency, equal

rights and accessible superiors (Varner & Beamer, 2011). Furthermore, it also means that the people in a

country with high power distance, as China, accept hierarchical structures with very limited upward social

mobility, and where everyone has their own place. In contrast, people from countries with a low power

distance, such as Denmark, embrace a less hierarchical system that allows upward social mobility and

allows the members to participate in the process of decision making (Hofstede, 2001). In addition,

Earnhardt (2009) explains that Chinese managers expect loyalty and respect from the subordinates, and

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242that there is a very clear separation between superiors and subordinates, and that the Chinese

subordinates are very unlikely to disagree with or question their superiors. These are some examples of

China’s high power distance. In connection, it should also be mentioned that Chinese superiors are

expected to have good relationships with their subordinates, which is known as guanxi in Chinese terms

(Earnhardt, 2009). Further elaboration of the term Guanxi can be found in section 2.3.

Furthermore, it is worth to note that Hofstede’s power distance can be related to Varner and

Beamer’s (2011) horizontal versus hierarchical organisational pattern within their cultural dimensions.

Looking at the horizontal versus hierarchical dimension, it can arguably be assumed the China has

hierarchical organisational patterns, which is based on the fact that China has a very high power distance as

concluded.

2.1.2. Individualism versus collectivism (RBL)

This is the most widely researched of Hofstede’s dimensions, according to Varner and Beamer (2011).

Individual cultures tend to focus on individual achievement and the needs and wants of the individual and

that of their close family. The individual should have the right and the possibility to make decisions for him

or herself. This is also reflected in the society only expecting the individual to care for themselves and their

immediate family. On the other hand, collectivistic cultures put more value to the group concept in general

and group is thought of as broader than just you and your close family. Being part of groups with strong

relationships and loyalty is seen as a big part of your identity. Therefore the group, or collective needs, will

often be set above individual interests. Basically, this dimension describes whether an individual’s self-

image and identity is defined by “I” or “We”. (Varner & Beamer, 2011; THC, 2010)

China is categorized as a highly collectivist culture while Denmark is a highly individualistic culture

(Appendix 1). This means that the importance of groups and networks in China might be difficult

comprehend as a Danish marketer. The concept of ”guanxi” describes the special relationship that will

develop between members of a group or team, and it is a very important term when dealing with China in

anyway (Dong & Liu, 2010; Lewis, 2006). Guanxi will be described further in paragraph 2.3.

In marketing communication, one of the main implications is, that where marketing messages in

individualistic cultures will often focus on making the individual “stand out”, marketing communication in

collectivistic cultures can arguably be more effective if they work with appeals of “fitting in” and

“acceptance” instead (Doctoroff, 2013). Further, collectivist cultures have been shown to respond more

positively to social marketing, Word-of-Mouth and micro-blogging (Jobs & Gilfoil, 2010).

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2.1.3. Masculinity vs. femininity (JMH)

The masculinity aspect of this cultural dimension represents a competitive society, a society that values

elements such as heroism, assertiveness, material reward for success and achievement. On the other hand,

feministic societies is generally more focused on consensus and bring caring for the weak, quality of life,

cooperation and modesty into focus (THC, 2010). However, no evidence on the importance of this

dimension in a marketing perspective has been found, and will not be discussed further.

2.1.4. Uncertainty avoidance (RBL)

Uncertainty avoidance is the degree to which a culture in general will tend to feel uncomfortable with

uncertainty and ambiguity. It should not be thought of as how much the culture tend to avoid risk, but to

which degree the culture aim to structure society in order to reduce anxiety – they will tend to arrange

things as to reduce the chance of unforeseen events. Cultures that score high in this dimension will tend to

have rigid codes of beliefs and behaviour, as well as being intolerant towards individuals who do not

conform to these. Cultures that score low in this dimension will tend to have a more relaxed attitude

towards rules and principles, as well as needing less structure in their work and personal life. (Varner &

Beamer, 2011; THC, 2010)

Both China and Denmark are in the low end on this scale and it is the only dimension where the

countries are close together (Appendix 1). According to THC (2010), the reason that China scores low in this

dimension is mainly that they have a very pragmatic and flexible view on rules and laws. In addition, the

Chinese language is often ambiguous and it can be very difficult for Western people to fully understand the

nuances. Danish people have the same tendency to be fine with the lack of structure and predictability in

the work place, though not as flexible with rules and regulations as the Chinese are. Further, Denmark is

low scored because of the curiosity and creativity that Danes learn from an early age.

You can argue that even though Denmark and China both are low scored on this dimension, they are scored

so for quite different reasons. In a marketing perspective, this is arguably not the most important of

Hofstede’s dimensions.

2.2. Critique of Hofstede’s cultural dimensions (JMH)

This paragraph serves the purpose of acknowledging that Hofstede’s cultural dimensions have received

massive criticism during the years from several theorists and studies. This should be taken into account

when using these dimensions.

Fang (2005) suggests new ways of looking at culture and presents a metaphor, where culture is seen as the

ocean instead of seeing culture as an onion. Hofstede created the “onion” model and metaphor in order to

understand culture as he sees it. In connection, it should also be mentioned that Trompenaars (1994) put

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242forward a similar model to the onion model and metaphor. Fang (2005) argues that the bipolar paradigm,

used to analyse national cultures, comprising Hofstede’s cultural dimensions, relies on a number of

assumptions that disables the dimensions ability to create progress in our knowledge of national culture.

These assumptions are for instance that complex matters are addressed in a simplified way; the bipolar

paradigm focuses on differences in culture, behaviour is determined by values not the other way around,

culture on a national level is difficult to change, and that values are stable over time (Fang, 2005).

Hofstede’s cultural dimensions split national cultures into masculine or feminine, high or low power

distance etc. Fang (2005) criticizes this simplified way of putting cultures into categories and boxes, as

cultures are not suitable for doing this, as culture changes over time. Fang (2005) continues, “Culture is

“both/and” instead of “either/or”” (p. 77). By this Fang (2005) means that we are both, for example

individualistic and collectivistic, and not just individualistic or collectivistic. However, the biggest advantage

of using the paradigm is that it is easy to compare one national culture with another and pinpoint

differences between the cultures (Fang, 2005).

Overall, Fang (2005) describes culture as, “The ocean has no boundaries, and its various waters are

both separate and shared, both different and similar, and both independent and dependent. Let us end this

analysis by calling this way of seeing culture an “ocean” metaphor of culture“(p.88). Hereby, Fang (2005)

describes the culture as an ocean, as a counterpart to Hofstede’s “onion” in order to look at culture as

more complex, and not as the bipolar paradigm that puts it into certain categories, hence “layers of the

onion”.

It can be argued that Hofstede’s cultural dimensions, despite the critique, are useful to this paper as the

paper take advantage of the major strength of the bipolar paradigm, pinpointing differences between

cultures, as mentioned earlier.

2.3. Confucianism, Face and Guanxi (RBL)

When from a western country like Denmark, there are concepts you are not familiar with by default, but

are paramount to understanding a culture like the Chinese. Based in Confucianism, the concepts of “Face”

and “Guanxi” are important to how the Chinese act, work, consume and behave (Lewis, 2006; Varner &

Beamer, 2011).

Confucian teaching can be summarized as respecting unequal relationships, being member of a

group before being an individual, behaving in a virtuous manner in order to maintain everybody’s “face”,

staying calm and avoid extremes (Lewis, 2006). Respect of unequal relations is seen as going both ways –

the higher ranked must protect and care for their subordinates.

“Guanxi” describes the relationship between people. Having strong guanxi means that two persons

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242trust each other, owe each other a lot and will be able to interact and do business with fast results. It is a

long process to build guanxi, but when the bond is built, it is very durable and does not require constant

attention (Lewis, 2006; Varner &Beamer, 2011). This is why guanxi is often taught in a communication and

business perspective, but it has also been the topic of studies relating it to marketing and consumer

behaviour (e.g. Geddie et al., 2005).

“Face” is a term that most westerners arguably are familiar with, although it is not viewed near as

serious as it is in China. The loss of face is seen as dire, and it reflects badly on your family and workgroup.

It is increasingly important as groups are not as fluctuating in China as in western countries. Hence, loosing

face is something you will have to live with for a long time (Varner & Beamer, 2011; Lewis, 2006). The main

implication for westerners is that Chinese people will go far to avoid losing face, especially in public, as well

as to avoid removing face of others. This can make it difficult to understand negative situations, in addition

to how critique and bad news should be dealt with (Varner & Beamer, 2011).

2.4. Chinese middle-class culture anno 2013 (RBL)

One of the main things that Fang (2005) criticizes about Hofstede’s framework, is that it sees values as

stable over time. One of the interesting arguments that both Silverstein et al. (2012) and Doctoroff (2013)

points out, is that this both is and is not the case in China. Both argue that China is becoming more

individualistic, and that the tendency is more evident in the younger generation, but they also argue that it

is not necessarily individualistic in the western sense. Doctoroff (2013) argues that the Chinese middle-class

who are beginning to be able to afford none-essential items, are split between the impulse of projecting

status and, on the other hand, a fear of sticking out. The impulse to display status symbols can be seen as

rooted in the importance of face and status, which are old Chinese cultural constituents, and not only a

move towards western values. Simply more and more people can afford to display these symbols. On the

other hand, the careful nature of Confucianism pulls the Chinese consumer in the other direction –

standing out and pulling attention to yourself, is still majorly frowned upon, according to Doctoroff (2013).

In other words, there exists a great cultural paradox within the Chinese middle-class, but whether this is

rooted in the Chinese culture, or in influence from Western culture, is difficult to discern. Doctoroff (2013)

encourages the reader to think of China as becoming internationalized instead of westernized.

Another interesting perspective on this came from our interview with Karina Trebbien, who argues that the

split between wanting to display your success and not wanting to stand out, can be compared to how the

“Jantelov” works in Denmark – some people would never dream of trying to stand out as much as possible,

whereas others completely disregards this. She further argues that cultural concepts, such as face and

guanxi, not are as evident in the younger generation as they are in the older generation, although the

expressive nature of the products and relationship building is still important.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242So, does Hofstede’s cultural dimensions and the concepts of Face, Guanxi and Confucianism still count in a

2013 middle-class perspective? Based on both primary and secondary research, the answer is: “Yes, but…”.

The Chinese middle-class is a relatively new demographic, and they display tendencies and consumption

patterns that can be seen as influenced by the west, although Doctoroff (2013) argues that this might partly

be a fallacy. On the other hand, they are also influenced by cultural concepts that are not well known in the

West. In a marketing perspective, especially the impulse to show and solidify social status is argued as an

important factor for effective marketing communication.

2.5. Sub-conclusion (JMH)

Looking at Hofstede’s dimensions, it is evident that the Chinese culture is vastly different from the Danish.

There are many aspects you should be aware of as a Danish marketer. It is especially the difference in

collectivism/individualism and power-distance that might stump marketers unable to put down the Danish

perspective. The way Hofstede’s dimensions influence the Chinese consumers, means that there are

aspects that a marketer will have to respect, which is not self-explanatory. Examples include generally

putting the group over the individual and treating superiors with proper respect.

Face, Confucianism and guanxi are cultural terms that are paramount to have an understanding of,

when dealing with China in any way. This is especially true from a Danish perspective, where the obsession

with face and relationship building might be difficult to fathom. These cultural terms influence all parts of

life for the Chinese consumers. The main influences that differ from a Danish perspective are: A “We” and

not an “I” mentality, an obsession with “face” and status, great respect for unequal relationships and that

relationship building has great importance.

There is a discussion to whether the Chinese culture is becoming westernised and whether

Hofstede’s dimensions and concepts, such as face and guanxi, are still influencing the younger generation

to a great extent. You can safely argue that Chinese culture is showing signs of change, and that China is

becoming more internationalised. However, as Tom Doctoroff (2013) argues, it is not necessarily becoming

more Western. The individualisation happening can also be due to the increase in income, which

historically has shown to increase individualistic and hedonic tendencies.

This part of the thesis has focused on general Chinese culture, and only discussed specific middle-class

culture in paragraph 2.4. The following part of the thesis, focusing on consumer behaviour, aims to delve

further into the specifics of the middle-class.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 4012423. Consumer behaviour analysis (JMH)

This chapter aims to investigate the characteristics of the Chinese consumer and more specifically the

Chinese middle-class, the underlying motives for buying and their decision making processes. Furthermore,

this chapter serves the purpose of understanding the Chinese consumers and more specifically the Chinese

middle-class in terms of consumer behaviour, in order to gain a better understanding and foundation for

answering the question of; how should the characteristics of the Chinese middle-class influence your

marketing communications as a Danish design company?

Overall, this chapter is based on the fact that, when characterising a market and targeting a specific

consumer group it is of utmost importance to possess knowledge of consumer characteristics seen from a

marketing perspective (Solomon et. al, 2010). In addition, in order to understand the Chinese middle-class

we must gain knowledge of the general Chinese consumer, and thereafter put focus on the middle-class

consumer, as one should understand the bigger perspective before understanding a smaller part of it.

3.1. Consumption cultures (JMH)

When investigating the Chinese consumers, their buying motives and decisions making processes it is

arguably important to have an understanding of the consumption culture of China and Western countries,

and the differences between them.

AFP explains that it has been commonly known for years that the Chinese consumers in general are

quite unwilling to spend their money (cited in Wang & Lin, 2009). In accordance, in terms of consumer

spending, the Chinese government, the consumers and the companies save 53.6 percent of the GDP for

future spending, whereas the US saves 9.8 percent of the GDP (Silverstein et al., 2012). AFP states that

China’s biggest cities, Shanghai and Beijing, are having some of the highest saving rates in all of China, and

it is worth to note that the middle-class is claimed to be 49% of the population in the two cities (cited in

Wang & Lin, 2009).

Additionally, due to the forecasts of continuing declining growth in GDP, the Chinese consumers’

saving rates continue to increase. The reasons for this are that Chinese consumers count in factors such as,

increasing costs of their children’s education, and the lack of social security net (Silverstein et al., 2012). On

the other hand, it is expected that the Chinese consumers will gradually increase their spending (Silverstein

et al., 2012). Similarly, Backaler (2010) explains that the China is adopting the Western lifestyles, and that

the Chinese government is trying to get the Chinese citizens to increase their consumption via certain

policies, designed to achieve this goal. In other words, China has begun to devote both the society, and

thereby also its economy to consumerism (Backaler, 2010). In connection, Wang and Lin (2009) explain that

the Chinese system is very different from the systems in the Western world, but the Chinese consumers are

changing. Their tendencies of consumption are changing, as they get the possibility of buying certain goods,

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242and adopting new lifestyles that have never been available to them in the past. Furthermore, the increasing

consumption in China brings numerous opportunities with it, but also many challenges (Backaler, 2010).

