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1 Rel Differences between Locl nd Interntionl Brnds: Strtegic Implictions for Interntionl Mrketers Author(s): Isbelle Schuiling nd Jen-Noël Kpferer Source: Journl of Interntionl Mrketing, Vol. 12, No. 4 (2004), pp Published by: Americn Mrketing Assocition Stble URL: Accessed: 14/10/ :09 Your use of JSTOR rchive indictes your cceptnce of Terms & Conditions of Use, vilble t. JSTOR is not-for-profit service tht helps scholrs, reserchers, nd students discover, use, nd build upon wide rnge of content in trusted digitl rchive. We use informtion technology nd tools to increse productivity nd fcilitte new forms of scholrship. For more informtion bout JSTOR, plese contct support@jstor.org.. Americn Mrketing Assocition is collborting with JSTOR to digitize, preserve nd extend ccess to Journl of Interntionl Mrketing.

2 Executive Insights: Rel Differences Between Locl nd Interntionl Brnds: Strtegic Implictions for Interntionl Mrketers In current context of globliztion, firms hve concentrted ir efforts on development of interntionl brnds. As result, interntionl brnd portfolios hve been restructured, nd mny successful locl brnds hve been eliminted. This rticle's objective is to improve understnding of locl brnd differences nd competitive dvntges reltive to inter ntionl brnds. To chieve this, uthors renlyzed Young & Rubicm dtbse Brnd Asset Vlutor nd exm ined more thn 744 brnds cross four lrgest countries in Europe: United Kingdom, Germny, Frnce, nd Itly. The uthors discuss mngeril implictions of findings for interntionl mrketers s y develop ir idel intern tionl brnd portfolios. Consistent with current trends in globliztion, mny inter ntionl compnies hve moved from multidomestic mr keting pproch to globl mrketing pproch. This move to globl mrketing hs hd mjor impct on compny brnding strtegies. During pst few yers, interntionl compnies hve concentrted ir efforts on develop ment of interntionl brnds. For exmple, Unilever is in process of eliminting 1200 brnds from its brnd portfolio to concentrte on 400 brnds. Procter & Gmble (P&G) hs kept 300 brnds, fter selling mny of its locl brnds. L'Or?l hs built its success on 16 worldwide brnds. Nestl? hs given priority to its 6 strtegic worldwide brnds, includ ing Nescfe nd Buitoni, nd Mrs hs invested minly in globl brnd nmes. In this context, firms' focus on development of intern tionl brnds hs hd negtive on impct locl brnds. Mny brnds hve been eliminted from interntionl brnd portfolios. This trend hs been found not only in fst consumer moving goods sector but lso in mny or types of industry, including bnking, insurnce, oil, nd retiling. It might be questioned wher elimintion of se locl brnds represents lost opportunity for interntionl comp nies. Strong locl brnds hve trditionlly benefited from high level of wreness in ir countries. Consumers hve developed close reltionships with locl brnds over yers, nd this represents solid mrketing investment in ir home mrkets. ABSTRACT Isbelle Schuiling nd Jen-No?l Kpferer Submitted December 2003 Accepted July 2004? Journl of Interntionl Mrketing Vol. 12, No. 4, 2004, pp ISSN IX 97

3 Both cdemics nd prctitioners hve focused on devel opment of interntionl nd globl brnds (Boddewyn, Soehl, nd Picrd 1986; Buzzell 1968; Crig nd Dougls 2000; Levitt 1983; Quelch nd Hoff 1986; Wind 1986). As such, little work hs been done to study specifics of locl brnds. Severl rticles hve mentioned existence of locl brnds (de Cherntony, Hlliburton, nd Bernrth 1995; Dougls, Crig, nd Nijssen 2001; Hlliburton nd H?nerberg 1993; Kpferer 2000, 2002), but no in-depth reserch hs been conducted on ir success compred with tht of inter ntionl nd globl brnds. However, interntionl mngers confront difficult questions when developing idel interntionl brnd portfolio (Dougls, Crig, nd Nijssen 2001). They must decide not only