Transcript Chapter 5 Strategies in Action

Strategic Marketing
052 430
• Instructor:
• E-mail Address:
• Office:
Michael Cooke
[email protected]
IC room 817
• Class hours:
• Class Location:
• Web:
Friday 13:00-16:00
IC room 806
home/kku.ac.th/michco
Term Project
• Likely Project Topics
– Thai silk
– Thai tourist industry
– Thai rice
– Thai shrimp
– Other business or industry
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Choose a topic and a partner by 7-December
Advise 10-15 minute presentation, papers accepted
Can use the Five Forces framework to look at the business
Suggest and support a market strategy for the industry or a
firm within the industry
• Due 1 February
“The most dangerous moment comes with
victory.”
Napoleon
Starbucks’ Comments to the IASB
• Our business model is built on a dynamic portfolio of numerous,
relatively small locations in a given market. Option periods enable us to
lock in a site while preserving flexibility to exit the location if
circumstances dictate. It is not a foregone conclusion that an option
period will be exercised, and the assessment conducted near the end of
the original lease term is very specific to the individual site, based not
only on that store’s performance but also other factors such as a more
desirable location becoming available nearby, changing traffic patterns,
and the impact of other stores in the area. Consequently, the effort to
assess the “more likely than not” lease term would be a very timeconsuming and imprecise process, involving several hours of work for
each lease at inception and again when a renewal or other trigger requires
re-evaluation. The goal of achieving comparability across companies – or
even among divisions of an individual company – would be difficult to
obtain. *
• Recall the bankruptcy of Tully’s, burdened with property when demand
changed.
• Businesses like flexibility, but an option (right to buy or sell that is not an
obligation) always comes with consideration for the other party (cost)
since they are giving up their own flexibility.
• Options to buy or sell are commonly used in of business strategy. A
company might place an option to buy on a property, for example.
* Financial Times 3-1 -13
Matrix Structure
 The most complex design, it enables resource sharing.
 Has both vertical and horizontal flows of authority and
communication (functional elements and product or
division elements)
 Suitable for rapidly changing environments
 Often used in project oriented organizations, with differing
levels of authority vested in project managers
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Construction
Research and Development
Defense
Healthcare
 Complex firms may use elements of several structural types
 GE has an SBU structure with four product related segments
 GE country units usually have a matrix structure, where local
business heads report directly to their counterparts at headquarters
(HQ), with a 'dotted line' connection to the country head.
 The new structure in India has everyone report to the country head.
Matrix Structure
Copyright © 2011 Pearson
Education, Inc.
Publishing as Prentice Hall
Ch 7 -6
Starbucks Organization Chart 2005
A Matrix Structure
Starbucks combines division and function in a matrix organization.
Starbucks 2011Restructuring
 Starbucks combines division and functional elements in a matrix organization.
 In late 2011 the company announced a new corporate structure to accelerate its
growth strategy.
 Starbucks said it will create a three-region organizational structure
 China and Asia Pacific
 The Americas
 EMEA (Europe, U.K., Middle East, Russia and Africa)
 A president for each region will oversee the company-operated retail business.
 Seattle Best Coffee will operate as an independent business unit under Jeff
Hansberry. He will be SBC's president in addition to his current role as president of
Global Consumer Products and Foodservice
Starbucks Long-Term Plans *
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Starbucks Corporation recently announced its long-term objectives for each of its segments; its
entry into the tea industry and its initiatives to boost consumer relations. The company plans to take
the following steps to ensure growth in the upcoming fiscal years.:
Segment Specific Plans
 The Americas business has witnessed a substantial turnaround since the last couple of years.
The segment witnessed 9% growth in net sales to $2.5 billion in the fourth quarter of 2012, driven
by 7% growth in same-store sales and new store openings. The company intends to open more
than 3,000 new stores and remodel many more in the next five years in order to capitalize on the
strong demand for Starbucks products in America.
