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MASTER'S THESIS. Branding Strategies of MNCs in International Markets

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MASTER'S THESIS 2008:005 Branding Strategies of MNCs in International Markets Hanna Häggqvist Camilla Lundkvist Luleå University of Technology D Master thesis Business Administration Department of Business
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MASTER'S THESIS 2008:005 Branding Strategies of MNCs in International Markets Hanna Häggqvist Camilla Lundkvist Luleå University of Technology D Master thesis Business Administration Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce 2008:005 - ISSN: ISRN: LTU-DUPP--08/005--SE Acknowledgement Acknowledgement This thesis was written for the program of International Business and Economics at the Division of Industrial Marketing and e-commerce at Luleå University of Technology and was completed in January, This thesis has been constructed during a limited period of time, and these weeks have been instructive and fun, but also very intensive, and have demanded hard work and commitment in order to make this thesis something to be proud of. We have had the chance to develop our skills within the field of business and marketing and we hope that this thesis will contribute to already existing research as well as ideas for further research. There are several persons that have made this thesis possible. We would first like to thank our supervisor, Manucher Farhang, Associate Professor at the Division of Industrial Marketing and e-commerce, Luleå University of Technology, who has guided us throughout the whole time and given us constructive feedback in order to improve the thesis. Secondly, we would like to thank Andreas Wagner, Assistant Brand Manager, at Procter & Gamble and Andrew Warner, Director of Brand Management at Sony Ericsson, who have provided us with valuable information during the interviews. We would also like to thank Ulrika Köbin, Assistant at Content Planning & Management, Sony Ericsson Mobile Communications AB, and Katarina Willig at Procter & Gamble, for handling valuable contacts. Luleå University of Technology, 2008 Camilla Lundkvist Hanna Häggqvist 5TÇç wtåç yééä vtç Ñâà ÉÇ t wxtä? uâà à àt~xá zxç âá? yt à{ tçw ÑxÜáxäxÜtÇvx àé vüxtàx t Wtä w bz Ääç Abstract Abstract In today s global marketplace, MNCs need to set up effective branding strategies in order to be competitive. Depending on the structure of the company and the products offered, MNCs can use different strategies. There are certain characteristics that will affect the type of strategy chosen. In order to reach economies of scale and scope, many MNCs standardize their branding- and marketing activities. However, MNCs are often required to adapt to local preferences and cultures. The purpose of this thesis is to investigate the branding strategies of MNCs in international markets. Two research questions were addressed: how can the branding strategies of MNCs in international markets be described and how can the factors determining MNCs choice of branding strategies in international markets be described. Two qualitative case studies of well-known MNCs, Procter& Gamble and Sony Ericsson were conducted; the first an example of a company with a product brand strategy and the latter one with a corporate brand strategy. Our findings show that MNCs use either a product brand strategy, or a corporate brand strategy. However, there may be mixtures of the two types, but emphasis is typically on one of them. A product brand strategy is characteristically used when a company offers multiple products within different business segments, and when there are several different target groups. With a corporate brand strategy, the corporate name and the brand are the same. There is typically a master brand which has the same name as the corporation, and which may have additional sub-brands. It was found that the factors determining the branding strategy in international markets are stakeholder interests, corporate image and reputation, market complexity, as well as marketing costs. Sammanfattning Sammanfattning På dagens globala marknad är multinationella företag tvungna att skapa effektiva varumärkesstrategier för att kunna hålla sig konkurrenskraftiga. Beroende på företagets struktur och på de produkter som företaget erbjuder, kan olika strategier användas. Vissa kännetecken avgör vilken strategi som företagen väljer att använda sig av. För att uppnå stordriftsfördelar och samproduktionsekonomi väljer många multinationella företag att standardisera sina varumärkes- och marknadsaktiviteter. Dock är många företag tvungna att anpassa sina aktiviteter till lokala preferenser och kulturer. Syftet med denna uppsats är att undersöka multinationella företags varumärkesstrategier på internationella marknader. Två forskningsfrågor lades fram: hur kan multinationella företags varumärkesstrategier beskrivas samt hur kan faktorerna som avgör multinationella företags varumärkesstrategier