978-0132664257 Chapter 14 Solution Manual

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Chapter 14

Managing Brands Over Geographical Boundaries and Market

Segments

Chapter Objectives

1. Understand the rationale for developing a global brand.

2. Outline the main advantages and disadvantages of developing a

standardized global marketing program.

3. Dene the strategic steps in developing a global brand positioning.

4. Describe some of the unique characteristics of brand building in

developing markets like India and China.

Overview

As they search for ways to achieve economies of scale, maximize

growth and prot, diversify risk, and satisfy the needs and wants of

increasingly mobile consumers, more and more rms are dening the

marketplace in global, rather than domestic terms. Global marketing

programs are attractive because they allow economies of scale in

production and distribution, result in lower marketing costs, convey

expertise and credibility, communicate a consistent brand image,

permit quick and e)cient leverage of good ideas, and enhance the

uniformity and control of marketing practices worldwide.

Critics of standardizing marketing programs contend that they are

based on “lowest common denominator” approaches that ignore

di,erences across countries and cultures. Such di,erences may be

related to consumer tastes and responses to marketing mix elements,

product or brand life cycle stages, competitive sets, reactions of

country managers, legal requirements and restrictions, and the

marketing infrastructure.

Development of a global marketing program requires that a rm decide

1) which markets are most attractive in terms of their t with corporate

objectives and marketing capabilities; 2) whether to enter a given

market by exporting established brands, acquiring another company’s

brands in the local market, or forming a strategic alliance with a local

market rm; 3) what the balance between standardization/globalization

and adaptation/localization in the marketing e,ort should be; and 4)

whether the marketing organization should be centralized in the

headquarters country, decentralized in the local market, or re3ect a

mix of the two.

In order to build global customer-based brand equity, brand awareness

and a positive brand image must be created in each country in which

the brand is marketed. This entails balancing the degree of

standardization/globalization and adaptation/localization in the choice

of branding elements, design of the supporting marketing plan, and

leverage of secondary brand associations. The chapter uses the

concept of the “Ten Commandments of Global Branding” to provide

guidelines for marketers looking to take their brands global.

The chapter concludes by a discussion on building brand equity across

market segments. There a number of di,erent types of market

segments that rms can expand into. Companies have employed

regional market segmentation strategies in which a larger geographic

area, such as a nation, is divided into a number of smaller segments.

Other segments include demographic segments, in which a market is

divided on the basis of age, gender, or income; and psychographic

segments, which divide a market based on consumer ideals, beliefs, or

attitudes.

Brand Focus 14.0 discusses China’s global brand ambitions, starting

with growing local businesses, developing interest in international

markets, developing local leaders, and nally going global.

Science of Branding

THE SCIENCE OF BRANDING 14-1

BRAND RECALL AND LANGUAGE

It is not surprising that some brand names are more likely to be

recalled in one culture than another. A series of studies addressing this

issue found signicant di,erences in the ways Chinese- and

English-speaking consumers processed brand names. Mental

representations of verbal information are coded mainly visually among

Chinese and in a phonological manner among English speakers.

Another study showed that more positive brand attributes resulted

when peripheral features of a brand name matched the associations or

meaning of the brand. A related study investigated perceptions of

brand names translated into Chinese. There are three possible types of

translation for names; phonetic, semantic, and phono-semantic. The

study found that consumers preferred phonetic translations if a

hypothetical product emphasized the English name, while they favored

phono-semantic and semantic translations equally regardless of which

name was emphasized. A di,erent study demonstrated that

“classiers” a,ected perceived similarity among objects and the way

words are clustered upon recall. The study also showed that for

Chinese speakers, images in hypothetical advertisements that

corresponded with a classier present in the ad copy were preferable

to images that had no correspondence.

Branding Briefs

BRANDING BRIEF 14-1

MARKETING TO AFRICAN AMERICANS

Although much marketing has targeted baby boomers, millennials,

Hispanics, and other demographic and psychographic groups, many

critics argue that rms have not e,ectively targeted the African

American market. African Americans occupy every income, education,

and geographic segment.

