WHo is able to complete this discussion?

The course TEXTBOOK

Textbook Cited: Keegan, W. J., & Green, M. C. (2020). Global marketing (10th ed.). Retrieved from https://www.vitalsource.com

10-1 Basic Product Concepts

10-1 Review the basic product concepts that underlie a successful global marketing product strategy.

The product P of the marketing mix is at the heart of the challenges and opportunities facing global companies today: Management must develop product and brand policies and strategies that are sensitive to market needs, competition, and the company’s ambitions and resources on a global scale. Effective global marketing often entails finding a balance between the payoff from extensively adapting products and brands to local market preferences and the benefits that come from concentrating company resources on relatively standardized global products and brands.

A product is a good, service, or idea with both tangible and intangible attributes that collectively create value for a buyer or user. A product’s tangible attributes can be assessed in physical terms, such as weight, dimensions, or materials used. Consider, for example, a flat-panel TV with an OLED screen that measures 42 inches across. The unit weighs 20 pounds, is 2.2 inches deep, features four high-definition media interface (HDMI) connections, has a built-in tuner capable of receiving high-definition TV signals over the air, and delivers a 4K screen resolution. These tangible, physical features and attributes translate into benefits that enhance the enjoyment of watching HDTV broadcasts and Blu-ray movies. Accessories such as wall mounts and floor stands enhance the value offering by enabling great flexibility in placing the set in a living room or home theater.

Intangible product attributes, including the status associated with product ownership, a manufacturer’s service commitment, and a brand’s overall reputation or mystique, are also important. When shopping for a new TV, many people want “the best”: They want a TV loaded with features (tangible product elements), as well as one that is “cool” and makes a status statement (intangible product element).

Product Types

A frequently used framework for classifying products distinguishes between consumer and industrial goods. For example, Samsung offers products and services to both consumers and businesses worldwide. Consumer and industrial goods, in turn, can be further classified on the basis of criteria such as buyer orientation. Buyer orientation is a composite measure of the amount of effort a customer expends, the level of risk associated with a purchase, and buyer involvement in the purchase. The buyer orientation framework includes such categories as convenience, preference, shopping, and specialty goods. Electronics products are often high-involvement purchases, and many shoppers will compare several brands before making a decision. Products can also be categorized in terms of their life span (durable, nondurable, and disposable). Samsung and other electronics companies market products that are meant to last for many years; in other words, they are durable goods. As these examples from the electronics industry suggest, traditional product classification frameworks are fully applicable to global marketing.

Product Warranties

A warranty can be an important element of a product’s value proposition. An express warranty is a written guarantee that assures the buyer that he or she is getting what he or she has paid for or that provides recourse in case a product’s performance falls short of expectations. In global marketing, warranties can be used as a competitive tool to position a company in a positive way.

For example, in the late 1990s, Hyundai Motor America chief executive Finbarr O’Neill realized that many American car buyers perceived Korean cars as “cheap” and were skeptical about the Hyundai nameplate’s reliability. Although the company had made significant improvements in the quality and reliability of its vehicles, consumer perceptions of the brand had not kept pace with the changes. O’Neill instituted a 10-year, 100,000-mile warranty program that represents the most comprehensive coverage in the auto industry. Concurrently, Hyundai launched several new vehicles and increased expenditures for advertising. The results have been impressive: Hyundai’s U.S. sales jumped from approximately 90,000 vehicles in 1998 to nearly 665,000 vehicles in 2017. Hyundai has also overtaken Toyota as Europe’s best-selling Asian car brand.

Packaging

Oftentimes, packaging is an integral element of product-related decisions. Packaging is an especially important consideration for products that are shipped to markets in far-flung corners of the world. The term consumer packaged goods (CPG) applies to a wide variety of products whose packaging is designed to protect or contain the product during shipping, at retail locations, and at the point of use or consumption. “Eco-packaging” is a key issue today, and package designers must address environmental issues such as recycling, biodegradability, and sustainable forestry.

Packaging also serves important communication functions: Packages (and the labels attached to them) offer communication cues that can influence consumers when making a purchase decision. Today, many industry experts agree that packaging must engage the senses, make an emotional connection, and enhance a consumer’s brand experience. According to Bernd Schmitt, director of Columbia University’s Center on Global Brand Leadership, “Packages are creating an experience for the customer that goes beyond the functional benefits of displaying and protecting the object.”1 Absolut Vodka, Altoids breath mints, and Godiva chocolates are a few examples of brands whose value proposition includes “experiential packaging.”

