Brand Strategy in Business

CHAPTER 3: LITERATURE REVIEW

Chapter introduction

In this chapter, the literature is reviewed, the main theories are explained and further research is outlined. The main purpose is to help the researcher to develop a good understanding and insight to relevant previous research and the trends that have emerged. The purpose of this chapter is to identify previous literature about the topic area, including: Strategy issues, Brand, Brand equity, Brand Strategy, strategic management, international strategy, growing business and intellectual property issues in the Asia Pacific.

Brand

A brand includes a name, term, sign, symbol, or design, or a combination of these that identifies the maker and seller of a product or service. For consumers, the brand is a very important factor of buying a product, and branding can increase the value of a product. For example, most consumers would perceive a bottle of White Linen perfume as of high quality, expensive product. Nevertheless, the same perfume in a different bottle may be considered to be of low quality, even if the component were similar.

Brands are more than just names or symbols. Brands embody consumers’ perceptions and feelings about a product and its performance — everything that the product or service means to consumers. Therefore, the real value of a strong brand is its power to acquire the preference and loyalty of consumers. Different brands may fail or succeed depending on the quality of the product or service, the quality of the brand itself, how they are ranked in the market place and their persuasiveness during their advertising campaigns. (Sam Hill and Rohit Deshande 2001).

Brand equity

Every powerful brand has high brand equity. Brand equity is a positive result that knowing the brand name has on customer response to the product or service” - (Gary Armstrong and Phillip Kotler 2004). This means, if a brand has high brand equity, customers are willing to pay more money for buying the products of this brand instead of a possible cheaper product of a less known product.

Strong brand equity is quite a valuable asset for a brand. Brand valuation involves measuring the financial worth of brand. Brands are very essential in breeding and maintaining the business’s financial performance. When every industry becomes highly capacitated and more competitive, then companies can only differentiate themselves from the rest in the market by using strong brands and explaining why their products can provide consumer satisfaction in a unique way.

A company with high brand equity will therefore be more competitive in the market as more consumer consciousness and devotion will be directed to that particular brand. Above all, a powerful brand offers the company some defense against fierce price competition” - (Gary Armstrong and Phillip Kotler 2004)

Creating a powerful brand is important for a company, but what the powerful brand really represents is a set of loyal customers. Therefore, the company should build their own customer equity; with brand strategy as a major marketing tool at this point, I will discuss possible dangers for the brand equity trough intellectual property irregularities.

Major brand strategy decisions

Branding poses challenging decisions to the marketer. The Figure below shows the fact that the major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship and brand development.

Licensing

Even if there are many producers that took a long time and spent much money to create their own brand there are “However, some companies license names or symbols previously created by other manufacturers, names of well-known celebrities, or characters from popular movies and books. For a fee, any of these can provide an instant and proven brand name” - (Gary Armstrong and Phillip Kotler 2004).

Accessories sellers pay large royalties to adorn their products—from blouses to ties, and linens to luggage—with the names or initials of well-known fashion Innovators such as Joop, Calvin Klein, Tommy Hilfiger, Gucci, or Armani. Sellers of children’s products attach an almost endless list of character names to clothing, toys, school supplies, dolls, lunch boxes, cereals, and other items. Licensed character names range from classics such as Sesame Street to Harry Potter characters. Almost half of all retail toy sales come from products based on television shows and movies.

Name and charter licensing has grown rapidly in the last years. Annual retail sales of licensed products in the US and Canada have grown from only $4 billion in 1997 to $55 billion in 1987 and more than $71 billion today. Licensing can be a very profitable business for companies. The licensing category that seems to be experiencing the fastest growth is the corporate brand licensing because many profit and non-profit organizations are licensing their names to generate additional revenues and brand recognition. Coca-Cola, for example, has some 330 licenses in 57 countries producing more than 11,000 products, ranging from baby clothes and boxer shorts to earrings, a Coca-Cola Barbie doll, and even a fishing lure shaped like a tiny Coke can. Last year, goods sold by the licensees were approximated to over one billion U.S. dollars of licensed Coca-Cola products.

Branding Strategies in International Markets

In this section, the writer will take a more detailed look at the characteristics and the implications of the various strategies.

