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Asian brands go west through strategic partnerships

2018 is squaring up to be an exciting year for Asian brands, both at home and abroad. January saw a flurry of activity, with a range of agreements being forged between powerhouse Asian organisations and new partners around the world. These deals signal that more and more brands in Asia-Pacific are looking West to secure their competitive future.

  1. Tencent and US Google patent deal

On January 18th, Google and Tencent, China’s biggest online entertainment and social network company, announced a long-term agreement to cross-license patents on a range of products and technologies. The agreement allows each company to access the other’s patent portfolio, and neither company can sue the other.

They have pledged to work together on future innovation and technology, with their first collaboration already underway. Both have invested in US-China biotech firm XtalPi, which uses artificial intelligence and computing to accelerate the development of new drugs.

  1. Tencent invests in US Skydance Media

Tencent also announced an investment in US Skydance Media as part of a strategic partnership. Skydance have produced and financed 15 films, including three “Star Trek” movies and two “Mission: Impossible” titles which have cumulatively grossed nearly $5 billion worldwide.

The partnership allows Tencent to co-finance Skydance films, as well as giving them marketing and distribution rights to films and merchandise in China, while Skydance gets access to Tencent’s Asian and gaming expertise, and collaboration in TV, interactive and virtual reality.

Tencent is no stranger to deals with western parent companies. Last year it bought a 5% stake in US electric-vehicle maker Tesla, a 10% stake in Swedish online music streaming service Spotify, an additional 10% share in US Snapchat owner Snap Inc, and ride-sharing apps Lyft (no. 2 to Uber in the US), and Ola in India.

According to Bloomberg, prior to this year’s deals Tencent had participated in more than 50 acquisitions or investment rounds involving US companies in the last five years.

  1. Japanese Rakuten and US Walmart partner

Rakuten, Japan’s largest e-commerce company, has partnered with Walmart to launch a new online grocery delivery service in Japan. This replaces Walmart’s existing online grocery delivery service. The partnership allows Rakuten subsidiary Kobo to sell its catalogue of six million e-books and audiobooks as well as e-readers through US Walmart stores. Walmart has a similar strategy in China, where it has a 5% stake in JD.com, China’s second largest online retailer.

Rakuten also announced its plan to acquire Asahi Fire & Marine Insurance Co Ltd for $415 million in order to strengthen its financial services portfolio, as it seeks to diversify beyond conventional online shopping and as point of differentiation from both Amazon and Yahoo Japan Corp, its primary competitors.

  1. Chinese Alibaba and US Kroger in talks

Chinese e-commerce retailer Alibaba is apparently in discussions on how best to work together with no.1 US supermarket chain Kroger. Given that Alibaba’s Hema Chinese supermarket chain pioneered the use of mobile phones in the order, payment and delivery of grocery items, and Amazon’s recent launch of checkout-free, cashier-less grocery stores, the synergies seem somewhat obvious!

Alibaba also has investments in both Snap and Lyft.

  1. Chinese JD.com launches Paris office

JD.com, China’s largest retailer and second-largest online retailer behind Alibaba, has launched an office in Paris in order to build relationships with French luxury, fashion, food and wine brands as part of its strategy to target upwardly mobile Chinese consumers. It follows a deal between JD.com and Business France to sell €2 billion of French goods to Chinese consumers over the next two years, and a deal with French industrial engineering giant Fives to purchase €100 million worth of French industrial products.

This follows an investment by JD.com last year in global luxury e-tailer Farfetch, to offer a special white-glove delivery service of luxury goods.

  1. Chinese JD.com announces it’s raising funds to set up logistics for a global expansion.

This year JD plans to start selling online in the US and Europe, in addition to expanding to all Southeast Asian countries. Its US base will be in Los Angeles, initially concentrating on the huge west coast Chinese population. Its potential advantage is that one of its shareholders is Walmart, and it’s in final-stage discussions to sell 15% of its logistics arm to Tencent and other investors in an early fundraising round.

These strategic deals reflect an increasingly global business outlook from Asian brands, as well as an understanding on the part of Western brands of the lucrative, rapidly growing middle class in Southeast Asian countries.

Strategic partnerships represent a powerful and mutually beneficial alliance for all companies concerned, providing access to each other’s huge markets and customer bases. More interestingly, in the battle for our purses, the partnerships provide additional backing in terms of technology and capital to take on their biggest competitors both at home and abroad.

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