 Starbucks has also been witnessing strong performance in the China-Asia-Pacific segment. Net
revenue grew 28% in the fourth quarter of 2012, driven by a 10% rise in same-store sales and new
store openings. China, Thailand, Singapore and Australia all posted strong performances. The
company believes China will become its second-largest market by 2014, surpassing Canada. The
segment will have 4,000 stores by the end of 2013, of which 1,000 will be in Mainland China,
1,000 in Japan and 500 in Korea. China is one of the most important markets for Starbucks and
the company plans to have 1,500 stores in 70 cities in 2015. Starbucks has opened its first three
stores in India and plans to open a fourth store in early 2013. The company also intends to open
its first store in Vietnam.
 Europe, Middle East and Africa segment witnessed a 2% decline in net revenue to $283.7
million in the fourth quarter of 2012, hurt by flat traffic and currency headwinds. However,
revenue and profit is expected to improve significantly over the next five years. Also, the
company intends to focus on brand building, generating more revenue from the existing stores
and increasing licensing agreements.
 The Consumer Packaged Goods (CPG) segment includes the U.S. Foodservice business and
also sells whole bean and ground coffees, premium Tazo teas, ready-to-drink beverages,
Starbucks VIA Ready Brew, coffee and tea K-Cup packs, and Starbucks ice creams. This highmargin, high return on capital business reported 32% revenue growth in the fourth quarter of
2012.
On November 14, 2012, Starbucks agreed to acquire Atlanta-based tea store chain Teavana Holdings,
Inc. for $620 million in cash. The acquisition will bring together Starbucks’ expertise in real estate,
style and store management and Teavana’s competencies in global tea industry.
* http://www.zacks.com/commentary_print.php?article_id=88173&type=BLOG
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Henkel AG founded in Germany 1876
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Silicate detergents
First major international expansion 1883
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By-product of Armour’s meat packing business
 Note similarities with P&G’s origins in Cincinnati
 Dial soap became very popular in the 1950s
Armour acquired by Greyhound Corporation 1970
 Armour-Dial was the consumer products division
 HQ moved from Chicago to Arizona in 1971
Dial Corporation created in 1996 restructuring
1997- 2004 Dial Corporation had several top management changes
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A value segment
Products well suited to developing markets
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Henkel (Dial) buys Gillette deodorant brands from P&G for $275MM
 Executive Vice President of Henkel Cosmetics/Toiletries: "We are excited to become the number 3 in the
attractive U.S. deodorants market through this acquisition, thus complementing the strong Dial portfolio”
 The acquired brands get 80 percent of their sales in North America
Sells a female deodorant brand and a liquid hand soap and body wash brand to Newhall Laboratories
Sells Dial Armour foods business (home care sector) to Pinnacle Foods for $183MM
Armour and Company begins to make soap in Chicago 1888
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Henkel buys Dial Corporation in 2004 for $2.9BB (Dial sales $1.3BB)
Dial soaps and detergents introduced in Russia and China 2005
Purchase and sale activity in 2006
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Reuters (2012): “German consumer goods group Henkel will become debt free next year, is looking
for acquisitions for both its consumer brands and industrial adhesive businesses four years after its
last major purchase” (adhesives).
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They are looking for big regional and country brands to add to Henkel's stable of Persil detergents and Right Guard
deodorants, and also looking for access to new technologies for expanding its world-leading adhesives business.
