vinod kumar- Branding Strategies of MNC’S in International Markets_001

CONTEMPORARY ISSUE ON SEMINAR

A STUDY ON

“BRANDING STRATEGIES OF MNC’S IN

INTERNATIONAL MARKETS”

Session: 2011–13

Presented at

Submitted: - Submitted by Aparna Kalla vinod kumar

ACKNOWLEDGEMENT

The beatitude, bliss & euphoria that accompany successful completion any task would not be completed without the expression of appreciation of simple virtues to the people who made it possible.

So, I take my immense pleasure in expressing a whole hearted thanks to all the faculty members who guided me all the way making this project successful.

It is my privilege to express a deep sense of gratitude and thanks to Ms MAHIMA RAI for providing us various information directly related to project.

I am also thankful to MS APARNA KALLA for his/her guidance & cooperation in this work.

I extend my gratitude and thankfulness to Apex Institute of Management & Science.

Date: Submitted By:

Place: Jaipur Vinod kumar

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PREFACE

The underlying aim of the seminar on contemporary issue as an integral part of MBA program is to provide the students with practical aspects of the organization – working environment.

Such type of presentation helps a student to visualize and realize about the congruencies between the theoretical learning in the premises of college and actual followed by the organization. It gives the knowledge of application aspect of the theories learnt in the classroom.

The seminar project “BRANDING STRATEGIES OF MNC’S in International Markets” is a complete experience in itself, which provide me with the understanding. This has become as inspirable of my knowledge of management being learned in MBA program.

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SUMMARY

Many firms have realized the potential of globalization and new markets in different locations of the world. When expanding globally a global brand strategy has to be developed and when entering international markets different strategies have to be considered.

The purpose of this thesis is to investigate the branding strategies of MNCs in international markets. The branding strategies used by MNC’s may be mixtures of the two types I .e product branding or corporate branding, but emphasis is typically on one of them. A product brand strategy is characteristically used when a company offers multiple products within different business segments, and when there are several different target groups. With a corporate brand strategy, the corporate name and the brand are the same.

The methodology used for the purpose of this project is the multiple case study approach to investigate the contemporary phenomena within its real-life context. A holistic multiple-case design is used so that the global nature of organizations and businesses can be effectively examined.

Both products based and service based businesses and organizations have been included as case studies. Various elements of strategic importance like marketing mix, brand architectures, segmentation, positioning have been included in the various studies to clearly understand how decision making and strategy formulation in terms of branding is carried out by multi national companies.

This project hence, helps the reader in gaining a deeper understanding on MNCs’ choice of branding strategies.

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TABLE OF CONTENTS

TOPIC PAGE NO

1 Introduction 5-8

2 Review of Literature 9-15

3 Methodology 16-19

4 Analysis & Interpretation 20-30

5 Summary of Findings 31-34

6 Scope for Further Research 35

7 Conclusions 36-37

8 Bibliography 38

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INTRODUCTION

1. Indian Journal of Marketing

“The big four banks: dealing with the on-line challenge”, Journal of Financial Services

Marketing Background

In order to be competitive in today’s global marketplace, MNCs need to set up effective

branding strategies. Depending on the structure of the company and the products

offered, MNCs can use different strategies. There are certain characteristics that will

affect the type of strategy chosen. In order to reach economies of scale, many MNCs

standardize their branding- and marketing activities. However, MNCs are often required

to adapt to local preferences and cultures. There has been a lot of research within the

area of branding strategies; however there is limited research on how MNCs choose

which strategy to adapt in different international markets.

What is a Brand?

A brand is defined as “a name, term, sign, symbol, or design, or a combination of them,

intended to identify the goods or services of one seller or group of sellers and to

differentiate them from those of competitors” (Kotler & Keller, 2006).

According to Album , Durer and Strandskov (2005) a brand is “anything that identifies a

seller’s goods or services and distinguishes them from others”.

Van Gelder (2003) states that when defining a brand; everything is carefully prepared

and planned in order to create value for the customers that will benefit the organization.

Functions of a Brand

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The basic purposes of a brand are universal, and these are:

To distinguish a company’s offering and differentiate one particular product from its

competitors.

To create identification and brand awareness

To guarantee a certain level of quality and satisfaction

To help with promotion of the product

The Value of a Brand

Kotler and Keller mention that a strong brand creates higher profits which in turn create

higher value for the shareholders.

New brands in a global marketplace have a tiny chance of competing against

established brands, and creating a brand from scratch involves enormous investments.