how to build ir interntionl brnds but lso which locl brnds to build, which to eliminte, which to sell, nd even which to ssimilte under n interntionl brnd nme. These re importnt decisions tht significntly influence ny compny's success. Therefore, it is prticulrly useful to develop furr under stnding of locl brnds reltive to interntionl brnds in current globliztion context. To chieve this, we con ducted explortory reserch tht covers two phses. The first phse consisted of interviews with interntionl mrketers, nd second phse involved conducting n nlysis of Young & Rubicm's (Y&R's) extensive brnd dtbse, Brnd Asset Vlutor. Our objective in this rticle is to better understnd rel differences between locl nd interntionl brnds. We first discuss recent on perspectives locl nd interntionl brnd development nd identify strtegic dvntges of locl brnds compred with interntionl brnds. We n evlu te differences in brnd equity between locl nd inter ntionl brnds. Lst, we conclude by highlighting impli ctions of se findings for interntionl mrketers. Perspectives on Locl nd Interntionl Brnd Development Globl Brnd Development We define locl brnds s brnds tht exist in one country or in limited geogrphicl re (Wolfe 1991). Such brnds my belong to locl, interntionl, or globl firm. We define interntionl brnds s brnds tht hve globlized elements of mrketing strtegy or mix. In more rdicl sense, globl brnds re defined s brnds tht use sme mr keting strtegy nd mix in ll trget mrkets (Levitt 1983). The debte on globl mrketing is not new, nd topic hs been subject of reserch for more thn 30 yers (Boddewyn, Soelh, nd Picrd 1986; Buzzell 1968; Crig nd Dougls 2000; Dougls nd Wind 1987; Huszgh, Fox, nd Dy 1986; Jin 1989; Levitt 1983; Quelch nd Hoff 1986; Sorenson nd 98 Isbelle Schuiling nd Jen-No?l Kpferer

4 Wiechmnn 1975). The dvntges of moving to intern tionl nd globl brnds under globl mrketing strtegy hve frequently been emphsized (Aker nd Jochimsthler 1999; Buzzell 1968; Kpferer 1992, 2004; Levitt 1983; Onkvisit nd Shw 1989). A key dvntge of globliztion is firms' opportunity to benefit from strong economies of scle. It is well-known tht stndrdized brnd cn generte significnt cost reductions in ll res of business system, including reserch nd development, mnufcturing, nd logistics. The shift to single globl brnd nme lso provides substntil svings in pckging nd communiction costs (Brtlett nd Ghoshl 1986; Buzzell 1968; Crig nd Dougls 2000; Levitt 1983; Porter 1986). Multintionl corportions hve leverged se economies of scle to gin mjor competitive dvn tges in worldwide mrkets (Dougls nd Wind 1987). Such reductions in costs reduce prices nd enhnce finncil per formnce. Anor dvntge is development of unique brnd imge cross countries. It is especilly importnt in certin product ctegories, whose brnds trget worldwide segments of consumers, such s ffluent nd teenger segments (Hssn nd Ktsnis 1991). The speed to mrket for new product inititives tht intern tionl brnds offer is lso importnt for interntionl comp nies, which cn now lunch new product inititives in fst-moving consumer goods industry on regionl or globl scle within 12 to 18 months. Such cycle tkes much more time when brnd re strtegies not globlized. Anor dvntge is possibility of supporting ny globl brnd with lrge budgets in communictions re. This is espe cilly importnt in context of very high dvertising nd medi costs. However, we note tht push towrd development of interntionl nd globl brnds hs been driven more by supply-driven considertions linked to costs thn by mrket considertions. In most cses, consumer preference hs not been reson primry for compnies to decide to move to interntionl nd globl brnds (Kpferer 1991, 2004; Terp str 1987). An exmple of n interntionl firm tht hs ccelerted its development of globl brnds since erly 1990s is P&G. Its objective hs been to chieve competitive dvntge in its mrkets. The benefits tht ccrue from such strtegy include significnt economies of scle tht led to reduced costs nd thus improved finncil performnce. It is not surprising tht P&G's key competitor, Unilever, strong proponent of multidomestic mrketing pproch, nnounced in 1999 tht it would furr globlize its oper tions. The competitive disdvntge of Unilever's pproch ws illustrted clerly by n exmple in its fbric softener Locl nd Interntionl Brnds