"We have been looking for acquisitions for two years and there have been assets which were too expensive. It is a
question of what we are willing to pay for. Acquisitions must be a good strategic fit at the right price and within the
company's core business areas.” (Reuters, 2012)
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A firm’s existing assets and competencies are
potential new market advantages
◦ Marketing, distribution, product development and
manufacturing and brands can be advantages
◦ Expand from core business and achieve synergy
◦ Synergy is achieving a result that is greater than the
sum of parts
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Categorize choices in terms of their distance
from core business
◦ Similar businesses have greatest chance of
leveraging assets and competencies (using them to
maximum advantage)
◦ More distance provides a greater variety of
opportunities, but with increasing risk
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Identify assets and competencies (step 1)
Find a business area where they can be exploited
(step 2)
◦ Look for excess capacity (office space, obsolete sites,
underused equipment, etc)
◦ Growth through using excess capacity = cost advantage
(consider perhaps a joint venture)
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Address implementation issues
◦ May need to add new capabilities
◦ Merge systems and cultures after an acquisition
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Types of Assets and Competencies
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Marketing skills and sales and distribution capacity
Design and manufacturing
Research and development
Achieving economies of scale
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Marketing skills are often specific to a
particular market
◦ P&G acquired Gillette in 2005 to gain skills in
marketing to men
◦ P&G subsequently sold part of the Gillette portfolio
to Henkel in 2006
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Capacity in sales or distribution can be used
to offset fixed costs
◦ Amazon’s distribution network complements their
e-commerce model
◦ In India Kimberly Clark makes and distributes
diapers through an alliance with Lever Brothers
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Sony and Apple had design skills that they could
port to new consumer products (note that design
skills often require deep understanding of
manufacturing)
Nokia used R&D driven innovation to evolve from
packaging to electronics and then mobile phones
Breakthroughs often come from technologies
owned by other industries
Economies of scale in sales, new product
development and testing, and logistics can often
be achieved by merging smaller firms
◦ A sales call with an expanded portfolio of products
◦ One product development effort rather than two
◦ A single delivery fleet rather than two
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Nokia was established near the small town of Nokia, Finland in 1865 to sell paper and other products. Nokia listed on the Helsinki stock
exchange in 1915.
When the rebuilding of Europe following World War II spurred demand for construction materials, Nokia began operating as an exporter of
paper and wood products. To increase its international presence, Nokia began to diversify by purchasing other companies.
By the early 1970s, the Soviet Union accounted for 12 percent of Nokia's sales. Most of the firm's business with the Soviet Union was done via
trade, as lumber products and machinery were exchanged for petroleum.
In 1975 a new CEO shifted Nokia's focus to consumer electronics. Two years later, Nokia acquired Oy Kymamo, which formed the core of the
firm's sixth operating unit, Nokia Plastics.
The company's first foray into telecommunications came in 1981, when it purchased a 51-percent stake in Finland's state-owned
telecommunications company, which was eventually renamed Telenokia.
In 1981 Finland began developing its cellular system, which developed into the world's most heavily used cellular network, a major factor in
Nokia's rise to dominance in the cellular phone industry. The following year, Nokia designed a digital switching system for Finnish telephone
companies and purchased Finnish mobile phone company Mobira, which gave the firm entrance to what would become an exploding mobile
phone market.
Nokia continued to expand its electronics holdings in 1984, acquiring Luxor, Sweden's state-owned electronics and computer firm, and an
18.3-percent stake in Salora, the second-largest manufacturer of televisions in Scandinavia. By then, Nokia had forged several original
equipment manufacture deals, agreeing to manufacture electronic equipment under the brand names of other firms.
The later half of the 1980s was marked by the launch of the Nokia brand name when the firm began to manufacture Nokia mobile phones.
In 1986 Nokia added the largest electrical products wholesaler in Finland. Purchases the following year included a German consumer
electronics manufacturer, a Swiss cable manufacturer, and a French manufacturer of consumer electronics.
Nokia became Scandinavia's largest information technology company in 1988 when it purchased the data systems division of Sweden-based
Ericsson Group. Tire producing operations were rolled into a new subsidiary, dubbed Nokia Tyres Ltd. Divestitures that year included paper a
pulp producer.
Reportedly feeling intense pressure to boost profit margins, the CEO committed suicide in 1988. Mobile phone operations continued to grow
as Nokia developed joint ventures to produce mobile phones in the United States with Tandy Corp., and in France with Matra. The following
year, Nokia sold off the bulk of its conveyor belt, technical, and flooring operations interests, as well as a circuit board plant.
In 1990, Nokia agreed to merge its European soft-tissue paper operations with those of United States-based James River Corp. and Italy-based
Ferruzzi Group. The firm also worked with the telephone authority in Moscow, Russia, to establish ATM there. Acquisitions included a Finnish
electrical equipment wholesaler and a 51-percent stake in NKF Holding NV, which owned a Dutch telecommunications and cable manufacturer.
Cellular phone assets grew in 1991 with the purchase of a British mobile phone manufacturer. Also that year, Nokia sold its Nokia Data unit.
