Onkvisit S., Shaw J. International Marketing: Analysis and Strategy
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6 Explain the “big-car” syndrome and “left-hand-drive” syndrome.
7 Why do foreign governments erect barriers to US exports of services?
DISCUSSION ASSIGNMENTS AND MINICASES
1 Provide examples of products for each of these IPLC stages: (0) local innovation, (1) overseas innovation,
(2) maturity, (3) worldwide imitation, and (4) reversal.
2 Given the implications of the IPLC theory, how should US innovating firms adjust their marketing strate-
gies?
3 Why are US manufacturers unwilling to modify their products for overseas customers?
4 Is it practical to offer a world product? (NB: this term should be differentiated from a standardized product.)
5 Can standard marketing techniques (e.g., market segmentation) be used to market services locally and inter-
nationally?
NOTES
1 “Credit Due for Transparency,”
Financial Times
, May 28, 2002.
2 “Eat Your Baby Food, Gramps,”
Business Week
, March 3, 2003, 14.
3 Masashi Kuga, “Kao’s Marketing Strategy and Marketing Intelligence System,”
Journal of Advertising
Research
30 (April/May 1990): 20–5.
4 “Goldstar Is Burning Bright,”
Business Week
, September 26, 1994, 129.
5 This section is based largely on Sak Onkvisit and John J. Shaw,“An Examination of the International Product
Life Cycle and Its Application within Marketing,”
Columbia Journal of World Business
18 (fall 1983): 73–9.
6 “Solectron Gets 3-Year Deal with Lucent,”
San José Mercury News
, March 29, 2002; and “Xerox to Transfer
Work to Singapore,”
San José Mercury News
, October 3, 2001.
7 “Rivals to Viagra Get Ready to Offer Stiff Competition,”
Financial Times
, May 28, 2002; and “Firms’ New
Drug Will Challenge Viagra in Europe,”
San José Mercury News
, March 8, 2003.
8 Imad B. Baalbaki and Naresh K. Malhotra, “Standardization versus Customization in International
Marketing: An Investigation Using Bridging Conjoint Analysis,”
Journal of the Academy of Marketing
Science
23 (summer 1995): 182–94.
9 Arnold Schuh, “Global Standardization as a Success Formula for Marketing in Central Eastern Europe?”
Journal of World Business
35 (No. 2, 2000): 133–47.
10 Robert C. Christopher,
Second to None: American Companies in Japan
(New York: Crown, 1986).
11 Aron O’Cass and Craig Julian, “Examining Firm and Environmental Influences on Export Marketing Mix
Strategy and Export Performance of Australian Exporters,”
European Journal of Marketing
37 (No. 3,
2003): 366–84.
12 “How to Compete,”
San José Mercury News
, February 18, 1990.
13 “US Consumer Goods,”
Export America
(August 2001): 18–23.
14 “Pillsbury Unlocks Japan by Doing as Japanese Do,”
Chicago Tribune
, February 11, 1982.
15 “The Americanization of Toyota,”
Business Week
, April 15, 2002, 52–54.
16 “Ford Attempts to Boost Its Sales by Rearranging Global Structure,”
San José Mercury News
, October 16,
1999.
17 “Fired Up to Introduce New Ideas,”
Financial Times
, December 10, 2002.
306
PRODUCT PLANNING
18 G. Tomas M. Hult, Bruce D. Keillor, and Roscoe Hightower, “Valued Product Attributes in an Emerging
Market: A Comparison between French and Malaysian Consumers,”
Journal of World Bu
siness 35 (No. 2,
2000): 206–19.
19 Monty L. Lynn, Richard S. Lytle, and Samo Bobek, “Service Orientation in Transitional Markets: Does It
Matter?”
European Journal of Marketing
34 (No. 3, 2000): 279–98.
20 “Hong Kong SAR Projected to See Significant Effects from China’s WTO Accession,”
IMF Survey
, June
19, 2000, 207–08.
21 Josephine Ludolph, “Services: Exporting’s Hidden Giant,”
Export America
(May 2001): 14–16.