Because almost all African Americans speak English as their rst

language and watch much network television, many companies rely on

general marketing campaigns to reach them. But unique attitudes and

behaviors distinguish this audience. Many observers note the

important role of religion, church, and family. As a result of their

historical experiences, African Americans are often thought to exhibit a

strong togetherness and pride in their heritage. They are also seen as

style leaders who set fashion trends, especially among younger people.

African Americans spend a disproportionate amount of their income on

apparel, footwear, and home electronics. They are more likely to spend

money on luxury items such as cruise-ship vacations, new cars, and

designer clothes.

African American consumers make a disproportionate amount of

purchases of menthol cigarettes, certain types of hard liquors—brandy,

scotch cognac— and malt liquor beers. Alcohol and tobacco companies

were among the rst to specically target this group, although these

strategies have been somewhat controversial. Given that African

Americans are prone to certain health risks, such as hypertension and

cardiovascular disease, food and drug advertising often also

specically target them.

The challenge for building brand equity among African Americans is to

create relevant marketing programs and communication campaigns

that accurately portray brand personality and user and usage imagery

and avoid fostering stereotypes, o,ending sensibilities, or lumping

market segments together.

BRANDING BRIEF 14-2

COCA-COLA BECOMES THE QUINTESSENTIAL GLOBAL BRAND

Coca-Cola pursued aggressive global branding, nding such creative

placements for its logo as on dogsleds in Canada and on the walls of

bullghting arenas in Spain. Its popularity throughout the world was

fueled by colorful and persuasive advertising that cemented its image

as the “All-American” beverage. Despite immense scope, Coca-Cola did

not institute a uniform marketing program in each of its global

markets. Rather, the company often tailored the 3avor, packaging,

price, and advertising to match tastes in specic markets. Local

managers were assigned responsibility for sales and distribution

programs of Coke products, to re3ect the marked di,erences in

consumer behavior across countries. Coke essentially keeps the same

basic look and packaging of the product everywhere. The company

simultaneously stresses that the brand be relevant and well positioned

against the competition. To keep it relevant, Coca-Cola uses di,erent

advertising agencies in di,erent countries in order to make the brand

feel local. The marketing mix is designed in each country to stress that

Coke is positioned positively on attributes relative to local competitive

products.

In 1999, Coca-Cola’s new global marketing mantra became “Think

Local. Act Local.” Intended to get Coca-Cola back to the basics, the

strategy meant hiring more local sta, and allowing eld managers to

tailor marketing to their regions. The results of this hyperlocal focus

were missed sales targets and local advertising that, in some cases,

did not t with the carefully crafted Coke image. Today, Coca-Cola

conducts business with more than 400 brands in over 200 countries.

About three-quarters of its revenues come from outside the United

States. As much as Coke has accomplished globally, many

opportunities still remain. Per capita consumption of Coke is much

lower in India and China than in the United States, Europe, and Latin

America. Africa has even more potential.

BRANDING BRIEF 14-3

UPS’S EUROPEAN EXPRESS

After rst entering the European market in 1976, United Parcel Service

of America (UPS) spent $1 billion between 1987 and 1997 to buy 16

delivery businesses, put brown uniforms on 25,000 Europeans, and

spray its brown paint on 10,000 delivery trucks in the process of

becoming the largest delivery company in Europe. French drivers were

outraged that they could not have wine with lunch; British drivers

protested when their dogs were banned from delivery trucks;

Spaniards were dismayed when they realized the brown UPS trucks

resembled the local hearses; and Germans were shocked when brown

shirts were required for the rst time since 1945. UPS ultimately

allowed a degree of local interpretation while standing rm on some

issues of company policy, such as brown trucks and uniforms and

alcohol-free drivers.