beskrivas. Två kvalitativa fallstudier utfördes av väl kända multinationella företag, Procter & Gamble och Sony Ericsson; det första är ett exempel på ett företag som använder sig av en produktvarumärkesstrategi, och det senare är ett företag med en företags-varumärkesstrategi. Våra studier visar att multinationella företag antingen använder sig av en produktvarumärkesstrategi eller en företags-varumärkesstrategi. Men, det kan dock finnas blandningar av de nämnda strategierna, men tonvikten ligger oftast på en av dem. En produktvarumärkesstrategi används karakteristiskt när ett företag erbjuder ett stort antal produkter inom olika affärssegment, och när det finns flera olika målgrupper. När en företagsvarumärkesstrategi används, är både företagsnamnet och varumärket lika. Det finns vanligtvis ett dominerande varumärke som har samma namn som företaget, och under detta varumärke kan det finnas under-varumärken. Det framkom att de faktorer som avgör varumärkesstrategin på internationella marknader är intressenter, företagets image och rykte, marknadskomplexitet, och marknadskostnader. Table of Contents Table of Contents 1 Introduction Background Problem Discussion Purpose Thesis Outline Literature Review Branding Strategies of MNCs in International Markets Standardization versus Customization Corporate Branding Product Branding Differences between Corporate Branding and Product Branding Factors Determining MNCs Choice of Branding Strategies in International Markets Stakeholder Interest Corporate Image and Reputation Market Complexity Marketing Costs Product Characteristics Conceptual Framework Branding Strategies of MNCs in International Markets Factors Determining MNCs Choice of Branding Strategies Methodology Purpose of Research: Explore, Describe and Explain Research Approach: Qualitative Research Research Strategy: Case Study Data Collection Method: Interviews Sample Selection: Subjective and Convenience Analysis of Data Quality Standards Data Presentation Case One: Procter & Gamble (P&G) Branding Strategy of Procter & Gamble in International Markets Factors Determining Procter & Gamble s Choice of Branding Strategies in International Markets Case Two: Sony Ericsson Branding Strategy of Sony Ericsson in International Markets Factors Determining Sony Ericsson s Choice of Branding Strategies in International Markets Data Analysis Within-Case Analysis Within-Case Analysis of Procter & Gamble (P&G) Within-Case Analysis of Sony Ericsson Cross-Case Analysis Branding Strategies of MNCs in International Markets Factors Determining MNCs Choice of Branding Strategies in International Markets Discussion, Findings, Conclusions and Implications Discussion: Reflections on Past Research... 67 Table of Contents 6.2 RQ 1: How can the branding strategies of MNCs in international markets be described? RQ 2: How can the factors determining MNCs choice of branding strategies in international markets be described? Implications and Recommendations Implications for Theory Implications for Practitioners Implications for Future Research References Appendices APPENDIX A The Top 100 Global Brands in the World, 2007 APPENDIX B Interview Guide, English version APPENDIX C Intervjuguide, Svensk version List of Figures Figure 1.1 Thesis Outline... 7 Figure 2.1 Four Brand Architectures Figure 2.2 Core-Value Framework linking a Corporate Brand to Product Brands Figure 2.3 Positioning Alternative Branding Strategies Figure 2.4 Factors Affecting Branding Strategy of Developed Country Firms in Emerging Markets Figure 2.5 Conceptual Framework of Branding Strategies in International Markets Figure 2.6 Conceptual Framework of Factors Determining MNCs Choice of Branding Strategies Figure 4.1 Sony Ericsson s Brand Hierarchy List of Tables Table 2.1 Comparison between a Corporate and a Product Brand Table 2.2 Shared Roles of the Corporate and Product Brand Table 5.1 Within-Case Analysis of the Branding Strategies of Procter & Gamble in International Markets Table 5.2 Within-Case Analysis of the Factors Determining the Choice of Branding Strategies in International Markets for Procter & Gamble Table 5.3 Within-Case Analysis of the Branding Strategies of Sony Ericsson in International Markets Table 5.4 Within-Case Analysis of the Factors Determining the Choice of Branding Strategies in International Markets for Sony Ericsson Table 5.5 Cross-Case Analysis of Branding Strategies in International Markets Table 5.6 Cross-Case Analysis of Factors Determining MNCs Choice of Branding Strategies in International Markets... 63 Introduction 1 Introduction Many firms have realized the potential of globalization and new markets in different locations of the world. When expanding globally a global brand strategy has to be developed and when entering international markets different strategies have to be considered. This chapter will start with a brief background to the thesis topic and is followed by a problem discussion which leads to the overall purpose and the research questions of the study. 