Product

A product is often considered in a narrow sense as something tangible that can be described in terms of physical attributes, such as shape, dimension, components, form, color, and so on. This is a misconception that has been extended to international marketing as well, because many people believe that only tangible products can be exported. A student of marketing, however, should realize that this definition of product is misleading since many products are intangible (e.g., services). Actually, intangible products are a significant part of the American export market. For example, American movies are distributed worldwide, as are engineering services and business-consulting services. In the financial market, Japanese and European banks have been internationally active in providing financial assistance, often at handsome profits. Even when tangible products are involved, insurance services and shipping are needed to move the products into their markets.

In many situations, both tangible and intangible products must be combined to create a single, total product. Perhaps the best way to define a product is to describe it as a bundle of utilities or satisfaction. Warranty terms, for example, are a part of this bundle, and they may be adjusted as appropriate (i.e., superior versus inferior warranty terms).

Purchasers of Mercedes-Benz cars expect to acquire more than just the cars themselves. In hot and humid countries, there is no reason for a heater to be part of the automobile’s product bundle. In the USA, it is customary for automatic transmission to be included with other standard automobile equipment.

One marketing implication that may be drawn is that a multinational marketer must look at a product as a total, complete offering. Consider the Beretta shotgun. The shotgun itself is undoubtedly a fine product, quite capable of superbly performing its primary function (i.e., firing shotgun ammunition). But Beretta also has a secondary function in Japan, where the Beretta brand is perceived as a superior status symbol. Not surprisingly, a Beretta can command $8000 for a shotgun, exclusive of the additional amount of a few thousand dollars for engraving. In this case, Beretta’s secondary function conceivably overshadows its primary objective. Therefore, a complete product should be viewed as a satisfaction derived from the four Ps of marketing (product, place, promotion, and pricing) – and not simply the physical product characteristics. 

Since a product can be bundled, it can also be unbundled. One problem with a bundled product is the increased cost associated with the extra benefits. With the increased cost, a higher price is inevitable. Thus a proper marketing strategy, in some cases, is to unbundle a product instead so as to get rid of the frills and attract price-sensitive consumers. As an example, Serfin is a mid-tiered bank in Mexico, and is owned by Spain’s Banco Santander Central Hispano. Serfin has launched Serfin Light, a new credit card that offers no points or air miles. Instead, its key feature is an interest rate of 24 percent rather than 40 percent charged by the main competitors. The word “Light” is appropriate because Mexico is the world’s largest consumer per capita of soft drinks, and Diet Coke is sold as Coke Light. The “light” concept has a significant meaning in Mexico. The success of Serfin Light prompted Banorte, the largest bank in northern Mexico, to change its slogan to “better than a light card, a strong card.”

Product adoption

In breaking into a foreign market, marketers should consider factors that influence product adoption.As explained by diffusion theory, at least six factors have a bearing on the adoption process: relative advantage, compatibility, trialability/divisibility, observability, complexity, and price. These factors are all perceptual and thus subjective in nature. 

For a product to gain acceptance, it must demonstrate its relative advantage over existing alternatives. Products emphasizing cleanliness and sanitation may be unimportant in places where people are poor and struggle to get by one day at a time.Wool coats are not needed in a hot country, and products reducing static cling (e.g., Cling Free) are useless in a humid country. A sunscreen film attached to auto windshields to block out sunlight may be a necessity in countries with a tropical climate, but it has no such advantage in cold countries. Dishwashing machines do not market well in countries where manual labor is readily available and inexpensive. 

A product must also be compatible with local customs and habits.A freezer would not find a ready market in Asia, where people prefer fresh food. In Asia and such European countries as France and Italy, people like to sweep and mop floors daily, and thus there is no market for carpet or vacuum cleaners. Deodorants are deemed inappropriate in places where it is the custom for men to show their masculinity by having body odor. Dryers are unnecessary in countries where people prefer to hang their clothes outside for sunshine freshness. Kellogg’s had difficulties selling Pop Tarts in Europe because many homes have no toaster. Unlike American women, European women do not shave their legs, and thus have no need for razors for that purpose. The Japanese, not liking to have their lifestyles altered by technology, have skillfully applied technology to their traditional lifestyle.The electrical kotatsu (foot warmer) is a traditional form of heater in Japan. New kotatsu are equipped with a temperature sensor and microcomputer to keep the interior temperature at a comfortable level. 

A new product should also be compatible with consumers’ other belongings. If a new product requires a replacement of those other items that are still usable, product adoption becomes a costly proposition. 

A new product has an advantage if it is capable of being divided and tested in small trial quantities to determine its suitability and benefits. This is a product’s trialability/divisibility factor. Disposable diapers and blue jeans lend themselves to trialability rather well, but when a product is large, bulky, and expensive, consumers are much more apprehensive about making a purchase. Thus, washers, dryers, refrigerators, and automobiles are products that do not lend themselves well to trialability/divisibility. This factor explains one reason why foreign consumers do not readily purchase American automobiles, knowing that a mistake could ruin them financially. Many foreign consumers therefore prefer to purchase more familiar products, such as Japanese automobiles, that are less expensive and easier to service and whose parts are easier to replace. 

Observation of a product in public tends to encourage social acceptance and reinforcement, resulting in the product’s being adopted more rapidly and with less resistance. If a product is used privately, other consumers cannot see it, and there is no prestige generated by its possession. Blue jeans, quartz watches, and automobiles are used publicly and are highly observable products. Japanese men flip their ties so that labels show. Refrigerators, on the other hand, are privately consumed products, though owners of refrigerators in the Middle East and Asia may attempt to enhance observability (and thus prestige) by placing the refrigerator in the living room, where guests can easily see it. In any case, a distinctive and easily recognized logo is very useful.

Complexity of a product or difficulty in understanding a product’s qualities tends to slow down its market acceptance. Perhaps this factor explains why ground coffee has had a difficult time in making headway to replace instant coffee in many countries. Likewise, 3M tried unsuccessfully in foreign markets to replace positive-acting printing plates with presensitized negative subtractive printing plates, which are very popular in the USA. It failed to convert foreign printers because the sales and technical service costs of changing printers’ beliefs were far too expensive. Computers are also complex but have been gradually gaining more and more acceptance, perhaps in large part because manufacturers have made the machines simpler to operate. Ready-made software can also alleviate the necessity of learning computer languages, a time consuming process. 

The first four variables are related positively to the adoption process. Like complexity, price is related negatively to product adoption. Prior to 1982, copiers were too big and expensive. Canon then introduced personal copiers with cartridges that customers could change. Its low price (less than $1000) was so attractive to consumers (but not to competitors) that Canon easily dominated the market.

Product standardization Vs product adaptation

Product standardization means that a product designed originally for a local market is exported to other countries with virtually no change, except perhaps for the translation of words and other cosmetic changes. Revlon, for example, used to ship successful products abroad without changes in product formulation, packing (without any translation, in some cases), and advertising. There are advantages and disadvantages to both standardization and individualization.