The firm purchased television manufacturer Finlux in 1992.
By 1993, Nokia had grown into the leading corporation in Finland. The diversified giant was the sixth-largest manufacturer of electrical cables
in Europe, as well as a leading television maker. Nokia also was the world's top cable machinery and winter tires maker. Despite the firm's
growth, it had lost $213 million over the previous two years.
Jorma Ollila became President and Chief Executive Officer of Nokia in 1992, and from 1999 to June 2006 he was Chairman and Chief Executive
Officer. He refocused the company on telecommunications and transformed Nokia into the biggest mobile phone maker.
Nokia’s success is now almost entirely dependent on Microsoft. If Windows 8 ends up failing, then Nokia will have to figure out what to
become. They used to make paper, they used to make cables, and perhaps we will be saying they used to make phones.
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Companies with their research and manufacturing employees close
together might be more innovative than businesses that develop a
design and send it overseas for low-wage workers to make.
Clusters of manufacturers, where workers and ideas can naturally flow
between companies, may be more productive and innovative than if they
were spread.
Instead of a sequential process where you look at product design and
then how to manufacture it, there is a simultaneous process.
Experts are researching whether such strategies offer the same benefits
for most businesses — and examining how this might show up in
national data on innovation, productivity and growth.
◦ Companies with products early in their life cycle seemed to benefit more than those
with products on the market for years.
◦ Companies making especially complicated or advanced goods, from new medicines to
new machines also benefit. Economists said that while the link between making and
innovating within individual businesses was not yet well established, the link between
making and innovating between different companies was.
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In a “spillover” effect: manufacturing companies near one another create
a kind of commons.
◦ Workers exchange ideas when they socialize or when they switch jobs, taking their
knowledge with them.
◦ Factories draw other companies, who compete to offer them goods and services.
◦ An MIT economist analyzed what happened to towns after large manufacturing
plants, like a BMW factory, moved in.
 Other factories in the town became more productive.
 Wages rose, too.
http://www.nytimes.com/2012/12/14/business/companies-see-high-tech-factories-as-fonts-of-ideas.html?nl=todaysheadlines&emc=edit_th_20121214&pagewanted=print
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Disney’s success with brand extension
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The new product context must fit the brand
◦ Through companion products, a common user, an attribute, an expertise, or
personality
◦ Generally a brand that is associated with intangibles such as personality is easier to
extend
Does the brand add value in the new class? (Arm and Hammer branding
did not add value to deodorant)
Will the extension enhance the brand image and name?
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Clear identity (family entertainment) which is frequently reinforced
Used different brands where it diverged from family entertainment
Operational excellence
Manages sub-brands with distinct identities
Uses synergies across products (films, videos, merchandise exploit common assets)
Internationally Disney adapted to local culture or exploited US roots (Euro Disney =>
Disneyland Paris)
Ideally the extension reinforces brand associations
The right extension provide energy to the brand (ubiquity of Coach)
Extensions must deliver on the expected brand experience
Luxury brands might use a sub-brand or endorsements
Sub-brands or endorsed brands
◦ Use these when brand associations are wrong or there is risk of damaging the parent
brand, or when the organization does not wish to commit to building a new brand
◦ Sub-brands offer the parent some insulation and allow a distinct identity
◦ Endorsed brands offer the parent insulation while providing a trust umbrella
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Dominant companies in slow growing markets
broaden scope to expand
Identify and serve customer needs that come
from use of existing products
 A check printing company expanded scope into other bank
activities
 The Economist magazine established Economist Intelligence
Unit
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Examine the customer use experience to identify
ways to expand the customer’s view
◦ Can involve working with distributors as well as end
customers to add value through a better experience
◦ Look for additional needs of the customer, especially
where the firm has slack capacity (McDonald’s coffee)
Ch
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Market development (duplicating business
operations) is based on the premise that the
business is operating well.
Expanding into new segments can be achieved by
adding distribution channels or targeting
different age groups
Starbucks extended the brand, expanded scope,
and entered new markets. In the USA you can
now get Starbucks brand Frappucino ice cream in
supermarkets. Wine is served after 2 pm in some
urban stores, along with cheese platters.
