Local Brands and Global Brands

Local Brands and Global Brands Local brands are defined by Wolfe (1991) as brands that exist in one country coun try or in a limited geographical area. It is also noted by b y Schuiling et al (2004) that local brands belong to a local, international, or o r global firm. Local brands provide a link between the national economy and individual well-being. Levitt (1983) defines global brands as brands that use the same marketing strategy and mix in all target markets. Johansson and Ronkainen (2004) assert that global brands benefit from the scale and scope of having presence in multiple markets. The researchers define global brand as “a brand that is marketed under the same name in multiple countries with similar and centrally coordinated marketing strategies.” However there are some selected global brands that don’t have the same name but share some marketing program elements. For example, “Mr. Clean” also sells under the “Mr. Proper” and “Maestro Limpio” names, among others. Although global brands play a dominant role in today’s world,

Consumer Perception of Global vs. Local Brands: The Indian Car Industry

the advantages of the local brands are still stronger and this is reviewed in the following part. 2.4. Pros and Cons of Local brands and global brands

An exploratory research on the Y&R (Young & Rubicam’s) database was conducted by Schuiling et al (2004) across four largest European countries: the United Kingdom, Germany, France, and Italy. The study affirms that local brands benefit from strong brand equity and specifically, local brands benefit from higher consumer awareness than international brands do, and they enjoy a strong brand image. Local brands benefit not only from a good quality image but also from a better value and trust perception than international brands do (Holt et al, 2003). Value is linked with the fact that prices of local brands are usually lower than those of international brands, providing consumers a sense of better value for the money (Schuiling et al, 2004). According to the research by Schuiling et al, (2004), local brands are also perceived as more “down to earth” than international brands, meaning that local brands offer a

more basic/no frills brand proposition. The study also indicates that local brands are perceived as more traditional than international brands, because local brands are linked more to local traditions and local cultures than international brands are. It was also found that trust is an important advantage for local brands, because it provides a unique relationship with consumers that take years to develop. It also indicated that there is no significant difference between the perception of prestige for international brands and that for local brands. Another significant finding was that consumers are attracted to international brands but in reality, they prefer to purchase local brands (Schuiling et al., 2004). In the words of Johansson and Ronkainen (2004), although


global brands may have more success in high-profile, high-involvement categories, consumers may still give local brands preference in purchasing every day products. The advantages cherished by local brands can be dominated by the enormous advantages enjoyed by global brands. Eckhardt (2005) avows that local brands are not more flexible than global brands in terms of their marketing activities when they compete in a foreign product category due to cultural categories being associated with the product category. Just as global brands need to conform to international marketing dictums, local brands sometimes need to conform to deeply held preconceptions about the product category in which they operate. Johansson and Ronkainen (2004) assessed brand realities on the global - local continuum using data from Young & Rubicam’s Brand Asset Valuator (BAV). This database is considered to be the most exhaustive of its kind, covering 20,000 brands across 40 countries. Data have been collected since 1993 across a wide range of industry sectors to measure brand perceptions of more than 100,000 consumers. It was noted that local brands exhibit higher familiarity among consumers, but when familiarity levels are similar, global brands enjoy higher levels of esteem. Also that Global brands were known for their perceived quality. The researchers asserted that global branding will arguably face different challenges b y product category. Certain categories, such as automobiles and computers, are deemed more global in terms of the similarity in consumer preferences. Apart from discussing the pros and cons of

local and global brands, it is necessary to comprehend the shifts that occurred due to increased consumer preference from local brands to global brands.


2.5. Shifts from Local Brands to Global Brands

During the recent years, a number of multinational companies are reducing their brand portfolios to manageable sizes in favor of global brands. For example, both Procter and Gamble (P&G) and Unilever have greatly pruned the number of brands they market around the world, often disposing of those with limited global potential (Pitcher, 1999). Massive presence of Global brands is fuelled by the increasing similarity that consumers display in their consumption habits and preferences. It has also been argued that Global brands, are perceived to be more value-added for the consumer, either through better quality (as a function of worldwide acceptance) or by enhancing the consumer’s self perception as being cosmopolitan, sophisticated and modern (Johansson and Ronkainen, 2004). Consumers throughout the world are becoming increasingly sophisticated and international brands offer a measure of exclusivity or even eccentricity that are increasingly sought after and valued because such appeals are universal (Interbrand, 1990). Ac cording to Schuiling et al (2004), this trend has been occurring not only in fast moving consumer goods sector but also in other industrial sector including services. Although global brands are becoming more significant, it is asserted that there are many local brands than international brands in Europe. As examples, in Germany’s oil industry, British Petroleum acquired the local leader Aral and decided to retain the local brand name due to its strong brand equity; In Belgium, Spa being the local leader in mineral water, has shares above international leader Evian (Schuiling et al, 2004). A number of reasons have been presented by various researchers for the moves toward global brands. Out of which, the main reason would be the one given by Hassan and Katsanis (1994), being meaningful segments of consumers around the