The international marketer must first decide what modifications in the mix policy are needed or warranted. Three basic alternatives in approaching international markets are available:

• Make no special provisions for the international marketplace but, rather, identify potential target markets and then choose products that can easily be marketed with little or no modification.

• Adapt to local conditions in each and every target market (the multidomestic approach).

• Incorporate differences into a regional or global strategy that will allow for local differences in implementation (globalization approach).

In today’s environment, standardization usually means cross-national strategies rather than a policy of viewing foreign markets as secondary and therefore not important enough to have products adapted for them. Ideally, the international marketer should think globally and act locally, focusing on neither extreme: full standardization or full localization. Global thinking requires flexibility in exploiting good ideas and products on a worldwide basis regardless of their origin. Factors that encourage standardization or adaptation are summarized in table below.

The adaptation decision will also have to be assessed as a function of time and market involvement. The more companies learn about local market characteristics in individual markets, the more they are able to establish similarities and, as a result,standardize their approach. This market insight will give them legitimacy with local constituents in developing a common understanding of the extent of standardization versus adaptation. For example, for years Mattel marketed Barbie dolls around the world that featured local characteristics. In 2009, however, the company’s new superstore in Shanghai featured the classic Barbie. According to the general manager of Barbie Shanghai, ‘‘our research shows that Chinese women want a blond doll, that they expect a blond doll because Barbie is American.’’ In 2009, Haier Appliances India, a division of the Chinese appliance maker Haier, introduced a new range of electric spa water heaters designed specifically for Indian consumers after extensive research of the Indian market and consumer needs there.

Factors Affecting Adaptation

Even when marketing programs are based on highly standardized ideas and strategies, they depend on three sets of variables: 

1. The market(s) targeted

2. The product and its characteristics; and 

3. Company characteristics, including factors such as resources and policy. 

Questions of adaptation have no easy answers. Marketers in many firms rely on decision-support systems to aid in program adaptation, while others consider every situation independently. All goods must, of course, conform to environmental conditions over which the marketer has no control. Further, the international marketer may use adaptation to enhance its competitiveness in the marketplace.

1. Regional, Country, or Local Characteristics 

Typically, the market environment mandates the majority of product modifications. However, the most stringent requirements often result from government regulations. Some of the requirements may serve no purpose other than a political one (such as protection of domestic industry or response to political pressures). Because of the sovereignty of nations, individual firms must comply, but they can influence the situation either by lobbying directly or through industry associations to have the issue raised during trade negotiations. Government regulations may be spelled out, but firms need to be ever vigilant for changes and exceptions.

The member countries of the European Economic Area are imposing standards in more than 10,000 product categories ranging from toys to tractor seats. While companies such as Murray Manufacturing have had to change their products to comply with the standards (in Murray’s case, making its lawnmowers quieter), they will be able to produce one European product in the future. Overall, U.S. producers may be forced to improve quality of all their products because some product rules require adoption of an overall system approved by the International Standards Organization (ISO). By December 2009, ISO had more than 162 member-countries and 17,500 international standards and similar documents governing a broad range of activities, products, services, and practices.

Product decisions made by marketers of consumer products are especially affected by local behavior, tastes, attitudes, and traditions—all reflecting the marketer’s need to gain the customer’s approval. A knowledge of cultural and psychological differences may be the key to success. For example, Brazilians rarely eat breakfast or they eat it at home; therefore, Dunkin’ Donuts markets doughnuts as snacks, as dessert, and for parties. To further appeal to Brazilians, doughnuts are made with local fruit fillings such as papaya and guava. While China’s Kentucky Fried Chicken menu features its signature ‘‘Original Recipe’’ fried chicken, it also creates products that appeal to local tastes such as the Spicy Dragon Twister, Pi Dan Congee (rice porridge), Fu Young Vegetable Soup, and Egg Tart (signature dessert). Pizza Hut restaurants display upscale decor to satisfy their customers’ preference for ‘‘five-star service and atmosphere at a three-star price.’’ The casual dining atmosphere is centered around an extensive menu that covers soup, salads, appetizers, and a range of pizzas such as Seafood Catch (seafood mix, crab sticks, green pepper, pineapple), and The Hot One (chili pepper, onion, tomato, beef, spicy chicken). Even with the success of KFC and Pizza Hut in China, the company is not resting on its laurels. Yum! China is testing East Dawning, the company’s first Chinese quick-service restaurant brand to provide affordable, great-tasting, authentic quick-service Chinese food to the Chinese consumer. As discussed in Focus on Culture, food is arguably one of the most culture-sensitive categories. Chinese and Western consumers share similar standards when it comes to evaluating brand names. Both appreciate a brand name that is catchy, memorable, distinct, and says something indicative of the product. But, because of cultural and linguistic factors, Chinese consumers expect more in terms of how the names are spelled, written, and styled, and whether they are considered lucky. PepsiCo Inc. introduced Cheetos in the Chinese market under a Chinese name, qi duo, roughly pronounced ‘‘chee-do,’’ that translates as ‘‘many surprises.’’

Often no concrete product changes are needed, only a change in the product’s positioning. Positioning is the perception by consumers of the firm’s brand in relation to competitors’ brands; that is, the mental image a brand, or the company as a whole, evokes. Coca-Cola took a risk in marketing Diet Coke in Japan because the population is not overweight by Western standards. Further, Japanese women do not like to drink anything clearly labeled as a diet product. The company changed the name to Coke Light and subtly shifted the promotional theme from ‘‘weight loss’’ to ‘‘figure maintenance.’’

Nontariff barriers include product standards, testing or approval procedures, subsidies for local products, and bureaucratic red tape. The nontariff barriers affecting product adjustments usually concern elements outside the core product. The U.S. Department of Commerce estimates that a typical machine manufacturer can expect to spend between $50,000 and $100,000 a year complying with foreign standards. For certain exports to the European Union, that figure can reach as high as $200,000. Because nontariff barriers are usually in place to keep foreign products out or to protect domestic producers, getting around them may be the single toughest problem for the international marketer.

The monitoring of competitors’ product features, as well as determining what has to be done to meet and beat them, is critical to product-adaptation decisions. Competitive offerings may provide a baseline against which resources can be measured—for example, they may help to determine what it takes to reach a critical market share in a given competitive situation. With a 14 percent share of the Chinese market compared to market leader Lenovo’s 28.5 percent share, Hewlett-Packard (HP) adjusted its urban-oriented strategy and marketing to respond to a 2009 Chinese government price rebate program for rural buyers of PCs. Both HP and Lenovo adapted the PCs to function through the electric voltage fluctuations common in rural areas and loaded the machines with software programs such as agricultural databases for farmers.