22 “How the War on Terror Is Damaging the Brain Pool,”
Business Week
, May 19, 2003, 72–73.
23 Carlos A. Primo Braga, “The Impact of the Internationalization of Services on Developing Countries,”
Finance & Development
(March 1996): 34–37.
24 Jennifer R. Moll, Susan Gates, and Lesley Quigley, “International Education and Training Services: A Global
Market of Opportunity for US Providers,”
Export America
(May 2001): 19–21.
25 M. Krishna Erramilli and C. P.Rao,“Service Firms’ International Entry-Mode Choice: A Modified Translation-
Cost Analysis Approach,”
Journal of Marketing
57 (July 1993): 19–38.
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PRODUCT PLANNING
308
The protection of trademarks is the law’s recognition of the psychological function of symbols.
Justice Felix Frankfurter, US Supreme Court
CHAPTER OUTLINE
■ Branding decisions
■ Branding levels and alternatives
Branding vs. no brand
Private brand vs. manufacturer’s brand
Single brand vs. multiple brands
Local brands vs. worldwide brand
■ Brand consolidation
■ Brand origin and selection
■ Brand characteristics
■ Brand protection
■ Packaging: functions and criteria
■ Mandatory package modification
■ Optional package modification
■ Conclusion
■ Case 11.1 Planet Ralph: the global marketing strategy of Polo Ralph Lauren
■ Case 11.2 Majorica S.A. vs. R. H. Macy
Product strategies
Branding and packaging decisions
Chapter 11
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BRANDING AND PACKAGING STRATEGIES
PURPOSE OF CHAPTER
The purpose of this chapter is to acknowledge the strategic significance of branding and packaging and
to examine some of the problems commonly faced by MNCs. Among the subjects discussed are brandless
products, private brands, manufacturers’ brands, multiple brands, local brands, worldwide brands, brand
consolidation, brand protection, and brand characteristics. The strengths and weaknesses of each branding
alternative are evaluated. The chapter also examines both mandatory and optional packaging adaptation.
The emphasis of the chapter is on the managerial implications of both branding and packaging.
Accor manages a network of worldwide hotels. Its
Sofitel brand offers 160 prestige hotels in fifty coun-
tries. Its Novotel brand has international standards
and good value and consists of 370 hotels in fifty-six
countries. The Mercure brand, in contrast, has 740
mid-scale hotels in forty-three countries. The Coralia
brand focuses on 200 resorts in thirty-five countries.
The Ibis hotel chain of over 600 hotels in thirty-four
countries offers simplicity, quality, and value for
money. In the USA, Accor has recently reminded
people that Motel 6 is an Accor hotel.
For decades, the name
Hyundai
was synonymous
with South Korea’s economic development. Due to its
financial troubles, the government-controlled creditor
banks have urged Hyundai Group, the nation’s largest
conglomerate, to spin off affiliates and unload assets.
Hyundai Electronics Industries, one of the world’s
major computer chip makers, is the first major affil-
iate to distance itself by discarding the name of
Hyundai. It has become Hynix Semiconductor.
Nestlé licenses its Kit Kat brand to Hershey for the
US market. If Hershey is for sale but bought by
someone else other than Nestlé, chances are good
that Nestlé will take back the rights to Kit Kat. Since
Kit Kat may be worth as much as $1 billion, it is
likely that the other potential buyers will not want to
pay as much without having the rights to the Kit Kat
brand.
Among the top 100 global brands in terms of
value, American brands claim eight of the top ten
spots while dominating the list with sixty-two brands.
The list is based on a detailed analysis of how a
product’s sales are driven by brand name, weighted
for market leadership, stability, and ability to cross
national borders, among other factors. Many of these
global brands have been around for so long that many
consumers are not aware of their origins. In surveys,
many believe that Heineken is a German beer and that
Nokia is a Japanese firm. They also do not realize
that Haagen-Dazs and Estée Lauder were born in the
USA. Even when consumers are aware of the origins
of the brands, they are inclined to think of these
brands as global rather than national. The top ten
brands are: Coca-Cola, Microsoft, IBM, GE, Intel,
Nokia, Disney, McDonald’s, Marlboro, and Mercedes.