5 business. Unilever competed in Europe under different brnd nmes (Robijn, Coccolino, nd Mimosin), wheres P&G hd unique Europen brnd, Lenor, in ll countries. Locl Brnd Development Neir cdemics nor prctitioners hve pid much tten tion to locl brnds. Some uthors hve pointed out exis tence of locl brnds (de Cherntony, Hlliburton, nd Bernrth 1995; Dougls, Crig, nd Nijssen 2001; Hlliburton nd Himerberg 1993; Quelch nd Hoff 1986) nd hve dis cussed ir chrcteristics (Ger 1999; Kpferer 2000, 2002; Schlosser 2002). Or uthors hve nlyzed impct of locl brnd nmes on brnd ttrctiveness in Chinese con text (Frncis, Lm, nd Wlls 2002; Zhng nd Schimitt 2001), but to our knowledge, reserch to furr develop no one hs conducted in-depth understnding of locl brnds. However, in Europe, re re mny more locl brnds thn interntionl brnds, though trend of proportion of locl brnds to interntionl brnds is diminishing. Although cr, computer, nd high-tech industries, mong ors, re well-known for ir strong interntionl brnds, mny sectors re still chrcterized by ir locl brnds. In Germny's oil industry, British Petroleum cquired locl leder Arl nd, in view of its strong brnd equity, decided to retin locl brnd nme. In Frnce, leding whisky brnds re not well-known J&B or Johnny Wlker but locl Lbel 5, Cln Cmpbell, nd Willim Peel. In Czech Republic, Dnone did not succeed in imposing its globl Lu brnd on tht mrket nd hs hd to use locl brnd frn chise Opvi to develop its business. In Belgium, leder in minerl wter mrket is locl leder Sp, nd it hs shres well bove interntionl leder Evin. Locl brnds lso represent mny yers of mrketing invest ment. re They well-known in ir mrkets nd often build strong reltionships with locl consumers over yers. However, strong locl brnds hve essentilly been elimi nted from multintionl brnd portfolios, not becuse y do not represent strong brnd frnchises loclly, but becuse ir reltive sles volumes do not permit economies of scle. For exmple, t end of 1990s, P&G considered eliminting leding detergent, Dsh, in Itly nd Belgium despite brnd's ntionl institution nd extreme prof itbility in both countries. The compny's motivtion t time ws tht Dsh creted cost complexities in Europe, where Ariel ws Europen leder. Strtegie Advntges of Locl Brnd Development The dvntges of firms building interntionl brnds re substntil nd hve n inexorble logic. However, locl brnds lso represent strtegic dvntges tht must be con sidered. We gred dt pertining to strtegic dvntges of locl brnds during first phse of 100 Isbelle Schuiling nd Jen-No?l Kpferer

6 explortory reserch. This involved interviewing generl mngers nd mrketing directors of ten well-known multi ntionl firms: Unilever, Nestl?, P&G, Coc-Col, Reckitt Benckiser, Sr Lee, Cmpbell Food, Bcrdi-Mrtini, Krft Jcobs Suchrd, nd Inbev (formerly Interbrew). We discuss dvntges of mintining locl brnds next. Better Response to Locl Needs. A locl brnd cn be designed to respond to locl mrket's specific needs. Locl brnd products hve more flexibility thn intern tionl brnds, so cn y be developed to nswers provide to locl consumers' prticulr needs. Tht is, locl brnding cn not only provide unique product but lso select its positioning nd generte n dvertising cmpign tht reflects locl insights. In contrst, n interntionl brnd must stisfy lrgest number of consumers cross mrkets, nd thus y often represent lrgest common denomin tor from both product's nd mrketing's perspectives. Flexibility