On the basis of the above, it can be inferred that the Chinese consumption culture still differ from the

Western consumption culture, despite increasing similarities. This is partly based on the assumption that

the US example in general reflects the tendencies for Western countries. Arguably, it is important to keep

the tendencies of the consumption culture in mind, when adapting to the Chinese consumption culture and

making your marketing communications seen from company’s perspective.

3.2. The self, face, needs and wants (JMH)

It is of utmost importance for any company in order to survive to understand the consumers and consumer

needs, and investigate whether the market offers a sufficient demand for their products or services (Kotler

et al., 2009). One aspect of understanding consumer buying behaviour is the consumers’ motives for buying

and the underlying reasons for these motivation processes. In specific, buying behaviour theory include

concepts such as the self, face, needs and wants (Solomon et al., 2010). These concepts will be examined in

the following and serve the purpose of identifying Chinese consumer tendencies.

The self (JMH)

Varner and Beamer (2011) argue for the importance of the self-concept when dealing with culture, and

with who we are. The self is arguably an important part of any identity along with group membership.

Consumers often choose to buy products that display certain values, values that are in accordance with the

consumer’s perception of oneself. The consumer’s perception of oneself is also referred to as “the self”

(Solomon et al., 2010). The self-concept is quite complex and consists of several different aspects as for

instance facial attractiveness, self-esteem, the ideal and the actual self etc.

The concepts of the ideal self and the actual self are both element of the self, and these are

interesting to look at, seen in the light of what a company can gain from having knowledge of these.

Solomon et al. (2010) explain the two selves as: “the ideal self is a person’s conception of how they would

like to be, while the actual self refers to our more realistic appraisal of the qualities we have or lack” (p.

145). In addition, consumers might buy certain products in order to achieve the goal of ones ideal self. For

instance, according to Yan have the Chinese middle-class consumers begun to desire mass-market luxury

products, as these can give satisfaction of self-pleasure and self-actualisation experiences (cited in Chen &

Kim, 2013).

This notion could be useful with regards to a Danish design company trying to sell their products in

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242China, as the companies’ product might be able help certain Chinese consumers to achieve their ideal self if

they market their products in the right way.

Face (JMH)

As mentioned earlier, the concept of “face” is very important to take into consideration when dealing with

the Chinese market and it consumers (Li & Su, 2007). They explain further that face is rooted in collectivistic

cultures and has a significant influence on consumer behaviours. Their research has shown that Asian

consumers have a strong demand for luxury products, and this demand is heavily influenced by face. Li and

Su explain (2007) that Asia consumers buy these high-end products to maintain, save, or enhance their

faces. Wong and Ahuvia agree on the fact that the Chinese buy high-end products in order to display

wealth and status, and hence enhance face (cited in Adams, 2011).

On the basis of the above, it can be inferred that marketing communications must take face into account

when marketing Danish design products to the Chinese consumers. In connection, it is worth to note that

companies that understand the concept of face will have a better chance of understanding the Chinese

consumers’ preferences, and the reasoning behind (Li & Su, 2007).

Li and Su (2007) recommend that companies might want to sell their products as products that can

help the Chinese consumers to achieve a sense of face. In relation, they argue further that companies

should emphasize high quality of their products, and the social status related to the products, when

promoting the products due to the important of face.

Needs and wants – utilitarian and hedonic needs (JMH)

Companies aim to satisfy consumer needs and wants by convincing the consumers to buy their products or

services (Solomon et al., 2010). It is difficult to distinguish between a need and a want, but it is certain that

a want is the type of consumption that satisfies a certain need. If we focus on the needs we can see that

these can be split up into different types of needs such biogenic and psychogenic needs, and again into

utilitarian and hedonic needs (Solomon et al., 2010). Biogenic needs are the vital needs that all people have

in order to survive, such as food, sleep, air etc., whereas psychogenic needs could for instance be the need

for power, status, affiliation etc. This paragraph will focus on the utilitarian and hedonic needs, as these are

have been found to be the most relevant to implement.

The utilitarian needs are objective and focus on practical benefit of certain attributes of a product

(Solomon et al., 2010). To exemplify, this could be the fabric composition of a shirt or the type of wood

some chopsticks are made of, or the durability of a scarf. On the other hand, hedonic needs are subjective,

and focus on achieving pleasure from a product. Hedonic needs are often associated with the emotional

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242aspect of buying and using a certain product. In addition, utilitarian needs are often argued to be related to

collectivistic cultures, whereas hedonic needs are correlated to more individualistic cultures (Adams, 2011).

In accordance, Kim et al.; Dickson et al.; Wu & Delong agree that the Chinese consumers have

generally been seen as a consumer group that focus on a product’s functional needs, hence the utilitarian

needs (cited in Xiao & Kim, 2009). As an example of utilitarian consumption, Fong explains the Swedish

furniture and interior giant IKEA is offering reduced prices as low as 70% of their prices in rest of the world

by selling Chinese-made articles, in order to meet the demand for quality and bargain prices of the Chinese

middle-class consumers’ (cited in Wang & Lin, 2009).

However, Yan states that evidence of that hedonism is affecting the luxury consumption of the

Chinese has been found, and as mentioned, especially the Chinese middle-class desires mass-market luxury

products that can provide them satisfaction of self-pleasure and self-actualisation experiences (cited in

Chen & Kim, 2013). In connection, Jin and Kang argue that the Chinese consumers in general are becoming

more self-centred, and are focusing more on hedonic needs (cited in Chen & Kim, 2013). As mentioned,

Adams (2011) argues that hedonic needs are correlated to individualistic cultures. This could be explanation

of the increasing influence of hedonism on the Chinese consumers, as China and especially the younger

generations are embracing individualistic values just as much as collectivistic values (Xiao & Kim, 2009;

Adams, 2011 ). In addition, Xiao and Kim (2009) state that it is especially the Chinese middle-class

consumers that are getting more individualistic, and that this transformation, along with social and cultural

values, has a great influence on their brand and product choices.

Furthermore, researches have shown that the Chinese consumers are developing a more positive

attitude towards foreign brands and products produced in foreign countries, as an outcome of the

increasing living standards and the exposure to the global consumer culture (Xiao & Kim, 2009). They often

choose imported brands over local, due to a mix of associations with Western lifestyles, symbolic

representation and better quality. Buying these foreign brands are satisfying consumers hedonic and

emotional needs (Xiao & Kim, 2009). In agreement, several theorists (Tse, Blelk & Zhou; Johansson &

Moninpour; Kim et al. have suggested an increase in GDP and thereby resources breed desires for hedonic

and/or emotional needs, whereas scarce resources breed a focus on elements such as price and

performance attributes (cited in Xiao & Kim, 2009).

To sum up, due to the internationalisation and increasing incomes the Chinese consumers have begun to

focus more on hedonic needs, whereas they traditionally have been seen a consumer group focusing only

on utilitarian needs. Hedonism is increasingly influencing the Chinese consumers, and especially the

Chinese middle-class consumers. The increasing hedonism, especially among the younger generations and

the middle-class, are also in accordance with Chinese culture moving from an extremely collectivistic one,

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brands are becoming more and more popular in China, as these can help achieve satisfaction of hedonic

needs.

3.3. Consumption of foreign products (JMH)

The Chinese consumers are developing a more positive attitude towards foreign brands, and the Chinese

consumers frequently choose imported brands over the local brands due to a mix of associations with

Western lifestyles, symbolic representation and better quality (Xiao & Kim, 2009). In connection, Batra and

Ahtola (1991) explain that an interdependent orientation within the Chinese culture is resulting in the

consumers’ choice of foreign products. Moreover, due to the wealth and status that high-end products

display, the Chinese consumers buy high-end products in order to meet societal expectations (Wong &

Ahuvia, 1998).

Xiao and Kim (2009) explain that the aspect of emotional experience when buying foreign brands,

were the aspect with the biggest influence on the buying decision, followed by social and functional values,

with regards to individualists. On the other hand, collectivists put more focus on functional appeals as for

instance trustworthiness and quality over emotional appeals.

Their research also revealed that both collectivism and individualism had an influence on foreign

brand purchasing, but that collectivistic minded consumers had a less positive attitude towards foreign

brand than the individualistic minded consumers.

It is also important to note that the Chinese consumers are not always aware of the origin country of

the brands that they are consuming (The McKinsey Quarterly, 2008). The reason for this ignorance of

certain brand’s nationality simply originates in strategies, where companies choose to equip their products

with a Chinese name, Chinese wrapping etc., and this strategy have been proven successful of product such

as Crest and Pantene (The McKinsey Quarterly, 2008).

3.4. Decision making processes (RBL)

The amounts of time and energy you spend on making a purchase decision greatly vary (Solomon et al.,

2010). The rational, or classical, view on the decision-making process, argue that you go through stages in

order to make a buying decision. Marketers should study these, in order to understand how consumers

obtain information, what criteria matters to them and how communication should be formed in order to

reach the consumers with the right information at the right time in the decision-making process (Solomon

et al., 2010). Understanding and reaching the Chinese middle-class will require a basic knowledge of the

general decision-making process and how this fit with our target group, in addition to how the process is

affected by the product category of design. This part will, describe the types of consumer decisions, outline

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242the classic 5-stage decision-making process and lastly critique and compliment it with a more modern take

on the model.

3.4.1. Types of consumer decision (RBL)

The amount of effort that goes into a decision varies from decision to decision. Solomon et al. (2010)

argues that this effort can be seen as a continuum that ranges from habitual decision-making in the low

effort end, to extensive problem solving in the high effort end. The middle ground of the continuum is

called limited problem solving. Habitual decision-making is purchase decisions that require very little or

zero effort, and will often be buying the same product as we have done countless times before – it simply

becomes routine and allows the individual to save time and energy. Limited problem-solving happens when

you have limited motivation to search for information and alternatives. The purchase decision will often be

made while in the store, but you might look around to find e.g. the cheapest or healthiest alternative.

Extended problem-solving generally happens for expensive and unfamiliar products which involves the self-

concept and is seen as high risk. The extensive problem-solving process is characterized by high

involvement, extensive information search from multiple sources and many outlets might be visited before

final purchase (Solomon et al. 2010)

You can argue that because we are dealing with a rather high priced product that relates to the self-

concept, the decision will generally involve extensive problem-solving. This means that much time and

effort will go into researching and that information about the product should be plentiful and readily

available. You can argue that interior design is not necessarily high priced products when compared to a

car, but the new Chinese middle-class still have limited resources and therefore tend to spend relatively

long time and energy on none-regular purchases (Silverstein et al., 2012; Doctoroff, 2013).

3.4.2. Stages in consumer decision making (RBL)

The model argues that you go through five isolated stages in order to make a purchase decision (Solomon

et al. 2010). The steps are; problem recognition, information search, evaluation of alternatives, product

choice and outcome.

Problem recognition is the stage where a gap between our current state and an ideal, or desired state, is

realized. This can be anything from realizing you are hungry and need food, to the realization that a new

level of income will allow you to get a better car. Being hungry is an example of need recognition, whereas

the new car desire is an example of opportunity recognition. Opportunity recognition will often happen

when our circumstances changes and is hence relevant when targeting the growing Chinese middle-class,

who are new to disposable income (Silverstein et al. 2012). Problem recognition does happen naturally, but

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242will often be spurred by marketing efforts. Here you differ between primary demand (encouraging

consumers to buy a product regardless of brand) and secondary demand (encouraging consumers to buy a

specific brand.

Information search is the second stage of the model and a stage which many marketers concern

themselves with (Solomon et al., 2010). Search can be broken down into internal and external search.

Internal search is our own memories of products and alternatives in the category and external search is

information from any outside sources. As the Chinese middle-class generally does not have a lot of

experience with design brands, other than knowledge of big clothing companies like Louis Vuitton and

Gucci (Silverstein et al., 2012; Doctoroff, 2013), most search will be external. Providing adequate

information about the product will therefore be critical for marketing efforts. Generally, the consumer will

search more for high-involvement buying decisions, when the purchase is considered symbolic (e.g.

clothing or design) and when there is a high perceived risk, which will be discussed further in paragraph

3.4.1.

The third stage of the model is evaluation of alternatives. Here the consumer come up with as many

alternatives as possible (the evoked set) and the ones that are seriously considered (the consideration set)

(Solomon et al. 2010). The main implication for our assignment is whether Danish design, or even the

design product category, is a part of the evoked and consideration set of the Chinese middle-class.

In the fourth stage, called product choice, the consumer makes the final purchase decision by selecting

among the previously found alternatives (Solomon et al. 2010). The consumer set up key criteria that the

buying decision will be based on, and makes purchase decision based on these. The criteria will vary greatly

from person to person, from product category to product category and depending on the complexity of the

buying decision. Very often heuristics will influence the final purchase decision and will allow the entire

process to be much faster (Solomon et al. 2010), but as we are dealing with a high involvement product, as

argued for above, this perspective is not in scope of our assignment. Lastly, outcome is how the final buying

decision effect future purchase, which is relevant from a brand building perspective but not within the

scope of this thesis.

3.4.3. Critique and update on the five step consumer decision-making model (RBL)

The five-stage decision-making model is based on the classical view of consumer behaviour, which

approaches the consumer as a rational information processing machine (Solomon et al., 2010). This

perspective is still believed to have value in situations, but it is also overly simplified and does not reflect

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242real-life consumer decisions. One of the main critiques posed in Solomon et al. (2010) is that the sequential

nature of the model does not mirror the real-life nature of decision-making. As a consumer, you will tend to

go back and forth between the steps before ending at a buying decision – not conclude one step and never

look back. Secondly, the individual perspective of the model is criticized. Both Solomon et al. (2010) and

Kongsompong et al. (2009) argue that the social influence on decision making is well established by

literature. Kongsompong et al. (2009) further argues that the social influence on decision-making is even

stronger in collectivist cultures such as China.

With inspiration from the consumer decision-making model put forth by Wim Verbeke (2000), and by

factoring in the critiques posed on the model by Solomon et al. (2010) and Kongsompong et al. (2009), the

authors of this thesis have created a consumer decision making model for Danish design products in the

Chinese middle-class. The model can be found in appendix 4, but will be presented here.

