How Global Brands Compete_polson

HOW GLOBAL BRANDS COMPETE? Lekshmy R Nair Nikunj Barnwal Rahul T Thomas

“The Globalization of Markets”: HBR article by Levitt  Declared that a global market for uniform products/ services had emerged  Corporations should exploit ‘economics of simplicity’ and grow by selling standardized products all over the world  He did not explicitly discuss Branding  But his ideas were interpreted to mean: Transnational companies should standardize products, packaging, communication to achieve a Least-Common-Denominator (hereafter mentioned as LCD) positioning that would be effective across cultures  Branding was only about saving costs and ensuring consistent customer communication 2

 This idea was popular in 80’s: several countries opened up to foreign competition  But consumers in most countries had trouble relating to generic products and communications that resulted from LCD thinking  So Hybrid strategies (Glocal) were adopted  Global scale: Technology, Production, Organization  Customized to Local customer: Product features, Communication, Distribution, Selling Techniques  Such Glocal strategies have ruled the marketing ever since

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Flip side…  Global branding has lost its luster: Transnational companies have been under virtual siege (anti-globalization protests)  Transnational Companies are the most visible and vulnerable symbols of globalization’s side-effects  E.g.: Pashmina shawls  USA’s war with Iraq and Afghanistan added to it  According to Interbrand: 62 out of top 100 most valuable global brands were American  Most transnational companies now fly below the radar ! 4

Global Brands…  Cant escape notice  People view most transnational brands differently than other firms  Due to their pervasiveness, they are seen as powerful institutions, capable of doing great good and also causing considerable harm  Research Project conducted involving 3300 consumers in 41 countries: most people choose one global brand over another because of differences in brand’s global qualities 5

 Firms must learn to manage the brand’s global characteristics  Critical because: future growth for most companies will come from foreign markets  By 2030, according to World Bank, the planet’s population will rise to 9 billion (with 90% people living in developing countries)

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Rise of Global Culture  Culture: created and preserved by Communication  For decades communication was only within borders of countries: strong national culture  With the wide availability of Music, Movies, TV Channels and Internet, people started comparing their cultures with foreign ones  Towards end of 20th century: global culture  Thus Global Brands become the lingua franca of consumers all over the world

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 Rise of global culture doesn’t mean that consumers share same taste or values!  Rather people with often conflicting viewpoints participate in a shared conversation, using shared symbols (global brands)  Consumers attribute some characteristics to global brands and use those attributes as criteria while making purchase decisions

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Global Brands: Study  2 stage research project  Research International/USA  Objective: To find out how customers in different countries value global brands  Qualitative study in 41 countries to identify the key characteristics people associate with Global Brands  Then, a survey of 1800 people of 12 nations was taken to measure the relative importance of dimensions, when consumers buy products

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Global Brands Study: Details  1st stage: Qualitative study (in 41 countries) to identify key characteristics that people associate with Global brands  RI held Focus group sessions:  1500 urban consumers (20-35 yrs) in 41 countries  Sessions with social activists in some countries

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Details of the research  Research helped them identify 4 dimensions that consumers may associate with global brands:  Quality signal  Global myth  Social Responsibility  American Values  2nd stage: Surveyed 1800 people (in 12 nations) to measure relative importance of the above dimensions when buying products  Developed multiple measures for each of the dimensions and pre-tested in US & UK 11

 RI administered the survey in UK, US and 10 other countries (different in terms of economic development, religion, heritage & political history)  In each country the consumers were 18- 75 yrs chosen at random  Respondents were asked to choose among 3 competing global brands in 6 product categories

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 Brand preferences were given by dividing 11 points among the 3 brands in each category  Then weights were derived for each of the global dimensions by the extent to which each factor explained brand preferences  Examined: how importance weights varied by country, category and segment

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Three Important Characteristics 1. Quality Signal  More people buying a brand- Better the quality  Rationale for charging premium  Transnational companies try developing new products faster than rivals and keep developing new products (unlike local brands)  Initially the countries of origin-factor was important, but now it reduced to 1/3 of the globalness 14

2. Global Myth  Global brands are seen as symbols of cultural ideals  Create imagined global identity that they share with like minded people  Transnational companies compete: to offer highest value products; to deliver cultural myths with Global appeal  Post World War- II era, companies spun American myths  Today’s global myths has less to do with American way of life  Myths are now created by virtually all brands: across industries 15

3. Social Responsibility  Global companies have extraordinary influence on society’s well being  Expected to address social problems  Infamous cases: Union Carbide’s Bhopal Gas tragedy in 1984  Playing field isn’t level  Such expectations are pronounced in developing countries, as they are in developed countries in Europe 16

Why consumers pick Global Brands?

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American Values ?  American companies have been criticized that they treat the cultures in other countries in a harsh manner  But those who support free trade have countered the people in other countries  This debate has cast a shadow over American firms  Americans: ‘want to impose their way on everybody’  Major finding: it didn’t matter to the consumers if the global brands they bought were American

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 This finding is remarkable  All the consumers looked for is quality in the products  The relative importance of the 3 dimensions was consistent across the 12 countries studied  Taken collectively global dimensions were more powerful in some countries than in others:  Smallest impact on US consumers  Less impact on consumers in Brazil & India  Consumers in Indonesia, Turkey and Egypt were influenced to a great extent 19

GLOBAL CONSUMER SEGMENTS  Not much variation across countries regarding views on global brands  But within each country consumers held a variety of views about global brands  Consumers who evaluate brands similarly were then grouped (regardless of home country) into:    