Brewers, soft drink marketers, distillers, and other beverage firms typically devote considerable thought to ensuring that packages speak to consumers or provide some kind of benefit beyond simply holding liquid. For example, a critical element in the success of Corona Extra beer in export markets was management’s decision to retain the traditional package design, which consists of a tall transparent bottle with “Made in Mexico” etched directly on the glass. At the time, the conventional wisdom in the brewing industry was that export beer bottles should be short, green or brown in color, with paper labels. In other words, the bottle should resemble Heineken’s! The fact that consumers could see the beer inside the Corona Extra bottle made it seem more pure and natural. Today, Corona is the top-selling imported beer brand in the United States, Australia, Belgium, the Czech Republic, and several other countries.2

Coca-Cola’s distinctive (and trademarked) contour bottle comes in both glass and plastic versions and helps consumers seek out the “real thing.” The bottle design, which dates back to 1916, was intended to differentiate Coke from other soft drinks. The design is so distinctive that a consumer could even use his or her sense of touch to identify the bottle in the dark! The Coke example also illustrates the point that packaging strategies can vary by country and region. In North America, where large refrigerators are found in many households, one of Coca-Cola’s packaging innovations is the Fridge Pack, a long, slender carton that holds the equivalent of 12 cans of soda. The Fridge Pack fits on a refrigerator’s lower shelf and includes a tab for easy dispensing. In Latin America, by contrast, Coca-Cola executives intend to boost profitability by offering Coke in several different-sized bottles. Until recently, for example, 75 percent of Coke’s volume in Argentina was accounted for by 2-liter bottles priced at $0.45 each. Now Coke has also introduced cold, individual-serving bottles priced at $0.33 that are stocked in stores near the front; unchilled, 1.25-liter returnable glass bottles priced at $0.28 are available on shelves farther back in the store.3

Other examples of packaging innovations include the following:

Grey Goose, the world’s top-selling super-premium vodka brand, was the brainchild of the late Sidney Frank. The owner of an importing business in New Rochelle, New York, Frank first devised the bottle design and name. Only then did he approach a distiller in Cognac, France, to create the actual vodka.4

Nestlé’s worldwide network of packaging teams contributes packaging improvement suggestions on a quarterly basis. Implemented changes include a plastic lid to make ice cream containers easier to open, slightly deeper indentations in the flat end of candy wrappers in Brazil that make them easier to rip open, and deeper notches on single-serve packets of Nescafé in China. Nestlé also asked suppliers to find a type of glue to make the clicking sound louder when consumers snap open a tube of Smarties-brand chocolate candies.5

When GlaxoSmithKline launched Aquafresh Ultimate toothpaste in Europe, the marketing team wanted to differentiate the brand from category leader Colgate Total. Most tube toothpaste is sold in cardboard cartons that are stocked horizontally on store shelves. The team designed the Aquafresh Ultimate tube to stand up vertically. The tubes are distributed to stores in shelf-ready trays, and the box-free packaging saves hundreds of tons of paper each year.6

Labeling

One hallmark of the modern global marketplace is the abundance of multilanguage labeling that appears on many products. In today’s self-service retail environments, product labels may be designed to attract attention, to support a product’s positioning, and to help persuade consumers to buy. Labels can also provide consumers with various types of information. Obviously, care must be taken that all ingredient information and use and care instructions are properly translated.

The content of product labels may also be dictated by country- or region-specific regulations. Regulations regarding mandatory label content vary in different parts of the world; for example, the European Union now requires mandatory labeling for some foods containing genetically modified ingredients. Regulators in Australia, New Zealand, Japan, Russia, and several other countries have proposed similar legislation.

In the United States, the Nutrition Education and Labeling Act that went into effect in the early 1990s was intended to make food labels more informative and easier to understand. Today, virtually all food products sold in the United States must present, in a standard format, information regarding nutrition (e.g., calories and fat content) and serving size. The use of certain terms such as light and natural is also restricted.

Other examples of labeling in global marketing include the following:

Mandatory health warnings on tobacco products are required in most countries.

The American Automobile Labeling Act clarifies the country of origin, the final assembly

point, and the percentages of the major sources of foreign content of every car, truck, and minivan sold in the United States (effective since October 1, 1994).

Responding to pressure from consumer groups, in 2006 McDonald’s began posting nutrition information on all food packaging and wrappers in approximately 20,000 restaurants in key markets worldwide. Executives indicated that issues pertaining to language and nutritional testing would delay labeling in 10,000 additional restaurants in smaller country markets.7

Nestlé introduced Nan, an infant-formula brand that is popular in Latin America, in the American market. Targeted at Hispanic mothers, Nan’s instructions are printed in Spanish on the front of the can. Competing brands have English-language labeling on the outside; Spanish-language instructions are printed on the reverse side.8

In 2008, the United States enacted a country-of-origin labeling (COOL) law. The law requires supermarkets and other food retailers to display information that identifies the country from which meat, poultry, and certain other food products are sourced. France enacted a similar law in January 2017.

Aesthetics

In Chapter 4, the discussion of aesthetics included perceptions of color in different parts of the world. Global marketers must understand the importance of visual aesthetics embodied in the color or shape of a product, label, or package. Likewise, aesthetic styles, such as the degree of complexity found on a label, are perceived differently in different parts of the world. For example, it has been said that German wines would be more appealing in export markets if the labels were simplified. Put simply, aesthetic elements that are deemed appropriate, attractive, and appealing in a company’s home country may be perceived differently—and to the product’s detriment—elsewhere.