The model uses a modified classical five-step decision-making framework, and list factors that

influence each step, as well as factors influencing the entire process. It is not bulletproof, nor extremely

elaborate, but it can be used as an overview of what to have in your mind at each step, or at all times, when

working with the Chinese middle-class consumer and design products.

The model acknowledges the critique of the five-step decision-making model, by arguing that all the

steps happens in a simultaneous and back and forth process, rather than as a sequential process. Influences

specific to each step, concerning the Chinese middle-class, Chinese culture and the nature of design

products, are listed. The sources are Doctoroff (2013), Silverstein et al. (2012), the interviews conducted

(Appendix 2 and 3) and articles: Lui and Kuo (2012), Møbjerg and Hansen (2008) and a sector analysis

produced by the Danish Ministry of Foreign Affairs (Appendix 6). The influences affecting the entire process

are listed in boxes outside the five-step framework. They also incorporate relevant findings from the

culture and consumer-behavior parts of the thesis. These describe how the high-involvement nature of

design products, the general Chinese culture and the middle-class specific culture, will tend to affect the

entire process and not just the single steps.

3.5. Sub-conclusion (RBL)

Solomon et al. (2010) argues for the general importance of possessing knowledge of the consumer

decision-making process, when working with marketing. Several characteristics concerning the Chinese

middle-class consumer behaviour, in relation to Danish design, have been found.

The consumption culture of China differs significantly from the Western consumption culture, as the

Chinese consumers generally are much more unwilling to spend their money, than the Western consumers.

In addition, Shanghai and Beijing are having the highest saving rates in all of China, and the middle-class is

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242believed to account nearly 50% of their inhabitants. The conclusion is that the middle-class consumers are

rather frugal. However, the consumption culture of China is changing, and the Chinese consumers are

becoming less frugal.

Furthermore, it is found that both the concepts of the self and face are influencing the Chinese

consumers, concerning consumption of mass-market luxury products. Luxury products are seen to be able

to give satisfaction of self and maintain, save or enhance the face of the consumer. In addition, the Chinese

consumers, and especially the Chinese middle-class consumers and the younger generations have begun to

focus on hedonic needs, and not only on utilitarian needs. Moreover, the more individualistic Chinese

consumers are developing preferences for foreign products, mainly due to the symbolic value, quality and

association with the Western lifestyle.

The Chinese middle-class consumer is quite new to disposable income, and therefore tends to do extensive

product research before larger purchases are made. In addition, as design products are relatively expensive

and relate to self-image, you can conclude that a very high amount of time and effort will generally be

spend on each buying decision. This means that information about products should be plentiful and readily

available both in-store and online. The internet is found to be the main source of product information for

the Chinese middle-class, and their trust in online sources is relatively high.

The five-step decision-making process is characterized by several factors. Problem recognition will generally

stem from opportunity recognition, which is based on an increased level of income. Trust in social and

online sources characterises the long process of information search. Western brands are seen as expressing

the wanted values, though there have not been found evidence that Danish design carry any particular

value in China. The main evaluation criteria are value (functionality and quality) for money and that the

product works as a tool for social advancement – be it reaching or solidifying middle-class status. Entering

the market with a low quality offer is quick road to failure, as the Chinese middle-class arguably consists of

very demanding consumers; they are willing to spend the time required to find the right products at the

right price. Furthermore, brand is seen as very important by the Chinese middle-class. It is a way to reduce

the risk of low quality products and to make sure the products signals the intended values. Further

conclusions concerning the five-step decision-making process can be found in the model proposed in

appendix 4.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 4012424. Interviews

4.1. Research approach and design (RBL)

This thesis focuses on secondary data, data that already exists (Kotler et al., 2009), but as a method for

supplementing our conclusions based on secondary data, as well as aiming to further the 2013 perspective,

2 qualitative interviews have been conducted. As Pickton and Broderick (2005) states, the aim of qualitative

research is to find what relevant others think and to discover what issues might be important to the

situation. Further, qualitative research is crucial to international market research as the researchers will

often be unfamiliar with the market (Doole & Lowe 2008). The exploratory nature of qualitative interviews

further makes it an arguably great fit for this thesis.

The in-depth interview allows the researcher to delve further into the responses of the interviewee, and is

relatively none-directive and less structured than quantitative research (Daymon & Holloway 2011).

Daymon and Holloway (2011), Pickton and Broderick (2005) and Doole and Lowe (2008) argue that doing a

qualitative interview is an art form in itself. These untrained authors have formulated question guides

based mainly on the prescriptions in Daymon & Holloway (2011). Some of the main guidelines include; not

asking leading questions, no ambiguous questions, no jargon, phrase clear questions and ask one question

at the time. The authors of this thesis have tried to follow these prescriptions, which proved more difficult

in theory than in practice. The transcribed interviews can be found in appendix 2 and 3.

The first qualitative interview conducted is with a Chinese soon-to-be college graduate. When graduating

this summer, the interviewee will be able to get a monthly fee of around 4.000 renminbi, which will put her

in the lower end of the Chinese middle-class. The interview focuses on attitude towards design,

consumption pattern, expectation of further spending and main criteria used when buying products.

Testing some of the findings of the thesis on a person, who is soon to be in our specific target group, as well

as being from the younger Chinese generation, is arguably a very relevant perspective. Additional

interviews with a broader category of members from the Chinese middle-class would be interesting and

relevant for further research.

The second qualitative interview conducted is with Karina Trebbien, managing director for Carl Hansen and

Son’s Hong Kong based office. Carl Hansen and Son is a seller of Danish design furniture in both the Hong

Kong, Chinese and Japanese markets. Karina Trebbien has worked for various companies within the design

industry for the last 11 years, all of them doing business in mainland China. She is interviewed as an expert

on China in relation to the design category, with a focus on trends, China’s relationship to Denmark and

how culture influences the Chinese consumer.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Both interviews were conducted over Skype and there will be provided a critical perspective on this, as well

as the interviews in general, after the presentation of the findings.

4.2. Findings

4.2.1. A qualitative in-depth interview with Lily Yan (JMH)

The interview with Lily Yan provided insights to some main themes which will be presented below and

supplemented with quotes from the interview.

Denmark and design

First of all, there were shown a general interest for design products, mostly in the furniture category, but

the main implication to the interviewee, was that good design usually means good quality and longer

product lifetime. The look of the product or the story behind it, were not major themes and design without

a functional use were not mentioned. Concerning Denmark and our design tradition, there was no prior

knowledge evident, exemplified by this quote:

“Most Chinese people know very little about Denmark, we know the economy is very good and the weather

is cold” (Appendix 2 pp. 1)

The Danish design tradition is hence not a selling point that would affect the interviewee without

communicating this first. Secondly, what is known about Denmark is mostly a stereotype, which a Danish

person might not completely agree with.

Western Brands vs. Chinese brands:

Fitting well with the literature of Tom Doctoroff (2013) and Silverstein et al. (2012), there was shown a

general mistrust of Chinese brands, both health and quality wise, and a tendency to prefer western brands

because of this. A very interesting perspective on this was provided:

“Chinese products have a lot of problems. For food they might put chemicals in there and make it unhealthy.

And other things, like furniture, if you buy Chinese brands the quality is not so good and you always have

some problems with them. So, me and most of my friends think it is better to spend maybe a little bit more

money to buy good stuff” (Appendix 2, pp. 4)

She goes on to explain that Western brands in general have a better reputation, and that she and her

friends always would prefer to buy a Western brand, if money allows it. She also explains that this attitude

towards Western brands might not count for her parents – they would look more at price than brand and

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242quality. The argument that she would spend a bit more money to get a better quality, is a trend that Ecco is

also seeing in China (Møbjerg & Hansen, 2008), and it is a big part of why their sales have increased in the

Chinese market.

Buying Process:

The general process of making a larger purchase is described in quite familiar terms:

“First, I will look for information on the internet and compare the different brands. And also, I will think

about how it will help the atmosphere of my room and what it will look like. Then I will go to the market to

see the real thing and maybe buy it. I will also think about my budget, how much money I want to spend.”

(Appendix 2, pp. 2)

She further explain that the timeframe, in which she is going to use the product, is a big part of her decision

of how much to spend and what quality to buy. For things she might only use a couple of months, she

argues that design, brand and quality are not important. On the other hand, it is worthwhile to go for more

expensive products when you will use it for a long time. Contrary to the literature on the subject, she also

prefers buying nice things for her home, rather than something she can bring outside:

“I think I would prefer to buy good things for my home, because it is the place I stay every day and I invite

my good friends to come. So I would prefer to make my home look better.” (Appendix 2, pp. 2)

Criteria of evaluation:

One of the main impressions after the interview was that quality is clearly the most important evaluation

criteria. Products that you are going to use for a long time, should also last that long, and this is where the

good quality reputation of Western brands is a plus. Secondly, the look of the product is important as it

increases the quality of everyday life. Function is only mentioned briefly, but it is noted that the concept of

function might not be completely understood by the interviewee – it seemed as design should have some

form of everyday function, in order to even be considered by the interviewee. Lily argues that many of her

friends spend a lot of money on “clothes, jewels and buying some useless stuff.” (Appendix 2, pp. 3) after

graduating, and that she does not think this is a good trend. Both concerning this, and her attitude towards

savings, she is showing conservative Chinese values, but also arguing that many of her friends are lacking

them. Price is the last items on the list of criteria, but as she explains, brand, quality and price are often

related and difficult to evaluate separately. When asked if her and her friends generally prefer Western

brands over Chinese brands, she laughingly replied:

“Always, if we have enough money, we would prefer to buy the Western brand.” (Appendix 2, pp. 3)

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242She also briefly mentions that she likes products to be unique, compared to what her friends have, but she

humorously writes that down to her being a girl, and that girls do not want to have the same stuff.

Future intentions:

Design products are not high on the list of wishes for future spending. When asked how she might choose

to spend her money after graduation, and if given nearly unlimited resources, she replied:

“If I had enough money I would do something to improve myself. Learning some new skills and abilities,

learning and instrument, studying a new language or studying abroad, not use it to buy a house. Maybe

when I am old I will think about it.” (Appendix 2, pp. 3)

She also mentions investing as good option and there is a general focus on long term improvements, in

contrast to quickly going for a more extravagant lifestyle. She also argues that it is very important to save

money, as it gives flexibility in life and in the job situation. One of the interesting findings of this interview is

that long term orientation seems quite strong in this relatively young individual. This is in accordance with

Hofstede’s ranking on the cultural dimensions, but her description of her friends as being rather rash with

the use of their money, speaks against this.

4.2.2. A qualitative in-depth interview with Karina Trebbien (RBL)

The interview with Karina Trebbien provided insights to some main themes which will be presented below

and supplemented with quotes from the interview.

Denmark and China

Karina provided some interesting insights to how she sees China as a market for Danish companies, which

generally is in accordance with the literature reviewed on the subject. Firstly, she argues that it is a big and

fractured market, which is difficult to reach. This is especially true for Danish companies with limited

resources, who will have to compete with large international companies. The advertising costs in China are

tremendous, and many large companies are accepting a loss just to have a presence in China. Secondly,

there are a lot of entry barriers to doing business in China. The process is slow, bureaucratic and full of

paperwork. In addition, many Chinese tend to have little trust of brand originality when they are bought in

China, and therefore tend to buy in Hong Kong, Macau or overseas. Lastly, even though the Chinese

generally are quite aware of Western products, it is only a minority who know and care about interior

design, and even fewer that have heard of the Danish design tradition. The process of educating the

Chinese on design, is a big theme for Karina and Carl Hansen and Son, and will be explained further below.

Trends and state of furniture design:

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242One of the big growth drivers in the furniture design category is, according to Karina, the property boom

China is experiencing right now. Contractors tend to use high-end Western furniture and design as a way to

differentiate the apartments. Another new thing is that consumer shops are starting to open in Beijing and

Shanghai. She argues that the design and furniture category is only in the beginning of the growth phase in

China, but she is also very optimistic about the potential of the market:

“We are very big in Japan, which is about a 40 million dkk. market. But we expect for China to take over the

same amount within the next 10 years.” (Appendix 3, pp. 2)

The preference for textile design, which can be brought outside of the home, is a reality in China according

to Karina, but she also argues that there is an increasing tendency to spend more on home building.

Further, the Chinese consumers are not as brand conscious when it comes to furniture, as they are for

textiles in general. As more Chinese people are becoming rich enough to travel overseas, many bring home

an appetite for design, according to Karina. This means that many of the bigger players are starting to show

interest for Western design and furniture. This affects the number of big orders, but there is still some way

to go for private consumption of design for the home. Karina also argues that there is a big gap between

the younger and the elder generation concerning design, and she laughingly says that she has pretty much

given up on the elderly generation. She also experiences that people from the younger generation might

send her pictures of new purchases for their home, something she has never experienced with the older

generation.

Brand awareness and attitude towards Western products:

Karina mentions several times during the interview, that there is a general distrust of brand products

bought in China – many consumers are unsure whether the product is real or fake. The awareness of

genuine design brands - and the fact that copy-products do not possess the same quality - is rising,

according to Karina. Further, Western designers and design products are increasing in popularity as the

Chinese want them in order to distinguish themselves. Again, Karina stress that China is new market for

design:

“Do not forget that China is so new that we have not had the time to create brand awareness yet.”

(Appendix 3, pp. 2)

Karina also explain that one of the main ways to fight copying, is to educate the retailers, and possible

customers, about their design, and she stress history and craftsmanship as the main themes of their

marketing efforts.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242The Chinese middle-class:

One of the first things that Karina stressed is that that the Chinese middle-class is not the target group for

their company - not yet at least. They are spending quite a lot of energy on educating retailers and larger

customers on the value of design. One of the main barriers is that only so few know about design, but she

argues that this will change as more Chinese people get resources enough to work and travel abroad, as

well as start working for international companies based in China. She also explains that some Danish

companies, who are targeting the middle-class, are already doing quite well, and that their profits have

been rising quite a lot in the last couple of years. The main reason that other companies are able to target

the middle-class, is that the prices are quite a lot lower than the price level of Carl Hansen and Son, but as

Karina argues, it is still design even if it does not cost thousands.