Global Citizens Global Dreamers Antiglobals Global Agnostics 20

Global Citizens  55% of respondents rely on global success of company as a signal for quality and innovation  Concerned whether the companies are socially responsible  US & UK: few Global citizens  Brazil, China, Indonesia: relatively higher number

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Global Dreamers  23% of respondents are less discerning about, but more ardent in their admiration of transnational companies  See global brands as quality products and readily buy into the myths  Are not as concerned with social responsibilities as are the Global Citizens

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Antiglobals  13% of consumers are skeptical if transnational companies deliver higher quality goods  Dislike brands that preach American values and do not trust global companies to behave responsibly  Try to avoid business with transnational firms  UK & China: relatively high numbers  Egypt & S.A: relatively low

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Global Agnostics  8% of the consumers don’t base purchase decisions based on brand’s global attributes  Evaluate global product by same criteria as they judge local brand (don’t think global nature requires special consideration)  US & S.A: higher percentage  Japan, Turkey, China, Indonesia: lower percentage

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COMPETING WITH GLOBAL BRANDS  Global brands compete with global brands  To succeed: transnational companies should:  Strive for superiority on basics (like brand’s price, performance, features and imagery)  At same time must learn to manage brand’s global characteristics

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1. Think Globalness  Smart companies manage their brands as global symbols  People are either astonished or disturbed by giant transnational companies  Firms must learn to participate in the polarized conversation and influence it

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 Consumer understanding of global brand is framed by mass media and discussions which spread rapidly over the internet  Companies should monitor these perceptions closely  It is important for executives to break the habit of thinking about global branding in least-common-denominator or Glocal terms  This will ignore the transnational company’s most distinctive characteristic- GLOBAL Symbol

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2. Manage the Dark Side  Globally successful companies- do the customers have only positive perceptions about them?  Transnational companies often have a “dark side” that they must manage.

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“Solutions for a small Planet” : Ad campaign of IBM  Reason: In early 1990’s, IBM discovered that while consumers believed the company was quality focused, they also thought it was arrogant and bureaucratic  Campaign: The ad showed non-business people in non-business settings  Implication: The scenes were jarring and evocative  The campaign smoothed over the feeling that IBM was arrogant and bureaucratic even as it asserted the company’s ability to deliver customer driven solutions across the world  By late 1990’s the campaign helped to change the perception to the fact that IBM is Kind & 30 gentle

3. Build Credible Myths Firms must create appropriate myths because Global success of a brand allows companies to deliver value to consumers by authoring identity-affirming myths

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E.g.: The idea of technological Utopia  The idea in which personal empowerment would reign supreme took hold in the late 1990’s  Major technology firms competed fiercely to own that ideal and become the company that people would join with, to feel empowered 31

“Where do you want to go Today?” : Microsoft  Microsoft was particularly effective with an advertising campaign built around the tagline  The American version showed the stories about common people  The dialogue was philosophical, not technological  “Anybody who says that one person can’t make a difference is wrong .Try to push, don’t give up, don’t give up, don’t give up, Where do you want to go today?”

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Implication: Microsoft was not selling just technology; it was selling the dream of personal empowerment. The campaign worked because being the world’s dominant software company, Microsoft earned the credibility to author such a dream  When companies are responsible for less than credible myths it can hurt brands  In 1990’s when global warming was a major concern, the dream of a sustainable world where fuels wouldn't pollute became particularly attractive. BP tried to tap in to this dream 33

‘Beyond Petroleum; Campaign: BP  Reason: Evocative stories and images invited consumers to share in an imagined have-your-cakeand-eat-it-too future of clean fuel  Implication: The idea was appealing but BP, as a major petroleum producer but minor alternative energy player, was not a credible author  The media and the activists roundly ridiculed the company for ‘greenwashing’ itself  Eventually BP had to rethink the campaign

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Treat Antiglobals as customers  Most transnationals are not sure how to treat people who dislike them  The study reveals that one person in ten wouldn’t buy global brands if given a choice  This is an extraordinary number: antiglobals represent more potential sales than markets, the size of Germany & UK  These people should be targeted  This can be done by investing in social activities to convince such skeptics 35

Turn Social Responsibility into Entrepreneurship  Most efforts on corporate social responsibility appears to be a new form of public relations  Even when companies are proactive, initiatives are often limited to those that are" sustainable” (money making activities)  Repackage philanthropic efforts using the new language of social responsibility to target socially responsible investors  Problem: Consumers are skeptical of transnational’s motives and regard those approaches as opportunistic 36

 Litmus Test: Will consumers perceive the actions to be motivated primarily by self interest or by an interest in the welfare of the people and the planet  P&G identified safe drinking water –critical social problem; fell within their scope of expertise 

It leveraged its knowledge of household sanitation to develop a water purification system that would be effective in poor countries

 Developed a sachel of particulate matter-Reduced the frequency of diarrhea episodes by around 25%  P&G deployed its vast technological capabilities to tackle a problem that govt. & NGO’s couldn’t do for decades 37

 To be credible - Global companies’ social responsibility efforts must demonstrate that the firms have used their ample resources to benefit society  People trust powerful individuals who are seen to have sacrificed their interests for the good of the whole  Priority to deliver return’s to Shareholders – Shortsighted  Consumers believe that Global companies must shoulder graeter social responsibility 38

Conclusion  Globalness has become a stronger quality signal than nation of origin  Consumers prefer brands hail from countries that have particular expertise.  Eg:- Switzerland for chocolates, Italy in clothing, France in cosmetics etc  Consumers expect global brands to tell their myths from that particular place associated with the brand Eg: Nestle – Swiss mountains, L’Oreal- France  Transnational companies would do well if they can manage their national identity and globalness 39

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