of Pricing Strtegy. Pricing strtegies for locl brnds cn be more flexible nd thus cn tke dvntge of brnd's strength in specific locl mrkets. There is lso no risk of prllel imports becuse brnd is not linked to regionl pricing strtegy. Such flexibility cn led to incresed profits becuse prices cn be fixed t higher levels. In contrst, interntionl brnds must remin within pr ticulr pricing corridor, becuse cn comprisons be esily mde cross territories. This is especilly true in Europe, fol lowing introduction of Euro. Possibility of Responding to Locl or Interntionl Competi tion. A locl brnd cn be used to respond to locl or inter ntionl or competition even to compete ginst retiler brnds. A locl brnd cn be repositioned nd mrketing mix dpted ccordingly. In contrst, mrketing strtegy for n interntionl brnd must follow predefined regionl or globl mrketing strtegy. Possibility of Blncing Portfolio of Brnds. An intern tionl portfolio tht mostly comprises interntionl nd globl brnds cn be powerful, but it lso presents risks. A problem tht rises with one meg brnd in prticulr country cn hve on negtive impct worldwide bsis. This ws illustrted in 1998 by exmple of Coc-Col in Belgium. Some consumers becme sick fter drinking pr ticulr btch of product. The news circulted quickly nd globlly, nd it hd on negtive impct Coc-Col's brnd imge. The interntionl medi, including Internet, is now ble to diffuse news nd informtion instntly round world. Anor exmple is cse of Perrier, which hd problems with wter purity when benzene ws detected in product. The U.S. Perrier business hs never recov fully Locl nd Interntionl Brnds

7 ered from this incident. A lesson tht cn be lerned from se exmples is tht brnd portfolio with both strong locl nd strong interntionl brnds is in better position to mnge risk on worldwide bsis. Possibility of Responding to Needs Not Covered by Intern tionl Brnds. To benefit from economies of scle, intern tionl brnds must cover similr segments in mny Profitble segments of mrkets tht re unique countries cn still represent ttrctive opportunities brnds. mrkets. to certin for locl Possibility of Fst Entry into New Mrkets. A compny tht cquires locl brnd lso cquires wy to enter mrket directly without furr lrge investment. This strtegy hs been used frequently in pst. For exmple, Inbev hs become number-one brewer in world by ggressively cquiring locl leders over pst ten yers. Seprtely, interviews of interntionl mrketers reveled tht strong locl brnds benefit from wreness nd brnd equity. Locl brnds lso develop close reltionships with consumers over time, which leds to high brnd trust. It is cler tht locl brnds lso represent importnt disd vntges, which by nd re lrge linked to cost. The rel tively smll volumes of products tht locl brnds sell pre vent brnds from generting significnt economies of scle in or res. product mrketing Brnd Equity of Locl nd Interntionl Brnds We hve noted strtegic dvntges of interntionl nd locl brnds, but it is lso useful to identify prticulri ties of ir brnd equities in terms of wreness level nd brnd imge (Kpferer 1991; Keller 1998). The literture on interntionl nd globl brnds hs provided some indic tions of importnce of brnd equity. For interntionl nd globl brnds, reserch shows tht perceived brnd glob lness could crete consumer perceptions of brnd superior ity (Kpferer 1992, 2004; Shocker, Srivstv, nd Ruekert 1994). Reserch lso confirms tht qulity is mong most importnt fctors tht drive consumer preference for globl brnds (Holt, Quelch, nd Tylor 2003; Steenkmp, Btr, nd Alden 2003). In ddition to qulity, interntionl nd globl brnds hve been ssocited with high prestige or sttus (Btr et l. 2000; Kpferer 1992). Recent empiricl studies hve demonstrted tht prestige is second fctor driving globl brnd prefer ence (Holt, Quelch, nd Tylor 2003; Steenkmp, Btr, nd Alden 2003). In contrst, some studies hve shown tht con sumers my prefer brnds with locl connections, nd some rgue tht re is no intrinsic consumer preference for inter ntionl nd globl brnds (De Mooij 1998). 102 Isbelle Schuiling nd Jen-No?l Kpferer