Management must take into account the stage of economic development of the overseas market. As a country’s economy advances, buyers are in a better position to buy and to demand more sophisticated products and product versions. Many companies have described how they have adapted to the new global era through a process they call reverse innovation. For example, in India, General Electric has developed a handheld electrocardiogram device that it sells for $1,000, about one-tenth of the price of the original (and much bulkier) U.S.-developed machine. Similarly, in China, the company has introduced a portable ultrasound machine with a price tag of $15,000, again vastly cheaper than the model GE used to try to sell to the Chinese market. Both these innovations have not only been successful in emerging markets, but they have also found new customers back in the United States, with ambulance teams and in emergency rooms. There is also a great need to develop new products for people with little money who aspire to a taste of the better life. For example, Tata Motors’ $2,200 Nano (a small vehicle analogous to the American SMART car) is specifically designed for India’s poor. Similarly, fewer than one in five Indian homes has a refrigerator; thus, a company could attract a huge new group of consumers if it could get the price right. By keeping it small and reducing the number of parts to around 20 instead of the 200 that go into regular refrigerators, Godrej Little Cool Refrigerator has been able to sell it for only $70, which is less than one-third of the price of a regular bottom-of-the-line fridge. It also consumes only half the power, so it keeps electricity bills at a level the poor can afford.

2. Product Characteristics 

Product characteristics are the inherent features of the product offering, whether actual or perceived. The inherent characteristics of products, and the benefits they provide to consumers in the various markets in which they are marketed, make certain products good candidates for standardization—and others not.

The international marketer has to make sure that products do not contain ingredients that might violate legal requirements or religious or social customs. DEP Corporation, a Los Angeles manufacturer with $19 million in annual sales of hair and skin products, takes particular pains to make sure that no Japan-bound products contain formaldehyde, an ingredient commonly used in the United States but illegal in Japan. Where religion or custom determines consumption, ingredients may have to be replaced for the product to be acceptable. In Islamic countries, for example, vegetable shortening has to be substituted for animal fats. In deference to Hindu and Muslim beliefs, McDonald’s Maharaja Mac is made with chicken or lamb in India. There is also a vegetarian burger, the McAloo Tikki.

Packaging is an area where firms generally do make modifications. Due to the longer time that products spend in channels of distribution, international companies, especially those marketing food products, have used more expensive packaging materials and/or more expensive transportation modes for export shipments. Food processors have solved the problem by using airtight, reclosable containers that seal out moisture and other contaminants.

The promotional aspect of packaging relates primarily to labeling. The major adjustments concern legally required bilinguality, as in Canada (French and English), Belgium (French and Flemish), and Finland (Finnish and Swedish). Other governmental requirements include more informative labeling of products for consumer protection and education. Inadequate identification, failure to use the required languages, or inadequate or incorrect descriptions printed on the labels may all cause problems. Increasingly, environmental concerns are having an impact on packaging decisions. On the one hand, governments want to reduce the amount of packaging waste by encouraging marketers to adopt the four environmentally correct Rs: redesign, reduce, reuse, and recycle. The EU has strict policies on the amounts of packaging waste that are generated and the levels of recycling of such materials. Depending on the packaging materials (20 percent for plastics and 60 percent for glass), producers, importers, distributors, wholesalers, and retailers are held responsible for generating the waste. In Germany, which has the toughest requirements, all packaging must be reusable or recyclable, and packaging must be kept to a minimum needed for proper protection and marketing of the product. Exporters to the EU must find distributors that can fulfill such requirements and must agree how to split the costs of such compliance.

The product offered in the domestic market may not be operable in the foreign market. One of the major differences faced by appliance manufacturers is electrical power systems. In some cases, variations may exist within a country, such as Brazil. Some companies have adjusted their products to operate in different systems; for example, video equipment can be adjusted to record and play back on different systems.

When a product that is sold internationally requires repairs, parts, or service, the problems of obtaining, training, and holding a sophisticated engineering or repair staff are not easy to solve. If the product breaks down and the repair arrangements are not up to standard, the product image will suffer. In some cases, products abroad may not even be used for their intended purpose and thus may require not only modifications in product configuration but also in service frequency. For instance, snowplows exported from the United States are used to remove sand from driveways in Saudi Arabia.

The country of origin of a product, typically communicated by the phrase ‘‘made in (country),’’ has considerable influence on quality perceptions. The perception of products manufactured in certain countries is affected by a built-in positive or negative assumption about quality. For example, many consumers around the world perceive Nokia as a Japanese brand, which does not have a negative impact on the company despite the incorrect appropriation, and has led to no action by Nokia. However, a Japanese carmaker, Daihatsu, suffered in the U.S. market at the time of its launch because it was perceived as a Korean brand. For this and other reasons, Daihatsu is no longer in the United States but concentrates its efforts in Latin America. These types of findings indicate that steps must be taken by the international marketer to overcome or at least neutralize biases. The issue is especially important to developing countries that need to increase exports, and for importers who source products from countries different from where they are sold. Some countries have started promotional campaigns to improve their overall images in support of exports and investment.

3. Company Considerations 

Company policy will often determine the presence and degree of adaptation. Discussions of product adaptation often end with the question, ‘‘Is it worth it?’’ The answer depends on the company’s ability to control costs, to correctly estimate market potential, and, finally, to secure profitability. The decision to adapt should be preceded by a thorough analysis of the market. Formal market research with primary data collection and/or testing is warranted. From the financial standpoint, some companies have specific return-on-investment levels (e.g., 25 percent) to be satisfied before adaptation. Others let the requirement vary as a function of the market considered and also the time in the market—that is, profitability may be initially compromised for proper market entry.

India is a country of more than a billion people with different cultures, languages, geographies, food habits, traditions, and sociocultural behaviors. No one can successfully do business in India by reading its potential from quantitative market reports. Understanding the psychological, sociological, and historical backgrounds is fundamental to hit the bull’s eye. Maggi has managed to enter Indian homes to change the traditional food habits of Indian children based on its promise of convenience. This brand has understood the psychology of Indian mothers and positioned itself for mother–child indulgence. Nokia produced a cell phone with a dust-resistant keypad, anti-slip grip, and a built-in flashlight; truck drivers and rural consumers enjoyed these simple-yet-useful features.

Most companies aim for consistency in their market efforts. This means that all products must fit in terms of quality, price, and user perceptions. Consistency may be difficult to attain, for example, in the area of warranties. Warranties can be uniform only if use conditions do not vary drastically and if the company is able to deliver equally on its promise anywhere it has a presence.

Arguments for standardization

The strength of standardization in the production and distribution of products and services is its simplicity and cost. It is an easy process for executives to understand and implement, and it is also cost effective. If cost is the only factor being considered, then standardization is clearly a logical choice because economies of scale can operate to reduce production costs. Yet minimizing production costs does not necessarily mean that profit increases will follow. Simplicity is not always beneficial, and costs are often confused with profits. Cost reductions do not automatically lead to profit improvements, and in fact the reverse may apply. By trying to control production costs through standardization, the product involved may become unsuitable for alternative markets. The result may be that demand abroad will decline, which leads to profit reduction. In some situations, cost control can be achieved but at the expense of overall profit. It is therefore prudent to remember that cost should not be overemphasized. The main marketing goal is to maximize profit, and production-cost reductions should be considered as a secondary objective. The two objectives are not always convergent.