1.1 Background In today s global marketplace, MNCs need to set up effective branding strategies in order to be competitive. Depending on the structure of the company and the products offered, MNCs can use different strategies. There are certain characteristics that will affect the type of strategy chosen. In order to reach economies of scale and scope, many MNCs standardize their branding- and marketing activities. However, MNCs are often required to adapt to local preferences and cultures. There has been a lot of research within the area of branding strategies; however there is limited research on how MNCs choose which strategy to adapt in different international markets and therefore this thesis will handle this issue. Brands A brand is defined as a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors (Kotler & Keller, 2006). Ind (1997) proposes that a product is something that is made, in a factory; a brand is something that is bought, by a customer. A product can be copied by a competitor; a brand is unique. Branding has the purpose of separating a brand from other competitors and to identify a product or a service and to build customer awareness (Kay, 2004). According to Albaum, Duerr and Strandskov (2005) a brand is anything that identifies a seller s goods or services and distinguishes them from others. A trademark is a part of the brand and is protected by law (ibid). Van Gelder (2003) states that when defining a brand; everything is carefully prepared and planned in order to create value for the customers that will benefit the organization. Functions of a Brand When moving from the concept of a brand, there is a need to explain its functions. Kotler and Pfoertsch (2007) discuss that branding is a very intangible concept and is often being misunderstood as to forming an illusion that the product is better than it really is. The authors state that, what brands actually do is that they facilitate the identification of products, services and businesses, and differentiate them from competition. Similar findings are made by Czinkota and Ronkainen (2004) and they state that branding has importance to customers, because it simplifies the buying process in the way that it reduces complicated buying decisions and provide emotional benefits, and offer a sense of community. According to Hollensen (2007) the basic purposes of a brand is universal, and these are: to distinguish a company s offering and differentiate one particular product from its competitors to create identification and brand awareness 1 Introduction to guarantee a certain level of quality and satisfaction to help with promotion of the product Holensen (2007) further states that these purposes have the function of creating new sales (take market shares from competitors) or to create a demand for repetitive sales (to get loyal customers). According to Kotler and Keller (2006) a brand can also give signals of a certain quality of the product. Brand loyalty can create barriers of entry to other companies because the brand is placed in the consumers minds and it can create competitive advantage and a willingness to pay a higher price. It creates brand identity through its brand name, but also teaches the customers what the product does and why the customer should choose that specific product (ibid). According to Yu Xie and Boggs (2006), branding means more than just naming a product; brands are a result of market segmentation and product differentiation. Importance of Branding A brand has several functions as stated above. Furthermore, brands are important, and the reasons for that will be discussed below. Kotler and Keller (2006) state that a brand is needed because it identifies the product, and the responsibility of the product hence lies in the hands of the makers or producers of the product. After a customer has been in contact with the brand and the product through its marketing activities, the customer has created a perception of the brand. After that, the brand can be identified by the customer (ibid). The increasing growth of globalization has forced companies to consider the importance of branding (Yu Xie & Boggs, 2006). Yin Wong and Merrilees (2007) state that branding has a remarkable potential for international marketing. According to Kotler and Pfoertsch (2007) brands are gradually more vital for companies in just about all industries since customers face a great number of different suppliers. Hence, the need for companies to differentiate themselves through branding is very important (ibid). Czinkota and Ronkainen (2004) state that brands are important because they shape customer decisions and, ultimately, create economic value. Brands are important in both consumer and business-to-business situations, where a decision of purchase is needed. A strong brand can create sufficient higher total returns to shareholders than a weak brand (ibid). The Value of a Brand Branding is important because of different reasons, and furthermore it generates value in different ways. Czinkota and