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Emerging-market brands can achieve success in global markets

5/16/2013

Professor Jan-Benedict Steenkamp shared insights about how emerging-market companies can develop global brands from his new book “Brand Blowback: How Emerging Market Brands Will Go Global” during a webinar offered by the Center for International Business Education and Research (CIBER) at UNC Kenan-Flagler.


Why invest money and time in company branding?

Brands generate demand, guarantee quality work, develop prestige with consumers, inspire trust, bring coherence to companies, attract top talent, ease consumer decision making, and allow emotional satisfaction, Steenkamp says. These benefits are extremely attractive to emerging-market firms as they promote success, brand loyalty and allow the companies to charge a price premium. Steenkamp presented a chart listing the most valuable brands in the world, with Coca-Cola as the leading brand worth $71 billion in shareholder value. With the exception of Corona, all brands on the list came from developed markets. 

How can emerging market companies develop global brands?

Why are emerging-market companies motivated to build global brands? The appeal includes the financial benefits as well as escalating labor costs, global ambition, market power and broader economic benefits. 

As global brands, companies are worth a lot of money. Steenkamp cited Chinese company Fu Hong Industries as a firm that recognized its worth as a market brand. Fu Hong produced plastic baby product like pacifiers for Western branded goods companies lime Gerber. Eventually, the company broke away from supplying its products to Western companies that asked for lower and lower prices. Now, Fu Hong Industries sells more than half its products under its own brand, KIDSME. Fu Hong founder Herman Lo credits his customers for prompting the change: “I have to say thanks to my customers. They gave me too much pressure… I had to think of another way to survive.”

Emerging-market companies must improve their management capabilities, and by doing so, they will be able to manufacture products that meet consumers’ needs. Global branding also can lead to broader economic benefits including country-of-origin spill-over, meaning that a country can overcome pre-existing image handicaps. The whole image of a country can improve, which can positively influence the firm’s presence in the global market, and incidentally, also help other firms from that country that hitherto suffered from the country image handicap.

What hurdles will emerging market companies approach in the development of global brands?

But currently the country-of-origin image is still a hurdle for an emerging-market company as it develops a global brand. “One of the biggest challenges many emerging market companies face as they globalize is the perception that emerging-market brands are inferior,” Steenkamp quoted from The Economist. Those firms often focus more on ramping up production rather than ramping up the quality of its products. Brands also must have intellectual property protection to attract investors. Steenkamp advised having patience through this process of global branding. “These are not trivial hurdles,” he advises. 


How can emerging-market firms become globally branded companies?
Steenkamp created a flow chart showing how an emerging-market firm can become a branded company. A company might begin as an original equipment manufacturer (OEM supplier) that manufactures products for a Western brand. At this stage, a company must be able to produce for a low price and its supply chain must be organized in a very strict fashion. The next step would be for the company to sell its own brand. A company at this level can be both an OEM supplier and sell its own brands, or solely sell its own brands. Finally, a company becomes a branded company. The characteristics of a branded company follow the same criteria of OEM suppliers and companies that sell their own brands, but the company is organized to build brand value. Steenkamp cited Coca-Cola and Procter & Gamble as examples of keep their brands at the centerpiece of their strategies.

There are many strategies that a company can implement to create global brands. Larger companies might follow the “Asian tortoise route,” as coined by Steenkamp and his co-author: slow, deliberate, but relentless. Toyota followed that route as it entered the Western market at the bottom with decent quality products at lower prices, and gradually increased quality and prices to create a strong global brand.

Another route Steenkamp shows is the “positive campaign route,” in which a company overcomes a negative image. He addressed a concern that also qualifies as a hurdle: “How can a company overcome the negative country-of-origin associations?” He advises that it selects a brand name that disguises its origin or invokes a favorable image of its country. Other advice included offering extra guarantees, investing heavily in marketing, and emphasizing the aesthetics of the brand.


To view the webinar, visit http://www.kenan-flagler.unc.edu/ciber/programs/webinar-series/webinar-archive.