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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. Dene 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 prot, diversify risk, and satisfy the needs and wants of
increasingly mobile consumers, more and more rms are dening 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 signicant 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
“classiers” a,ected perceived similarity among objects and the way
words are clustered upon recall. The study also showed that for
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
Chinese speakers, images in hypothetical advertisements that
corresponded with a classier 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 specically 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
specically 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
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Coca-Cola pursued aggressive global branding, nding such creative
placements for its logo as on dogsleds in Canada and on the walls of
bullghting 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 specic 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
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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-Pacic 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 prots 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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-prole 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 prole by
outtting 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 dierent 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 dierent countries. How are they the same and how are they
dierent?
4. Pick a product category. How are dierent leading brands targeting
dierent demographic market segments?
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
5. Contrast Coca-Cola’s and McDonald’s global branding strategies.
How are they similar and how are they dierent? 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?
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
2. Assign students the task of introducing an American brand into a
specic 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
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 dened 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.
© 2013 Pearson Education, Inc. publishing as Prentice Hall.