8 No reserch hs been conducted on understnding of locl brnd equity. Country-of-origin reserch some provides generl indictions of brnd equity on locl brnds, when product's country of origin is emphsized. Such studies revel tht country of origin hs n on impct consumers' evlutions of products (Hn nd Terpstr 1988; Hong nd Wyer 1989; Johnsson, Dougls, nd Nonk 1985; Smiee 1994; Schooler 1971). Reserchers hve lso found tht consumers tend to evlute locl more products highly thn foreign products (Bilkey nd Nes 1982; Hn 1989; Ky nk nd Cvusgil 1983; Ngshim 1977; Schooler 1971), though this bis vries cross consumer segments nd coun tries (Heslop nd Ppdopoulos 1993; Shimp nd Shrm 1987). Some uthors hve shown tht consumers prefer brnds tht s y perceive originting from nonlocl country, especilly from Western countries, more thn y do locl brnds nd tht preference is linked not only to per ceived qulity but lso to socil sttus (Alden, Steenkmp, nd Btr 1999). To mke use of our informtion sources, we next evlute difference in wreness nd brnd imge ttribute, in prtic ulr ttributes of qulity, prestige, nd trust. We con ducted second phse of explortory reserch on bsis of secondry nlysis of Y&R worldwide brnd dtbse Brnd Asset Vlutor. The originl Y&R dtbse covered 44 countries worldwide nd 20,000 brnds. Three wves of interviews hve been conducted since dtbse Explortory Anlysis of Y&R Dtbse ws creted in 1993, nd more thn 230,000 respondents hve been surveyed to dte. From this dtbse, we selected smple of 12 product cte gories in food sector (see Tble 1). They represent 744 dif ferent brnd units covering four coun lrgest Europen tries: United Kingdom, Germny, Frnce, nd Itly. A totl of 397 brnds (53%) re locl, nd 347 (47%) re inter ntionl, s Tble 2 indictes. A totl of 9739 people were interviewed from 1999 to The dtbse is extremely rich in terms of vilble dt, nd thus we were ble to n lyze dt on wreness, brnd imge (48 imge criteri were vilble to consumers to evlute ech brnd), nd brnd usge. There were lso reltively high number of respondents from totl dtbse (9739) nd from countries under considertion (3460 from Germny [36%], 2474 from United Kingdom [25%], 1915 from Frnce [20%], nd 1890 from Itly [19%]). We selected food sector becuse it covers mny product ctegories tht offer different levels of globliztion. For exmple, lcohol nd chewing gum ctegories hve mjority of interntionl brnds t 60% nd 56%, respec tively. In contrst, beer nd minerl wter ctegories hve Locl nd Interntionl Brnds 103

9 Tble 1. Brnds per Product Ctegory Product Number of Ctegory Brnds Number of Locl Brnds (% of totl) Number of Interntionl Brnds (% of totl) 1. Alcohol (40%) 92 (60%) 2. Chocolte (43%) 71 (57%) 3. Beer (59%) 49 (41%) 4. Yogurt (63%) 27 (37%) 5. Minerl wter (58%) 19 (42%) 6. Frozen goods (63%) 14 (37%) 7. Chewing gum (44%) 20 (56%) 8. Fruit juice (81%) 7 (19%) 9. Coffee (69%) 11 (31%) 10. Ice crem (50%) 17 (50%) 11. Soup (46%) 14 (54%) 12. Pst (76%) 6 (24%) TOTAL (53%) 347 (47%) Tble 2. Brnds per Country Totl Number Brnds of Number of Locl Brnds (% of totl) Number of Interntionl Brnds (% of totl) All countries (53%) 347 (47%) Frnce (43%) 98 (57%) Germny (62%) 87 (38%) Itly (61%) 69 (39%) United Kingdom (45%) 93 (55%) mjority of locl brnds, t 59% nd 58%, respectively, ccording to dtbse. Moreover, re re mny globl, interntionl, nd locl plyers in this industry. Unilever, Nestl?, Mrs, nd Krft Jcobs Suchrd re good exmples of interntionl nd globl firms, nd strong locl plyers re still present in key locl mrkets. Note tht though food sector ws linked fully to locl tr ditions nd cultures t one time, this sitution hs now chnged, s indicted by rpid development of mny interntionl brnds in this sector, including Nestl?, Dnone, Evin, Brill, Nutell, nd Krft. Products tht reflect locl trditions hve grdully been replced by products tht pprently stisfy lrgest number of consumers. This ten dency hs lso been driven by concentrtion in retil ing industry. Logiclly, interntionl brnds tht belong to interntionl re plyers given preference; retilers hve mjor impct on deciding which brnds re displyed on supermrket shelves. 104 Isbelle Schuiling nd Jen-No?l Kpferer