The return on the investments spent on branding is converted into brand awareness,

image and loyalty and the concept summarizing the value of the brand is referred to as

brand equity. According to Keller (2007) different marketing programs must be created

to satisfy different market segments in building brand equity:

Differences in consumer behavior have to be identified

The branding program has to be adjusted accordingly through the choice of

brand elements, the nature of the actual marketing program and activities, and

the leveraging if secondary associations.

International Branding

Kevin Keller states that the reasons for going international are:

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Perception of slow growth and increased competition in domestic markets

Belief in enhanced overseas growth and profit opportunities

Desire to reduce costs from economies of scale

Need to diversify risk

Recognition of global mobility of customers

Global Brand

Many companies adapt a global strategy. Global brands are usually positioned and

marketed similarly throughout the world with slight modifications. A global brand reflects

the same set of values around the world, and the key in global brand strategy is formed

by those values or brand character forms. In order to succeed, global brands have to

foresee cultural trends and consumer values.

The benefit of a global brand is higher acceptance of products by consumers and

intermediaries, and the drawbacks are “loss of local flavor”.

Strategic Decision

When developing an international brand strategy, the company has to decide; which

markets to act on (new or existing), new products or modifying existing products, and

also the accessibility of the products in the international market. Companies can gain

competitive advantage in international markets through quality and performance.

Furthermore, the companies have to sustain competitive advantage in their branding

strategy, and they make that achievement through; brand equity, financial strength and

international distribution.

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There are four brand architectures that firms may use:

1) Corporate branding

2) Product branding

3) Corporate-and-product (with dominant use of the corporate brand)

4) Product-and-corporate (with dominant use of product brands)

Some MNCs, for example IBM, may put emphasis on their corporate brand, whereas

other MNCs such as Procter & Gamble (P&G) put most emphasis on their product

brands

Other MNCs choose to set up their strategies by focusing on corporate- and product

branding simultaneously. Corporate branding is on the firm-level, whereas the product

branding is focused on the actual product or service.

Many MNCs shift focus from product brands to corporate brands as they move towards

globalization. Firms which are successful in building a strong corporate brand is more

competitive than firms which rely simply on their product brands.

Outline

The introduction will give a brief background of the topic. Literature review will give the

relevant secondary literature concerning the main issues and research questions. The

methodology will give the explanation of the procedure and method for collecting the

data on the research questions. Data analysis will analyze and compare the data

collected with the literature and theory. Finally, the discussions, findings and

conclusions would be presented.

LITERATURE REVIEW

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Introduction Literature Review Methodology Data Analysis Conclusions

Branding Strategies of MNC’s in International Markets

Branding Decisions

The first choices that have to be made by companies are: to select a good brand, and to

choose how many brands that should be included in the product line. Furthermore,

there are different decisions that have to be made:

• A single/family brand, this strategy indicates that all products under the same brand

name have the same quality, and also simplifies the advertising.

• An individual (local) brand, which is a strategy that adapts to local preferences.

• Multiple brands, is a strategy to have the same product but within different segments

in one national market. This strategy differentiates products from its quality or

characteristics.

Country of Origin Effects

Countries can take advantage of their country-of-origin, and acquire other companies in

order to enter a market. It is important to have a stable international distribution system

when acting in international markets in order to keep the costs low. However, a large well

organized distribution system can create barriers to entry.

Global Brands

Global brands have gained popularity with the rise in globalization. With the ubiquity and

reach of the internet, people learn what is going on around the world more than before.

Global brands are more appealing to the younger segments. Furthermore, global brands

are more common in urban areas, than in rural areas. Consumer behaviors are more

similar between large cities in different countries, than in a large city and an area in the

same country.

Global brands are positioned in the same way all around the world and the

consumers take country-of-origin in consideration when buying a global brand. Most of

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the global firms have the same product line all around the world; this is because it is

difficult to be too diversified when acting on a global scale.

Strategy Approaches

Different forms of strategy approaches that a company can undertake are shown

below -

At one extreme, product brand strategy can be found. This is where one individual

product has a specific name and a specific positioning; every new product gets its own

brand name and positioning. At the other extreme the corporate umbrella brand strategy

can be found, this means that a company has different products that share the same

brand name.

Standardization versus Customization

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Brand Function: Indicator of Origin

Brand Function: Product Differentiation

Corporate Umbrella Brand

Umbrella Brand

Range Brand

Line Brand

Product Brand

By using a strategy based on local preferences, the company can get advantages of:

• Customer needs

• Distribution and promotion methods to be used

• Competitive market structure

• Economies of scale in production and distribution

• Legal constraints

• Operational structures

Corporate Branding

Corporate branding is defined as “the strategy in which the brand and the corporate

name are the same.” Corporate brands simplify communications with government,

the financial sector, the labor market and society. Some examples of corporate

brands are IBM, Nike, Virgin and Sony. The base for corporate branding consists of

organizational values, core values and added values.