When appropriate, standardization is a good approach. For example, when a consistent company or product image is needed, product uniformity is required. The worldwide success of McDonald’s is based on consistent product quality and services. Hamburger meat, buns, and fruit pies must meet strict specifications. This obsession with product quality necessitates the costly export of french fries from Canada to European franchises because the required kind of potato is not grown in Europe. In 1982, a Paris licensee was barred through a court order from using McDonald’s trademarks and other trade processes because the licensee’s twelve Paris eateries did not meet the required specifications.

Some products by their very nature are not or cannot be easily modified. Musical recordings and works of art are examples of products that are difficult to differentiate, as are books and motion pictures.When this is the case, the product must rise and fall according to its own merit. Whether such products will be successful in diverse markets is not easy to predict. Films that do well in the USA may do poorly in Japan. On the other hand, movies that were not box-office hits in the USA have turned out to be money makers in France (e.g., most of Jerry Lewis’ films).Yet in the case of Ricky Martin, his worldwide fame has to do in part with his France ‘98 World Cup theme song (“The Cup of Life”) – in Spanish, English, and French.

With regard to high-technology products, both users and manufacturers may find it desirable to reduce confusion and promote compatibility by introducing industry specifications that make standardization possible. A condition that may support the production and distribution of standardized products exists when certain products can be associated with particular cultural universals; that is, when consumers from different countries share similar need characteristics and therefore want essentially identical products.Watches are used to keep time around the world and thus can be standardized. The diamond is another example. Levi Strauss’ attempt to penetrate the European market with lighter-weight jeans failed because European consumers preferred the standard heavy-duty American type.

Another study also found that industrial managers and managers of consumer goods regarded certain marketing-related factors differently, thus implying that product standardization or customization depends in part on the type of product. Furthermore, respondents consistently regarded competitive environment as the most important variable affecting the extent of marketing standardization.

While market conditions tend to support localization, Western companies tend to favor standardization, but there is some logic behind the practice. Most Central and Eastern European countries are too small to pay off for customization. In addition, within a decade, these markets may converge to Western Europe market structures and rules.

Arguments for adaptation

There is nothing wrong with standardized products if consumers prefer those products. In many situations, domestic consumers may desire a particular design of a product produced for the American market. However, when the product design is placed in foreign markets, foreign buyers are forced either to purchase that product from the manufacturer or not purchase anything at all. This manner of conducting business overseas is known as the “big-car” and “left-hand-drive” syndromes. Both describe US firms’ reluctance and/or unwillingness to modify their products to suit their customers’ needs.

According to the big-car syndrome, US marketers assume that products designed for Americans are superior and will be preferred by foreign consumers. US car makers believe (or used to believe) that the American desire for big cars means that only big cars should be exported to overseas markets.

The left-hand-drive syndrome is a corollary to the big-car syndrome. Americans drive on the right-hand side of the road, with the steering wheel on the left side of the automobile. But many Asian and European countries have traffic laws requiring drivers to drive on the left side of the road, and cars with steering wheel on the left present a serious safety hazard. Yet exported US cars are the same left-hand-drive models as are sold in the USA for the right-hand traffic patterns.

 According to the excuse used by US car makers, a small sales volume abroad does not justify converting exported cars to right-hand steering: as GM’s president explained, “There’s a certain status in having a left-hand steer in Japan.” This is one good reason why American automobile sales abroad have been disappointing. A half-hearted effort can only result in a half-hearted performance. American exporters have failed time and time again to realize that when in Rome one should do as the Romans do. Japanese car makers have not shown the same kind of indifference to market needs; Japanese firms have always adapted their automobiles to American driving customs.

Those American firms that have understood the need for product modification have done well even in Japan. Du Pont has customized its manufacturing and marketing for the Japanese market, and its design units work with Japanese customers to design parts to their specifications. Sprite became the best selling clear soft drink in Japan after being reformulated – the lime taste was taken out because Japanese were found to prefer a purer lemon flavor.10 Yamazaki-Nabisco’s Ritz crackers sold in Japan are less salty than the Ritz crackers sold in America; similarly, Chips Ahoy are less sweet than versions sold elsewhere. Responding to the Japanese demand for quality, Ajinomoto-General Foods used a better grade of bean for its Maxim instant coffee.

Firms must choose the time when a product is to be modified to better suit its market. According to the Conference Board, important factors for product modification mentioned by more than 70 percent of firms surveyed are long-term profitability, long-term market potential, product–market fit, short-term profitability, cost of altering or adapting (e.g., retooling), desire for consistency (e.g., maintaining a world image), and short-term market potential. These factors apply to consumer nondurable and durable products as well as to industrial products.

Product adaptation is necessary under several conditions. Some are mandatory, whereas others are optional. In addition, firm characteristics and environmental characteristics have a significant impact on a firm’s overall performance and marketing mix strategy.

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 manufacturer 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.

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.

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 trustworthiness. 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.

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 manufacturer’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 promotion. 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 powerful brand names are Sony, Adidas, Ford, Toyota, Volvo, BMW, and Mercedes. When International 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 companies 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 standardization 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.

One study found that international marketing managers considered some cultural and socioeconomic conditions of foreign countries in making global brand image strategy decisions. If the markets are similar, a firm may be able to use the standardization strategy by extending its brand image theme to the other markets. However, when markets differ in cultural uncertainty avoidance, individualism, and national socioeconomics, managers tend to employ the image customization strategy.

Other than merely using the same brands worldwide, 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 increasingly adopted a standardized CVIS, stimulated in part by global restructuring, merger, or acquisition. Their reasons include aiding the sale of products and services, creating an attractive environment for hiring employees, and increasing the company’s stature and presence.

Brand origin and selection

Brand names can come from a variety of sources, such as from a firm’s founders (e.g., Francois Michelin, Albert G. Spalding, Pierre Cardin, and Yves St. Laurent), places (e.g., Budweiser), letters and numbers (e.g., IBM), and coined words (e.g., Ikea based on a combination of the initials of the Swedish-born founder, Ingvar Kamprad, with those of the farm, Elmtaryd, and the village, Agunnaryd, where he grew up).

Sometimes, it is easier simply to purchase an existing brand from another company. Hong Kong’s Universal International bought Matchbox, a British toy car maker.W. Haking enterprises, another Hong Kong company, acquired the Ansco name from GAF, and most Americans do not realize that the brand of Haking’s low-priced cameras is actually a Hong Kong brand. North American Philips (NAP) bought the Schick shaver trade name. Underscoring the value of this name, Remington even filed a complaint alleging that the Schick name enabled NAP to avoid spending $25 million needed to launch a new shaver to supplement the Norelco line.