10 First, our nlysis of dtbse shows tht wreness level of locl brnds (85%) is significntly higher thn tht of interntionl brnds (73%), in confirmtion of results from first phse of interviews. This points to significnt dvntge for locl brnds; this wreness level might be relted to number of yers tht brnds hve been in mrket. Second, nlysis of brnd imge, bsed on 48 dif ferent brnd ttributes vilble in dtbse, shows tht perception of qulity is s high for locl brnds s it is for interntionl brnds (25.3% versus 24.3%), s Tble 3 indi ctes. There is no significnt difference between eir group of brnds. Note tht of 48 vilble ttributes, qulity is most importnt ttribute selected by consumers. Third, imge of trust is significntly stronger for locl brnds thn for interntionl brnds (22.1% versus 17.9%). This lso confirms findings of first phse of inter views of interntionl mrketers. Trust is key brnd equity element (Aker 1991; Kpferer 1991); tht is, brnds exist becuse of trust y convey to consumers. Results Dtbse of Y&R Fourth, vlue is lso s n perceived importnt ttribute for locl brnds, s is indicted by significntly higher vlue rting for locl brnds (18.8%) thn for interntionl brnds Vribles Locl Brnds (%) Interntionl Brnds (%) High qulity Trustworthy * Good vlue * Tble 3. Comprison of Mens on Selection of Imge Vribles Simple Down to erth * Friendly Trditionl * Trendy Helthy Originl * Relible * Distinct Socil Kind Auntic Fun * Sensul Prestigious *Significnt difference between interntionl nd locl brnds, p <.05. Locl nd Interntionl Brnds 105

11 (16.8%). This might be linked with fct tht prices of locl brnds re usully lower thn those of interntionl brnds, consumers providing sense of better vlue for money. Fifth, locl brnds re lso s more perceived "down to erth" thn interntionl brnds. This conveys ide tht locl brnds offer more bsic/no frills brnd proposition. The study lso indictes tht locl brnds re s perceived more trditionl (15.1%) thn interntionl brnds (12.7%). This is quite logicl, becuse locl brnds re linked more to locl trditions nd locl cultures thn interntionl brnds re. Sixth, results lso indicte tht locl brnds (22.1%) ben efit more from significntly stronger imge of relibility thn do interntionl brnds (17.9%). This ttribute is closely correlted in dtbse with trustworthy ttrib ute, confirming this strong dvntge for locl brnds. The results lso indicte tht re is no significnt difference between perception of prestige for interntionl brnds (7.4%) nd tht for locl brnds (6.9%). The reltively low level of this ttribute for both interntionl nd locl brnds is surprising in cse of interntionl brnds, s this ws not identified in previous reserch on globl brnds (Holt, Quelch, nd Tylor 2003; Steenkmp, Btr, nd Alden 2003). The dtbse lso provides informtion on usge of locl nd interntionl brnds. The results show higher rtings for locl brnds (42.9%) thn for interntionl brnds (37.4%), s Tble 4 indictes. Note tht usge intention figures indicte different pttern; rtings re slightly higher for interntionl brnds (47.5%) thn for locl brnds (46.0%). This might indicte tht consumers re ttrcted to intern tionl brnds but tht, in relity, y prefer to purchse locl brnds. The identified vlue dvntge of locl brnds could explin difference between usge nd usge intention. A reltively lower vlue rting for interntionl brnds could keep people from buying brnds y would hve liked to buy. We lso conducted fctor on nlysis 48 imge vri bles nd identified 9 fctors. To evlute resons con sumers use locl brnds, we performed regression nlysis with usge s dependnt vrible; this produced signif Tble 4. Comprison of Usge nd Usge Intention Vribles Locl Brnds (%) Interntionl Brnds (%) Usge * Usge intention * Significnt difference between interntionl nd locl brnds, p < Isbelle Schuiling nd Jen-No?l Kpferer