Characteristics of Corporate Brand

Cultural. Corporate brands have cultural roots that stem from the sub-

cultures that are contained within the corporate brands. The personnel

have responsibility since they are the key stakeholder group since they

communicate the organization’s values by everything they say or do.

Intricate. Corporate brands are intricate because they are

multidimensional and multi-disciplinary, have a range of stakeholders,

both internal and external, they also have controlled or uncontrolled

communications through for example, word-of-mouth.

Tangible. Corporate brands “encompass tangible elements such as

business-scope, geographical coverage, performance-related issues,

profit margins, pay scales, recruitment etc.”

Ethereal. The stakeholders of the corporate brand are subjective and

emotional when judging the brand; this can be for example, country-of-

origin or the type of industry.

Commitment. The total organizational commitment is very essential and

the CEO and the board-level is the prerequisite for corporate branding.

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Commitment is hence the core and the cornerstone in corporate brand

management.

Product Branding

Product branding may be defined as the strategy of building separate brand identities

for different products. Product brands are short term and live in the present. The

ambition of product brands is to attract customers and boost sales. Examples of

product brands include Sprite under the Coca-Cola Corporation, Lux and Dove from

Unilever and Toyota and Lexus from Toyota.

A ‘product brand strategy’ is where one individual product has a specific name and a

specific positioning. Every new product gets its own brand name and positioning.

Thus, a product brand strategy has a strategy of product differentiation. This strategy

is undertaken by P&G. The product is at focus and the only way to extend the

product is by a renewal of the product, and to improve the product in order to adapt to

customer needs.

Characteristics of a Product Brand

It is flexible which allows firms to position themselves against different

segments in different markets.

It creates differentiation and preference for a product or service in the mind of

the customer.

Failure of one brand does not affect another brand, or the company name, that

is because every brand is individual.

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Factors Determining MNC’s choice of Branding Strategies in International

Markets

The development of brand strategy in an emerging market should be based on an

understanding of its economic, technological, socio-cultural, and competitive conditions.

Other factors that may influence the MNCs initial branding strategy when entering an

emerging market are –

Stakeholder Interest

Corporate Image and Reputation

Market Complexity

Marketing Costs

Product Characteristics

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Stakeholder Interest

Corporate Image and Reputation

Market Complexity

Marketing Costs

Product Characteristics

Choice of Branding Strategy:

Corporate Branding Product Brand

Stakeholder Interest

The focus of product branding is on the customer and the focus of corporate branding is

on the stakeholders.

Corporate branding is successful when the values of the corporation are attracted by

the stakeholders. An advantage with a strong corporate brand is that the company may

attract investors, and potential employees.

Corporate Image and Reputation:

Customers’ perception of a product brand typically comes from the communicated

image and advertising, whereas the corporate image is derived from the customers’

interaction with the firms’ employees, physical presence and overall marketing efforts.

MNCs have to create positive customer perceptions. However, that is much more

complicated in emerging markets due to heterogeneity in the market structure.

Market Complexity

Branding strategies become difficult to set due to complex international environments.

There are some barriers that MNCs have to face:

• On a macro environment

Consumer characteristics and behaviors

The legislative infrastructure

Existing competition

• On the task environment

Inter-institutional relationships

Behavioral norms and channel structures

• On the organizational environment

Cost structures and operational flexibility

Management styles and cultures

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Five environmental factors that may influence brand-name standardization/adaptation

strategy:

(a) Religion may affect certain items in society which may be perceived as taboo.

(b) Language, translation blunders may occur.

(c) Education, the degree of illiteracy within a society has to be considered.

(d) Technology, technological differences across nations may affect marketing.

(e) The economy, standardization is more practical in markets that are

economically comparable.

Marketing Costs

Creating a brand is very costly and it is very expensive to sustain an existing brand.

There may be high marketing costs when targeting different brands at separate

small segments. Corporate branding is efficient in communicating market and

product information. A way of reducing the marketing costs may be to create an

integrated marketing communication program rather than promoting different product

brands. Companies can reduce costs by adapting a corporate brand strategy, since

they can exploit the economies of scale in advertising and marketing. This

strategy is suited in markets where the product life cycle is declining and hence

the costs would be high to continually creating new product brands.

Product Characteristics

Consumer products are typically more culturally sensitive than industrial products,

especially in emerging markets.