In some cases, a standardized color can be used in all countries; examples include the distinctive yellow color on Caterpillar’s earthmoving equipment and its licensed outdoor gear, the red Marlboro chevron, and John Deere’s signature green. In other instances, color choices should be changed in response to local perceptions. For example, as noted in Chapter 4, white is associated with death and bad luck in some Asian countries. When General Motors (GM) executives were negotiating with China for the opportunity to build cars there, they gave Chinese officials gifts from upscale Tiffany & Company in the jeweler’s signature blue box. The Americans astutely replaced Tiffany’s white ribbons with red ones because red is considered a lucky color in China and white has negative connotations (see the Emerging Markets Briefing Book sidebar later in the chapter).

Packaging aesthetics are particularly important to the Japanese. This point was driven home to the chief executive of a small U.S. company that manufactures an electronic device for controlling corrosion. After spending much time in Japan, the executive managed to secure several orders for the device. However, following an initial burst of success, Japanese orders dropped off; for one thing, the executive was told, the packaging was too plain. “We couldn’t understand why we needed a five-color label and a custom-made box for this device, which goes under the hood of a car or in the boiler room of a utility company,” the executive said. While waiting for the bullet train in Japan one day, the executive’s local distributor purchased a cheap watch at the station and had it elegantly wrapped. The distributor asked the American executive to guess the value of the watch based on the packaging. Despite all that he had heard and read about the Japanese obsession with quality, it was the first time the American understood that, in Japan, “a book is judged by its cover.” As a result, the company revamped its packaging, seeing to such details as ensuring that the strips of tape used to seal the boxes are cut to precisely the same length.9

10-2 Basic Branding Concepts

10-2 Compare and contrast local products and brands, international products and brands, and global products and brands.

A brand is a complex bundle of images and experiences in the customer’s mind. Brands perform two important functions. First, a brand represents a promise by a particular company regarding a particular product; it is a type of quality certification. Second, brands enable customers to better organize their shopping experience by helping them seek out and find a particular product. Thus, an important brand function is to differentiate a particular company’s offering from all other companies’ offerings.

Customers integrate all their experiences of observing, using, or consuming a product with everything they hear and read about it. Information about products and brands comes from a variety of sources and cues, including advertising, publicity, word of mouth, sales personnel, and packaging. Perceptions of service after the sale, price, and distribution are also taken into account. The sum of these impressions is a brand image, defined as perceptions about a brand as reflected by brand associations that consumers hold in their memories.10

Brand image is one way that competitors in the same industry sector differentiate themselves. Take Apple and Samsung, for example. Both companies market smartphones. The late Steve Jobs, Apple’s legendary cofounder and CEO, was a constant media presence and a master at generating buzz; the iPhone, iPad, and other Apple products generally receive stellar reviews for their sleek designs, powerful functionality, and user-friendly features. Apple’s retail stores reinforce the brand’s hip, cool image. By contrast, Samsung’s brand image is more heavily skewed toward technology; few Samsung users are likely to know the name of the company’s chief executive.

“If you’re into a certain brand, you expect a certain terminology and vocabulary. For brands, it’s important to speak the language of the target audience.”11

Ron Tolido, Global Chief Technology Officer for Insights and Data, Capgemini

Another important brand concept is brand equity, which represents the total value that accrues to a product as a result of a company’s cumulative investments in the marketing of the brand. Just as a homeowner’s equity grows as a mortgage is paid off over the years, so brand equity grows as a company invests in the brand. Brand equity can also be thought of as an asset representing the value created by the relationship between the brand and its customers over time: The stronger the relationship, the greater the equity. For example, the value of global megabrands such as Coca-Cola and Marlboro runs in the tens of billions of dollars.12 As outlined by branding expert Kevin Lane Keller, strong brand equity brings numerous benefits for the company:

Greater loyalty

Less vulnerability to marketing actions

Less vulnerability to marketing crises

Larger margins

More inelastic consumer response to price increases

More elastic consumer response to price decreases

Increased marketing communication effectiveness13

Warren Buffett, the legendary American investor who heads Berkshire Hathaway, asserts that the global power of brands such as Coca-Cola and Gillette permits the companies that own them to set up a protective moat around their economic castles. As Buffett once explained, “The average company, by contrast, does battle daily without any such means of protection.”14 That protection often yields added profit because the owners of powerful brand names can typically command higher prices for their products than can owners of lesser brands. In other words, the strongest global brands have tremendous brand equity.

“There is a strong local heritage in the brewing industry. People identify with their local brewery, which makes beer different from detergents or electronic products.”15

Karel Vuursteen, chairman, Heineken

Companies develop logos, distinctive packaging, and other communication devices to provide visual representations of their brands. A logo can take a variety of forms, starting with the brand name itself. For example, the Coca-Cola brand is expressed in part by a word mark consisting of the words Coke and Coca-Cola written in a distinctive white script. The “wave” that appears on red Coke cans and bottle labels is an example of a nonword mark logo, sometimes known as a brand symbol. Nonword marks such as the Nike swoosh, the three-pronged Mercedes star, and McDonald’s golden arches have the great advantage of transcending language and, therefore, are especially valuable to global marketers. To protect the substantial investment of time and money required to build and sustain brands, companies register brand names, logos, and other brand elements as trademarks or service marks. As discussed in Chapter 5, safeguarding trademarks and other forms of intellectual property is a key issue in global marketing.