Among the non-US brands, Samsung Electronics,
SAP, L’Oréal, and Toyota have made the biggest gains
in value.
Sources:
“Kit Kat License Likely to Be Worth $1 Billion,”
San José Mercury News
, July 27, 2002; “Brands in an Age
of Anti-Americanism,”
Business Week
, August 4, 2003,
68–78.
MARKETING ILLUSTRATION THE NAME GAME
BRANDING DECISIONS
To understand the role of trademark in strategic
planning, one must understand what a trademark
is from a legal standpoint. According to the US
Lanham Trade-Mark Act of 1947, trademark
“includes any word, name, symbol, or device or any
combination thereof adopted and used by a manu-
facturer or merchant to identify these goods and
distinguish them from those manufactured or sold
by others.” If a trademark is registered for a service,
it is known as a service mark (e.g., Berlitz).
A trademark can be something other than a
name. Bibendum, the roly-poly corporate symbol,
is Michelin’s trademark in France, and it is known
as Bi-bi-deng in China. It should be noted that the
Michelin Man, a 100-plus-year-old mascot, seems
recently to have lost some weight while becoming
more muscular. Nipper, the familiar fox terrier
sitting next to a phonograph along with the phrase
“His Master’s Voice,” is RCA’s official symbol. Other
easily recognized logos include Ralph Lauren’s polo
player and Goodyear’s wingfoot. Figure 11.1 shows
the logos of General Foods’ well-known brands.
Figure 11.2, in contrast, shows the trademarks of
multinational firms that have direct investment in
Cyprus.
A trademark can be more than a name or logo.
Harley Davidson tried unsuccessfully to register the
sound of its heavy motorcycles as a trademark. H.J.
Heinz Company had better luck in registering
a color in England.While words and logos account
for a vast majority of trademarks registered in
England and while it is unusual for a food company
to be granted a trademark on a color alone, the
Trademarks Registry granted legal protection to
Heinz Baked Beans’ distinctive use of turquoise.The
Trademarks Registry has determined that Heinz
Baked Beans’ turquoise has “achieved distinctiveness
through use.” As the number one brand of baked
beans in the United Kingdom for generations, the
product is an important part of the British culture,
and almost everyone recognizes the turquoise can.
1
Although companies spend millions of dollars
developing logos, some are more effective than
others. One study asked consumers to judge a
company’s image by looking at its name alone as
well as with its logo. Motorola Inc., for example,
received a positive score of 55 percent, meaning
that the logo adds a sense of quality and trustwor-
thiness. British Airways and Infiniti, on the other
hand, received negative scores of –20 percent and
–16 percent respectively. In the latter case, the
logos, instead of being helpful, may actually hurt
corporate image.
2
A logo, when inappropriate, ineffective, or
dated, should be modified. In the case of Audi,
which wanted to further differentiate itself from
its parent Volkswagen, replaced its corporate logo
in 1995 with a new one featuring the four silver
rings with the Audi name written underneath in
red.
In many countries, branding may be nothing
more than the simple process of putting a manufac-
turer’s name, signature, or picture on a product or
its package. Many US firms did precisely this in
the old days, as illustrated by King Gillette’s own
portrait being used as a trademark for his Gillette
razor-blades.
The basic purposes of branding are the same
everywhere in the world. In general, the functions
of a brand are to: (1) create identification and brand
awareness, (2) guarantee a certain level of quality,
quantity, and satisfaction, and (3) help with promo-
tion. All of these purposes have the same ultimate
goal: to induce repeat sales.The Spalding name, for
example, has a great deal of marketing clout in
Japan. In fact, a group of investors bought the
company in 1982 because they felt that Spalding was
the best-known name in sports in the free world and
that the name was underused.
For American consumers, brands are important.