Expanding geographically typically involves
exporting operations to other countries
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The history of Douwe Egberts starts in 1753 when Holland had extensive trade
with the Far East
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By 1960, Douwe Egberts accounted for more than half of Dutch coffee exports
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In 1978, Douwe Egberts acquired by Consolidated Foods Corporation of Chicago
(CFC)
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CFC becomes Sara Lee Corporation (1985)
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March 14, 2012 — Sara Lee Corporation announced that its International Coffee
and Tea company will be renamed D.E Master Blenders 1753. D.E Master Blenders
1753 operates across Europe, Brazil, Australia and Thailand under brands such as
Douwe Egberts, Senseo, L’OR EspressO, Marcilla, Pilão, Moccona, Pickwick and
Hornimans. (1)
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DE Master Blenders 1753 becomes an independent company in 2012. Press
release July 2012:
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“The creation of a stand-alone focused company enables D.E MASTER BLENDERS 1753 to
more rapidly introduce new products and to react faster to changes in its markets. There is
a more streamlined organization due to the reduced number of management layers.”
“The independence offers greater strategic flexibility, including more opportunities for
strategic partnerships and/or acquisitions.”
(1) http://www.demasterblenders1753.com/en/News-and-media
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How Sarah Lee Corp. choose the DE Master
Blenders 1753 name
 The six month research process involved thousands of candidate
names
 A short-list group of about 50 names which met the positioning
and personality criteria for the firm, was evaluated globally for
trademark and URL availability, cultural sensitivities and local
market pronunciation
 The renaming project used branding and identity firm IDEO.
 Law firms in several countries conducted more than 3,000
trademark searches under tight deadline
http://www.demasterblenders1753.com/Global/News_pdf
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Moccona Brand – AU, NZ, Thailand, Finland
Pictured here: The Australian label
Bangkok Post (April 10th, 2012) Sara Lee Coffee & Tea (Thailand) Ltd,
the producer of Moccona instant coffee, insists it will continue its
investment in Thailand by resuming coffee production at Navanakorn
Industrial Estate in Pathum Thani. (Flooding had halted production.)
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Mode of Entry to New Geographic Markets
 Company Objectives
 Ambitious companies commit more for greater control
 Firms with limited goals or resources invest little
 Need for Control
 Trade off between level of control and resources committed
 Control may be desirable in any aspect of the business or marketing
 Financial and Human Resources, Assets, and Capabilities
 With limited assets choose exporting or licensing
 Also weigh risk against amount company can commit
 Flexibility of the entry mode (when the environment changes)
 JVs and licensing tend to offer less flexibility
 Subsidiaries hard to divest when exit barriers exist
 Mode of Entry Choice: Transaction Cost Explanation
 Benefits of increased control come with costs of additional
resources and higher risk
 When intellectual property is valuable, high control is best
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A general rule about risk
 Total company risk is not the same across companies
 Companies with more resources or a broad portfolio can
afford to lose more in a given venture
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Early China entrants were large well funded companies with
several products
 Yum! Brands
 AIG
Early entrants had extensive experience in foreign markets
(deep human resources)
 Companies with more experience in an area can better
manage risks
 Companies will always assess the risk of entry in the
context of their own situation and tolerance for losses
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Strategic Alliances
 Coalition of organizations to achieve goals for mutual benefit
 Can be licensing, joint ventures, R&D partnerships
 Can be informal
 Types of Strategic Alliances
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Simple licensing agreements between two partners
Market-based alliances (distribution channels, trademarks)
Operations and logistics alliances
Operations-based alliances (sharing of manufacturing ideas)
 The Logic Behind Strategic Alliances
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Defend leading position by access to new ideas, markets, etc
Catch-Up by joining forces
Remain in a leading business that is not core to the parent
Restructure a non-core business (which may be acquired by the alliance
partner)
 Success factors
 Partners of equal strength
 Alliance must have independent management with authority
 Shared vision and support from top management in the parent organizations
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Franchisor gets royalty payments for use of intellectual
property in a designated area for a specific time
Franchisee pays royalties and other payments
◦ Note the supply chain clause in Papa John’s (Exhibit 9-6)