Local Products and Brands

A local product or local brand is one that has achieved success in a single national market. Sometimes a global company creates local products and brands in an effort to cater to the needs and preferences of particular country markets. For example, Coca-Cola has developed several branded drink products for sale only in Japan, including a noncarbonated, ginseng-flavored beverage; a blended tea known as Sokenbicha; and the Lactia-brand fermented milk drink. In India, Coca-Cola markets bottled water under the Kinely brand. In contrast, the spirits industry often creates brand extensions to leverage popular brands without making large marketing expenditures. For example, Diageo PLC markets Gordon’s Edge, a gin-based ready-to-drink beverage in the United Kingdom. Allied Domecq created TG, a brand flavored with Teacher’s Scotch and guaraná, in Brazil.16

Local products and brands also represent the lifeblood of domestic companies. Entrenched local products and brands can present significant competitive hurdles to global companies that are seeking to enter new country markets. In China, for example, a sports-apparel company started by Olympic gold medalist Li Ning competes head to head with global powerhouse Nike. In developing countries, global brands are sometimes perceived as overpowering scrappy local ones. In some cases, growing national pride may result in a social backlash that favors local products and brands. In China, a local TV manufacturer, Changhong Electric Appliances, has generated a high degree of awareness among Chinese consumers by cutting prices and using patriotic advertising themes such as “Let Changhong hold the great flag of revitalizing our national industries.”

White-goods maker Haier Group has also successfully fought off foreign competition and now accounts for 40 percent of China’s refrigerator sales. In addition, Haier enjoys a 30 percent share of both the washing machine and air conditioner markets. Slogans stenciled on office walls delineate the aspirations of company president Zhang Ruimin: “Haier—Tomorrow’s Global Brand Name” and “Never Say ‘No’ to the Market.”17 In 2002, Haier Group announced a strategic alliance with Taiwan’s Sampo Group. The deal, valued at $300 million, called for each company to manufacture and sell the other’s refrigerators and telecommunications products both globally and locally.

International Products and Brands

International products and international brands are offered in several markets in a particular region. For example, a number of “Euro products” and “Euro brands” such as Daimler’s two-seat Smart car are available in Europe; the Smart was eventually launched in the United States as well. GM’s experience with its Corsa model in the early 1990s provides a case study in how an international product or brand can be taken global. The Opel Corsa was a new model originally introduced in Europe. GM then decided to build different versions of the Corsa for China, Mexico, and Brazil. As David Herman, chairman of Adam Opel AG, noted, “The original concept was not that we planned to sell this car from the tip of Tierra del Fuego to the outer regions of Siberia. But we see its possibilities are limitless.” GM calls the Corsa its “accidental world car.”18

Honda had a similar experience with the Fit, a five-door hatchback built on the company’s Global Small Car platform. Following Fit’s successful Japanese launch in 2001, Honda rolled out the vehicle in Europe (where it is known as Jazz). Over the next few years, Fit was introduced in Australia, South America, South Africa, and China. The Fit model made its North American market debut in 2006.

Global Products and Brands

Globalization is putting pressure on companies to develop global products and to leverage brand equity on a worldwide basis. A global product meets the wants and needs of a global market. A true global product is offered in all world regions, including the Triad and in countries at every stage of development. A global brand has the same name and, in some instances, a similar image and positioning throughout the world. Some companies are well established as global brands. For example, when Nestlé asserts that it “Makes the very best,” the quality promise is understood and accepted globally. The same is true for Gillette (“The best a man can get”), BMW (“The ultimate driving machine”), GE (“Imagination at work”), Harley-Davidson (“An American legend”), General Motors (“Find new roads”), and many other global companies (see Exhibit 10-2).

Exhibit 10-2

In French (“La perfection au masculin”), German (“Für das Besteim Mann”), Italian (“Il meglio di un uomo”), Portuguese (“O melhorpara o homem”), or any other language, Gillette’s trademarked brand promise is easy to understand.

Former Gillette CEO Alfred Zeien explained his company’s approach as follows:

A multinational has operations in different countries. A global company views the world as a single country. We know Argentina and France are different, but we treat them the same. We sell them the same products, we use the same production methods, we have the same corporate policies. We even use the same advertising—in a different language, of course.19

Zeien’s remarks reflect the fact that Gillette creates competitive advantage by marketing global products and utilizing global branding strategies. The company reaps economies of scale associated with creating a single ad campaign for the world and the advantages of executing a single brand strategy. By contrast, Peter Brabeck-Letmathe, the former CEO of Nestlé, has a different perspective:

We believe strongly that there isn’t a so-called global consumer, at least not when it comes to food and beverages. People have local tastes based on their unique cultures and traditions—a good candy bar in Brazil is not the same as a good candy bar in China. Therefore, decision ­making needs to be pushed down as low as possible in the organization, out close to the ­markets. Otherwise, how can you make good brand decisions? A brand is a bundle of functional and emotional characteristics. We can’t establish emotional links with consumers in Vietnam from our offices in Vevey.20

Whichever view prevails at headquarters, all global companies are trying to increase the ­visibility of their brands, especially in key markets such as the United States and China. Examples include Philips with its “Innovation and you” global image advertising and Siemens’ recent “­Siemens answers” campaign.