Brand selection is far from being an exact science, as illustrated by the origins of many successful brands. Gabrielle Chanel liked the scent of the fifth sampled bottle in 1921. Feeling that 5 was a pretty number, she named the perfume Chanel No. 5. Denmark’s Lego Group, well known for its interlocking plastic bricks, is the world’s fifth largest toy maker with annual sales of about $1 billion. The founder, Ole Kirk Kristiansen, named his company Lego which is a combination of the

Danish words leg godt, meaning “play well.” More recently, brand selection has shifted away from being an art and is becoming more of a science.There are several companies that specialize in creating brand and corporate names, and they use computer programs that can run prefixes, suffixes, and other word combinations. However, it must be pointed out that marketers often do not have the luxury of picking and choosing names they like. Nor is it always feasible to conduct marketing research to investigate the appropriateness of a name. In Brazil, Philip Morris chose the Galaxy name without marketing research because it happened to be one of the company’s registered names. NUMMI’s use of the Nova trademark for cars produced jointly with Toyota and General Motors was due in part to GM’s ownership of the Nova brand name.

Brand characteristics

A good brand name should possess certain characteristics, and such characteristics are thoroughly discussed in most advertising and marketing textbooks. In essence, a brand should be short, distinctive, easy to pronounce, and able to suggest product benefits without negative connotations. In the international arena, these qualities are also relevant. In selecting a brand name, a marketer should first find out whether a brand name has any negative connotation in the target market. One company in the business of brand-name selection felt that Probe was an inappropriate name for Ford’s car, having an unpleasant gynecological reference. One reason why Japan’s Daihatsu Motor Co. Ltd. did not succeed in the USA may have to do with its name. According to research, many American consumers thought that the company was Korean, and it was a negative association.

An international brand name should reflect the desired product image.Toward this end, consumer perception should be taken into account. For instance, worldwide consumers usually perceive French perfumes to be superior, and French-sounding names for this kind of product may prove beneficial.

Likewise, good watches are perceived to be made in Switzerland, toiletries in the USA, machinery and beers in Germany, and so on. If appropriate, brands should reflect such images. Russian-sounding names may be used to position a vodka brand positively. Smirnoff originated in the Soviet Union but has been made in the USA for decades – a fact not known by many Americans.

Marketers may want to consider foreign branding which is a strategy of pronouncing or spelling a brand name in a foreign language. Foreign branding, by triggering cultural stereotypes, may influence product perceptions and attitudes. As shown in one experimental study, a brand name’s French pronunciation affects the perceived hedonism of the products as well as attitudes toward the brand name and the brand. Even with the presence of direct sensory experience, French branding still changes perceptions of a product.

One way of creating a desired image is to have a brand name that is unique or distinctive. Exxon has this quality. Aprica, a status-symbol stroller, is also unique in several respects. In choosing the name, Kenzo Kassai, the company’s owner, wanted something cute like “apple” for his folding stroller. During a trip to Italy, he found apri – an appropriate name for something that opens and closes. As “stroller” in Japanese is translated as “baby car,” the ca syllable (for “car”) is a natural ending. In effect, Aprica is a blend of English, Italian, and Japanese, meaning “open to the sun.”

A unique name often renders itself to graphic design possibilities, another desirable feature of a trademark. Exxon was chosen because of its distinctiveness, usefulness in work markets, and graphic design possibilities.After rejecting Hot-Line and Sound-About for not being appealing, Sony selected Walkman because of the distinctive logotype with two legs sticking out from the bottom of the letter A in walk.

An international product should have an international brand name, and this name should be chosen with the international market in mind. When possible, the name should suggest significant benefits. Although Emery Air Freight ships everything large and small anywhere in the world, its name gave no indication of this advantage.To overcome a secretary’s fear of shipping a letter to foreign countries with a carrier specializing in freight, the corporate name was changed to Emery Worldwide. Not wanting the trademark to be closely identified with USA, US Rubber adopted Uniroyal to reflect its diverse businesses around the world.The former French-born chairman of Revlon viewed Amoresse as unsuitable for a fragrance for the international audience; consequently, the name was changed to Jontue.

One way of making a brand name more international is by paying special attention to pronunciation. Many languages do not have all the alphabet characters, and the English language is no exception. The Spanish alphabet does not include the letter w, and the Italian language has no j, k, w, or y. Exhibit 11.2 examines the vowels and consonants that pose pronunciation problems to the Chinese.

Stenographers can easily see why many American words are misunderstood overseas because shorthand notations are based on how a word is pronounced and not on the way it is spelled. In general, any prefix, suffix, or word containing such letters as ph, gh, ch, and sh invites difficulty. Phoenix sewing machines provide a good example – it is inconceivable to many foreign consumers how the brand can be pronounced fe-nix and not pe-nix or fo-nix. It is difficult to understand why the o and not the e is silent in this case. Also, if the o is silent, why should it be in there in the first place? By the same token, people in many countries do not make any distinction, as far as pronunciation is concerned, between the following pairs: v and w; z and s; c and z; and ch and sh. A similar lack of distinction often exists with the trio of j, g, and y. The letter c in English words can be confusing because it can be pronounced like an s, as in the words audience and fragrance, or like a k, as in the words cat and cost.The letter y also poses some problems because it can sound like an a at one time and an i at another. Consider the hair product Brylcream. Foreign consumers may think that the e is silent and that the y should sound like a long i. A simple test could have easily revealed any pronunciation difficulties. Figure 11.8 shows how Hoechst tried to overcome the pronunciation difficulty while producing a promotional message at the same time. 

Finally, the legal aspect of branding definitely cannot be overlooked. A name that is similar to other firms’ trademarks should be avoided.Toyota’s Lexus was sued in 1988 by Lexis, which is Mead Data Central Inc.’s information retrieval service. Lexus was originally prevented from using the name nationally in the USA until it won a decision from an appeals court. Likewise, Altima Systems Inc., a California computer business, wanted to stop Nissan from also using the name before finally reaching a confidential agreement in 1992. Directed Electronics Inc., another California automobile security company, owns the name “Viper” for its line of automobile security alarm systems. A legal challenge followed when Chrysler started using the name for its Dodge car. Both sides reached an out of- court settlement in 1992, agreeing to coexist.

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 multiple brands, and (4) local brands versus worldwide brand. Following figure shows an outline of the decision making process when branding is considered

Following figure provides a branding model for decision making

1. 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 procedures. 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 undifferentiated 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 carat weight – and not by brand. This is why DeBeers promotes the primary demand for diamonds 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 marketing 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 cutthroat competition.

Branding, when feasible, transforms a commodity 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 developed 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.

Branding makes premium pricing possible because of better identification, awareness, promotion, differentiation, consumer confidence, brand loyalty, and repeat sales. According to one Supreme Court decision (No. 649, May 4, 1942, Mishawaka Rubber and Woolen Manufacturing Co. vs. S. S. Kresge, 53 USPQ 323), “The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. . . . Once established, the trademark owner has something of value.”

Although branding provides the manufacturer with some insulation from price competition, a firm must still find out whether it is worthwhile to brand the product. In general, the following prerequisites should be met:

• Quality and quantity consistency, not necessarily the best quality or the greatest quantity.

• The possibility of product differentiation.

• The degree of importance consumers place on the product attribute to be differentiated.