Overseas consumers are just as brand-conscious –
if not more so – because of their social aspirations
and the social meanings that brand names can
offer. Eastern European consumers recognize many
Western brand names, including some that are
unavailable in their countries.Among the most pow-
erful brand names are Sony, Adidas, Ford, Toyota,
Volvo, BMW, and Mercedes. When International
310
BRANDING AND PACKAGING STRATEGIES
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Figure 11.1 General Food’s registered trademarks and logos
Source:
Reprinted with permission of General Foods Corporation.
Semi-Tech Microelectronics Inc. acquired troubled
SSMC Inc., the most important asset was probably
the Singer trademark.
When a company is for sale, the remainder of the
purchase price after deducting the fair value of the
physical assets is called goodwill, “going concern
value,” or an intangible asset. In the case of service
businesses,nearly all of the purchase price that com-
panies generate tends to be goodwill.The brand has
brand equity when there is value that is attached to
that brand. Perhaps Coca-Cola’s most valuable asset
is its brand equity which is worth $39 billion.
Taking into consideration the importance of
branding as a marketing tool, one would expect
that corporate headquarters would normally have
a major role in brand planning for overseas
markets. As a component of an MNC’s marketing
mix, branding is the area in which standardiza-
tion appears to be relatively high. Westinghouse,
for example, requires its Westinghouse do Brasil
affiliate to use the common logo, resulting in all
the MNC’s Brazilian companies using the familiar
circled W symbol in their promotion programs.
Thus brand centralization is a common practice.
312
BRANDING AND PACKAGING STRATEGIES
Figure 11.2
Trademarks and foreign
direct investment
Source:
Courtesy of Central
Bank of Cyprus.
One study found that international marketing
managers considered some cultural and socioeco-
nomic conditions of foreign countries in making
global brand image strategy decisions.
3
If the mar-
kets are similar, a firm may be able to use the stan-
dardization strategy by extending its brand image
theme to the other markets. However, when mar-
kets differ in cultural uncertainty avoidance,individ-
ualism, and national socioeconomics, managers tend
to employ the image customization strategy.
Other than merely using the same brands world-
wide, MNCs are also interested in creating a global
identity via some degree of standardization of a
corporate visual identity system (CVIS) in their
multinational operations. As in the case of British
companies operating in Malaysia, they have increas-
ingly adopted a standardized CVIS, stimulated in
part by global restructuring, merger, or acquisi-
tion.
4
Their reasons include aiding the sale of prod-
ucts and services, creating an attractive environment
for hiring employees, and increasing the company’s
stature and presence.
BRANDING LEVELS AND ALTERNATIVES
There are four levels of branding decisions: (1)
branding versus no brand, (2) private brand versus
manufacturer’s brand, (3) single brand versus mul-
tiple brands, and (4) local brands versus worldwide
brand. Figure 11.3 shows an outline of the decision-
making process when branding is considered;
Figure 11.4 provides a branding model for decision
making; and Exhibit 11.1 lists the advantages of each
branding alternative.
Branding vs. no brand
To brand or not to brand, that is the question. Most
products are branded, but that does not mean that
all products should be. Branding is not a cost-free
proposition due to the added costs associated
with marking, labeling, packaging, and legal proce-
dures. These costs are especially relevant in the
case of commodities (e.g., salt, cement, diamonds,
produce, beef, and other agricultural and chemical
products). Commodities are “unbranded or undiffer-
entiated products which are sold by grade, not by
brands.” As such, there is no uniqueness, other than
grade differential, that may be used to distinguish
the offerings of one supplier from those of another.
Branding is then probably undesirable because
brand promotion is ineffective in a practical sense
and adds unnecessary expenses to operations costs.
The value of a diamond, for example, is determined
by the so-called four Cs – cut, color, clarity, and
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BRANDING AND PACKAGING STRATEGIES
Generic (brandless) product
Branding
decisions
Branded product
Private label
Manufacturer’s
own brand
Single
market
Multiple
markets
Single brand
Multiple brands
Global brand
Local brands
Figure 11.3 Branding decisions
carat weight – and not by brand. This is why
DeBeers promotes the primary demand for dia-
monds in general rather than the selective demand
for specific brands of diamonds.