In the twenty-first century, global brands are becoming increasingly important. As one research team noted:

People in different nations, often with conflicting viewpoints, participate in a shared conversation, drawing upon shared symbols. One of the key symbols in that conversation is the global brand. Like entertainment stars, sports celebrities, and politicians, global brands have become a lingua franca for consumers all over the world. People may love or hate transnational ­companies, but they can’t ignore them.21

These researchers note that brands that are marketed around the world are endowed with both an aura of excellence and a set of obligations. Across the planet, consumers, corporate buyers, governments, activists, and other groups associate global brands with three characteristics, which consumers then use as a guide when making purchase decisions:

Quality signal. Global brands compete fiercely with each other to provide world-class ­quality. A global brand name differentiates product offerings and allows marketers to charge premium prices.

Global myth. Global brands are symbols of cultural ideals. As noted in Chapter 7, ­marketers can use global consumer culture positioning (GCCP) to communicate a brand’s global identity and link that identity to aspirations in any part of the world.

Social responsibility. Customers evaluate companies and brands in terms of how they address social problems and how they conduct business (see Exhibit 10-3).

Exhibit 10-3

Nucor is a steel ­company best known for its pioneering use of the minimill. Minimills produce steel by melting scrap in electric arc furnaces—a process that is much more efficient than the one used by traditional integrated steel producers. Nucor uses print and online media for an integrated general branding ­campaign featuring the tagline “It’s our nature.” This campaign is designed to raise awareness about the company’s stance on a variety of issues, including the environment, energy conservation, sustainability, and the importance of creating a strong corporate culture.

A global brand, however, is not the same thing as a global product. For example, personal stereos are a category of global product; Sony is a global brand. Many companies, including Sony, make personal stereos, but Sony created the category 30 years ago when it introduced the ­Walkman in Japan. The Sony Walkman is an example of combination branding or tiered branding, whereby a corporate name (Sony) is combined with a product brand name (Walkman). By using combination branding, marketers can leverage a company’s reputation while developing a distinctive brand identity for a line of products. The combination brand approach can be a powerful tool for introducing new products. Although Sony markets a number of local products, the company also has a stellar track record as a global corporate brand, a creator of global products, and a marketer of global brands. For example, using the Walkman brand name as a point of departure, Sony created the Discman portable CD player and the Watchman portable TV. Sony’s current global product brand offerings include Bravia brand HDTVs, Cyber-Shot digital cameras, PlayStation game consoles and portables, and the Xperia XZ smartphone.

Co-branding is a variation on combination branding in which two or more different company or product brands are featured prominently on product packaging or in advertising. When properly implemented, co-branding can engender customer loyalty and allow companies to achieve ­synergy. When done badly, it can confuse consumers and dilute brand equity. This approach works most effectively when the products involved complement each other. Credit card companies were the pioneers in the co-branding realm, so that today it is possible to use cards to earn frequent-flyer miles and discounts on automobiles. Another well-known example of co-branding is the Intel Inside campaign promoting both the Intel Corporation and its Pentium-brand processors in conjunction with advertising for various brands of personal computers.

Global companies can also leverage strong brands by creating brand extensions. This strategy entails using an established brand name as an umbrella when entering new businesses or developing new product lines that represent new categories to the company. British entrepreneur Richard Branson is an acknowledged master of this approach: The Virgin brand has been attached to a wide range of businesses and products (www.virgin.com). Virgin is a global brand, and the company’s businesses include an airline, a railroad franchise, retail stores, movie theaters, financial services, and health clubs. Some of these businesses are global, and some are local. For example, Virgin Atlantic Airways flies to many global destinations, whereas Virgin Rail Group and Virgin Media operate only in the United Kingdom. The brand has been built on Branson’s shrewd ability to exploit weaknesses in competitors’ customer service skills, as well as his flair for self-promotion. Branson’s business philosophy is that brands are built around reputation, quality, innovation, and price rather than image. Although Branson is intent on establishing Virgin as the British brand of the new millennium, some industry observers wonder if the brand has been spread too thin. Branson’s newest ventures include spaceflight firm Virgin Galactic.

The history of the Sony Walkman illustrates the burden placed on visionary marketers to create global brands. Initially, Sony planned to market its personal stereo under three brand names. In their book Breakthroughs!, Ranganath Nayak and John Ketteringham describe how the global brand as we know it today came into being when famed Sony chairman Akio Morita realized that global consumers were one step ahead of his marketing staffers:

At an international sales meeting in Tokyo, Morita introduced the Walkman to Sony representatives from America, Europe, and Australia. Within 2 months, the Walkman was introduced in the United States under the name “Soundabout”; 2 months later, it was on sale in the United Kingdom as “Stowaway.” Sony in Japan had consented to the name changes because their English-speaking marketing groups had told them the name “Walkman” sounded funny in ­English. Nevertheless, with tourists importing the Walkman from Japan and spreading the original name faster than any advertising could have done, Walkman became the name most people used when they asked for the product in a store. Thus, Sony managers found themselves losing sales because they had three different names for the same item. Morita settled the issue at Sony’s U.S. sales convention in May 1980 by declaring that, “funny or not,” Walkman was the name everybody had to use.22