Localization Strategy

The Localization strategy (different brands, different products) is designed for brands with a strong local heritage and products with a very specific ingredient of known local origin, mainly addressing a specific local consumer need. In Europe, many organizations are currently facing a vast portfolio of local brands because of a series of acquisitions in the past two decades. Industry mergers have created graveyards for once-trusted and established brands that had to be killed in the post merger search for financial synergies. A good example of a localization strategy is the Spanish toiletry brand La Toja, which uses salt from hot springs at La Toja Island as an active ingredient. Both product and brand form a credible entity and respond to the established needs of the Spanish toiletry market, commanding a reasonable and stable market share in Spain and using local resources.

Globalization Strategy

The globalization (same name, same product) strategy still seems the most desirable strategy to follow, since it entails the highly desired financial advantages that corporations seek, as they grow large. Large quantities of goods will be produced and marketed under the same brand name everywhere; production complexity and marketing costs would go down to a minimum, and managerial complexity would be significantly reduced. In practice, however, this strategy can be successfully implemented only when all persuasive elements of the branded product have been carefully aligned and agreed with consumers around the globe. Only if a company is secure in the knowledge (acquired by international market research) that it is addressing a universal need with a universal product under a universally accepted psychological carrier system in the form of a commonly understood brand can get the result that marketing effort will be a profit pillar and not a profit killer. Such a situation is rare, but occurs most frequently in the case of a launch of a new branded product.

Regional Adaptation Strategy

The regional adaptation strategy (same brand, different products) is another interesting alternative. Here the same brand appears under different product frames. Although this may sound odd to marketing strategists (why produce different products when you already have a global brand?), it makes a lot of sense to consider this strategy. The strategy is designed for scenarios where the brand part already stands for trust and confidence in consumers’ minds, yet due to different consumer habits and different needs, it seems indispensable to provide different product characteristics. Let us also look at some examples here. Washing dishes is done differently in different countries in Europe: the German user does it in hot standing water and the Spanish user under running cold water. It seems clear even to chemical laypersons that these different conditions must be met with different chemical ingredients. Therefore, if a global brand is positioned as the ultimate product against burned-in grease, it must meet this functional expectation under all kinds of different usage situations. As another example, Asian hair has a different structure and different shades compared with Caucasian hair. A coloration product promising ultimate gray coverage must consider these different hair structures in its formula to get the same product quality in this region. Again, different products may result, even under the same brand. In order to achieve constant sales, functional expectations on the user should be matched on the regional user.

Strategy and strategic Management

Strategy may be defined as the capacity or the way through which an organization strives to achieve its objectives through a constant designation of its resources within a demanding environment to meet the needs and interest of the markets and to ensure stakeholder satisfaction. In other words, strategy is about where the business is trying to get to in the long-term, the markets a business should compete in and the kind of activities involved in such markets, how the business can perform better than the competitors in those markets, the resources i.e. skills, assets, finance, relationships, technical competence and facilities required for a successful competition, the external environmental factors that affect the businesses' ability to compete and the values and expectations of those who have power in and around the business.

Strategy at Different Levels of a Business

Strategy can be found at different levels of the organization. It can be found in the overall organization or within the individuals working in an organization. Examples of the strategies include the following.

Corporate Strategy, this has to do with the whole organization. It looks at the span and functions of the organization in its attempt to satisfy the employee needs and expectations. It is a very crucial level in the operation of organizational activity since it is responsible for strategic decision making and thus highly influenced by the investors.

Operational Strategy, which deals with every department in an organization in relation to how their work is organized, how they operate to deliver the company and business unit level strategic direction. Operational strategy therefore put more emphasis on the people, resources and processes.

Business Unit Strategy, this is mainly concerned with the competitiveness of a business in the market. Its main areas of concern include making strategic decisions on customer need satisfaction, gaining advantage over competitors, choice of products and exploiting or creating new market opportunities

Strategic Management

Strategic management is mainly concerned with making long-term decisions that will help in meeting the business goals and objectives thus achieving the business vision. An effective strategic management involves three major components. The three components include strategic analysis, strategic choice and strategic implementation.

