15th March 2019
Outside Fortress Europe Excerpts
This Global Business Strategy Blog post is based upon unabridged excerpts from Chapter Six, Strategic Marketing and Global Brand Management, in Outside Fortress Europe: Strategies for the Global Market.
Campbell, P. (2019, March 15). Reputation risk: Nazi blunder entangles VW chief. Financial Times, p. 14.
Campbell, P. (2019, 15 March). Volkswagen boss apologises for evoking Nazi slogan: Diess used phrase similar to one over gates of Auschwitz concentration camp in Poland. ft.com.
Economist. (2019, March 14th). Two tragic air disasters may not down Boeing: reputational damage, together with protectionism and rising debt, herald troubled times for America’s aerospace giant. economist.com.
Hill, A., & Waldmeir, P. (2019, March 15). Boeing crisis management skills queried over 737 Max safety fears: Experts are divided on whether jet maker’s reputation will be damaged for the long term. Financial Times, p. 6.
Huggler, J. (2019, 14 March). Anger as VW chief executive plays on Nazi slogan at company event. telegraph.co.uk.
McGee, P., Shubber, K., & Woodhouse, A. (2019, 15 March). SEC sues Volkswagen and ex-chief Winterkorn over diesel scandal: German carmaker accused of failing to disclose emissions cheating to investors. ft.com.
Outside Fortress Europe Excerpt
Global brands: Something old, something new, something bought
The proliferation of global competition, coupled with the perceived ‘commoditization’ of products and services, has challenged traditional views of ‘the brand’ and ‘brand management’. This, in turn, has created a discussion amongst both academics and practitioners about the role of brands in the contemporary digital ‘information age’. Practitioners continue to struggle to quantify the return on the (intangible) brand investments they make. Academics, meanwhile, point to social, cultural, demographic and technical discontinuities which potentially threaten to undermine brands as traditionally understood.
The internet-fuelled globalization of communications poses another challenge, particularly for established brands. Conversely, the same global communications phenomenon provides opportunities to create global brands from scratch, for example, Airbnb, Alibaba, Alphabet (Google), e-Bay, Instagram, Facebook, LinkedIn, Ring, Snapchat, Twitter, Uber. Organizationally, brand management roles and responsibilities remain fragmented, particularly in large companies, and this at a time when corporate responsibility and organizational reputation is under intense scrutiny, for example, Facebook and its multiple travails. The principles of branding are well understood and thoroughly documented in the academic literature. However, in many cases, the practice of brand management is poorly executed.
The impact of the internet and digital technologies on traditional brand management practice is evolving in many ways, some pretty much predictable, others less so (Tapscott, 2014). For example, consider the extent to which social media and ‘digital marketing platforms’ such as Facebook, Twitter, LinkedIn, Google, Instagram etc. are influencing traditional brand and marketing communications strategy (see Kingsnorth, 2016, for insights into ‘digital marketing strategy’ and ‘online marketing’). Innovative, ‘disruptive’ technology business models such as those of Amazon, Just Eat, Alibaba, Airbnb and Uber should be examined from the perspective of start-up ‘born global’ brands (Gabrielsson and Kirpalani, 2004). The exciting potential of new concepts in marketing communications such as viral marketing, guerrilla marketing, ambush marketing etc. should be explored alongside an assessment of the potential pitfalls and dangers they bring from a more traditional brand management perspective (see Fill and Turnbull, 2016). Consider also the increasing influence of countries such as Brazil, Russia, India, China, Taiwan, South Korea etc… on global brand perceptions. So, for example, what is the impact of ‘Made in China’, ‘Made in Vietnam’, Morocco, Philippines etc. on brand appreciation, particularly for ‘heritage brands’ where country-of-origin effect (e.g. ‘Made in Germany’) historically added intrinsic value to a brand’s quality, whether real or perceived?
Furthermore, in the hot-wired world we now inhabit, bad news travels fast, fake or otherwise: word-of-mouth, that most powerful form of communication, has never been so critical to manage properly to maintain brand integrity yet is ever more difficult to control, with companies providing ‘bot services’ selling ‘likes’ or ‘dislikes’ to the highest bidder. Keith Weed, Unilever’s Chief Marketing Officer (CMO) has said publicly that brands needed to take urgent action to rebuild trust in the powerful Word-of-Mouth ‘influencer’ dimension of marketing communications:
The one thing influencer marketing requires is confidence in the influencers. Unfortunately, in influence marketing today there are a few bad apples who risk spoiling the barrel. Trust comes on foot but leaves on horseback. Influencers who buy followers undermine that relationship.