Table 10-1 shows the four combinations of local and global products and brands in matrix form. Each represents a different strategy; a global company can use one or more strategies as appropriate. Some global companies pursue strategy 1 by developing local products and brands for individual country or regional markets. Coca-Cola makes extensive use of this strategy: Its Georgia canned coffee in Japan is one example. Coca-Cola’s flagship cola brand is an example of strategy 4. In South Africa, Coca-Cola markets Valpre brand bottled water (strategy 2). The global cosmetics industry makes extensive use of strategy 3: The marketers of Chanel, Givenchy, Clarins, Guerlain, and other leading cosmetics brands create different formulations for different regions of the world. However, the brand name and the packaging may be uniform everywhere.

Table 10-1 Product/Brand Matrix for Global Marketing

Product

Local

Global

Brand

Local

1. Local product/local brand

2. Global product/local brand

Global

3. Local product/global brand

4. Global product/global brand

Global Brand Development

Table 10-2 shows global brands ranked in terms of their economic value as determined by analysts at the Interbrand consultancy and Citigroup. To be included in the rankings, the brand has to generate approximately one-third of sales outside the home country; brands owned by privately held companies, such as Mars, are not included. Not surprisingly, technology giants Apple and Google occupy the top two spots. Coincidentally, Google also ranked number 3 in the 2017 Global Brand Simplicity Index compiled by Siegel+Gale; German discounter Aldi topped the rankings.23

Table 10-2 The World’s Most Valuable Brands

Source: Adapted from “Best Global Brands: 2017 Rankings,” www.bestglobalbrands.com/2017/ranking/ (accessed March 1, 2018).

Rank

Value ($ millions)

Rank

Value ($ millions)

1. Apple

184,154

14. Disney

40,772

2. Google

141,703

15. Intel

39,459

3. Microsoft

79,999

16. Cisco

31,930

4. Coca-Cola

69,733

17. Oracle

27,466

5. Amazon

64,796

18. Nike

27,021

6. Samsung

56,249

19. Louis Vuitton

22,919

7. Toyota

50,291

20. Honda

22,696

8. Facebook

48,188

21. SAP

22,635

9. Mercedes

47,829

22. Pepsi

21,491

10. IBM

46,829

23. H&M

20,488

11. GE

44,208

24. Zara

18,573

12. McDonald’s

41,533

25. IKEA

18,472

13. BMW

41,521

The rankings show that strong brand management is being practiced by companies in a wide range of industries, from consumer packaged goods to electronics to automobiles. But even top brands have their ups and downs: When the 2012 rankings were released, Nokia had dropped out of the top 10. When he was president and CEO of Nokia, Stephen Elop partnered with Microsoft to develop a new generation of smartphones. Despite that collaboration, in the 2014 rankings, Nokia dropped out of the top 25 (see Exhibit 10-4). Following Microsoft’s purchase of Nokia’s Devices and Services business, Elop was named executive vice president of Microsoft Devices Group. HMD Global group is currently the owner of the Nokia smartphone brand.

Exhibit 10-4

Annual global cellphone sales have passed the 1 billion units mark. Now, faced with saturated markets in the West, HMD Global, owner of the Nokia smartphone brand, and its competitors are looking to emerging markets for new customers. Robust economic growth and rising incomes mean that consumers in China, India, and other emerging markets can buy cellphones as status symbols. Many users are upgrading to new handsets with fashionable designs and the latest features, including myriad apps, wireless charging, and dual cameras.

Developing a global brand is not always an appropriate goal. As David Aaker and Erich Joachimsthaler note in the Harvard Business Review, managers who seek to build global brands must consider whether such a move fits well with their company or their markets. First, those managers must realistically assess whether anticipated scale economies will actually materialize. Second, they must recognize the difficulty of building a successful global brand team. Finally, managers must be alert to instances in which a single brand cannot be imposed on all markets successfully. Aaker and Joachimsthaler recommend that companies place a priority on creating strong brands in all markets through global brand leadership:

Global brand leadership means using organizational structures, processes, and cultures to allocate brand-building resources globally, to create global synergies, and to develop a global brand strategy that coordinates and leverages country brand strategies.24

“People love the Uber product. They don’t necessarily love the brand.”25

Bozoma Saint John, chief brand officer, Uber

Mars Inc. confronted the global brand issue with its chocolate-covered caramel bar that was sold under a variety of national brand names, such as Snickers in the United States and ­Marathon in the United Kingdom. Management decided to transform the candy bar—already a global ­product—into a global brand. This decision entailed some risk, such as the possibility that consumers in the United Kingdom would associate the name Snickers with knickers, the British slang for a woman’s undergarment. Mars also changed the name of its successful European chocolate biscuit from Raider to Twix, the same name used in the United States. In both instances, having a single brand name gave Mars the opportunity to leverage all of its product communications across national boundaries. Managers were forced to think globally about the positioning of Snickers and Twix—something that they had not been obliged to do when the candy products were marketed under different national brand names. The marketing team rose to the challenge; as Lord Saatchi described it:

Mars decided there was a rich commercial prize at stake in ownership of a single human need: hunger satisfaction. From Hong Kong to Lima, people would know that Snickers was “a meal in a bar.” Owning that emotion would not give them 100 percent of the global confectionery market but it would be enough. Its appeal would be wide enough to make Snickers the number-one confectionery brand in the world, which it is today.26

Table 10-3 lists the names of several global brands and describes the strategy behind the names.