◦ Potential for mark-up, also ensures quality
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Master franchising often used in foreign markets
◦ Master franchise gets right to sell local franchises in a territory
◦ Master franchise usually commits to a target number
Benefits:
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Risks:
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◦ Overseas expansion with a minimum investment
◦ Franchisees’ profits tied to their efforts
◦ Access to local franchisees’ knowledge of the local laws and customs
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Revenues may be lower than with other modes
Lack of a master franchisee
Limited franchising opportunities overseas
Lack of control over the franchisees’ operations
Cultural problems
Physical distance
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Cooperative joint venture
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Equity joint venture – partners have equity stakes
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JV Benefits:
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JV Risks:
◦ No equity in the venture
◦ Involves collaboration
◦ Common among large multinationals with emerging market
partners
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Higher rate of return and more control over the operations
Shared capital and risk
Sharing of expertise and other resources
Access to host country distribution networks
Contact with local suppliers and government officials
◦ Lack of control
 Government restrictions often forbid majority stake
 Multinationals can deploy expatriates for greater control
◦ Partner can become competitor
◦ Conflicts arising over matters such as strategies, resource
allocation, transfer pricing, and ownership of assets like
technologies and brand names (Exhibit 9-7)
◦ Well planned agreements help reduce conflict
Copyright (c) 2007 John Wiley &
Sons, Inc.
Chapter 9
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◦ Screen for the right partner (Exhibit 9-8)
 Obtain information about the partner
 See if the partner has similar investment objectives
Establish clear objectives from the beginning
Bridge cultural gaps (perhaps with a middleman)
Gain top managerial commitment and respect
Use an incremental approach (start on small
scale)
◦ Create a launch team during the launch phase:
(1) Build and maintain strategic alignment
(2) Create a system for parent company oversight
(3) Manage the compensation of each parent
(4) Build the organization for the joint venture
(assign responsibilities)
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Copyright (c) 2007 John Wiley &
Sons, Inc.
Chapter 9
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Wholly Owned Subsidiaries
 Acquisitions and Mergers
 Merger is when companies of similar size unit
Mergers come with issues about control of the resulting entity.
 Can be a defensive move against a powerful rival.
An acquisition is when one company acquires another.
 Usually no question about control
 Management or private investors might ‘take a company private’ in an LBO
 A hostile takeover is when management or the BOD of the target firm is against
the transaction
Quick access to local markets by buying an existing company
Synergies, or economies of scale are often cited reasons for mergers
Cross border acquisitions are a way to get access to local brands or distribution
networks
Funding is a key to acquisitions
 Cash (either from borrowing or retained earnings)
 Equity (use of shares as currency)
 A combination of cash and equity is most common
 A company with high share price may use the price to purchase weaker companies
 If a earnings per share rise the acquisition is said to be accretive to EPS
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 Greenfield Operations
 Entire operation is developed by the multinational
 Offers the company more flexibility than acquisitions in the areas of human resources,
suppliers, logistics, plant layout, and manufacturing technology.
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A Study of Criteria for Choosing the Mode of Entry
 Entry with wholly owned subsidiaries (high control)
 High R&D business
 High brand equity business
 The company has high foreign entry experience
 Entry via partnerships
 Risky country
 Legal restrictions on foreign ownership of assets
 The country is culturally and socially distant
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Exhibit 10-4: Examples of Test Market Countries
Masaaki Kotabe, Global Marketing Chapter 11
Copyright (c) 2007 John Wiley & Sons, Inc.
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Multinational product line management
brings issues such as:
◦ What product assortment should the company
launch when it first enters a new market?
◦ How should the firm expand its multinational
product line over time?
◦ What product lines should be added or dropped?
◦ How to condense several local brands (as with Sarah
Lee) into a manageable number of regional or global
brands?
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Global marketers also face global piracy.
In global marketing, firms exploit or work
around country-of-origin stereotypes.
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◦ A global brand is one that has a consistent identity with
consumers across the world.