Historically, brands were developed slowly over time, making their first impressions in domestic markets and gradually developing global status as their parent-company owners internationalized their businesses by replicating their organization into foreign markets, in the process creating the original multi-national enterprises (Vernon, 1966; 1972) and transforming ‘commodities’ into ‘brands’.
In the contemporary international business environment, meanwhile, global brands seemingly appear overnight and are ‘positioned’ with the same identity wherever they operate, obvious examples being those mentioned in the introduction to this chapter: Facebook, Netflix, PayPal, Airbnb, Alibaba, Snapchat, Uber and so on. Meanwhile, in the frenzy for global brand ownership, start-up ‘unicorns’ ($1bn value, no profits, often no proven business model) are being snapped up by cash-rich monoliths, for example, Facebook/Instagram, Alphabet/YouTube, Microsoft/LinkedIn and suchlike.
Traditional asset-swapping and mergers amongst ‘old economy’ organizations also provide a daily topic of discussion in the brand landscape, for example, the coming together of P&G and Gillette, BP’s acquisition of Castrol (the global category-killer in lubricants – see Chapter Seven), Unilever’s acquisition of US start-up The Dollar Shave Club for $1bn and, perhaps the most spectacular single-case example in recent years, Chinese computer manufacturer Legend’s acquisition of IBMs entire PC division to establish Lenovo, quite literally creating an overnight global brand.
As an aside, the reason that the company had to create a new brand name was simply that Legend was already trademarked™ by numerous companies in multiple countries, ranging from large corporations to small Chinese take-aways. The marketing agency thought long-and-hard and came up with a smart solution, a portmanteau (OED: a word blending the sounds and combining the meanings of two others, for example, motel or brunch):
“Le-” (Legend) and “novo”, Latin for “new.” In traditional Chinese: 聯 想
But, to hedge their bets against customer resistance, Legend also acquired the right to use long-established IBM registered trademarks, the most noteworthy being ThinkPad™, hence, Lenovo ThinkPad™.
As another example, Amazon, which has stretched its e-commerce brand organically across multiple categories, starting with books, has ventured into pastures new via acquisition, most notably the upmarket grocery retailer Whole Foods, a nod to the bricks ‘n’ mortar retailing past, to its most recent acquisition (at the time of writing), a nod to the future, Ring, an App (software)/hardware ‘unicorn’ home-security company (price paid = $1bn), and already a fully understood, stand-alone global brand.
(See the award-winning biography of Amazon founder Jeff Bezos by Brad Stone, 2014, The Everything Store: Jeff Bezos and the Age of Amazon, for a fascinating account of the origins, development and future directions of Amazon).
For more than two decades writers and commentators on business and management have been waxing lyrical about ‘the new economy’, ‘the digital economy’, ‘the gig economy’, ‘the millennial economy’ and so on, as though anything principle-wise which pre-dated the ‘dot-com economy’ of the early 21st Century is irrelevant. As we have demonstrated elsewhere in the book and as we will show in this chapter, the core principles of Customer focus, Competitive advantage and organizational Capabilities, the legendary 3Cs of market economics (Ohmae, 1982), are more relevant than ever in the current phase of globalization. Everything conceptual is the same, just quicker. And more intense.
At this point, it should be noted that branding principles and processes apply equally to business (B2B) and consumer (B2C) markets (whether product or service sectors) and to organizations and companies of all sizes. Indeed, the very origin of the word ‘brand’ is rooted in how cattle ranchers branded their herds to distinguish them from those of rival ranchers and to protect their businesses against hustlers. In its simplest sense, wielding the branding iron to identify animals constituted the earliest form of trademark and the legitimate protection of proprietary rights in ancient and modern history.
The challenges of global brand management
Brands are like fine Chinese porcelain: beautiful to behold but intrinsically brittle. They are difficult to build, easy to destroy: think of Blackberry, Nokia, Yahoo, MySpace, Friends Reunited, Toys R Us etc. for contemporary examples. The recent fall from grace of the mighty‚ ‘heritage brand’ VW in the ‘dirty emissions‘ scandal is guaranteed to be featured amongst the all-time classic case studies of brand failure, regardless of those commentators who say that the affair, along with testing emissions on smart but entrapped monkeys and free-willed but docile humans, will have no lasting impact. Watch this space! In the meantime, have a look at Figure 1 below which is adapted from a viral internet meme.
Earlier in the chapter, we explored the effect of ‘country of origin’ on the perceived quality of global brands. Most people are familiar with Audi’s long-running positioning statement Vorsprung durch Technik and most people won’t have a clue what it means but it doesn’t matter: ‘it’s German, so it must be excellent’. It is extremely rare that a global brand would have a positioning statement in any language other than English but the rationale here is clear: ‘Made in Germany’ puts a halo above Audi, an already saintly brand. But what if the halo becomes tarnished?