When talking about how the desire to be unique, while still not wanting to stand outside of the group,

Karina has a very interesting perspective on how it is difficult to generalize about the Chinese middle-class:

“In Denmark, with the very big middle-class that we have, some people would never dream of spending a lot

of money on things – we have the “Jantelov”, but we also have people who does not mind showing off and

buys super expensive brands. I think it is the same in China basically, but I do not know the percentage who

can actually afford doing it.” (Appendix 3, pp. 8)

The lesson to take from this is that a culture might tend to like or dislike something, but there will still be a

part of the population who does not feel that way. Karina goes on to explain, that she would like to focus

more on the Chinese middle-class, but she does not think that the market is ready for them yet. But, as she

also explains, the market is moving very fast. She believes that the market will look completely different in

5-10 years. She also highlights the success of IKEA as an example of the potential of low priced design

products aimed at the middle-class.

Towards the end of the interview, Karina argues that most companies can simply not afford not to be in

China:

“The companies who are not in China – I do not think they can afford it. Especially because of how the

European market is right now. It is also very frustrating to be in China, but then suddenly you get an order of

2 million dkk., and just like that, it is all worth it.” (Appendix 3, pp. 10)

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4.3. Critical perspective on interviews (RBL)

The main critiques of qualitative interviews posed by Daymon and Holloway (2011) are that the interview is

often viewed naively and uncritically by researchers, that researchers just take the words of the

interviewee for granted and that the situation of the interview is not included as a source of data.

The interviews in this thesis suffer several limitations that should be noted. Concerning the first interview,

the interviewee is a Chinese national with good English language skills, yet we experienced that some

question were not understood completely. The inability to understand, in some cases, let to the

interviewee arguably answering what it was believed the interviewer wanted to hear. Further, the

interviewee was previously known to the interviewer, which might askew the view of Denmark compared

to the general Chinese population, as well as increasing the desire to provide pleasing answers.

Nonetheless, several answers were unexpected and the findings are presented with the limitations in mind.

The second interview suffers the same limitations as the first. The interviewer effect, when the interviewee

might modify their answers in order to please (Daymon & Holloway 2011), is also in effect here. It is

enhanced by the interviews being conducted by untrained interviewers, who found it difficult in practice to

completely avoid leading questions. Still, many answers did not, or only partly, conform to the conclusions

based on secondary research, and therefore provide an interesting perspective to the thesis. Further, as

Carl Hansen and Son mostly focus on business-to-business sales and high-class Chinese consumers, the fit

could arguably be better, although most answers are still seen as applicable to this thesis.

The authors of the thesis are aware that this is the perspectives of only two people, and should not be seen

as providing a full picture. Further interviews with design-professionals and Chinese middle-class

consumers could provide a fuller picture and would be an interesting future study. Another general note by

the authors is that formulation of short and open-ended questions are more difficult in real time than when

doing a question-guide. In addition, doing interviews online, and not being able to react to body language

and facial expressions, makes the communication process increasing difficult – especially when

communicating with the Chinese interviewee.

4.4. Sub-conclusion - interview findings (RBL)

So what does these findings mean in the light of the literature reviewed in this thesis and in order to

answer the problem statement? First of all, it is unwise to either completely confirm or dismiss the

conclusions based on theory, on the grounds of the interview findings. This is discussed further in the

interview critique paragraph. That being noted, the interviews provide two different perspectives that are

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242arguably very relevant to this thesis; the perspective of the future consumer and the seller who markets in

China.

There is no doubt that both interviewees believe Western brands to have an advantage in China. They are

believed to be of a better quality and they work well as status symbols. However, brands that or not well

known and do not have the resources to market broadly, do not have the same show-off effect. This

conforms to the writings of both Doctoroff (2013) and Silverstein et al. (2012), as well as the literature

reviewed about the cultural importance of status symbols in China.

One of Karina’s main points is that you cannot look at the culture as counting the same for every customer,

a point mirrored by Fang (2005) in his critique of Hofstede. Whether or not there is a cultural slide

happening in the younger generation, is something that Doctoroff (2013) also discuss at length, but he

writes it down to internationalization and increased resources, rather than westernization. Lily points out

several times that she sees herself as quite different from her parents, both concerning taste, dreams and

what to spend her money on. However, this might be true for any generation gap in any culture.

Concerning consumer behaviour, the main outcome of the interviews was further insights into the criteria

of evaluation and the appeals that can be used effectively in marketing. Quality, craftsmanship and history

are the main themes, which also conforms partly to the literature reviewed. That price is not mentioned as

a key area, as it is in literature, might be because Carl Hansen and Son deals with high priced luxury

furniture. That price is also low on the list, for an otherwise quite conservative Chinese student, is an

interesting finding.

As Karina argues several times, the Chinese market is still very new, and even newer concerning design.

Further, both Karina and Lily argue that brand does not tend to matter as much for furniture as for items

you can bring outside – a point also made by Silverstein et al. (2012). But the potential is definitely there,

and you have only look at IKEA to see how the middle-class have adopted Western design. Price is definitely

an issue if you want to penetrate the broad middle-class, especially concerning the older generation. This

point is made by both Karina and Lily, whereas the literature does not tend to differentiate between the

younger and older generation to a high degree. That you might have to incorporate the age demographic

quite a lot into you marketing strategy, is one of the main points to take from the interviews.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 4012425. Marketing communications (JMH)

The essence of marketing is to understand your target audience needs, meaning the customers and

consumers, and make marketing choices in agreement with these needs (Kotler et al., 2009). Making the

right marketing choices, and meeting the customers’ needs, can help a company to achieve competitive

advantage over its competitors (Doole and Lowe, 2008).

Next, this section seeks to look into marketing communications, and aims to specify how the findings

of the cultural and behavioural aspects should be implemented in a Danish design company’s marketing

communications when focusing on selling products to the Chinese middle-class. In order to clarify and

frame how the communication towards the Chinese consumers should be developed successfully, we have

chosen to focus on some of the 4P’s of the marketing mix; product, price, place and promotion as well as

strategy and appeals. The reason for focusing on these marketing elements is that the 4 p’s represent the

marketing tools a company can use in pursue of influencing their consumers. Moreover, appeals and

executions have been included in promotion, in order to gain an understanding of certain themes and

executions that often have been used in marketing communications, and especially in advertising. This

understanding should help to provide answers to how the characteristics of the Chinese middle-class

should influence your marketing communications as a Danish design company, the research problem

definition of this thesis. The field

of marketing includes a ceaseless number of theories, models and tools (Kotler et al., 2009; Doole and

Lowe, 2008; Pickton and Broderick, 2005). The choice of a specific marketing communication model or

including a complete marketing communication plan might seem as the obvious choice, in relation to the

problem definition. However, in this thesis we have chosen to implement the mentioned marketing

elements, as these have been found to be more suitable to provide meaningful and useful answers to the

thesis and problem statement at hand. We have chosen not to create a complete marketing

communication plan that includes all the elements of the IMC RABOSTIC planning model; research &

analysis, audience, budget, objectives, strategy, tactics, implementation and control, as this thesis mainly

has dealt with the aspects of research and audience (Pickton and Broderick, 2005). In addition, a well-

executed marketing communication plan could constitute a whole research paper in itself.

5.1. The 4 p’s (JMH)

The 4 p’s include product, price, place and promotion suggested by Jerome McCarthy constitute the

marketing mix of a company and thereby the instruments a company can avail oneself of in order to

influence their consumers (Kotler et al., 2009). In connection, it should be mentioned that there exist a

framework that includes 7 p’s emanating from the work of McCarthy. This framework includes the 4 p’s and

additionally three; people, process and physical evidence. These 3 p’s have been omitted in this thesis, as

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242the 4 p’s have been found to be the most important ones and provide sufficient answer for the purpose of

this paper, despite the critique of the 4 p’s found in section 5.1.5.

5.1.1. Product (RBL)

Generally when looking at a product from a marketing perspective, products are seen to have five levels,

which all add to the customer perceived value (Kotler et al. 2009). The fundamental level is called the core

benefit, and this is interesting in relation to this thesis and the target group. The core benefit of buying a

design chair is not getting something to sit on, in relation to the Chinese middle-class, they are buying the

status symbol. Having brand-name easily visible and a distinctive Western design is arguably a good start.

Further, quality and high durability are two things stressed as very important, in both the literature and the

interviews.

Tom Doctoroff (2013) argues the Chinese middle-class are looking for products that cement their middle-

class status. They are new to this extra income and lifestyle that goes with it, but they are also very aware

that they might lose it in a blink of an eye. Producing and communicating with quality, durability, longevity

and Western design in mind, while not forgetting that you are selling status symbols, is arguably key points.

The culture of gift giving, a big growth driver in the design industry (Doctoroff, 2013 and Silverstein et al.,

2012), relates to both face and guanxi and provides another opportunity for how to market your product.

Finding the middle-road between a utilitarian and hedonic product – a product that meets the want for

quality, bargain price and cementing middle-class status, is arguably a way to the hearts of the Chinese

middle-class consumers. As Katrine Trebbien points out, IKEA is doing very well selling low priced design

products to the middle-class (Appendix 3). However, she also stress that many customers are uneducated

about design and believe IKEA to be high-class and high quality. The general lack of knowledge about

design, and the tendency to buy copy products, is two of the main challenges of marketing your design

product in China, according to Karina Trebbien.

5.1.2. Price (RBL)

As Fong argues, IKEA has lowered their prices as much as 70 % in order to penetrate the Chinese middle-

class market (cited in Wang & Lin, 2009). Much of the literature consulted in this thesis, e.g. Xiao and Kim

(2009), Doctoroff (2013) and Silverstein et al. (2012) argue that the Chinese are very price sensitive and

always looking for bargain prices. Even if they have reached the middle-class, their resources are still quite

limited and they will therefore tend to spend a long time researching each purchase (Solomon et al., 2010).

Further, the Chinese middle-class is largely varied in terms of income (Doctoroff, 2013), and you will have to

decide whether you target the lower, middle or higher end of the middle-class.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242As design items will be costly for most members of the middle-class, it will generally be a high involvement

decision. This means that consumers will tend to shop around for substitutes and better bargains, which is

a factor that heightens price sensitivity (Kotler et al., 2009). This, in turn, means that the middle-class

market might not offer high profit margins per product (Silverstein et al. 2012), and partly explains why

much literature from 1990-2010 focus on selling luxury products to the richest segment. In addition, as

Karina Trebbien argues, there are many companies willing to have a financial loss just to be in China, which

can further press the price-level (Appendix 3).

5.1.3. Place (JMH)

As this thesis has looked as the middle-class in general, the geographical divide has not been a focus point.

However, China is a vast country. There is farther between Beijing and Guangzhou, two of China’s 3 largest

cities, than there is between the Danish and the French borders. Both Silverstein (2012) and Doctoroff

(2013) argue that much of the increased wealth in China, will surface in what is called lower-tier cities.

China divides its cities into tiers, but there is no official description of what these tiers constitute, and the

breakdown used in literature varies. In addition to the growth of income projected in lower tier cities,

Silverstein (2012) and Doctoroff (2013) also argue that the competition and existing brand preference, is

significantly lower than in tier 1 and 2 cities. This makes them attractive market opportunities, and a

relevant subject for further research. Doctoroff (2013) further argues that the motivations of the middle-

class in lower tier cities are more or less the same as in tier 1 and 2 cities, meaning that the barriers are

operational and not based on a different set of attitudes.

5.1.4. Promotion (JMH)

In order to help explain what a Danish design company should focus on in their marketing communications,

when promoting their company and products to the Chinese middle-class consumers, theory of appeals

have been implemented. The theory of appeals refers to the content of a persuasive message send to a

receiver, which includes the aspect of how the content appeals to the receiver, and the receiver’s reaction

on the basis of the content/appeals (Solomon et al., 2010). In connection, themes and executions that often

have been used in marketing communications, and especially in advertising, can generally be put into the

categories of rationale/emotional and further into product-/consumer-oriented appeals (Pickton and

Broderick, 2005). Emotional appeals could for instance be satisfaction, romance, pride, sympathy, whereas

rational appeals focus on elements such as performance, potential and economy (Plessis, 2000). These

appeals and executions should been seen as guidelines, as there is no right or wrong appeals to take

advantage of (Solomon et al., 2010). The choice of appeals depends upon on each individual situation.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242With regard to the Chinese consumers and the Chinese middle-class, Xiao and Kim (2009) have found that

those who are mainly individualistic minded values emotional appeals, whereas those who are mainly

collectivistic minded value rational appeals when buying foreign brands. In addition, the younger Chinese

generations tend to be more individualistic than the older generations (Xiao and Kim, 2009).

In connection, the interviewee Lily Yan explains that she prefers to buy Western brands when she

has the money for it, but that her parents probably would not, as they would focus on price rather than the

brand. From this it can be inferred that Lily, as a young Chinese girl, value emotional appeals more than her

parents in this aspect. However, Lily explains further that she is very focused on the Western brands

because of their reputation of high quality products, which is identified as a rational appeal. In addition, Li

and Su (2007) recommend that you should emphasize high quality of your products, and the social status

related to the products, when marketing to the Chinese consumers. They argue that this is mainly due to

the important of face. The above mentioned indicates that mix of both rational and emotional appeals

should be implemented in marketing communications when targeting the Chinese middle-class.

Similarly, Doctoroff (2013) argues that the Chinese middle-class consumers are split between

displaying their status and being afraid of standing outside of the group. In connection, Lily Yan explained

that she like to buy nice things for her home to make it look nice, because it is a place where she is every

day and her friends are coming too. Moreover, she explains that she rather buy things that her friends does

not have than buying things they also own, which indicates that she is not afraid of standing out in this

aspect.

Overall, it is found that Danish design companies should focus on emotional appeals in their marketing

communications, as these appeal to the middle-class and the younger generations, the up-coming middle-

class. In case a company wants to focus on the older generations who are already a part of the middle-class,

it is found that the rational appeals should be brought into focus. However, both rational and emotional

appeals should be used, when dealing with the Chinese middle-class in general. As this will appeal to

broadest audience.

5.1.5. Critique of the 4 p’s (JMH)

In connection, when using the theory of the 4 p’s it should also be mentioned that this framework has been

criticized. Schultz (2001) explains that the 4 p’s are outdated as the marketers are no longer in control of

the market, only the elements of the market not the system. It is the consumers who are in control of

market. At the time the 4 p’s were invented the marketers held most of the knowledge and information of

the marketplace, meaning the products available, price levels, location etc. However, the development and

availability of information technology have taken away the exclusive rights of these advantages from the

marketers, and made them available to the public, the consumers (Schultz, 2001). It is argued that this

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242development has outdated the 4 p’s, and their position as an instrument that every company can use to in

order to control their marketing communications. Ettenson et al. (2013) agrees that the 4 p’s are outdated.