UPS faced problems such as truck restrictions on weekends and

holidays, low bridges and tunnels, widely varying weight regulations,

terrible tra)c, and, in some places, limited highway systems, primitive

airports, and curfews. Workers resisted part-time work and had

stronger employment protection and higher nonwage costs than

workers in the United States.

To improve its share of European business, UPS spent an estimated

$1.1 billion between 1995 and 2000 upgrading its European operations

by purchasing vehicles, aircrafts, buildings, and logistics systems. The

2012 acquisition of Dutch-based TNT Express for almost $7 billion

increased UPS’s European small-parcel revenue to $60 billion in annual

sales and its market share to 20 percent. It also expanded the

company’s aircraft and vehicle 3eet infrastructure to help it move more

deeply into the Asia-Pacic region and better compete with DHL and

FedEx. All these investments have paid o,.

BRANDING BRIEF 14-4

MANAGING GLOBAL NESTLE BRANDS

For about 15 years, Nestlé spent more than $30 billion on acquisitions

in di,erent countries which yielded valuable economies of scale to

Nestlé in developed markets. In less-developed markets, however, the

company adopted a di,erent strategy. Its entry strategy there was to

manipulate ingredients or processing technology for local conditions

and then apply the appropriate brand name. To limit risks and simplify

its e,orts in new markets, the company attacked with a handful of

labels selected from a set of strategic brand groups. Then it

concentrated its advertising and marketing money on just two or three

brands.

Nestlé attempts to balance global and local control in managing its

brands. Some decisions, such as branding, follow strict corporate

guidelines. The company has six strategic corporate brands—Nestlé,

Nescafé, Nestea, Maggi, Buitoni, and Purina. There are 70 di,erent

strategic international brands, including Nesquik line of chocolate milk

products as well as product brands Kit Kat, Friskies, and Perrier.

Eighty-three strategic regional brands include Aquarel and Contrex.

Finally, there are a host of local brands that are only important to

particular countries.

Nestlé had used a decentralized management approach, in which most

decisions were primarily decided by the local managers. The company

consolidated factory management by region and combined oversight of

similar products into strategic business units. Nestlé’s more centralized

management approach enabled the company to focus on growing its

core brands at each level.

Brand Focus

BRAND FOCUS 14.0

CHINA GLOBAL BRAND AMBITIONS

China has industrialized at a remarkable rate and is now the world’s

second-largest economy and a manufacturing giant. China is the

world’s largest garment exporter by a large margin, it is also the

world’s largest manufacturer of consumer electronics, and it

manufactures 80 percent of the clocks sold in the world, 50 percent of

all cameras, and 60 percent of all bicycles. The primary reason for

China’s manufacturing prowess is its remarkably cheap labor pool.

China’s economic boom has created a wealth of opportunity for the

country’s citizens and companies, as well as an attractive consumer

base for foreign companies seeking growth.

A Growing Consumer Class

With China’s newfound wealth came an interest in consuming

conspicuously, which precipitated a windfall for foreign luxury-goods

manufacturers. With a rapidly expanding middle class, China made the

country the world’s largest luxury market. Luxury brands have 3ocked

to China to try to cash in. Despite the fortunate wealthy few, vast

numbers of urban and especially rural poor have been left behind.

Despite the concerns generated by the wealth polarization, China’s

consumer class still harbors enough purchasing power to attract

foreign brands, as the next section describes.

Foreign Interest

Ever since China began relaxing its trade policy in 1978, foreign

companies have eagerly sought the Chinese consumer’s ‘yuan’.

Coca-Cola was one of the rst Western brands in China, entering in

1979. China accounts for over a third of international prots for Yum

Brands, which owns KFC and Pizza Hut. Some faded foreign brands

have managed to remake their images in China. Competition comes

not just from international brands.

Emerging Local Leaders

Many Chinese consumer electronics and consumer packaged goods

brands are the market leaders at home. Haier, China’s number–one

appliance maker, is a multibillion manufacturing giant based in

Qingdao. Gome and Suning are China’s top electronics retailers.