12 icnt percentge of explined vrince (76.9%). Two fctors, trust nd bsic/no frills, intercted significntly with indictor vribles (locl brnd nd interntionl brnd), t significnce level of 5%. This confirms tht consumers per ceive locl brnds to be more trustworthy nd to offer more bsic/no-frills brnd proposition thn interntionl brnds. For n interntionl compny, interntionl nd globl brnds provide mny indisputble dvntges. In current context of mrket globliztion, it is sensible for firms to ccelerte development of se power brnds. Becuse of ir size, interntionl nd globl brnds crete brriers to entry, benefit from generte importnt ttrctive. hving unique imge worldwide, nd economies of scle tht re finncilly Conclusion Mngeril nd Implictions However, ppliction of strong globl mrketing pproch cn crete risks tht interntionl mrketers must consider (Schuiling 2001). Interntionl compnies use cen usully trlized strtegies to develop ir powerful globl brnds. Therefore, such compnies hve less intimte reltionships with locl mrkets nd tke long time to rect to problems when y rise. For exmple, Coc-Col chnged its strtegy when it found tht its structure hd become too cumbersome nd tht it ws insensitive to locl mrkets. In 2000, com pny decided to return to more multidomestic mrketing pproch nd to give more freedom to locl subsidiries. Locl tems re now permitted to develop dvertising to locl consumers nd, on bsis of locl knowledge, cn even lunch new locl brnds. Thus, over pst two yers, locl subsidiries hve lunched mny locl brnd inititives. Even P&G, strong dvocte of globl mrketing, ws forced to understnd limits of its strtegy. As we men tioned previously, in 2000 in Belgium, P&G tried to replce leding locl nd very profitble detergent Dsh brnd with Europen-wide Ariel brnd. For nine months, P&G discontinued dvertising Dsh, n inconceivble move for this type of business. In wke of this, becuse P&G's results in detergent ctegory were so poor, it ws forced to renew mrketing support for Dsh. It lso some reopened locl subsidiries tht it hd closed to reduce costs. Becuse P&G hd put distnce between itself nd locl con sumers, its business suffered. We recommend tht intern tionl firms mintin close contct with relities of locl mrket by communicting with locl experts who know locl consumers, even if re is n extr cost element sso cited with doing so. We hve lso shown tht, in ddition to interntionl brnds, locl brnds cn offer strtegic dvntges tht interntionl Locl nd Interntionl Brnds 107

13 mrketers should consider. Locl brnds provide firms greter strtegic flexibility in mny mrketing res. First, y offer product tht cn better respond to specific needs of locl consumers. This is in contrst to interntionl brnds tht must deliver stndrdized product to stisfy lrgest possible number of consumers. Firms cn select correct positioning for specific mrket, tking existing locl nd interntionl competitors into ccount. cn They dopt specific pricing without being influenced by globl pricing strtegy. They cn lso introduce new mrkets quickly nd with minimum mrketing investment through cquisition of successful locl brnd. Second, locl brnds cn help minimize risk represented by portfolio tht contins mjority of interntionl brnds. We believe tht cdemics nd prctitioners hve not sufficiently emphsized need for risk mngement in this sitution. Therefore, we recommend tht interntionl mr keters encourge development of interntionl brnd portfolios tht combine blnced