As an example, Nike’s unique designs (e.g., the waffle sole) allowed the company to differentiate its brand from others and to become the top-rated brand among serious joggers.

2. Private brand vs. manufacturer’s brand

Branding to promote sales and move products necessitates a further branding decision: whether the manufacturer should use its own brand or a distributor’s brand on its product. Distributors in the world of international business include trading companies, importers, and retailers, among others; their brands are called private brands. Many portable TV sets made in Japan for the US market are under private labels. In rare instances, Japanese marketers put their brands on products made by US companies, as evidenced by Matsushita’s purchases of major appliances from White and D&M for sale in the USA. The Oleg Cassini trademark is put on the shirts actually made by Daewoo.

Even though it may seem logical for a distributor to carry the manufacturer’s well-known brand, many distributors often insist on their own private brands for several reasons. First, a distributor may be able to create a unique product by bundling or unbundling product attributes and then adjusting the price to reflect the proper value.

Carrefour, a French retail giant, sells some 3000 in-house products at prices about 15 percent lower than national brands. J. Sainsbury PLC, a British retailer, has a private brand that is able to win 30 percent of the detergent market, moving it ahead of Unilever’s Persil and just behind Procter & Gamble’s Ariel which is the market leader. It is believed that private-label products now account for one-third of supermarket sales in the United Kingdom and a quarter in France.

Second, a private brand is a defensive strategy which guarantees that a distributor is not bypassed by its supplier. For example, Ponder and Best, after losing the Rolleiflex and Olympus distributorships, came up with its own brand of photographic products, Vivitar.

Third, distributors can convert fixed production costs into variable costs by buying products made by others. Sperry’s products are made by more than 200 manufacturers (e.g., Sperry’s personal computer is manufactured by Mitsubishi). With this practice, Sperry is able to save cash and researchand- development expenses. Of course, it is important for a distributor with a private brand to have a reliable supplier.

The fourth and perhaps the most important reason for a distributor’s insistence on a private brand is due to brand loyalty, bargaining power, and price. In spite of the lower prices paid by the distributor and ultimately by its customers, the distributor is still able to command a higher gross margin than what a manufacturer’s brand usually offers.The lower price may also be attributed to the distributor’s refusal to pay for the manufacturer’s full costs. A distributor may want to pay for the manufacturer’s variable costs but not all of the fixed costs. Or a distributor may want to pay for production costs only but not the manufacturer’s promotional expenditures, because a distributor gets no benefit from the goodwill of a manufacturer’s advertised brand. If a firm has any problem with the supplier (manufacturer), it has the flexibility of switching to another supplier to make the identical product, thus maintaining brand loyalty and bargaining power without any adverse effect on sales. RCA, for example, switched from Matsushita to Hitachi for its portable units of VCRs.

There are a number of reasons why the strategy of private branding is not necessarily bad for the manufacturer. First, the ease in gaining market entry and dealers’ acceptance may allow a larger market share overall while contributing to offset fixed costs. Toronto-based Cott Corp., once an obscure regional bottling company, has emerged as a leading private-label player by being involved with dozens of store-brand sodas. It sells more than one billion servings of soft drinks to Wal-Mart Stores Inc. under the label of Sam’s American Choice. Cott bottles Sainsbury Classic Cola for J. Sainsbury PLC which is the top food retailer in Britain. In the USA, Safeway Inc. is one of Cott’s largest customers. Safeway feels that it can give consumers value while earning better margins than on national brands.

Second, there are no promotional headaches and expenses associated with private branding, thus making the strategy suitable for a manufacturer with an unknown brand. Suzuki cars are sold in the USA under the GM Sprint brand name. Ricoh’s facsimile machines are sold under AT&T’s well-known name. Brother has had virtually no name recognition because it has marketed its many products under the private labels of US major retail chains; to secure recognition, it has begun to mount a major campaign.

Third, a manufacturer may judge that the sales of its own product are going to suffer to a greater or lesser degree by various private brands. In that case, the manufacturer may as well be cannibalized by one of those private brands made by the manufacturer.

There are also reasons why private branding is not good for the manufacturer. By using a private brand the manufacturer’s product becomes a commodity, at least to the distributor.To remain in business and retain sales to the distributor, the manufacturer must compete on the basis of price, since the distributor can always switch suppliers. Cott Corp., for example, lost its contract to brew its President’s Choice beer for Loblaw Cos., Canada’s top supermarket, when John Labatt Ltd. paid Loblaw $28 million for the contract.

By not having its own identity, the manufacturer can be easily bypassed. Furthermore, it loses control over how its product should be promoted – this fact may become crucial if the distributor does not do a good job in pushing the product. For example, Mitsubishi, which manufactures Dodge Colt and Plymouth champ for Chrysler, felt that its products did not receive Chrysler’s proper attention. As a result, Mitsubishi began to create its own dealer network and brand identity (e.g., Mitsubishi Mirage). Ricoh used to sell copiers in the USA only under such private brands as Savin and Nashua, whose sales lagged.After switching to its own brand name in 1981, Ricoh’s sales increased tenfold to take second place in unit sales behind only Canon.

The manufacturers’ dilemma is best illustrated by Heinz’s experience in the United Kingdom, where consumer recognition for its brand is stronger than in any other country in the world. Whereas Campbell Soup and Nestlé’s Crosse & Blackwell make some products under private labels to accommodate giant supermarkets’ insistence, Heinz produces products only under its own brand because, as the largest supplier of canned foods there, it has the most to lose.To preserve its long term market leadership at the expense of short term earnings, Heinz has held down prices, stepped up new product introductions, launched big capital spending programs, and increased advertising. Heinz does make private-label merchandise in the USA, where private brands account for 10 percent of its US sales. Its logic is that the slow growth of US private labeling does not pose a serious threat as it does in the United Kingdom.

Clearly, the manufacturer has two basic alternatives: (1) its brand, or (2) a private brand. Its choice depends in part on its bargaining power. If the distributor is prominent and the manufacturer itself is unknown and anxious to penetrate a market, then the latter may have to use the former’s brand on the product. But if the manufacturer has superior strength, it can afford to put its own brand on the product and insist that the distributor accept that brand as part of the product.

The hypothesis of the “least dependent person” can be quite applicable in determining the power of the manufacturer and that of its dealer.The stronger party is the one with resources and alternatives, and that party can demand more because it needs the other party less. The weaker party needs the other partner more due to a lack of resources and/or alternatives, and thus the weaker must give in to the “least dependent” party. In most cases, the interests of both parties are interdependent, and neither party may have absolute power. For instance, Kunnan, a maker of a high-quality tennis racket, lost some of its well-known customers when they began doing their own manufacturing. When those companies discovered later that they could not produce so well in terms of cost and quality, they came back to Kunnan for the private-brand manufacturing.

Private branding and manufacturer’s branding is not necessarily an either/or proposition: a compromise may often be reached to ensure mutual coexistence. If desired, both options can be employed together. Michelin, for instance, is world renowned for its own brand, and most people do not realize that Michelin also makes tires for Sears and Venture. Sanyo, another major international brand, is relatively unknown in the USA because it has relied heavily on private-label sales to Sears and other big companies. To rectify this identity problem, Sanyo has been pushing its own name simultaneously.