Table 10-3 Where Did That Name Come From?

Company Name/HQ Country

History Behind the Name

Aldi (Germany)

“Albrecht Discount,” named for the two brothers who founded the company.

Alfa (Italy)

“Anonima Lombarda Fabbrica Automobili”

Alibaba (China)

“Everybody knows the story of Alibaba. He’s a young man who is willing to help others.”

Fiat (Italy)

“Fabbrica Italiana Automobil Torino”

Haribo (Germany)

Hans Riegel Sr., Bonn, named for the founder and the city where he lived.

IKEA (Sweden)

“Ingvar Kamprad Elmtaryd Agunnaryd,” named for founder’s initials; the farm where he grew up; and name of hometown.

Kering (France)

Luxury goods firm formerly known as PPR. “Ker” means “home” in Brittany; “Kering” is pronounced like “caring” in English; name change intended to “soften company’s image.”

LEGO (Denmark)

“Leg godt” means “play well” in Danish.

Rimowa (Germany)

Richard Morszeck Warenzichen; Richard is son of company founder Paul Morszeck

TOMS (USA)

Founder Blake Mycoskie shortened the name from “Shoes for a Better Tomorrow” and “Tomorrow’s Shoes.”

The following six guidelines can assist marketing managers in their efforts to establish global brand leadership:27

Create a compelling value proposition for customers in every market entered, beginning with the home-country market. A global brand begins with this foundation of value.

Before taking a brand across borders, think about all elements of brand identity and select names, marks, and symbols that have the potential for globalization. Give special attention to the Triad and BRICS nations.

Develop a company-wide communication system to share and leverage knowledge and information about marketing programs and customers in different countries.

Develop a consistent planning process across markets and products. Make a process ­template available to all managers in all markets.

Assign specific responsibility for managing branding issues to ensure that local brand ­managers accept global best practices. This can take a variety of forms, ranging from a business management team or a brand champion (led by senior executives) to a global brand manager or brand management team (led by middle managers).

Execute brand-building strategies that leverage global strengths and respond to relevant local differences.

Coke is perhaps the quintessential global product and global brand. Coke relies on similar positioning and marketing in all countries; it projects a global image of fun, good times, and enjoyment. The product itself, though, may vary to suit local tastes; for example, Coke increased the sweetness of its beverages in the Middle East, where customers prefer a sweeter drink. Also, prices may vary to suit local competitive conditions, and the channels of distribution may differ. In 2009, Coke adopted the global advertising theme “Open Happiness.” The previous slogan, “The Coke Side of Life,” was also global but required adaptation in emerging markets such as Russia and China.28 In 2016, Coke replaced “Open Happiness” with a new global tagline, “Taste the Feeling.”

Emerging Markets Briefing Book

China Gives Buick a New Lease on Life

GM’s experience at home and abroad provides a good example of how a company’s brand strategy must be adapted to cultural realities as well as the changing needs of the market. For example, in the 1990s GM was vying for the right to build a sedan in China. Company executives gave Chinese officials gifts from Tiffany’s in the jeweler’s signature blue boxes. However, the Americans replaced Tiffany’s white ribbons with red ones: They recognized that red is considered a lucky color in China and white has negative connotations.

GM ultimately won government approval of its proposal and was given the opportunity to produce Buick sedans for ­government and business. Why was the Buick nameplate chosen from among GM’s various vehicle brands? In an interview with Fortune, former GM CEO Rick Wagoner explained that the Chinese have a straightforward negotiation style. The Chinese wanted Buick; the American company suggested one of its global nameplates. The Chinese were adamant, saying, “We’d like you to use Buick.” The Americans agreed, and a deal was struck.

Back at home, Buick’s image has been in decline for decades. The average Buick buyer is 61 years old; this demographic stands in marked contrast to that served by, say, Volvo, whose average buyer is only 50. Buick was once a popular aspirational brand among American drivers; one advertising tagline asked, “Wouldn’t you really rather have a Buick?” The line was designed to motivate a Ford owner to take a step up in class by choosing a Buick LeSabre or Riviera. Another headline read, “Want the Big buy for Big families?”

Unfortunately, by the mid-1980s, Buick had fallen victim to corporate consolidation and cost cutting. The resulting design and engineering overlap meant that some car buyers found it difficult to distinguish among models from GM’s different divisions. A case in point: The ­Riviera, the Oldsmobile Toronado, and the Cadillac Eldorado were all very similar. Even the breakthrough design of the 1995 Riviera could not breathe new life into the brand; despite rave reviews (Autoweek said the new design was “bound to make waves in the luxury coupe segment”), the Riviera model itself was retired in 1999.