Strategic analysis involves determining the position of a business in terms of strengths and weaknesses and trying to understand the external environmental factors that influence the business position. Several tools are used in achieving this purpose. Such tools include the PEST analysis, which evaluate the political, economic, social and technological factors. It scrutinizes the external macro environment in which the business operates. Another tool is the SWOT analysis, which examines the strengths, weaknesses, opportunities and the threats that a business faces in the course of its operation. Other than the PEST and SWOT analysis, we have the market segmentation, which involves the division of the market into different segments putting into consideration the needs of different groups of consumers. Scenario planning is another tool used in strategic analysis. It is a model that helps the organization to predict the future, how it will unfold and how it may affect issues that face the business. Strategic analysis also uses directional policy matrix. This tool assists the organization in deciding on whether to invest, divest, grow or harvest. It assesses the strength of the market and the ability of the organization to chase it. Competitor analysis is yet another tool. It helps the organization to know its competitors, their strengths and weaknesses and to know the customer needs that it is competing to meet. It helps the organization to identify threats and opportunities. Other the above tools, we also have the five forces analysis. This helps the organization to understand how strong it is in terms of market competition and the strength of the position that it considers being into in the future. Lastly, we have the critical success factor analysis, which helps the organization managers to understand and analyze their information requirement needs.

The second component of strategic management is Strategic Choice. This mainly focuses on the decisions to be made when planning and how the uncertainties surrounding such decisions can be handled.

The last component is strategy implementation. This is not an easy task but organizations can still succeed thus will have six managing factors to manage. The six factors are, action planning, the annual business plan, human resources, linkage, organization structure and monitoring and control.

The strategic audit

Direct audit is the process through which the organization obtains information from interviews, research, internet and field work. It takes several stages to formulate a strategic audit. These stages are as below.

Resource audit, which appraises the practices, policies and procedure of an organization. It involves job descriptions, hiring and orientation procedures, employee welfare and benefits and compensation procedures.

The second stage is the value chain analysis. This involves a chain of activities through which the products pass in order to gain more value. It boosts the product quality thus improving their demand in the market.

The third stage is the core competence analysis. These are factors that are essential in helping a business to achieve its competitive advantage. It helps the business with ideas that help it give more attention to what it can do best.

Performance analysis is the fourth stage. This is only used when the organization wants to a portion of the organization like performance improvement e.g. business performance, individual performance, job performance and training performance.

Portfolio analysis, this refers to the assessment of the business and the products of a company. A good portfolio should support a company’s strengths and help in the exploration of the available opportunities.

The last stage is the SWOT analysis. This stands for the strengths, weaknesses, opportunities and threats within a business environment. It defines the position of a business in relation to its competitors.

Business growth strategy

Business growth can be improved mainly by increasing sales. The goal of increasing sale is to make the existing customers buy more of the product and create more customers for the product. For this to be achieved, the organization must posses growth skills, privileged assets, operational skills and special relationship with the customers. The organization should also establish a market growth matrix whereby there is segmentation of existing products for existing customers, existing products for new customers, new products for existing customers and new products for new customers.

An organization may equally improve its sales by inventing new delivery approaches. This may include the use of distribution channels instead of direct sales. Service provision is also very important in product delivery. It can be done manually to meet the needs of the customers. The service provided by the organization should deviate depending on the type of the product, its quality, price and the channel of distribution implemented.

New geographical regions where the goods can be sold should be identified by the organization that wants to improve its sales. An organization can be effective in increasing its operations when the geographical under which it operates is large enough, leading to business growth.

Organizations can acquire new industry structure in order to increase their growth. This may be a great challenge and threat to competitors and a competitive advantage to the organization.

New competitive arenas can be developed where the organization considers the opportunities to incorporate or consider using the existing business skills in another industry.

Intellectual property in Asia pacific

The intellectual property in Asia pacific was expanded and a greater coverage of the Asia pacific region provided when the trademark scan was added to the dialog platform. Businesses that want to be more successful in their operations through out the world are advised to attentively watch the operations of the intellectual property. This will help them to maintain their competitiveness in the market and especially in the most popular economic areas like North America, Europe and Asia pacific. This shows that the behavior and different attitudes that different companies have towards the intellectual property in Asia pacific can greatly influence their competitiveness in the market and more so in the most popular and highly recognized economic regions i.e. North America, Europe and Asia pacific (Michael 2004).

