UNC Kenan-Flagler Business School

Shaping Leaders, Driving Results

UNC Kenan-Flagler Business School

ROI: RESEARCH INSIGHTS FROM KENAN-FLAGLER


Brand breakout

10/8/2013

How emerging market brands can go global.

UNC Kenan-Flagler marketing professor Jan-Benedict E.M. Steenkamp has identified eight strategies that emerging market firms can use to build global brands in “Brand Breakout: How Emerging Market Brands Will Go Global” (Palgrave-Macmillan, June 2013). CEIBS Publishing Group published a Chinese edition (August 2013) of the book, co-authored with Nirmalya Kumar. The book is based on extensive interviews with executives in emerging markets; original academic research; and consulting with companies on all continents.  It has insights that will apply to Western brand managers in search of global growth and focused on emerging markets.

What are common misconception(s) about marketing in today’s globalized and digital world?

The greatest misconception is the widely held belief that emerging companies will not be a threat to global – largely Western – powerhouses. This includes the assumption that emerging-market companies will remain content to remain as the original equipment manufacturers (OEM) for Western brands. This will change in the next few years.

How do you define building a global brand?

A global brand is a brand that uses the same name and logo, has awareness, availability and acceptance in multiple regions of the world, derives at least 5 percent of its sales from outside the home region, and is managed in an internationally coordinated manner.

What are the benefits of building a global brand?

The benefits are:

  • Higher profit margin
  • Brand trust and loyalty
  • Higher market share because global brands benefit from associations of higher quality and prestige, and for many, especially young consumers, their association with the global community signifies progress and modernity
  • Economies of scale in production, supply chain and R&D as well as economies of scope in marketing
  • Having a strong global brand gives market power. Brand power = market power

What preparations should a company engage in to build a global brand?

The company must be able to manufacture a good quality product or provide a good quality service. Since trust is the bedrock of brands, the company must deliver on the functional promise (product performance) or everything else is a waste of money. It should overlay this with deep knowledge of the marketplace and choose a strategy to global success. “Brand Breakout” outlines strategies and how to implement them.

Maintaining brand consistency and adapting to local markets is tricky. What should a company that plans to go global do?

The best way to balance these two forces is by developing a “global brand audit sheet” to identify if each element of the brand strategy is globally imperative, locally adaptable and locally discretionary. This together with the appointment of a brand champion with general oversight over the brand and authority on all issues that are not locally discretionary will help.

Why do you believe that Chinese brands and brands from other emerging markets could become household names in next decade?

My conviction is based on three fundamental observations:

  • The push to global sourcing means leading emerging market firms have now built world-class manufacturing capabilities, so they have the good product quality in place.
  • The traditional model based on low-cost labour is breaking down, in China, Brazil, South Africa to name a few countries. The time when these companies could rely on low cost products for export growth has ended. They must add value to their products to compensate for the rapid erosion of their cost advantage. Brands are the linchpin of this strategy.
  • The slowdown in economic growth means that the growth targets of emerging market companies can no longer be satisfied selling only domestically. Even for a large country like China, overseas markets are much larger than the domestic market.

What are the major problems or challenges for brands from emerging markets to go global?

The poor perception of products from these countries combined with a lack of marketing experience pose the greatest barriers.

Going from local to global brand building is a long learning curve. What are the common mistakes or misconceptions companies made during this process?

Sometimes companies are impatient. You cannot build a global brand overnight. Building a brand takes time. It took the Japanese brands decades; the Koreans somewhat less time.

There can be a misconception that brands are all about functional logic. Strong brands command strong emotional attachment. Strong brands have both logic and magic. This is not easy to grasp for companies that made their success by selling good quality products.

How can emerging-market firms use social media to boost their brand image?

Companies around the world are struggling how to leverage the power of social media to their advantage. Two aspects of social media are noteworthy for emerging-market brands.

  • Since news spreads very fast, an emerging-market brand must be very transparent. Think about production processes, labor conditions and quality. And importantly, when there is an issue (like defective products), it must act fast and decisively. It cannot try to sweep it under the carpet. Of course, this also applies to Western brands, which are more used to be under public scrutiny.
  • Social media offer a huge opportunity for emerging market brands. They often do not have the marketing budgets of Western brands so they could not break through the advertising clutter. News, videos and ads can go viral and have a huge effect. The Korean rapper Psy would never have made it without social media. By targeting bloggers and other influentials, the emerging-market brand can make limited dollars work harder.

 is the Knox Massey Distinguished Professor of Marketing and area chair of marketing.