number of both strong locl nd interntionl brnds. Our explortory reserch on Y&R dtbse indictes tht locl brnds benefit from strong brnd equity. In prticulr, locl brnds benefit from consumer wreness higher thn interntionl brnds do, nd y enjoy strong brnd imge. They benefit not only from good qulity imge but lso from better vlue nd trust perception thn intern tionl brnds do. We find tht trust is n importnt dvn tge for locl brnds, becuse it provides unique reltion ship with consumers tht tkes yers to develop; it is not linked to ny prticulr level of investment. It is doubtful tht n interntionl brnd could reproduce such unique reltionship with consumers, even fter substntil invest ment in mrketing. Thus, we recommend tht interntionl mrketers leverge dvntge of trust tht locl brnds hve succeeded in building with locl consumers. At time when product differentition is more difficult to chieve, strong brnds re essentil differentiting ssets. Interntionl firms should tke into ccount tht owning strong locl brnd frnchises represents key long-term sset. Therefore, we recommend tht compnies not elimi nte locl brnds on bsis of short-term finncil consid ertions but tht y consider substntil long-term dvntge of owning brnds with strong even equity, t locl level. In support of this recommendtion, recent exmples illus trte tht some multintionl firms hve begun to recognize virtues of locl brnds. Through its ctions, Unilever hs cknowledged tht trust is essentil to develop brnds in Isbelle Schuiling nd Jen-No?l Kpferer

14 food sector. In its ice crem business, Unilever hs kept best-known locl brnd nmes, such s Miko in Frnce, Wll's in United Kingdom, nd Agnesi in Itly, while globlizing logos, products, nd new concepts, such s Mg num nd Solero. Even in trditionlly globlized cos metic business, L'Or?l hs discovered tht locl brnds hve power to retin clients. In globlizing U.S. My belline brnd, L'Or?l hs pursued double-brnding strt egy, in which Mybelline is host brnd nd nor nme is locl brnd. For exmple, compny mrkets Gemey-Mybelline in Frnce nd Jde-Mybelline in Germny. We lso recommend tht in ir strtegies, interntionl firms cknowledge recent trends towrd more regionl ism in different prts of world, including Europe, nd ccount for effects of ntiglobliztion movement. It might be criticl for interntionl firms to offer more diver sity in ir brnd portfolio to void overloding consumers with sme interntionl brnds in ll ctegories every where. This is nor rgument for compny brnd portfo lio to mintin blnce of both strong locl nd intern tionl brnds. Finlly, to crete source of new ides, interntionl comp nies should encourge development of new locl brnds. As we mentioned previously, Coc-Col hs grnted locl tems right to new develop locl brnds, which is pow erful wy to generte new ides. These new locl brnds could be trnsformed into successful interntionl brnds t lter point. In ddition, firms' providing locl mrketing tems opportunity to build locl brnds hs n impct on tems' motivtion nd skill level. Thus, we recommend tht interntionl mrketers encourge locl tems to develop new locl brnds s source of new ides. In summry, if interntionl compnies eliminte strong locl brnds, y might be throwing wy opportunities. Strong locl brnds represent strtegic dvntges tht re worth considertion, nd y enjoy strong brnd frnchises tht re rel ssets for ny compny. When brnds re elimi nted from ir mrket, it is difficult to relunch m suc cessfully. Therefore, re re mny resons to encourge development of brnd portfolios tht contin blnced mix of strong locl nd interntionl brnds. - Aker, Dvid A. (1991), Mnging Brnd Equity: Cpitlizing Vlue of Rrnd Nme. New York: The Free Press. nd Erich Jochimsthler (1999), "The Lure of Globl Brnding," Hrvrd Rusiness Review, 77 (November-December), on References Locl nd Interntionl Brnds 109

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