◦ The development costs for products launched under a
global brand can be spread over large volumes.
◦ A global brand has more visibility than a local brand.
◦ The fact of being global adds to the image or prestige of
a brand.
◦ How brand value is calculated by Interbrand:
 http://www.interbrand.com/en/best-global-brands/bestglobal-brands-methodology/Overview.aspx
 At best - a soft number with company profit a huge
component (Gillette is the only P&G brand in the top 100)
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Copyright (c) 2009 John Wiley &
Sons, Inc.
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World’s Most Valuable Brands (2011) - Interbrand
Rank 2011
Rank 2010
Brand
% change val
Country
1
1
Coca Cola
2
USA
2
2
IBM
8
USA
3
3
Microsoft
-3
USA
4
4
Google
27
USA
5
5
GE
0
USA
6
6
McDonalds
6
USA
7
7
Intel
10
USA
8
17
Apple
58
USA
9
9
Disney
1
USA
10
10
HP
6
USA
11
11
Toyota
6
Japan
12
12
Mercedes
9
Germany
13
14
Cisco
9
USA
14
8
Nokia
-15
Finland
15
15
BMW
10
Germany
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◦ Global brands can leverage the country association for the
product (such as vodka from Russia)
◦ Brand equity usually varies from country to country
 Quality signal – consumers often believe global brands have
higher quality
 Global myth – sense of belonging to something bigger
 Social responsibility – global brands held to higher standard
◦ Inter-country gaps in brand equity may be due to any of
the following factors:
 History – long time and consistent positioning strategy helps
 Competitive climate – in some countries more competition
 Marketing support – varying communication strategies in a
firm
 Cultural receptivity to brands – some cultures avoid
uncertainty more than others (brands can be a signal of
quality)
 Product category penetration – higher usage brings higher
equity
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Global Branding Strategies
 Reasons for Local Branding
The name is already in use locally, or trademarked
Cultural issues such as language (pronunciation or meaning)
Local sensitivities to foreign influence
Keeping local brand equity when a company is acquired
 Styles of branding
 Solo branding – product or brand manager (P&G style)
 Hallmark branding – a corporate brand applied to all products (HSBC)
 Family branding – hierarchy with sub-brands (Sony with Vaio, etc.))
 Extension branding – stretch the brand to many product categories
(Virgin), consumers feel less risk with new name if associated
 A firm’s global brand is shaped by three types of factors
 Firm-based drivers such as the organizational structure, strength of
identity, expansion strategy
 Product market drivers - food and beverages succeed as local brands,
nature of target segments (local or not?)
 Market dynamics, such as economic integration
 Brand Architecture guides how brand will be used at each organizational
level (new brands, umbrella brands, extensions, cross border brands)
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Copyright (c) 2009 John Wiley &
Sons, Inc.
42
Global Branding Strategies
Brand Name Changeover Strategies
Fade-in of global brand name, fade-out of local name
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Umbrella (Family) Branding such as Virgin or Cobranding (typically used in joint marketing)
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Gradually replace existing local brand name with new global
brand name
Euro Disney > Euro Disneyland > Disneyland Paris
Combine old local brand name and new global name
Can use global name as umbrella or can co-brand
Gives consumers time to absorb the change
Transparent forewarning – inform consumer and the
trade ahead of the name change (Exhibit 11-5)
Summary axing – primarily done when competitors are
rapidly building global brands
Companies must ensure local brands are up to standards
of the global brand before attaching the new name
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Copyright (c) 2009 John Wiley &
Sons, Inc.