Ronkainen (2004) state that a strong brand allows the company to take advantage of the brand awareness in other new markets as well, because the brand might be known in countries where the brand has no physical activity. Kotler and Keller (2006) mention that a strong brand creates higher profits which in turn create higher value for the shareholders. Motameni and Shahrokhi (1998) state that new brands in a global marketplace have a tiny chance of competing against established brands, and creating a brand from scratch involves enormous investments. The return on the investments spent on branding is converted into brand awareness, image and loyalty and the concept summarising the value of the brand is 2 Introduction referred to as brand equity (ibid). According to Keller (2007) different marketing programs must be created to satisfy different market segments in building brand equity: Differences in consumer behaviour have to be identified The branding program has to be adjusted accordingly through the choice of brand elements, the nature of the actual marketing program and activities, and the leveraging if secondary associations. International Branding The concept of branding, its functions, the importance of branding, and its value have now been discussed. When turning towards foreign countries there are certain factors to consider. Bradley (2002) states that it is usually a process when brands are turning internationally; it often develops from being a local brand and after a while, when the brand is known, move into foreign markets. Palumbo and Herbig (2000) state that in today s global market, brands compete not only with regional and national competitors, but also with international competitors marketing strategies. Yin Wong and Merrilees (2007) state that developing brands on an international basis provides opportunities to exploit economies of scale, develop global markets and explore various market segments. The authors further claim that international marketers need to organize their marketing strategies to match the characteristics of diverse external environments. Another opportunity with acting on international markets is that companies can take advantage of their country-of-origin, and acquire other companies in order to enter a market (Bradley, 2002). Keller (2007) states that the reasons for going international are: Perception of slow growth and increased competition in domestic markets Belief in enhanced overseas growth and profit opportunities Desire to reduce costs from economies of scale Need to diversify risk Recognition of global mobility of customers Global Brand When a brand has entered international markets, many companies recognize the benefits with global brands. According to Kapferer (1997), a global brand has two functions; to distinguish different products from each other, and to indicate a product s origin. Albaum et al. (2005) state that many companies adapt a global strategy. Global brands are usually positioned and marketed similarly throughout the world; however, slight modifications may occur (ibid). A global brand reflects the same set of values around the world, and the key in global brand strategy is formed by those values or brand character forms (Palumbo & Herbig, 2000). In order to succeed, global brands have to foresee cultural trends and consumer values (ibid). Van Gelder (2003) states that various markets have different internal and external factors that influence societies around the world, a brand is perceived differently in different cultures and countries. For a global brand it is needed to carefully consider the factors that influence customers behaviors (ibid). 3 Introduction The benefit of a global brand is according to Czinkota and Ronkainen (2004), higher acceptance of products by consumers and intermediaries, and the drawbacks are loss of local flavor. Quelch (1999) states that industrial products and services, luxury products, and pharmaceuticals are groups of products that are suited to be global brands. This is because they are identical all over the world, and the marketing activities are also similar (ibid). Quelch further states that global brands have gained popularity because of telecommunication and youth. People are more and more mobile in their habits, and more people are traveling, or moving to other countries, and the easiness of internet has boosted globalization. With these opportunities, people learn what is going on around the world more than before. Furthermore, global brands are more common in urban areas, than in rural areas (ibid). Quelch (1999) states that what the ten strongest global brands have in common and what distinguishes global brands is that they; are strong in home market, have geographical balance in sales, addresses similar consumer needs worldwide, consistent positioning, consumers who value the country-of-origin, product category focus, and they have the corporate name that is the same as the brand name. Acc
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