By 2009, Buick’s Chinese sales totaled 450,000, more than four times the U.S. sales figure. Moreover, the typical Buick owner in China is 35 years old. These facts help explain why the Buick nameplate is still in production. When the U.S. government took control of GM, it pressured GM chief Fritz Henderson to terminate Buick. Thanks to the brand’s popularity in China, it was given a reprieve. Meanwhile, GM has phased out Oldsmobile, Pontiac, and Saturn. One auto analyst summarized the situation by noting, “In China, GM has played a local strategy. They left the people running Buick alone, and they were extremely successful in building the brand there.”

Now the task facing the company’s American marketing managers is to revitalize the Buick brand at home. New models such as the mid-sized Regal and the Verano compact sedan are integral to that effort. The Regal is built in Germany, and some early print ads positioned it as having European roots. For example, one ad suggested, “Listen closely and you might detect a German accent.” As Craig Bierley, advertising and promotions director, told Financial Times, “The goal is about expanding the audience for the brand. Germany automatically says ‘sports sedan’ to people.” In summer 2016, the Buick Envision, a ­midsize SUV, was launched in the United States. It is sure to be a case study in Buick’s global strategy, for one simple reason: The Envision is the first Chinese-assembled mass-market vehicle sold in the United States (see Exhibit 10-5).

10-3 A Needs-Based Approach To Product Planning

10-3 Explain how Maslow’s needs hierarchy helps global marketers understand the benefits sought by buyers in different parts of the world.

Coca-Cola, McDonald’s, Singapore Airlines, Mercedes-Benz, and Sony are a few of the ­companies that have transformed local products and brands into global ones. The essence of marketing is finding needs and filling them. Maslow’s needs hierarchy—a staple of sociology and psychology courses—provides a useful framework for understanding how and why local products and brands can be extended beyond home-country borders. Maslow proposed that people’s desires can be arranged into a hierarchy of five needs.29 As an individual fulfills needs at each level, he or she progresses to higher levels (Figure 10-1). At the most basic level of human existence, physiological and safety needs must be met. People need food, clothing, and shelter, and a product that meets these basic needs has potential for globalization.

Figure 10-1 Maslow’s Hierarchy of Needs

Of course, the basic human need to consume food and drink for nutrition is not the same thing as wanting or preferring a Big Mac or a Coke. Before the Coca-Cola Company and McDonald’s conquered the world, they built their brands and business systems at home. Because their products fulfilled basic human needs and because both companies are masterful marketers, they were able to cross geographic boundaries and build global brand franchises. At the same time, Coca-Cola and McDonald’s have learned from experience that some food and drink preferences—China is a case in point—remain deeply embedded in culture.30 Responding to those differences has meant creating local products and brands for particular country markets. Sony has prospered for a similar reason. Audio and video entertainment products fulfill important social functions. Throughout its history, Sony’s corporate vision has called for developing new products, such as the transistor radio and the Walkman personal stereo, that fulfill the need for mobile entertainment.

Mid-level needs in Maslow’s hierarchy of needs include self-respect, self-esteem, and the esteem of others. These social needs, which can create a powerful internal motivation driving demand for status-oriented products, cut across the various stages of country development. Gillette’s Alfred Zeien understood this point quite well. Marketers in Gillette’s Parker Pen subsidiary are confident that consumers in Malaysia and Singapore shopping for an upscale gift will buy the same Parker pen as Americans shopping at Neiman Marcus. “We are not going to come out with a special product for Malaysia,” Zeien has said.31 In Asia today, young women are taking up smoking as a status symbol—and showing a preference for Western brands such as Marlboro. At the same time, those smokers’ needs and wants may be tempered by economic circumstances. Recognizing this reality, companies such as BAT create local brands that allow individuals to indulge their desire or need to smoke at a price they can afford to pay.

Luxury goods marketers are especially skilled at catering to esteem needs on a global basis. Rolex, Louis Vuitton, and Dom Perignon are just a few of the global brands that consumers buy in an effort to satisfy esteem needs. Some consumers flaunt their wealth by buying expensive products and brands that others will notice—a behavior referred to as conspicuous consumption or luxury badging. Any company with a premium product or brand that has proved itself in a local market by fulfilling esteem needs should consider devising a strategy for taking the product global.

Products can fulfill different needs in different countries. Consider the refrigerator as used in industrialized, high-income countries. The primary function of the refrigerator in these countries is related to basic needs as fulfilled in that society: storing frozen foods for extended periods; keeping milk, meat, and other perishable foods fresh between car trips to the supermarket; and making ice cubes.

In lower-income countries, by contrast, frozen foods are not widely available and homemakers shop for food daily, rather than weekly. In these markets, people are reluctant to pay for unnecessary features such as icemakers, because they are perceived as luxuries that require high income levels to support. The function of the refrigerator in a lower-income country is to store small quantities of perishable food for one day and to store leftovers for slightly longer periods. Because the needs fulfilled by the refrigerator are limited in these countries, a relatively small refrigerator is quite adequate.

In some developing countries, refrigerators have an important secondary purpose related to higher-order needs: They fulfill a need for prestige. In these countries, there is demand for the largest model available, which is prominently displayed in the living room rather than hidden in the kitchen