However, he argues further that the 4 p’s are not irrelevant, but that there is need for rethinking them.

6. Discussion (RBL)/(JMH)

RBL

By putting on culture and consumer-behaviour glasses and discussing what this means in a marketing

perspective, the thesis provides insights to one of the most interesting market opportunities of our time.

Taking the perspective of a Danish design company proved harder than expected, as much literature only

distinguishes between Chinese and Western. Further, as furniture and interior design is generally seen as a

luxury good, and previously has been unaffordable for the broad Chinese middle-class, not much is written

about it. This is a great argument for how this thesis tries to break new ground, and investigate a new

opportunity, but it has also made the access to secondary sources limited. Through the qualitative

interviews, the Danish Design perspective has been investigated, but further primary research, e.g.

interviews with more middle-class citizens and design professionals, could greatly enhance the insight into

this specific subject. This would clearly be a goal for future research and would provide more weight to the

Denmark and design specific conclusions.

The literature about China is vast. There is simply no other way to describe it. China has been explored from

both cultural, organisational, management and marketing perspectives, to name a few, both in books,

journals and other theses. No culture or society is static, which means there is a need for on-going

research, in order to build current and relevant hypotheses. For China this goes double. Several theorists

argue that the Chinese middle-class can only be said to have truly existed since the turn of the twenty-first

century, and is hence quite a new research object – but the interest from marketers all over the world is

immense. And there is a reason for that. The annual average income in China is going to nearly triple from

2010 until 2020, meaning that nearly 100 million more Chinese people will join the middle-class in this

period. The era of China as a market for sourcing and selling luxury goods to the small percentage of rich

people, is over. Educating yourself on this new consumer-group and market opportunity, can prove to be

very valuable for your international career in the next 20 years, and is one of the main arguments for the

relevance and value of the knowledge presented in this thesis. Further, businesses, who are interested in

pursuing the Chinese middle-class customer, could use this thesis as a starting point for their own research.

Even when focusing on a subject as seemingly specific as the Chinese middle-class and Danish design, you

could write endlessly about the different aspects. China is very different from Denmark from nearly every

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242perspective, which is also one of the reasons why there exists a vastness of literature on the subject. This

thesis focus on culture and consumer-behaviour in a marketing perspective, and uses classic models

supplemented by current literature and research, in order to provide a snapshot of the Chinese middle-

class anno 2013. As you can discuss whether Hofstede’s cultural dimensions are still relevant to this target

group, you can also discuss whether or not the findings of this thesis will be relevant in just 5-10 years. Both

the literature consulted, and the primary research done, concludes that the culture is changing in China. As

income rises, there is a historic tendency for individualistic values to rise. Several theorists argue that China,

and especially the younger generation, is becoming increasing influenced by Western values and the

Western consumption patterns. Tom Doctoroff, on the other hand, argues that instead it should be seen as

an internationalisation of China instead of Westernisation. He argues that the individualisation is a result of

rising income level, and the freedom to spend that comes with it, and that Chinese cultural values are still

going strong. So is there a cultural slide happening in China? Will they be so Western in a generation or two

that it is no longer necessary to study Chinese culture extensively? This thesis argues that culture will

continue to be important, if less so in the future. To which extent this will happen is difficult to discern from

literature, and could be an interesting subject for future research. A main point made by Fang (2005) and

also found in our interview with Karina Trebbien, is that culture is not so general as some theorist and

marketers would like it to be: You will meet Chinese for which culture is very important and who rely

greatly on the concepts of face and guanxi, but you will also meet Chinese where this matters little. The

paradox of a collectivist culture that is starting to show increased individualism, and increased tendency for

hedonic consumption, is difficult to completely grasp, but it is the current reality of the market.

JMH

The consumer behaviour of the Chinese middle-class proved difficult to analyse overall, due to the

geographic and demographic differences within this class. Age, income and whether the consumer lives in a

tier 1 city or not, showed to influence consumption behaviour as much as being part of the ‘technical’

middle-class (annual household income from 60.000 RMB to 500.000 RMB, defined by Euromonitor and

cited in Doctoroff 2013). Greater limitation of the target group would be advised for future studies. Since

several theorists argue that the divide between urban and rural areas is significant in numerous ways,

limiting by geography is also valid. China’s system of dividing cities into different tiers can further ease this

approach.

However, the aim of this thesis is to look broadly at the Chinese middle-class, and the explorative nature of

the problem statement, means that the findings still possess value in a consumer-behaviour perspective.

The model proposed on consumer decision-making in the Chinese middle-class, is an attempt to provide a

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242general overview, on what might influence the process of buying design products for the general Chinese

middle-class consumer. It could be made more specific, depending on, for instance, the price level and the

category of the design product, as well as a more specific target group. As a starting point for further study

and a tool for assessing the different influences together, the authors believe it to be valuable.

The main value of the two qualitative interviews conducted, was to get a current and practical perspective

on the conclusions found by secondary research. The main outcome was confirmation of what was found in

literature, e.g. that the Chinese prefer Western brands, that they are using them to differentiate

themselves and that there is a cultural gap between the older and the younger generation concerning

certain attitudes and spending habits. Further, both interviews conformed to the argument that it can be a

mistake to generalise too much concerning culture. Lily Yan seemed quite conservative about her spending

habits, and also scolding her friends for spending money on Western brands that they are not able to

afford, instead of saving for a rainy day. Karina Trebbien also argued that she does not see the cultural

concepts of face and guanxi meaning a lot to the younger generation, but also points out that she sees

great difference in how culturally bound her customers are. Being aware of the actual situation, and not

just cultural stereotypes, is a main recommendation based on this – a recommendation mirrored by Fang

(2005). Further, there was not found any evidence that the Chinese, except for a very small percentage of

the richest, have any prior knowledge of the Danish design tradition. Brand does not matter as much for

furniture as other design products, but generally, branding and educating about your product is seen as

paramount to success. Looking further into branding is a relevant and interesting subject, but not within

the scope of this thesis. The limitations of the interviews have been discussed at length in part 4, and will

therefore not be duplicated here.

The marketing part of the thesis have mainly been used to answer the “So what?” question. The authors

discussed supplementing the thesis with a SWOT or LONGPEST analysis, but thought this to be too far from

the consumer focus in the rest of the assignment. Instead the 4P’s, even as a very basic theory, provided a

better framework for discussing what culture and consumer-behaviour means in a marketing

communication perspective. Appeals are included under Promotion, as it is seen by the authors as a way to

conceptualize what the findings of the thesis should mean in praxis. Products should be means for social-

advancement, a way to cement your middle-class status, and the Chinese are willing to pay a premium if

these values are properly communicated. From a marketing perspective, you can argue that the Chinese

middle-class consist of difficult consumers: They have limited resources which means they spend a lot of

time researching and looking for substitute products, they are always looking for bargain prices because of

their frugal nature, and they expect high quality of Western products. Further, the threat of copy products

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242is very high within the design category, as the Chinese in general do not frown upon buying these. As Karina

Trebbien so eloquently put it: “They see nothing wrong in copying a masterpiece” (Appendix 3, page 7).

Throughout the paper we have summed up on conclusions and recommendations in “sub-conclusions”. In

addition, limitations have been discussed in the Introduction part and touched-upon throughout the thesis.

Therefore, we will not go into great detail with these in the discussion. Further, the marketing

communication part of the assignment uses the 4P’s as a framework for practical recommendations. These

are based on the findings from the other parts of the thesis, as well as marketing insights. The conclusion

following this discussion will sum up the complete findings and recommendations of the thesis.

7. Conclusion (JMH & RBL)

The purpose of this thesis was to investigate the characteristics of the Chinese middle-class and how these

should influence a Danish design companies’ marketing communications. Three sub-questions were

formulated based on this: How is culture influencing the Chinese consumer? What characterises the

Chinese-middle-class consumer-behaviour? How the do culture and the consumer-behaviour of influence

your marketing communications?

First, several conclusions on culture not specific to the Chinese middle-class were made. It is evident from

the research of Hofstede’s cultural dimensions that the Chinese culture differs significantly from Danish

culture. In addition, the cultural concepts of face, Confucianism and guanxi are widely described in

literature to have great influence on the Chinese people. From a Danish perspective, the main influences to

be aware of are: China has a “We” and not an “I” culture where the group is predominantly put ahead of

the individual. Face and status are very important in China and respect should be shown accordingly. There

is great respect of unequal relationships, which is very different from Denmark as one of the countries with

the lowest power-distance. Lastly, relationship building is important when dealing with the Chinese, both

for business in general and as a marketing tool. Currently, there exists a cultural paradox within the middle-

class. They are increasingly becoming able to afford more expensive and none-essential products, and are

split three-ways between the impulse to display status symbols, the fear that everything can be lost as

quickly as gained, and the careful Confucian nature of not wishing to stand outside the group. However, it is

important to note that this is to be thought of as a steppingstone for greater understanding of specific

cultural situations, and not valid for all and every dealing with the Chinese culture. The Chinese middle-

class is already vast and divided by income level as well as geography and demography. This means that

further specification of target group is recommended for future studies.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Secondly, the needs of the Chinese middle-class are moving from focusing predominantly on utilitarian

needs, to also focusing on hedonic needs. The need to solidify middle-class status by consumption of

products with the right signal value is found to be one of the main motivators of their consumer behaviour.

They still possess limited resources and seek to avoid risk in purchases to a high degree. In addition, the

purchase of design products, which have symbolic value in addition to being costly, will tend to be high-

involvement decisions. This means that a long time is spent on each purchase, and that all the steps of the

consumer decision-making model will generally be considered. Brand is seen as a very important tool of

reducing risk and the time spend on each purchase. Further findings are presented in the model in

appendix 4.

Third, the interviews conducted proved useful in order to test some of the preliminary findings of the

thesis. Findings in contradictions with literature were few, and one of the main values proved to be insights

into the relationship between China and Denmark, as well as the current state of design in China. Danish

design does seemingly not have large brand value in China, as it arguably does in Europe. The Chinese

middle-class is still very new to design and need education on this. On the other hand, they have a large

disposition towards Western brands. This is mainly due to the reputation for quality and the expressive

values of the products. Furthermore, the cost of advertising in China is massive and the competition from

big brands makes it a difficult market to penetrate, for the generally small Danish design companies.

Lastly, several conclusions have been drawn in relation to how the findings of the thesis should influence

the marketing communication of a Danish design company. First of all, there is no doubt that the decision-

making processes of purchasing design products will be high-involvement for most members of the middle-

class. This means that a plethora of information on the products should be readily available, as research will

often be done extensively. The internet based media is found to be a relevant channel for making

information available, as trust and usage of online sources is high. Further, as there in general is low

knowledge about design products, educating your customers on your product is paramount. A mix between

rational and emotional appeals is needed in order to break through to the Chinese middle-class.

Communicating that your products will help signal status and will withstand the test of time for a great

value price, is a way to hit the middle-ground between rational and emotional appeals, which can prove

effective for penetrating the middle-class. Additionally, focusing messages on how the products can be

consumed socially is a way to bridge the split between the collectivist and individualistic tendencies of the

middle-class. The Chinese middle-class arguably consists of quite difficult consumers. They require bargain

prices, high quality and the security of well-known brands, and they are willing to spend the time required

to find these products. You will not be able to enter this market with a low quality design product and

expect to sell solely based on being a Western brand. Their eyes are bright and they are willing to spend

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242large percentages of their resources on status-symbols, such as design products, but only if you can

communicate how your offer fit all of these requirements. As a final point: The importance of brand and

brand building, when marketing to the Chinese, has surfaced several times in both the primary and

secondary research of this thesis. Further research in this area could be very relevant in order to reach the

enormous potential of the rapidly growing Chinese middle-class.

8. References

8.1. Books

Daymon, C., & Holloway, I. (2011). Qualitative Research Methods in Public Relations and Marketing

Communications. Second Edition. Routledge.

Doctoroff, T. (2013). What Chinese Want: Culture, Communism and China’s Modern Consumer. Palgrave

MacMillan.

Doole, I., & Lowe, R. (2008). International Marketing Strategy. 5th edition. Cengage Learning.

of 74

Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Hofstede, G. (1991). Cultures and Organizations: Software of the Mind. New York:

McGraw-Hill.

Hofstede, G. (2001). Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations

Across Nations (Second Edition). Thousand Oaks, CA: Sage Publications.

Kotler, P., Keller, K. L., Brady, M., Goodman, M. & Hansen, T. (2009). Marketing Management. Pearson Education Limited.

Lewis, R. D. (2006). When Cultures Collide: Leading Across Cultures. Third Edition. WS Bookwell.

Palmer, E. (1969). Hermeneutics. Northwestern University Press.

Pickton, D., & Broderick, A. (2005). Integrated Management Communication. Prentice Hall.

Plessis, D. D. (Eds.). (2000). Introduction to Public Relations and Advertising. Juta Education (Pty) Ltd.

Silverstein, M. J., Singhi, A., Liao, C. & Michael, D. (2012). The $10 Trillion Prize: Captivating the Newly

Affluent in China and India. Harvard Business Review Press.

Solomon, M. R., Bamossy, G., Askegaard, S. & Hogg, M. K. (2010). Consumer Behaviour: A European

Perspective. Fourth Edition. Prentice Hall.

Trompenaars, F. (1994). Riding the Waves of Culture: Understanding Diversity in

Global Business. Chicago: Irwin.

Varner, I., & Beamer, L. (2011). Intercultural Communication in the Global Workplace (International

edition). McGraw-Hill.

8.2. Journal articles

Adams, R. (2011). The Utility of Prestige: Chinese and American Hedonic Ratings of Prestige Goods. Journal

of Global Marketing, 24:287-304.

Batra, R., & Ahtola, O. (1991). Measuring the hedonic and utilitarian sources of consumer attitudes.

Marketing Letters, 2(2), 159–170.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Chen, J., & Kim, S. (2013). A Comparison of Chinese Consumers’ Intentions to Purchase Luxury Fashion

Brands for Self-use and for Gifts. Journal of International Consumer Marketing, 25:29-44.