44
Management of Multinational Product Lines
Adaptation of Products
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Consumer preferences
Vary from country to country – especially among packaged
goods
Shampoo for curls not relevant in Asia (Exhibit 11-6)
McDonalds menus (Exhibit 11-7)
Japanese consumers crave novelty (Exhibit 11-8)
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Price spectrum
Emerging markets will have more budget products
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Smaller sizes
Cheaper formulas or packaging
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Competitive climate (Exhibit 11-9 Coca Cola in Japan)
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Organizational structure – degrees of local autonomy
History – non-core products added via acquisitions
Probe and learn when introducing unfamiliar products
45
Country-of-Origin (COO) Effects
 Country-of-Origin (COO) Influences
 For many products, the “made in” label matters a great deal to
consumers. (Japanese cosmetics sell well in China)
 Research into COO effects found:
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COO effects change over time with increasing brand
familiarity
COO is more important when brand is unfamiliar
Both the country of design and the country of
manufacturing or assembly can be factors
 Foreign companies can become local participants
 Foreign companies can also use home country image
Expertise and demographics: COO influences are
greater among novices, and elderly, less educated and
politically conservative consumers
Culture affects COO outcomes – collectivists tend to
rate home country highly in any circumstance
COO varies with product category (Exhibit 11-3)
46
Strategies to Cope with COO Stereotypes
 Product Policy
 Choice of brand name (Italian sounding name for clothing)
 Create positive perceptual associations with the product
 Work on product quality
 Pricing
 Low prices to attract value minded consumers (if firm has
cost advantage)
 High price might work as a quality signal
 Use respected distribution channels (such as high-end
retailers)
 Communication
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Improve the country image
 Usually done by industry associations or government agencies
 Chilean wines promoted in USA along with the country
Bolster the brand image
Copyright (c) 2009 John Wiley & Sons, Inc.
47
Strategies to Cope with COO Stereotypes
Fine Print from Moccona
 From the Moccona Thailand label:
 Imported and repacked by: Sara Lee Coffee and Tea (Thailand) Ltd.
 For Douwe Egberts Royal Factories, Utrecht, Holland.
 Distributed by: Sara Lee (Thailand) Ltd.
 From the Moccona.com.au website:
 Moccona is made by Douwe Egberts in Joure, The Netherlands
 Douwe Egberts created the brand name "Moccona" in the early 1960's and brought it to
Australia. Originally sold in delicatessens, specialty outlets and pharmacies..
 In 1977, Moccona was successfully launched in Australian supermarkets.
 Moccona sold in Australia, NZ, Thailand, and Finland
 Sarah Lee Australia/New Zealand offices:
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Head Office at Pymble - Sydney, NSW
Auckland Sara Lee New Zealand Ltd
Shanghai Sara Lee China Trading Company
Hong Kong Sara Lee Hong Kong Limited
Bangkok Sara Lee Thailand Ltd
Singapore Sara Lee Singapore Pte Ltd.
Selangor Sara Lee Malaysia SDN BHD
 Brandnewday Asia:
 Research proved that Thai consumers reacted positively to lifestyle-oriented packs and this
became the direction Brand New Day took for Moccono Trio
 Moccona was able to highlight their message targets – appetite appeal, coffee provenance,
and lifestyle demographic
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provenance
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Evaluating Leverage Options
 Look for attractive markets, with few competitors
 No point in extending mediocrity
 How similar is the new product market to the core product
market (or to markets in which the company has gained
expertise)
 Will the customer value the product or experience? (Some
measure of differentiation is essential)
 Seek to become a market leader
 Look for strategies that are repeatable (Nike’s use of
endorsements across new product categories)
 Learning curve effects and perfectibility
 Speed of execution
 Organizational Simplicity and Clarity
 Be skeptical about projected synergies (look for least
favorable outcomes as well as most favorable)
The Mirage of Synergy
 Potential Synergy Does not Exist
 Potential Synergy Exists But is Unattainable
 Potential Synergy is Overvalued
PPT 11-51
Summary
Leveraging assets and competencies involves identifying them and creatively
determining in what business areas they might be able to contribute.
Brand extensions should both help and be enhanced by the new offering, in
addition to being perceived to have a fit with it.
The business can be leveraged by introducing new products to the market or
expanding the market for the existing products.
Entering a new product market is risky, as the new offering might lack market
acceptance or needed resources. Success likelihood goes up if the core
business is healthy, if the new product market is attractive (competitors will
be profitable), if the business model is repeatable, if market leadership is
possible, and if the stretch from the core is small.
Synergy can be a mirage. Too often, it does not exist, or it exists but is
unattainable or overvalued.
PPT 11-52