Figure 1 was taken from a viral picture that ‘did the rounds’ as the VW emissions scandal unfolded. Like Audi, its ‘sister’ company, VW has long-used the slogan ‘Das Auto’ to underscore its Germanness, and this is parodied in the meme presented in Figure 1. A key question raised here is whether VW’s misdemeanour would damage the whole ‘Made in Germany’ country reputation. German Chancellor Angela Merkel doesn’t think so. Speaking at the World Economic Forum in Davos in 2016, when asked this question by a German journalist, she replied: “I do not believe that ‘Made in Germany’ got a scratch by what happened at Volkswagen”.
We can speculate, but only time will tell.
Perhaps the biggest single challenge for brand communications is the shift from traditional media outlets towards the brave new world of digital advertising, primarily the domain of Facebook and Google who dominate this sector. Consider the following angry comments from the occupier of the most coveted position in global brand management, the Chief Brand Officer (CBO) of P&G, Mark Pritchards:
Together [as advertisers] we’re now spending $70bn on digital adverts but we serve advertisements to consumers through a non-transparent media supply chain with spotty compliance to common standards, unreliable measurements, hidden rebates, and new inventions like bots driving fraud… frankly, the jig is up and the days of giving digital a pass are over.
That’s an irked observation from the individual with the biggest media budget in corporate history. On a lighter note, Facebook CEO Mark Zuckerberg was forced in early 2018 to testify before Congress on issues associated with data privacy (or lack of it). At a certain point, a befuddled, elderly congressman asked Zuckerberg what Facebook’s business model was, i.e. how did his company make money? A bemused, baby-faced, slightly blushing Zuckerberg, struggling to hold back a cheeky little teenage smirk said, “We run ads, sir”. It’s a brave new world, the world of global brand management. Let’s explore it…
The paradox of brands
We can summarise the above themes as the Paradox of Brands: brands are both extremely strong yet delicately fragile. Their strength lies in customer satisfaction and loyalty, employee engagement, channel support and shareholder value. Their fragility is rooted in poor management. While it takes a long time to build a strong brand based on trust (which is what brand loyalty reflects) it takes no time at all to destroy one. As the ancient adage reminds us, “trust takes years to build, seconds to break and forever to repair”. Well-managed strong brands, coupled with the creation and launch of new value propositions and brand concepts, provide the perfect balance between generating current cash flows and securing long term profitable income and capital growth, a process described as portfolio management in the previous chapter.
Brands are cool. Everybody loves them, despite what the naysayers may say. Of course, there will be some resistance amongst the self-actualisers and the champagne hippies and way too many people who lack the means to access them, although the latter are not resisting, just excluded. The world of brand management also seems to be in a strange place right now, struggling to make sense of what the hell is happening in the www.digital universe. Don’t worry, they’ll work it out; and a decade or so later, so will the regulators.
Volvo is ‘Made in Sweden’ and builds on this heritage (apparently only ABBA outsells it in Swedish krona export value). But it’s a Chinese company. Jaguar is quintessentially English, and Range Rover oozes British aristocracy, days at the races and champagne picnics. An Indian company owns them both. The Dollar Shave Club is west-coast hipster-cool Americana. Owned by the dullest company on the planet, Anglo-Dutch conglomerate Unilever. Lea and Perrins Worcestershire Sauce is an archetypical English craft condiment. But it is owned by an American monolith, Heinz.
In the era of Globalization, the global brand rules the world…
Outside Fortress Europe Extract References
Fill, C., & Turnbull, S. (2016). Marketing Communications: discovery, creations and conversations (7 ed.). Harlow: Pearson.
Gabrielsson, M., & Kirpalani, M. V. H. (2004). Born global: how to reach new business space rapidly. International Business Review, 13, 555-571.
Ohmae, K. (1982). The Mind of the Strategist: Business Planning for Competitive Advantage. London: Penguin Publishing.
Stone, B. (2014). The Everything Store: Jeff Bezos and the Age of Amazon. London: Bantam Press.
Tapscott, D. (2014). The Digital Economy: Rethinking Promise and Peril in the Age of Networked Intelligence (2 ed.). New York: McGraw Hill.
Vernon, R. (1966). International Investment and International Trade in the Product Cycle. Quarterly Journal of Economics, 80(2), 190-207.
Vernon, R. (1972). The Economic and Political Consequences of Multinational Enterprise: An Anthology. Boston, MA: Harvard University Press.
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