Manufacturers cannot treat private brands as simply generic competitors. After all, retailers that carry the private labels are both customers and competitors at the same time.5 The popularity of private brands varies from country to country. In England, the key factors that have contributed to the evolution of retail brands within British grocery retailing are changing the basis and use of retail power in the distribution channel, centralization of management activities, and appreciation of what constitutes retail image. British grocery retailers have successfully managed these factors. As a result, their retail brands are regarded by consumers as being as good as, if not better than, the established manufactured brands.

The discussion so far has focused primarily on the practice of distributors or middlemen having their own private brands manufactured by the other companies. A new trend in the high-technology arena is for manufacturers with top brands to have their products manufactured by someone else. IBM, the company responsible for the worldwide acceptance of personal computers, has stopped making desktop PCs in most parts of the world. It has signed a three-year, $5 billion agreement with Sanmina- SCI, a contract manufacturer, to make the IBMbrand PCs.

High-technology firms have been relying more on contract manufacturers and original design manufacturers (ODMs). Quanta Computer Inc. is a contract manufacturer that does all the manufacturing and logistics. This Taiwan company makes Apple’s Titanium G4 PowerBook. It also takes care of just about everything in less than forty-eight hours for HP’s notebook unit, from hardware to software and from testing the final product to shipping it to customers. Compaq Computer did not design nor make its iPaq Pocket PC. This handheld PC and its system of interchangeable accessory sleeves are actually the products of HTC, an ODM in Taiwan. Samsung, LG Electronics, and Acer are ODMs that make products for others as well as their own brands. Samsung’s Q10 notebook is almost indistinguishable from Dell Latitude X200 and Gateway 200. In the end, customers cannot rely on tangibles to tell these brands apart and must trust such intangibles as warranty and technical support.

The branding and manufacturing strategy mentioned above illustrates the potential benefits and problems of private branding. By putting their brands on the computers made by outside suppliers, the brand owners are able to take care of the gap in their product lines quickly and economically while solving their inventory problems. However, this new strategy will make product differentiation more difficult.Well-informed consumers may not see a good reason to pay extra for these brands.

3. Single brand vs. multiple brands

When a single brand is marketed by the manufacturer, the brand is assured of receiving full attention for maximum impact. However, a company may choose to market several brands within a single market based on the assumption that the market is heterogeneous and thus must be segmented. Consequently, a specific brand is designed for a specific market segment. In the case of Intel, it spent several hundred million dollars to promote Centrino, a new brand for wireless computing. Figure 11.5 shows Anheuser-Busch’s various brands for the US market.

The watch industry provides a good illustration for the practice of using multiple brands in a single market for different market segments. Bulova is a well-known brand, as are the Accutron and Caravelle brands. Citizen, in its attempt to capture the new youth and multiple-watch owners’ market, traded down to include a new brand called Vega. Likewise, Hattori Seiko is well known for its Seiko brand, which is sold at the upper-medium price range in better stores; to appeal to a more affluent segment, the firm traded up with the Lassale name. Seiko’s strategy is to deliberately divorce the Seiko and Lassale names, once used together in the public mind, with the gold-plated Lassale line and the karat-gold Jean Lassale line. Lassale watches have Seiko movements but are made only in the USA and Western Europe in order to curb parallel trading, and they are distributed only through jewelers and department stores. The company also trades down, with Pulsar, Lorus, and Alba for Asia. Swatch Group Ltd. has more than 50 percent of the Swiss watch industry. Swatch owns a number of well-known brands that include Omega, Longines,Tissot, and Calvin Klein. It recently spent $75 million to acquire the French watchmaker Breguet.

Multiple brands are suitable when a company wants to trade either up or down because both moves have a tendency to hurt the firm’s main business. If a company has the reputation for quality, trading down without creating a new brand will hurt the prestige of the existing brand. By the same rationale, if a company is known for its low-priced, mass-produced products, trading up without creating a new brand is hampered by the image of the existing products. Casio is perceived as a manufacturer of low-priced watches and calculators, and the name adversely affects its attempt to trade up to personal computers and electronic musical instruments. To overcome this kind of problem, Honda uses the Acura name for its sporty cars so that Acura’s image is not affected by the more pedestrian Honda image.

China has a long way to go before it can become synonymous with quality in the eyes of Western consumers. Not surprisingly, Chinese companies have downplayed the origin of their products. In the case of TCL Corp., a TV and cellular-phone maker, it acquired the bankrupt German TV maker Schneider in 2002. Although the TCL name has done well in Asia, the company believes that it needs a better known brand to succeed in Europe. To this end, Schneider, a century-old brand, should do better.

4. Local brands vs. worldwide brand

When the manufacturer decides to put its own brand name on the product, the problem does not end there if the manufacturer is an international marketer. The possibility of having to modify the trademark cannot be dismissed. The international marketer must then consider whether to use only one brand name worldwide or different brands for different markets or countries. To market brands worldwide and to market worldwide brands are not the same thing.

A single, worldwide brand is also known as an international, universal, or global brand. A Eurobrand is a slight modification of this approach, since it is a single product for a single market (i.e., the European Union and the other Western European countries), with an emphasis on the search for intermarket similarities rather than differences.

For a brand to be global or worldwide, it must, by definition, have a commonly understood set of characteristics and benefits in all of the markets where it is marketed. Coca-Cola is a global brand in the sense that it has been successful in maintaining similar perceptions across countries and cultures. However, most other brands do not enjoy this kind of consistency, thus making it debatable whether a global brand is a practical solution.

A worldwide brand has several advantages. First, it tends to be associated with status and prestige. Second, it achieves maximum market impact overall while reducing advertising costs because only one brand is pushed. Bata Ltd., a Canadian shoe marketer and retailer in ninety-two countries, found out from its research that consumers generally believed Bata to be a local concern, no matter the country surveyed. The company thus decided to become an official sponsor of World Cup soccer in order to enhance Bata’s international stature. For Bata and others, it is easier to achieve worldwide exposure for one brand than it is for multiple local brands.Too many brands create confusion and fragmentation.

Third, a worldwide brand provides a convenient identification, and international travelers can easily recognize the product. There would be no sense in creating multiple brands for such international products as Time magazine,American Express credit card, Diner’s Club credit card, Shell gasoline, and so on.

Finally, a worldwide brand is an appropriate approach when a product has a good reputation or is known for quality. In such cases, a company would be wise to extend the brand name to other products in the product line.This strategy has been used extensively by GE. In another case, 3M perceived commonalities in a consumer demographics and market development worldwide; in response, it devised a “convergence marketing” strategy to develop global identity for its Scotch brand of electronic recording products, whose design displays prominently the Scotch name and a globe like logo.