Consumer Perception of Global vs. Local Brands:

world develop similar needs and tastes. According to Neff (1999), globalization speeds up a brand’s time to market by reducing time- consuming local modifications. Another important reason given by Shocker et al. (1994) for moves toward global brands would be consumer preference for brands with ‘global image’ over local competitors, even when quality and value are not ‘objectively’ superior. Conversely, in the view of Terpstra (1987), consumer preference has not has not been the primary reason for companies to decide to move to international and global brands. As an example, P&G accelerated its development of global brands since the early 1990s and its aim being to achieve competitive advantage in markets (Schuiling et al 2004). As the world is shrinking in to a global marketplace, it is increasingly significant to understand the consumers’ perception of global brands to local brands. There is also need to uncover the reasons for consumers’ preference for global brands over local brands. Consumers become perceptive to global brands when consumers believe the brand is marketed in multiple countries and is recognized as global in these countries (Steenkamp, 2003). This perception occurs in two forms; consumers realize that the same brand is found in other countries through media exposure, word of mouth, or during travel overseas. Secondly, as studied by Alden e t al., (1999) that a brand may assert or imply its ‘globalness’ through marketing communications that use brand names, endorsers, advertising themes, etc.. Consumers prefer brands that they perceive as originating from a non-local cou ntry, especially from Western countries, more than they do local brands and that preference is linked not only to perceived quality but also to social status (Alden et al., 199 9). In the words of Peterson and

Basic factors that effect consumer preference for Global Brands

Research shows that perceived brand globalness for global brands could create consumer perceptions of brand superiority (Shocker et al., 1994). International and global brands have been associated with high prestige or status, in addition to quality (Batra et al., 2000). Empirical study conducted by Steenkamp et al (2003) has revealed that prestige is the second factor driving global brand preference. Foreign

brands of most consumer durables and non-durable categories were given significantly higher mean attribute ratings on “status and esteem” except where “cold drinks” and “ice creams” were concerned. A study conducted by Kinra (2006) held that COO credibility of foreign brands was a significant factor influencing con sumer attitudes and preferences as it was correlated highly with “quality” and “status and esteem”. Consumer Perception of Global vs. Local Brands: The Indian Car Industry

Steenkamp et al (2003) made a study on consumer preference for global brands to local brands. The researchers framed three pathways through which perceived brand globalness (PBG) influences consumers’ purchase likelihood were hypothesized. The pathways were higher perceived quality, higher prestige, and the psychological benefits of PBG. The hypotheses were tested in Korea and the United states, across different product categories and brands.

This research can help us understand why people may gravitate toward one brand or another. "The findings reveal how multinational or local firms can solidify consumers' preferences for global or local products if their consumers' global or local inclinations are compatible with their products' positioning, Consumers prefer local soft drinks rather than global brands like Coca Cola or Pepsi due to their built-in mindsets connected to their desire, a new study said. “Global-minded consumers prefer global products and local-minded consumers prefer local products (different specifications for consumers from different parts of the world)” the study authors explained.

“Due to rapid globalisation, local products… such as Mecca Cola (France) and Fei-Chang Cola (China) and global products… Pepsi and Coke, routinely compete against each other,” wrote study authors Yinlong Zhang (University of Texas San Antonio-UTSA) and Adwait Khare (Quinnipiac University). The authors set out to answer the question “why global products fare better than local products in some markets and local products better than global products in other markets?” The inclination toward global or local mindsets is connected to people’s desire for distinctiveness (local) versus their desire to be similar to others (global). In three subsequent studies, the authors enhanced the accessibility of participants’ local or global identities to investigate their responses to products. They then manipulated consumers’ preferences by informing participants of the unsuitability of their global or local inclinations, said an UTSA release. “A reversal in preference occurs when global-minded consumers’ desire for distinctiveness from others is enhanced and when local-minded consumers’ desire for solidarity with others is enhanced,” the authors wrote. “The findings reveal how multinational or local firms can solidify consumers’ preferences for global or local products if their consumers’ global or local inclinations are compatible with their products’ positioning,

Local Brands and Global Brands

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