Cui, G., & Liu, Q. (2001). Executive insights: Emerging market segments in a transitional economy: A study

of urban consumers in China. Journal of International Marketing, 9, pp. 84–106.

Dong, K., & Liu, Y. (2010). Cross-cultural management in China. Cross Cultural Management: An

international Journal, Vol. 17, issue 3, pp. 223-243

Earnhardt, M. (2009). The Successful Expatriate Leader in China. Graziadio Business Review, 12(1)

Ettenson, R., Conrado, E., & Knowles, J. (2013). Rethinking the 4 P’s. Harvard Business Review, p. 26.

Fang, T. (2005). From “Onion” to “Ocean” – Paradox and Change in National Cultures. International Studies

of Management & Organization. 35(4), 71-90.

Gadamer, H. (2006). Classical and Philosophical Hermeneutics. Theory Culture Society, 23:29.

Geddie, M. W., DeFranco, A. L., & Geddie, M. F. (2005). A comparison of relationship marketing and

Guanxi: Its implications for the hospitality industry. International journal of Contemporary Hospitality

management, Vol. 17, Issue 7, pp. 614-632.

Guirdham, M. (2005). Chapter 7: Skills for working abroad. Second Edition. In Communicating across

Cultures at Work, pp. 265-286.

Hofstede, G. (2001). Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations

Across Nations (Second Edition). Thousand Oaks, CA: Sage Publications.

Jobs, C. & Gilfoil, D., M. (2012). Less is more for online Marcom in emerging markets: Linking Hofstede’s

cultural dimensions and higher relative preference from Microblogging in developing nations. Academy of

Marketing Studies Journal, Vol. 16 issue 2, pp. 79-96.

Kongsompong, K., Green R. T., & Patterson, P. G. (2009). Collectivism and social influences in buying

decision: A four country study of inter- and intra-national differences. Australasian Marketing Journal, Vol.

17, pp. 142-149.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Li, J. & C. Su. (2007). How face influences consumption: A comparative study of American and Chinese

consumers. International Journal of Market Research, 49(2), 237-256.

Salacuse, J.W. (1998). Ten ways that culture affects negotiating style: some survey results.

Negotiation Journal, vol. 14, no. 3, pp. 221-240.

Schultz, D. E. (2001). Marketers: Bid farewell to strategy based on old 4 P’s. Marketing News

Skinner, Q. (1986). The return of grand theory in the human sciences. Cambridge University Press, pp. 21-

39.

Soares, A. M., Farhangmehr, M., & Shoham, A. (2007) Hofstede’s dimensions of culture in international

marketing studies. Journal of Business Research, Vol. 60 issue 3, pp. 277-284.

St-Maurice, I., Süssmutg-Dyckerhoff, C., & Tsai, H. (2008) What’s New with the Chinese Consumer. The

McKinsey Quarterly (2008), pp.1-8.

Verbeke, W. (2000). Influences on the consumer decision-making process towards fresh meat: Insight from

Belgium and implications. British Food Journal, Vol. 102 No. 7, pp. 522-538.

Wang, C. L., & Lin, X. (2009). Migration of Chinese Consumption Values: Traditions, Modernization, and

Cultural Renaissance. Journal of Business Ethics, 88:399-409.

Wong, N. Y., & Ahuvia, A. C. (1998). Personal Taste and Family Face: Luxury Consumption in Confucian and

Western Societies. Psychology & Marketing, 15(5), 423-41.

Xiao, G., & Kim, J. (2009). The Investigation of Chinese Consumer Values, Consumption Values, Life

Satisfaction, and Consumption Behaviours. Psychology & Marketing, Vol. 26(7): 610-624.

8.3. Internet articles

Backaler, J. (2010). Inside China’s Consumer Culture. (1.5.2013)

http://www.forbes.com/sites/china/2010/08/12/inside-chinas-consumer-culture/

International Monetary Fond. (2013). Statista. (1.5.2013)

http://www.statista.com/statistics/19323/total-population-of-china/

Lui, V. & Kuo, Y. (2012). Affluent holds key to corporate success. (3.4.2013)

http://europe.chinadaily.com.cn/epaper/2012-12/14/content_16016726.htm

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http://europe.chinadaily.com.cn/epaper/2012-12/14/content_16016726.htm

http://www.statista.com/statistics/19323/total-population-of-china/

http://www.forbes.com/sites/china/2010/08/12/inside-chinas-consumer-culture/

Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Ministry of foreign affairs Denmark. (2012). Sector analysis: Furniture and Design.(10.3.2013)

(Note: Link not available without username – enclosed in appendix 6)

Møbjerg, L. & Hansen, L. M. (2008). Dansk design hitter i Kina. (3.4.2013)

http://www.dr.dk/Nyheder/Penge/2008/06/19/105827.html

(Note: Translated to English in appendix 5)

(THC) The Hofstede Centre. (2010). The Hofstede Centre: Strategy, Culture, Change. (13.03.2013)

http://geert-hofstede.com/index.php

(Note: 2010 has been chosen as year of reference, because this is the most recent year that the

cultural dimensions have been updated)

8.4. Others

Hofstede G. (2010). Hofstede – example of power distance. HOFSTEDEinsight, (1.5.2013)

http://www.youtube.com/watch?v=JZqX0z3g5bE

Kure, Nikolaj. Philosophical Hermeneutics. ASB Class lecture. 2010: 1-28.

8.5. List of abbreviations/acronyms

THC = The Hofstede Centre

GDP = Gross domestic product

9. Appendices

Appendix 1 – Comparison of the cultural dimensions of Denmark and China

http://geert-hofstede.com/countries.html

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http://geert-hofstede.com/countries.html

http://www.youtube.com/watch?v=JZqX0z3g5bE

http://geert-hofstede.com/index.php

http://www.dr.dk/Nyheder/Penge/2008/06/19/105827.html


Appendix 2 – Transcription of interview with Lily Yan

I = Interviewer

LY = Lily Yan

I: First off, Lily, when I say the term design, what does that mean to you? What do you think of?

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242LY: I care about design and furniture. For me the quality is the most important thing and how it looks like. I

think I prefer the western style of furniture more than the Chinese style.

I: I can ask, if you could rank some factors of what you consider most important – you said the most

important was quality, but if I mention functional benefit, brand name, design, price and where the product

comes from, how would you rank it?

LY: Quality is most important. The second is how it looks. The third is function and I do not really care about

the brand, but I think that in some cases, if you choose the better brand the quality is better. But I just care

about quality and then maybe the brand will influence my decision, as good brands can have better quality.

Where it comes from is not that important but I prefer the products from Western companies, because

they have better reputations.

I: You said that you prefer western brands over Chinese brands, is that only because of the quality of the

goods?

LY: Yes, mostly because of the quality, but also because the Chinese furniture always look the same and the

western furniture look more beautiful.

I: Did you know that Denmark is quite famous in Europe for creating high quality design products?

LY: Not really. Most Chinese people know very little about Denmark, we know the economy is very good

and the weather is cold.

I: When I say interior design, it could also be small figures or vases or lamps, not only furniture.

LY: Danish people are very creative right?

I: Yes, Denmark is famous in most of the world for creating design products, especially furniture and

interior. Do you buy design products? If two products are about the same, but one is more expensive

mostly because of the brand name, would you choose the expensive one over the cheap one if the quality

was more or less the same?

LY: Yes I think so, especially in furniture, because I may use it for many years, so I prefer to buy the better

designed one and the better brand. For some small things, if I just use it for a short time, I do not care

about the brand and the quality so much.

I: When you buy stuff like this, how do you do it?

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242LY: First, I will look for information on the internet and compare the different brands. And also I will think

about how it will help the atmosphere of my room and what it will look like. Then I will go to the market to

see the real thing and maybe buy it. I will also think about my budget, how much money I want to spend.

I: Do you think that in the future, when you are going to earn more money, would you spend more on

design?

LY: Yes I do. Now for Chinese people, especially if you have enough money, the quality of life is very

important. If you buy some good design products I think it will make you feel better in your daily life.

I: What do you think about buying an expensive product that you have only in your home? Let us say that

you buy a good looking designer lamp or an expensive handbag which you can bring outside? What would

you prefer?

LY: I think I would prefer to buy good things for my home, because it is the place I stay every day and I

invite my good friends to come. So I would prefer to make my home look better.

I: When you buy something, does your family or friends have any influence?

LY: Yes of course. I think my parents does not have a big influence on me, because they are from a different

generation, but my friends do have some influence on me.

I: Would you buy something your friend already have that you liked? Or would you try to buy something

different?

LY: I think I will buy something else, because for girls, we do not want to buy something that our friends

already have.

I: If you had a nearly unlimited amount of money, what would you prefer to spend it on? Would you buy a

house, go traveling or?

LY: For me, if I had a lot of money, first I would invest some of it instead of going traveling. Traveling is

something I want to do when I have enough spare money. Buying a house in China now is not a very good

idea.

I: Do you think you would use your money differently than your parents would?

LY: Yes quite different. If I had enough money I would do something to improve myself. Learning some new

skills and abilities, learning and instrument, studying a new language or studying abroad, not use it to buy a

house. Maybe when I am old I will think about it.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242I: What is your attitude towards saving? Will you use the money as you earn it or will save in the future?

LY: I think it is very important to save money, because if you do not have enough money you cannot do

other things, like investments. Some of my friends spend all their salary, and then if they want to change

jobs, they have to think a lot about it, because if they change job they are afraid they will lose the salary

and not have money to use. I think it is very terrible for young people. You should always have some

savings to make your life more flexible. Now after you graduate, many spend a lot of money on clothes and

jewels, and buying some useless stuff. You know in China, nearly everyone have an Iphone, even if their

salary is not good, they may spend money on expensive stuff. I do not think it is very good.

I: Among your friends, do you know what the attitude towards western brands v.s. Chinese brands is?

LY: (Laughs) Always if we have enough money we would prefer to buy the western brand.

I: Could you put some more words on that?

LY: Chinese products have a lot of problems. For food they might put chemicals in there and make it

unhealthy. And other things, like furniture, if you buy Chinese brands the quality is not so good and you

always have some problems with them. So me and most of my friends think it is better to spend maybe a

little bit more money to buy good stuff.

I: Do you think it is the same for your parents?

LY: For my parents, they might compare a lot, but will think price is more important.

I: One last question. You say you use the internet quite a lot when you research products. Are there any

special website you are visiting?

LY: (Laughs) We normally use google. Like you.

Appendix 3 – Transcription of interview with Karina Trebbien

I = Interviewer

KT = Karina Trebbien

I: First of all we would like to know a bit about you and your background, what your experience is with

china so far is, and a bit about your company:

KT: My background, I have been working and living in Hong Kong for 11 years. I also have a bachelor degree

in business and marketing. After that I have been doing an MBA with Henley her in HK, I graduated in 2007.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242I have been working with china the first 7-8 years in Hong Kong. I mainly did traveling, purchasing all over

china, trying to locate the factoires. And then the last 5 years I have been mainly on the sales side, where I

have concentraded on HK and China.

I: Okay, so for the same company all these years or for different companies?

KT: No, it has been for 3 different companies in total.

I: Within the same product categories or completely different ones?

KT: Yes, more or less, it has been within design, Danish design furniture products. And the last 5-7 years, it

has been high end products. My previous company was Paustian which is was an agent for. And on the

sales side, where I did furniture projects – implemented furniture for Coloplast in their US office and in

their China factories. Quite big orders with more than 1000 workplaces.

I: So you have been all over China in different design categories so far?

KT: Yes.

I: Could you tell us a bit about the company you are in now?

KT: Yes, currently I am working at Carl Hansen and son. It’s a third generation company in Denmark, the

owner used to live in HK himself for 10 years in 1980’ties, where he was the managing director for an East

Asian company. It was small shipping company that used to be very big in the far-east. It does not exist

anymore. But anyway, our owner had a big passion for HK and China and he had the idea that he wanted to

succeed out here, even though it is not an easy market. Especially not for high end products, like furniture,

and especially not what Carl Hansen is famous for: We are famous for solid wood furniture. This is a difficult

product in China, especially because there are so many copies. And secondly, there are a lot of entry

barriers. When we are shipping cargo to China, they like to stop our things in custom clearance, but it is

also because we don’t have a registered company yet in China. We are very big in Japan, which is about a

40 million dkr market. But we expect for China to take over the same amount within the next 10 years. But

it is very much in the beginning phase. Until we establish a home company in China, I think we will meet

these problems in custom clearance all the time.

I: Our research have shown that some of the entry barriers are getting loosened a bit. You talked a bit

about your target group, but in China, who are you mainly selling to? Is it mainly business or private

consumers?

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242KT: I need to add one thing, do not forget that furniture is often lacking behind the textile business. The

thing is, branding of textiles is very big in HK already, all the big French brands like Louis Vuitton and Gucci,

they are all here. And many mainland Chinese come to Hong Kong to buy products, because they trust that

the brand is the original brand.

I: Yes, we saw some of the numbers for that. It is a very large amount of mainland Chinese who does that.

Many high end brands are bought in either Hong Kong or Macau.

KT: Exactly. And the thing is, furniture is lacking a little bit behind that, or it has. What I have noticed is, that

it slowly also pick up here in Hong Kong. Many from mainland China are coming here to buy also furniture.

I: So the trend in Hong Kong is kind of affecting main land China bit by bit?

KT: Yes very much. So far, to the question of who our consumer is – it is definitely the B2B market that is

our biggest market. It is definitely the contract market where the highest sales are.

I: One of the biggest growth drivers in furniture is apparently the many building projects around China, with

big office buildings and so on, and they are very interested in minimalistic design, that you can argue

Denmark is famous for.

KT: The property boom in China, where they now start to want high end furniture in order to differentiate

themselves and compete – to sell these apartments, they have started to go for Western brands, designed

by western people, to put in some of these buildings. We have seen an increased trend of this. And another

interesting trend is that in Beijing and Shanghai, that there has been opened up consumer shops. I do not

know if you have seen design republic in Shanghai?

I: It is one of the retailers who sell some of your products right?

KT: Correct.

I: Yes, then we have checked that one out.

KT: Also in Beijing we have Lang Guo Ford which is a high end brand warehouse from HK. A retail shop.

They are also doing textile and cosmetics and furnitures. And then we have KonWhan Shop, which is from

England, that has also opened up a show room in Shanghai. It is not selling fantastic yet, but they do buy

some pieces, but its helping us to build design awareness in China.