Global consumer culture positioning (GCCP) is a positioning tool that suggests one pathway through which a brand may be perceived by consumers as “global.” GCCP is a construct that associates a brand with a widely understood and recognized set of symbols which constitute an emerging global consumer culture. A significant number of advertisements employ GCCP (instead of positioning the brand as a member of a local or specific foreign consumer culture).

A C Nielsen’s Global Mega Brand Franchises report uses a number of criteria to identify mega brands. A megabrand must be available in at least fifteen out of fifty countries that account for 95 percent of the global economic output. It must be marketed under the same name in at least three different product categories in three or more regions. Based on these criteria, the mega brands are dominated by the highly extendable personal care and cosmetics manufacturers and by food and drinks manufacturers. The queen of megabrands is Nivea, a brand owned by the German consumer products group Beiersdorf. This skin-care brand is a huge success, and the brand has been extended to at least nineteen product categories (shampoos, after-shave, wrinkle lotion, and bath foam) in every part of the world. In contrast, Coke as a brand does not have much of this power of extensibility.

The use of multiple brands, also known as the local or individual approach, is probably much more common than many people realize. Discover Financial Services, while using the Discover name in the USA, issues a consumer credit card in England under the Morgan Stanley Dean Witter. In the case of Unilever, its fabric softener is sold in ten European countries under seven names. Due to decentralization, the multinational firm allows country managers to choose names, packages, and formulas that will appeal to local tastes. More recently, the company, while keeping local brand names, has been gradually standardizing packaging and product formulas.

There are several reasons for using local brands. First, developing countries resent international brands because the brands’ goodwill is created by an advertising budget that is much greater than research-and-development costs, resulting in no benefit derived from research and development for local economies. In addition, local consumers are forced to pay higher prices for advertising and goodwill, benefiting MNCs but hindering the development of local competitive capacity. Such resentment may explain why India’s ministries, responding to domestic soft drink producers’ pressure, rejected Pepsi’s 35 percent Pepsi-owned joint venture. Some governments have considered taxing international brands or limiting the use of such brands, as in the case of South Korea, which has considered placing restrictions on foreign trademarks intended for domestic consumption.

Second, when the manufacturer is unable to ensure uniform product quality across countries, it should consider local brands. Third, when an existing brand is difficult to pronounce, a new brand may be desirable. Sometimes, consumers avoid buying a certain brand when it is difficult to pronounce because they want to avoid the embarrassment of a wrong pronunciation.

Fourth, a local brand is more easily understood and more meaningful for local consumers. By considering foreign tastes and preferences, a company achieves a better marketing impact. Post-it note pads made by 3M are marketed as Yellow Butterflies in France. Grey, an international advertising agency, worked with Playtex to create appropriate names for Playtex’s brassières in different languages. The result was Wow in England and Traumbügel (dream wire) in Germany. Translation may also make a brand more meaningful.This approach is sometimes mistaken for a single-brand approach when in fact a new brand is created. Close-Up (toothpaste) was translated as Klai-Chid (literally meaning “very close”) in Thailand; the translation retained the meaning and the logo of the brand as well as the package design.

Fifth, a local brand can avoid a negative connotation. Pepsi introduced a non-cola under the Patio name in America but under the Mirinda name elsewhere due to the unpleasant connotation of patio in Spanish.

Sixth, some MNCs acquire local brands for quick market penetration in order to save time, not to mention money, which otherwise would be needed to build the recognition for a new, unknown brand in local markets. Renault would have been foolish to abandon the AMC (American Motors) name after a costly acquisition. Thus Renault , for example, became AMC Alliance in the USA. Chrysler subsequently bought AMC from Renault, one reason being AMC’s coveted Jeep trademark.

Seventh, multiple brands may have to be used, not by design but by necessity, due to legal complications. One problem is the restrictions placed on the usage of certain words. Diet Coke in countries that restrict the use of the word diet becomes Coke Light. Antitrust problems can also dictate this strategy. Gillette, after acquiring Braun A.G., a German firm, had to sign a consent decree not to use the name in the US market until 1985. The decree forced Braun to create the Eltron brand, which had little success.

The eighth and perhaps most compelling reason for creating new local brands is because local firms may have already used the names that multinational firms have been using elsewhere. In such a case, to buy the right to use the name from a local business can prove expensive. Unilever markets Sure antiperspirant in the United Kingdom but had to test market the product under the Trust name in the USA, where Sure is Procter & Gamble’s deodorant trademark.

In an interesting case,Anheuser-Busch bought the American rights to the Budweiser name and recipe from the brewer of Budweis in Czechoslovakia; Budejovicky Budvar Narodni Podnik, the Czech brewer, holds the rights in Europe. Operating from the town of Ceske Budejovice, known as Budweis before World War I, this brewer claims exclusive rights to the Budweiser name in the United Kingdom, France, and several European countries. Courts have ruled that both companies have the right to sell in the United Kingdom, but Anheuser-Busch has to use the Busch name in France and the corporate name in other parts of Europe.

Ninth, a local brand may have to be introduced due to price control.This problem is especially acute in countries with inflationary pressures. Price control is also one reason for the growth of the so-called gray marketers, as the phenomenon contributes to price variations among countries for the same product.Thus, instead of buying a locally produced product or one from an authorized distributor/ importer, a local retailer can buy exactly the same brand from wholesalers in countries where prices are significantly lower. A manufacturer will have a hard time prohibiting importation of gray market goods, especially in EU countries where products are supposed to be able to move freely. Parallel trading can be minimized by having different national brands rather than only a worldwide brand.

As mentioned above, brand standardization is a common strategy. Companies tend to brand globally but advertise locally. Interestingly, although the McDonald’s logo is one of the most recognizable trademarks in the world, McDonald’s has changed its advertising logo for Quebec, perhaps the only market in the world which receives this special treatment.The most well-known logo in Quebec is J’M. This is a play on “j’aime” which means “I love” in French.

The strategy of using a worldwide brand is thus not superior (or inferior) to using multiple local brands. Each strategy has its merits and serves its own useful functions.This is where managerial judgment comes in. Unilever, for example, considers consumer responses to a particular brand mix. It uses an international brand for such products as detergents and personal products because common factors among countries outweigh any differences. Food products, however, are another story. Food markets are much more complex due to variations in needs and responses to different products. The southern half of Europe uses mainly oil for cooking rather than margarine, white fats, or butter. The French more than the Dutch consider butter to be an appropriate cooking medium. German home makers, when compared to British home makers, are more interested in health and diet products. Soup is a lightweight precursor to the main dish in Great Britain but can almost be a meal by itself in Germany. Under such circumstances of preferential variations, the potential for local brands is greatly enhanced.

When creating local brand names in the multilingual international market, companies have three translation methods to consider: phonetic (i.e., by sound), semantic (i.e., by meaning), and phonosemantic (i.e., by sound plus meaning).The effectiveness of translation depends on the emphasis of the original English name and the translation method used previously for brand names within the same category. When the phonetic naming method is used, brand-name evaluations are more favorable for names that emphasize an English word than for those names that emphasize a Chinese word.