Several companies have however; try to duplicate the work or the products of others in an attempt to improve their competitiveness. The copycats seem to be getting better, increasing faster and becoming more competitive. The copies sometimes appear to be very similar to the original thus can only be differentiated by the quality and the way of production and package since this takes a long process and could be easy to come up with the exact package as the original copy. Observations made have shown that sometimes a company may loose such vital things as building plans, building facilities and even blue prints of machines. The copy cats at times try to build a machine that is already build by simply buying it, breaking it into parts and then trying to put the parts together. In an attempt to reduce the number of products copied, there has been a call for establishment of strict border controls and restrictions of imports (Kendall and McNamara 2002, p. 140).

Conclusion

It is obvious that the success of a business is highly determined by nature of its competitiveness in the market. However, several other factors one of them being branding determines the competitiveness of an industry in a market. It is therefore necessary for businesses to evaluate their brands and improve their advertising techniques to maintain high competition in the market (McRobert &Hewitt 2002). Other than branding, a company should also develop appropriate strategies and ensure proper management of those strategies. Lastly, a company should be positive towards the intellectual property in Asia pacific in order to improve its performance and be more competitive in the market.

Reference

Gary Armstrong and Phillip Kotler, 2004, Principles of marketing, Australia: Pearson Prentice Hall.

Stonehouse, et al, Tony. 2004, Global and Transnational Business: Strategy and Management. Second Edition. Chichester: John Wiley

Johnson, Gerry, Scholes, Kevan and Whittington, Richard, 2006, Exploring Corporate Strategy: Text and Cases. Seventh Enhanced Media Edition. Harlow: Pearson Education Prentice Hall.

Porter, Michael, 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press

Porter, Michael, 1985, Competitive Advantage. New York: Free Press

Singh, Kulwant, Delios and Andrew, 2005, Strategy for Success in Asia: Mastering Business in Asia. Singapore: John Wiley

Yip, George S, 1992, Total Global Strategy: Managing for Worldwide Competitive Advantage. New Jersey: Prentice Hall.

Yip, George S, 2003, Total global strategy II: updated for the Internet and service era / George, [second Ed], Upper Saddle River, N.J.: Prentice Hall.

Yip, George S, 2000, Asian advantage: key strategies for winning in the Asia-Pacific region / George, Reading, Mass.; Oxford: Perseus.

Lasserre, Philippe, 1999, Strategy and management in Asia Pacific / Philippe Lasserre and Hellmut Schü. London: McGraw-Hill.

Singh, Kulwant, 2005, Mastering business in Asia: strategy for success in Asia / Kulwant Singh, A. Singapore: Wiley.

Akio Hosen, 1998, Development strategies in East Asia and Latin America, Basingstoke: Macmillan.

Chien, Willie, 2005, Business growth strategies for Asia Pacific / Willie Chien, Stan Shih, Po-Yo. Chichester: Wiley.

Winning in Asia, European style: market and non-market strategies for success. Basingstoke: Palgrave, 2001

Johnson, Gerry, 2005, Exploring corporate strategy / Gerry Johnson, Kevan Scholes, Richard Whittin. Seventh ed. Harlow: Financial Times Prentice Hall.

Global and transnational business: strategy and management / George Stoneho. Second ed. Chichester: Wiley, 2004

Kendall, C. and McNamara, L. 2002, Piracy and the Copyright Act: Criminal Deterrent, Australian Intellectual Property Journal vol.13 no. 3, pp.121-145.

Sam Hill and Rohit Deshande, 2001, Developing market strategy: Understanding consumer needs. Hong Kong, Haworth press.

Michael, D. 2004, Intellectual property and the Public sphere, McKenzie Cyber Law Centre, University of New South Wales.

McRobert, and Hewitt, C. 2002, Advertising Agencies and misleading advertising, Campaign Brief (December 2002).

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