I: One of the main things we have read, over and over again when researching, is that Chinese people still

prefer design, and especially high end design, that you can bring out of the house, to show off and show

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242that you have this. Not just something you have in your home, but more like fashion, Lous Vuiton bags

more than a design chair they can have in their home. Is this something you also see?

KT: Yes absolutely. And also, they are not so brand conscious when it comes to furniture. So right now, we

are educating, the people in China about brand, about our furniture brand, and because of the brand

building awareness we have had, because we have been represented in design republic and Ford, we have

been contacted a few times with some very interesting projects. For example, oh is okay I do not tell the

customers name?

I: Of course, of course.

KT: We did a project last year in Shanghai. Well you can look it up, I just do not want to quote any customer

names. Because we are all competing a lot. So, a customer in shanghai last year, who said they wanted to

open up a Scandinavian design museum, and they had seen our furniture in design republic, and at the

Milan Fair as well. And they contacted us, and it was not a small order. It was in Danish size, a super big

order. It was in 2 million Danish kroner, no sorry 3 million Danish kroner project. They just placed the

project, and we were like: Wow. It just came out of the blue. So the scale of the project if you get into

something, they are quite big. They bought 600 chairs for the design museum that is going to open. And I

recently had another project, it has not been delivered yet, but it is confirmed. It is also a very interesting

project, it is the Chinese government, or actually not the government, but it is an artist from HK who are

going to open a conference-restaurant-hotel-center, that are going to host all the G8 and G20 meetings in

China. And it is at that level, so it is going to be used for government purposes. And they said they wanted

to have furniture from our company. After the project, the architect had put in our furniture absolutely

everywhere, to lighten up the place. So that is another trend we see, there is some brand building going on

in between the big players, who also have the money to travel, but as you know, the distance between rich

and poor in China is just tremendous. So it is only very few people who knows about it.

I: One of the really interesting things you mentioned, is the way you are educating people about design.

Could you perhaps elaborate a bit more on how you do that as a company?

KT: Yes. Firstly, with all our retailers we have in China, we educate the staff. How to sell the furniture and

how to maintain them, we tell them about the craftsmanship behind the furniture, and that it is iconic

design, plus how much effort and craftsmanship that have been put into creating these pieces and that they

last for years and years to come. It is very important to have our strategy about that in China, in order to

compete against the many copies that we find in China. That is the only way we can distinguish ourselves

you know. And of course, in order to do that we need to educate them. Another thing is our PR strategy in

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242China. We have only just started ourselves, we have not even selected a PR company yet, but it is in the

pipeline. We have had interviews with various. And of course we are not only going to do PR in China, we

are also going to host evening events where we are educating Chinese about our furniture, showing them

small films maybe, about Carl Hansen and Son. How we developed furniture in the 1950’s and how it is

developed today.

I: So the history part is also one of the themes that the Chinese seem to respond to?

KT: Absolutely. We tell them about history and the craftsmanship behind it.

I: So they are the main themes of your marketing efforts?

KT: Yes.

I: Is there anything else that Chinese people react positively to when you tell them about your products?

KT: Do you mean the contract market or in general?

I: Just in general, if there is any other themes or good things that you tell about your product when you are

trying to sell a product or negotiating?

KT: I am telling them it is Danish design. They are very aware of western brands, and also we have

cooperation with a few architects that have done furniture for us, who are quite famous. We had Ted

Fernando, who did a chair for us. And to be honest, it is just all about PR, but he is a very famous architect

in China. Even though he is Japanese. When he spoke in China, 12.00 people came to listen to his speech. If

it was a Chinese it would never attract that many people. So we have noticed that western designers

behind a product, it attracts customers, not if it is a Chinese person. Not yet. They are still not there. They

want the western brands in order to distinguish them. Like they do with Louis Vuitton hand bags.

I: That was one of the other things we were hoping to ask you. Do you see any evidence that the Danish

design history, which is quite famous in Europe at least, that being Danish design is a sign of it being a good

product – that it is a plus to be a Danish design company. Is there anyway where that counts in China? Or

they only distinguishing between western and Asian brands?

KT: Sorry can you repeat the last bit?

I: Yes. Do you know if they see Danish design as anything special, or do they only think about Western

design, and then it does not matter whether it is from Denmark or from Spain.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242KT: No no, absolutely. They see Danish design as something special, they do. But again, it is only a minority

who knows that stuff. It is not the middle-class, that knows yet, but as Denmark is such a small country,

that to build brand awareness about Denmark, it is something we have to lift together. But I honestly do

not think that Denmark is very good at that. It is a shame, because we are competing a lot, but if we went

more together, we could probably lift this awareness much quicker. Because the big players, they are aware

that Danish design is one of the frontrunners within especially furniture and design in general. Some of

them know, they do. And they have a huge interest. Last week we had a few Chinese people visiting our

factory in Denmark after the Milan fair. They are interested in seeing our production line. But these are the

Chinese people who have often lived overseas, like in the US.

I: So it is definitely not the main part?

KT: No, and I will say that their English is still quite poor, compared to that they have been to the US, but

they have had some kind of outside influence. Because, do not forget that China is so new that we have not

had the time to create brand awareness yet.

I: So it is still very much in the building phase?

KT: It is very much in the beginning phase yes. I would not even say it is the growth phase yet. Well, of

course it is in the growth phase, with the amount of orders we have had we have to say it is in the growth

phase, but compared to the size of the country I am not so sure. But it is a difficult market, it is a very

fragmented market, it is big. Even though you have a shop in Shanghai you do not reach the consumers I

Beijing and vice-versa.

I: Yes, the distance and the difference in the consumer groups just make it very difficult compared to the

smaller European markets that we know so well, which is also why this is a very interesting subject.

KT: Yes. And also, advertising in China is so so expensive. It is even more expensive than in Hong Kong. It is

like they know that all of the western brands want to be there. And that they are willing to have a loss just

to be there.

I: Yeah many companies are apparently doing that right now.

KT: Yes. And that is very hard for the Danish companies. We do not have the resources like the big French

brands.

I: Do you use the internet in any way, to advertise or market your products? That is one of the things we

have looked into as a cheaper alternative to broad media advertisement.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242KT: We have translated our website into Japanese, but not yet into Chinese.

I: But as you are mostly business to business, it might not be that relevant?

KT: At one point I did look into an online webshop in China for brands. I cannot remember the name now.

Anyway, they looked very interesting and promising. I had a designer in HK who is super famous, who

actually recommended me the website because he had been creating a few things that has sold on the site.

But how much he have sold I don’t know, but it is definitely something I am thinking about doing. But right

now we have to franchise our products, and we would rather want to do it ourselves, instead of letting

other companies sell it. But it could be a channel, we just do not have the time to let into it yet. It is only me

out here and then we have one person in Shanghai.

I: So it is on the to do list but not on the top?

KT: No it is not on the top of the list, but it is definitely something we have talked about could be a

potential distribution channel into China.

I: You talked about that the general middle-class does not know anything about design and Danish design,

and do not really care for branded furniture?

KT: It was not meant that harsh. Some of them are slowly learning, they have a desire as well to travel

overseas, to visit all the furniture fairs we have in Cologne and Milan, and they learn about the factories

back home. But it is not our biggest market yet. That is probably because we are very high end. I think other

Danish companies, for example Hay in Shanghai, which could be an idea for you to speak to as well. Hay is

doing those Pinochio carpets you have in Denmark, they have also opened a retail store. They are targeting

the middle-class also in Denmark. It is still design, so it is an interesting company to look at I think. I know

they are not doing too bad in China, because their prices are lower.

I: You say there is a tendency for more people to become interested in design. Do you see a big divide

between the older generation and the younger?

KT: Oh absolutely. There is a very big trend there. The older people still like the heavy old furniture, the

dark wood, the Chinese history. And they like to buy copies. They do not see any wrong in copying a

masterpiece. That’s their philosophy and culture and it is very difficult to compete with.

I: Especially from a design perspective.

KT: Exactly. The elder population, I have given up. It is too difficult. But the younger generation, they have

an eye for design, they started to like light color wood and I think that is the reason why Scandinavian

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242furniture is so popular. Because it used to be only plastic and steel and glass. You know, the bling-bling

furniture, that was made cheap in China and was full of chemicals and not environmental friendly. But the

younger generation, I have noticed, they have started to value wood, and especially light color wood, and I

think it is one of the reasons why, for example, the Japanese consumer goods store Mochi is doing so well

out here. It is because this younger generation have started to begin wanting these goods. But also, in Hong

Kong and in Shanghai, the space is not too big, so the younger generation cannot afford big properties and

they live in smaller properties, so they need smaller scale furniture which is lighter in color and not the dark

color ones. So definitely I see a big difference.

I: One of the barriers for furniture and design that we have looked into, is that the Chinese generally do not

invite people to their homes, that at least it is quite a rare incident that they do that, is that something you

take into consideration?

KT: Hmmm, to be honest I do not know. I think it is in many countries where there is no tradition for

inviting people to your home. It is a Danish thing I think. I have lived in Germany and England, and you do

not invite people to your home. You mostly go out, it is a very Scandinavian thing that we are so proud of

our home. In England, Germany and France they still buy design products though.

I: One of the main things we have found is that the Chinese want the things they buy to be status symbols,

but status symbols does not really work if no one is seeing them. That might be why they choose to spend

more on designer handbags or a nice car, because people will see that.

KT: To be honest, I have been invited home by a few Chinese people, and some of them I was completely in

shock. Why invite me home when the homes look like that? You come home and the mother is laying on

the stove completely black of coal and freezing cold. And I was like, what am I supposed to do here? But I

have also been invited home where they have been truly proud of their homes. So I do not know if it is a

new trend, but it has happened that I have been invited home. But also, I have Chinese colleagues who

have sent me photos of their homes because they are so proud of the decoration. That is mostly young

people.

I: Of course it is difficult for you to generalize just based on your own experience, but it is just your own

experience we are interested in. And we know that it might not count for all of China and Hong Kong. I

think there is a few more things we would like to get into, but we have been around most of it. There is a

couple of things we would like you to comment on specifically. Do you have any experience with concept of

face and guanxi in China, and whether this has an influence on what the Chinese people are buying?

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242KT: I do not know. Yes the elder generation, but now a days, the younger generation do not follow the rules

so much any more. They have been so influenced by living abroad, studying abroad or working abroad for

foreign companies or something like that.

I: We know it is a difficult question but we hoped you had some thoughts on it. You have already

mentioned this, but do you feel that brand is more important to the Chinese people than it is in Denmark?

KT: Yes I think so. But again, the amount of people who are coming to Hong Kong to buy, I do not know how

big a percentage that really is. In Denmark, with a very big middle-class that we have, some people would

never dream of spending a lot of money of things – we have the “Jantelov”, but we also have people who

does not mind showing off and buys super expensive brands. I think it is the same in China basically, but I

do not know the percentage who can actually afford doing it. I just know, that it is insane here in Hong Kong

how you see them line up and they come out with 5-8 handbags at 50.000 apiece. They are dressed from

top to toe in Prada clothes and designer brands. We western people cannot even afford that, and we would

not be interested in showing ourselves off like that. Is that answer enough.

I: That is great yeah. Then I think we are coming to our last question, which might also be a bit difficult…

KT: Oh regarding your question with the guanxi, of course relationship building is super important. In China

more than in Denmark. The reason we have had those orders, is because of our relationship building in

China. They trust us, they trust our product and they trust our brand. They know that they are more or less

buying our connections, when they buy our brand. Our connection to the outside of China. They have a

purpose for buying our products – they want to lift what they have created to a higher level, in order to

attract more people. It is a mutual thing. For sure, guanxi is super important and also in the young

generation.

I: Especially in a business to business perspective relationship building must be really important.

KT: Absolutely.

I: As the last thing, we would like to hear your thoughts on the potential for Danish design products for the

Chinese middle-class. You said the company Hay is doing that. We are not talking high-end design, but

cheaper products. As you said, still design, but design in the cheaper end.

KT: I think there for sure is a potential. If you look at IKEA, it is a lower end product, but in China it is seen as

almost high-end. Slowly, slowly, the Chinese are learning. I have met some Chinese people who say: “Hmm

not so good quality”. So they have slowly started to see this. But it was the same in England. In the

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242beginning English people thought that IKEA was high-end products. But, for sure there is a market for the

middle-income group. I think IKEA is doing really well in China, although I do not have numbers.

I: Yeah I think you are completely right. We visited an IKEA store when we were in China and there was a

crazy amount of people.

KT: And we should be thankful for IKEA, because they have been teaching them to buy light color wood.

IKEA have been education them for more years than us, so thank god for that. But, for sure I think there is a

market. They like it. There is the Danish BoKonsept. When I started in China 11 years ago, they already had

some of their first shops here. But at that time they did not sell anything. It was very expensive even though

it was manufactured in China. But know they are doing well, I know they had a large surplus the last two

years. It could be an idea for you to talk to them as well.

I: We have looked into that, but it can be difficult to get in contact with the right people.

KT: Oh yeah, I could imagine. Us people dealing with China are always so busy!

I: Exactly! That is a thing we are hearing all the time.

KT: There is a lot of adversaries and there is a lot of barriers so you get stuck all the time. Paper flow and all

that. It is very time consuming to work with China.

I: I think that is it. Thank you very much for your time.

KT: I just want to say that we also want focus more on the middle-class. It is not for us yet, but I truly

believe that in 5 to 10 years time, the Chinese market is going to look so different than it does now.

Already, what I have experienced the last 10 years is unbelievable where we are now. So it is moving very

very fast, and I would more face it like that. The companies who are not in China, I do not think they cannot

afford it. Especially because of how the European market is right now. It is also very frustrating being in

China, but suddenly you get an order of 2 million Danish kroner, and just like that, it is all worth it.

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Appendix 4 – Model on consumer decision making

9.1. Appendix 4 – Model on consumer decision making

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Appendix 5 – Translation of the article “Dansk Design hitter I Kina”

Article – Dansk Design hitter I Kina by Lene Møbjerg and Lars Møller Hansen (2008)

Original found at: http://www.dr.dk/Nyheder/Penge/2008/06/19/105827.html

Danish design is popular in China.

Clothes, shoes, furniture and electronics. The Chinese are shopping like never before, and there is status in

buying expensive foreign brands. This is great for Danish design

Beyond Yo has recently bought a pair of shoes in Ecco’s store in Shanghai:

- After I learned about Ecco, I will gladly pay the cost of the shoes, because price and quality goes hand-in-

hand, he tells the Money segment of Danish Radio.