Zhangyu and Great Wall are top-10 selling wines worldwide whose

sales are based almost entirely in China. The Internet is another area

where Chinese brands often rule at home. One reason for their success

is that local brands possess superior distribution networks built from

the ground up, enabling them to reach millions of consumers not

served by the multinationals, which initially targeted only major

Chinese cities. Many local brands are outspending their foreign rivals

on advertising.

Locals Going Global

Due to its high-prole acquisition of IBM’s PC unit, Lenovo is likely the

best-known Chinese company seeking to build its brand abroad.

Observers predict that many other brands will likewise follow in the

footsteps of Korea’s Samsung, LG, and Hyundai as Asian brands that

rose from obscurity to global prominence in a matter of decades. To

better compete in overseas markets, appliance maker Haier increased

its R&D spending to 4 percent of revenues. Athletic clothing and

equipment maker Li-Ning sought to build its international prole by

outtting many Chinese athletes for the 2004 Athens and 2008 Beijing

Olympics, and by acquiring the rights to use NBA players and logos in

its marketing.

These moves abroad are, in part, simply a function of the pressures

facing large rms searching for sources of revenue growth beyond an

increasingly competitive domestic market. Another cause is o)cial

encouragement from the Chinese government. A related reason is

global brand recognition as a source of national pride.

Companies that did have an international presence, such as Haier and

Lenovo, were priced as entry-level bargains, like their Korean

predecessors. To shortcut their way to brand recognition and respect,

some Chinese rms began bidding for foreign brands, as Lenovo did

with IBM. Others, like Haier, invest more heavily in R&D to bolster their

images through innovation.

Discussion questions

1. Pick a brand marketed in more than one country. Assess the extent

to which the brand is marketed on a standardized vs. customized

basis.

2. How aware are you of the country of origin of dierent products you

own? Which products do you care about their country of origin?

Why? For those imported brands that you view positively, #nd out

and critique how they are marketed in their home country.

3. Pick a product category. Consider the strategies of market leaders

in dierent countries. How are they the same and how are they

dierent?

4. Pick a product category. How are dierent leading brands targeting

dierent demographic market segments?

5. Contrast Coca-Cola’s and McDonald’s global branding strategies.

How are they similar and how are they dierent? Why are they so

well-respected?

Exercises and assignments

1. Ask students to visit the Benetton website (www.benetton.com) to

view the company’s advertising. What are the advantages and

disadvantages of the type of ads Benetton runs? How are reactions

to the ads likely to di,er across countries?

2. Assign students the task of introducing an American brand into a

specic country in which it is not sold. What would be the

challenges associated with such an introduction? What marketing

strategies would be necessary? How would the strategies di,er from

those used in the United States?

3. Tell students to nd a brand whose success in the United States is

bigger than in its home country. Is the situation the result of

di,erences in marketing or markets? In what other countries might

the situation be the same?

4. Have students pick a brand of their choice and assess its global

branding success as against the Ten Commandments of Global

Branding provided in Figure 14-5.

Key take-away points

1. Marketers are interested in regional marketing because mass

markets are splintering, computerized sales data from supermarket

scanners can reveal regional pockets of sales’ strengths and

weaknesses, and marketing communications make possible more

focused targeting of consumer groups dened along virtually any

lines.

2. Some consumers may not like being targeted on the basis of their

being di,erent, since that only reinforces their image as outsiders or

a minority.

3. Global marketing programs provide a number of advantages,

including economies of scale, lower marketing costs, increased

credibility, consistent brand image, and the ability to establish

uniformity and control of marketing practices worldwide.

4. The increasing mobility of consumers and reach of media allows –

and even dictates – the development of global branding strategies.

5. Building global customer-based brand equity requires creating

brand awareness, and a positive brand image in each country in

which the brand is marketed.

6. Marketers often plan globally, but implement regionally.