On the positive scale, a brandless product allows
flexibility in quality and quantity control, resulting
in lower production costs along with lower market-
ing and legal costs.
The basic problem with a commodity or
unbranded product is that its demand is strictly a
function of price. The brandless product is thus
vulnerable to any price swing or price cutting.
Farmers can well attest to this vulnerability because
prices of farm products have been greatly affected
by competition from overseas producers.Yet there
are ways to remove a company from this kind of cut-
throat competition.
Branding, when feasible, transforms a commod-
ity into a product (e.g., Chiquita bananas, Dole
pineapples, Sunkist oranges, Morton salt, Holly
Farms fryers, and Perdue fryers). A product is a
“value-added commodity,” and this bundle of added
values includes the brand itself as well as other
product attributes, regardless of whether such
attributes are physical or psychological and whether
they are real or imaginary.The 3M company devel-
oped brand identity and packaging for its Scotch
videotapes for the specific purpose of preventing
them from becoming just another commodity item
in the worldwide, price-sensitive market.
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BRANDING AND PACKAGING STRATEGIES
1. BRANDING VS. NO BRAND DECISION
Does the product have production consistency
and salient attributes which can be
differentiated?
2. MANUFACTURER’S OWN BRAND VS.
PRIVATE BRAND DECISION
Is the manufacturer the ‘‘least dependent
person’’?
Branding
Manufacturer’s own brand
3. GLOBAL BRAND VS. LOCAL BRANDS
DECISION
Are there intermarket differences
(demographically and/or psychographically)?
Local brands
Market segmentation
and multiple brands
4. SINGLE BRAND VS. MULTIPLE BRANDS
DECISION
Are there intramarket differences
(demographically and/or psychographically)?
yes
yes
yes
yes
Unbranded commodity
no
Private brand
no
Global brand
no
Single brand
no
Figure 11.4 A branding model
for decision making
Source:
Sak Onkvist and John J. Shaw,
“The International Dimension of
Branding: Strategic Considerations and
Decisions,”
International Marketing
Review
6 (No. 2, 1989): 29.
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BRANDING AND PACKAGING STRATEGIES
No Brand Brand
Lower production cost Better identification
Lower marketing cost Better awareness
Lower legal cost Better chance for product differentiation
More flexibility in quality and quantity control Better chance for repeat sales
(i.e., possibility of less rigidity in control) Possible premium pricing (i.e., removal from
Good for commodities (undifferentiated items) price competition)
Possibility of making demand more price
inelastic
Private Brand Manufacturer’s Brand
Ease in gaining dealers’ acceptance Better control of products and features
Possibility of larger market share Better price due to more price inelasticity
No promotional hassles and expenses Retention of brand loyalty
Good for small manufacturer with unknown Better bargaining power
brand and identity Assurance of not being bypassed by channel
members
Multiple Brands (in single market) Single Brand (in single market)
Utilization of market segmentation technique Better marketing impact
Creation of excitement among employees Permitting more focused marketing
Creation of competitive spirits Brand receiving full attention
Avoidance of negative connotation of existing Reduction of advertising costs due to better
brand economies of scale and lack of duplication
Gain of more retail shelf space Elimination of brand confusion among employ-
Retention of customers who are not brand loyal ees, dealers, and consumers
Allowance of trading up or down without hurting Good for product with good reputation and quality
existing brand (halo effect)
Local Brands Worldwide Brand
Legal necessity (e.g., name already used by Better marketing impact and focus
someone else in local market Reduction of advertising costs
Elimination of difficulty in pronunciation Elimination of brand confusion
Allowance for more meaningful names (i.e., Good for culture-free product
more local identification) Good for prestigious brand
Elimination of negative connotations Easy identification/recognition for international
Avoidance of taxation on international brand travelers
Quick market penetration by acquiring local brand Good for well-known designer
Allowance of variations of quantity and quality
across markets
EXHIBIT 11.1 ADVANTAGES OF EACH BRANDING ALTERNATIVE
(FROM MANUFACTURER’S VIEWPOINT)