And Beyond Yo is far from the only Chinese who goes for foreign brands. It is the case for a rising number of

the middle-class, existing of 100-300 millions Chinese.

Consumption is the driver

Last year, consumption was the driver behind the economic growth of 11,4 %, in front of both exports and

investments. And this is a good thing for Danish design companies.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242- China is one of Ecco’s fastest growing markets. From 2006-2008 we have doubled our turnover, which

means, that by the end of the year we will turnover more than 300 million dkr, says Michael Hauge

Sørensen, director of Ecco Asia, to the Money segment of Danish Radio.

The Danish flag is in the shoes

Ecco has 331 stores spread between 126 cities in China. And the shoe-producer makes an effort to show

the customers that they are a foreign brand. Several shoes has small Danish flags on them, and both in the

stores and in advertisement, the shoe-producer tells that is it supplier for The Royal Family of Denmark.

- It is important to us to show the consumers that we have very strong Danish roots, and that we put a

great amount of effort into design, Michael Hauge Sørensen explains.

Flexa is opening store number 75

Another Danish company, with success in China, is Flexa, a maker of furniture for children. Flexa has

recently opened their 75th store in the country, and last year their turnover increased by 20 % compared to

the year before.

- We are targeting the high-income group, and this group is rising significantly and fast. This present a great

opportunity for use to sell more products, says Per Lykke Jensen, managing director at Flexa.

Hans Christian Andersen is helping Danish design

One of the reasons that Danish design is gaining foothold in China is that the Chinese know Hans

Christian Andersen.

- The Chinese like to buy good quality, design and a nice image. For many Chinese, Denmark is a

fairyland. Many knows Hans Christian Andersen from school, so you can market the products

alongside the country, and this makes the products different and unique, explains Hong Jiang,

leader of Fond of Industrialisation for Developing Countries office in Beijing.

From the middle of the 1980ties, the salary of the average Chinese have gone from $300 to $2000.

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Appendix 6 – Ministry of foreign affairs Denmark (2012) Sector analysis: Furniture and

Design

Introduction:

China has witnessed an unprecedented period of growth in the last two decades and today it is the largest

producer, exporter and consumer of furniture worldwide. According to figures released by the National

Bureau of Statistics, total retail sales for consumer goods increased by 15 % in the first half of 2009, with

furniture sales as one of the strongest product categories growing by 28.3 %. Retail sales throughout the

financial crisis are reported to grow in stability in the tier 2 cities and regions, whereas tier 1 cities saw first

a decline and subsequently grew again.

Furthermore, according to data from the China National Furniture Association, the production value of

China’s furniture industry in 2010 was US$ 66.38 billion, an increase of 32.4% if compared to that of 2009.

This increase is subject to 2 factors in the Chinese market: Increasing construction for both residential

buildings and office buildings and the growth of the Chinese consumer’s purchasing power and the demand

for higher living standards facilitating consumer spending on new furniture.

However, in July 2011 Bloomberg reported that consumer spending seems to have peaked and is fading, as

sales growth on furniture eased from 37% in May 2010 to 26% one year later. Nevertheless, according to

the China Daily list of top 10 consumer spending trends in 2010, luxury furniture is number 8, as it is

considered a sign of high status.

The furnishing market for do-it-yourself (DIY) products, on the other hand, seems to have a hard time

penetrating the Chinese market as it is often still cheaper to buy products that are ‘made-in-China’ than

those you have to ‘make-in-China’.

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Market Indicators:

In 2010 the provinces of Zhejiang, Guangdong, Fujian, Shandong and Shanghai were the top five areas for

furniture production, counting for 81.1% of national production. There are over 50,000 furniture

manufacturers in China in total and these companies engage in a wide range of products including

household, office and kitchen furniture, as well as mattresses, bedding and furniture parts.

Industry growth slowed in 2008 as the global financial crisis negatively impacted consumer spending levels

in the second half of the year and the impact continued in 2009. However, the Chinese market gradually

recovered and the industry’s sales revenue was US$ 61.58 billion in 2010, an increase of 31.85% compared

to that of 2009.

The rise of the furniture and design market is partly due to the increase in disposable income for the

Chinese consumers. According to statistics, within the last 10 years, the average disposable income has

doubled for rural Chinese and tripled for urbanites. That means that the average Chinese person now has

more to spend. Evidence also shows that the average Chinese has indeed spent more, despite the rising

inflation rate.

The increase in consumer spending on furniture and interior design is also stimulated by more spacious

housing. As living standards are improving, people will often place a higher priority on the interior design of

their home and either rent or buy bigger apartments. In 1994 the average per capita living area for urban

residents was only 15.7 square meters; in 2005 this figure had increased to 25 square meters, which is an

increase of 59%. Improved living conditions allow and stimulate people to purchase more products supplied

by this industry.

Urbanization is a continuous process of China’s fast-paced development. In 2008 the urbanization rate was

47 per cent. At the moment there are about 700 tier 3 and tier 4 cities, yet the number seems to be

growing in line with development moving inward and towards the more western parts of China. As urban

residents have greater consumption power and as the furniture stores are primarily located in urban areas,

the rising urban population is bound to stimulate the demand for more furniture and design products.

Furthermore, new construction projects also mean greater demand for furniture products. More offices

and public buildings, particularly in the larger cities such as Shanghai, Beijing and Guangzhou, have been

built. In addition, due to the development of the tourism sector, there is now greater demand for high-end

furniture for hotels.

Despite the rise in home ownership, however, home furnishing market such as the Do-It-Yourself (DIY)

concept, seems to be struggling to properly establish its presence on the Chinese market. Kingfisher, the

home improvement retailer which owns B&Q, has been forced to close down 22 of its stores since it

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242entered the Chinese market in 1999. Another brand, Home depot, has had to close 5 stores within the last

two years. China is arguable one of the most difficult DIY markets to enter according to the Chief Executive

of Kingfisher. He argues that it is because ‘the Chinese don’t tend to do small projects. They don’t paint

over the bathroom over the weekend. They either do brand-new apartments fitted out from a concrete

shell or, when they do refurbish their apartment, it is once every 10 years’.

Market Trends:

The demand for foreign imported furniture and interior design in China is increasing. Demand for high

quality furniture is escalating as income levels increase and as the middle class in China expands. This

market segment often prefers well-made, modern furniture that enhances living spaces and compliments a

more luxurious lifestyle. As incomes increase and demand for luxury increases, high end furniture will

account for a greater proportion of industry revenue in the future.

Within the furniture industry, wooden furniture used to have the largest production output, but recently it

has been overtaken by metal furniture. In 2009, the total production for wooden furniture was 205 million

pieces, while the total production for metal furniture was 333.7 million pieces. The production of these two

types of furniture account 88.6% of the total volume of furniture production, which was 608.1 million

pieces in 2009.

The reason why there has been a decline in wooden furniture is partly due to the increasing price of raw

material, and the design and colour improvements of metal products. However, as household disposable

income levels in China continue to increase in the future, domestic demand will continue to increase (in

particularly for products that are not mass-produced), and manufacturers will be able to charge higher

pricing levels for their products.

Low to medium-end products are often sold in furniture hypermarkets. For instance, Xianghe Furniture

Market, about 100 km away from central Beijing, is the third largest furniture market in China. With a sales

area of nearly 500,000 square meters, it mainly sells low to medium-end products at 20-30% lower prices

than Beijing. For mass production products such as garden chairs, folding chairs, shoes racks and mattress,

Chinese manufacturers of such products heavily rely on their own sales or marketing departments to sell

directly to the hypermarkets. Many factories are built near the hypermarkets In order to reduce costs.

Furthermore, the traditional housing system has been reformed and this has given the Chinese the

possibility to invest in private housing. As a result of this development, the interest for residence and long-

term durable goods, furniture, and interior design has increased. New ways of consumer lending for the

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242Chinese consumers might be the beginning of a loan-financed consumption. The need and scope of

consumer lending still remains a relatively immature area but the attitude towards consumer lending and

other personal financial services, such as insurance, loans and investments is improving. House buyers will

be presented with more flexible mortgages, leaving an increasing part of the savings for decorating the new

homes. However, as China has enter somewhat of a real estate bubble with husing prices decreasing in tier

1 cities, such as Beijing, Shanghai and Guangzhou, it seems highly unlikely that consumer lending will

increase. Nevertheless, according to a press release in August 2011 from Boston Consulting Group, in the

period 2005-2010, ‘China's consumer lending balance grew at an average annual rate of 29 percent, to

about RMB7 trillion today. Though the growth may ease slightly to 24 percent in the next five years, it is

expected to grow into a RMB21 trillion market by 2015’.

Furtermore, in an attempt to decrease the tendency of Chinese consumers to save approximately over one-

third of their income, Beijing has now decided to prioritise the boost of domestic consumption, giving it a

considerable focus in its 12th 5-year plan.

China’s rising economy is attracting large investments from domestic and foreign enterprises. New

enterprises are continuously being established while existing enterprises are expanding their commercial

territories by setting up more establishments. This market trend is representing an increasing demand for

business furniture which is contributing to the high growth rate in the industry. Office and commercial

furniture accounted for 39% of the industry revenue in 2008. The office market continues to hold the

largest potential for Danish exporters of high-end products.

The hospitality industry in China is also maturing by virtue of China becoming a more important trade

center and tourist destination. Tourism provides a boost to regional retail sales, particular sales of luxury

items but also increase the demand in the hospitality industry after consistent and tasteful furniture and

interior.

The total value of furniture import to China went from US$ 1.3 billion in 2007 to US$ 1.53 billion in 2008, a

year-on-year increase of 18.07%. In 2009 it was US$ 1.85 billion, which is a year-on-year increase of

20.55%. By 2010 it had reached US$ 3.12 billion, a year-on-year increase of 68.65%.

Buying behaviour:

When choosing a piece of furniture, Chinese consumers look for quality craftsmanship and durability in

addition to design and price. Consumers are constantly looking for better value in their product purchases

and they will shop around to get the best price possible. Chinese consumers adopt a number of techniques

to assist in their decisions. Unsurprisingly given explosive internet usage in China, online product reviews

are becoming increasingly important research tools especially for higher value products. The impact of this

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242trend has increased significantly as more and more Chinese consumers are considering the internet as a

credible source of information. More and more people shop online as the number of internet users sharply

increases every year. China’s online retail market is now the biggest in the world, right after the US.

Furthermore, it is estimated that in 5 years’ time, this will change and that its worth will exceed RMB 2

trillion, which is double of what the US figure is today.

For the Chinese consumers there is great tendency to save and not buy on credit, although this attitude is

shifting, especially among younger consumers. In general, there is a tendency for people in the age group of

20-35 to spend more in high-end products than any other age group. The consumer optimism is high in

China, and the consumer is confident about the future and spending an increasing amount on more

expensive goods like furniture.

A trend for buying a complete series of furniture exists in China. Instead of only buying one or two pieces of

furniture, the Chinese tend to buy furniture for the whole room. Danish exporters are thereby given the

possibility of increasing the sales volume and it creates the possibility of introducing a “Danish Series”. The

range of products offered by a single brand or retailer will influence the consumer’s preferences. It is highly

recommended that a complete picture is created in the eyes of the consumers so a range of furniture

products are matched with complementary accessories such as lamps and rugs.

Although Chinese furniture producers make 90% of the furniture in the current market, more and more

international distributors have been actively involved in the market. The Scandinavian design is popular

and, so far, primarily known via IKEA’s presence. In 2009 IKEA’s market share of the furniture retail market

was 7.2 %. IKEA is trying to adapt to the Chinese furniture market. In April 2006, IKEA lowered its delivery

and assembling charge and offered free delivery if total consumption reached a certain threshold. IKEA also

made some other adjustments to its universal market strategies for Chinese consumers such as longer time

limit for returning. IKEA’s strategies are working well as IKEA announced over 30% growth in both 2006 and

2007. The primary success factors are considered to be IKEA’s strong competiveness, brand image and wide

international influence.

Conclusion and Recommendations:

As China’s economy continues to grow at a rapid pace the purchasing power of the Chinese consumer will

continue to increase. Additionally, housing expenditure is rising which stimulates demand growth for new

furniture. The industry is considered to be in its growth phase beyond the outlook period.

China’s strong economy continues to encourage business people to invest in new enterprises and

establishments combined with the huge number of foreign companies entering the market and demanding

quality furniture and having larger budgets for interior decoration.

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Aarhus School of Business and Social Sciences – Marketing and Management Communication - BA-Thesis 2013Exam Student No. 302233 & 401242It is considered valuable to team-up with foreign architects and decoration companies. The potential of this

collaboration is particular promising with players from Hong Kong, where the sophistication and originality

are predominant.

The low-income segment is not representing a natural match to Danish furniture, as this segment tends to

buy cheaper Chinese products. Often this segment is not focused on design and high quality.

Geographically, the Chinese furniture and interior decoration industry is for the largest part located in the

Southern Guangdong-province. This is where the largest number of export-oriented companies is located.

However, there are significant and important clusters in other parts of the country, such as the Beijing-area,

and the Zhejiang-province, close to Shanghai. In terms of sales potential, the market should be viewed as

first, second and third-tier cities, with first tier cities being the largest cities along the East coast. Second-

tier cities, which include larger cities inland as well, also constitute interesting market opportunities to

foreign companies. However, as there is a tendency for the tier 1 and 2 cities to already having matured,

and it is therefore recommended to also focus in the tier 3 and tier 4 cities. As mentioned, there are about

700 of those cities right now and more to come. About 60% of all consumer goods are bought by people in

tier 3 and 4 cities.

It is also advised to adopt a market strategy that focuses more on a cluster of cities within a certain area

and then expand from there. Once you’ve won the market share of that cluster it is easier to penetrate the

market of other areas as the success of a brand in one area will often spread by word of mouth to another.

Equally important as a marketing tool is the internet. The internet is a great way to get consumers involved

and to gather intelligence on current Chinese trends. However, it seems that the internet is not better a

source for consumers to get product information than any other kind of media channel. In order to reach

Chinese consumers, it is therefore important to be involved in social media channels, such as for example

weibo.

Other opportunities are sourcing of parts and products in China, which enhances the worldwide

competitiveness of Danish furniture and interior products. Often this is an optimal way to enter the market,

obtain market knowledge, and later develop sales to the domestic Chinese market.

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