New entrants in emerging markets are more likely to use corporate branding for

industrial products rather than consumer products due to the fact that consumer

products are more culturally sensitive. When targeting new markets, product branding

should be suited. Product branding should also be used when entering markets with

new products, since a new approach is expected from the customers. Product

branding should be used for service brands in different situations.

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METHODOLOGY AND DATA

A qualitative research approach is suitable when human activities or when

behavioral patterns will be investigated.

Research Strategy: Case Study

Data Presentation

Case Study 1: Procter & Gamble

Company Background

According to P&G’s webpage, the company consists of over 138,000

employees working in over 80 countries worldwide. P&G is a public company

and is listed on the New York Stock Exchange (NYSE). Additionally, the

company is on the Fortune 500 list. The headquarter is based in Cincinnati,

Ohio. P&G has nearly 300 brands in different areas. The company has one of

the largest and strongest portfolios of brands, for example Pampers, Tide,

Ariel, Always, Pantene, Bounty, Folgers, Pringles, Charmin, Downy, lams,

Crest, Atonal and Olay.

The company’s operations are listed into three global business units (GBU),

with each GBU divided into different Business Segments:

• Beauty

Beauty Segment

Grooming Segment

• Household Care

Baby Care and Family Care Segment

Fabric Care and Home Care Segment

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• Health & Well-Being

Health Care.

Snacks, Coffee and Pet Care

Branding Strategy of P&G in International Markets

Product Branding Strategy

P&G focuses merely on product branding and uses a global strategy. There is no

“real” home market since P&G is global company, but it is originally an American

company. P&G as a corporation is more publicly known in USA and Great Britain

than in other countries. But the actual corporate brand, P&G, is never marketed;

instead focus is on the different product brands. P&G has around 300 brands in

total worldwide. However, the number of brands may change monthly and

sometimes even weekly.

The brands that are not successful are sold. For example, many of the family

care brands have previously been sold, but instead P&G has acquired the global

brands Walla and Gillette.

The reason for using a product branding strategy is because P&G has many

different kinds of products: baby care, health care, pet food, coffee, etcetera.

When there are diverse kinds of products it is better to focus on product branding

rather than corporate branding. The focus will stay on product branding.

However, P&G sometimes uses an umbrella strategy where one product brand

is extended to several additional products such as Ariel with different

products/sub brands under the Ariel brand.

Traditionally, the brands’ strengths have been driven by innovation - to be best in

class. Today, the focus lies more on commercial innovation. Hence product

innovation is losing importance for brand management. For P&G people and

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managerial resources are important. Additionally, it is important with first-mover

advantage. In order to build a competitive advantage, P&G has traditionally been

very focused on innovation. However, focus has shifted to be more driven by

marketing knowledge.

To sustain competitive advantage P&G makes huge investments. There is a

huge R&D infrastructure, as well as marketing functions. In some cases P&G

acquires other companies with strong global brands in order to sustain

competitive advantage. Two recently acquired strong global brands are Wella

and Gillette. Hence, P&G focuses only on acquiring truly global brands, or brands

that have the potential of becoming global. P&G would never acquire a small

local supplier just to open the market.

P&G focuses on traditional advertising such as TV-advertising etcetera. P&G

does not want to change its type of branding and marketing strategy. The

company wants to create global brands. When the company has a new product

idea, it has to be considered how that specific product can be taken into other

markets. Hence, there has to be consensus for a whole continent. That is the

reason why P&G prefers to bring in successful brands from one country to

another, instead of developing new products.

When developing a strategy for specifically emerging markets, P&G takes the

best ideas from other markets and sends the best people to the new markets.

P&G opened up China and Russia by sending 10 of the best people. After a few

years time, the number of employees had risen to 200 people. P&G’s main

reason for going international is to boost sales and reach economies of scale and

scope. It also has to do with international communication. P&G simply tries to

find out what works internationally.

Management of the Brand

The product brand is undoubtedly the most important. The whole organization

focuses on product branding except for some special functions which may deal

with the corporate brand. Since P&G focuses on product management it is the

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marketing organization which manages the product brands. The PR department

is the ones who make some kind of corporate branding for P&G.

There is a Global Business Unit (GBU) which is responsible for the strategic

development of the brand. P&G also has regional GBUs on each continent, as

well as Market Development Organization (MDO) in each region. When it comes

to managing the brand image, the GBU and MDO have the main responsibility.

Both entry level position management, middle level management, as well as

senior level management are responsible. The more important a brand is; the

higher level of management responsibility. When delivering the product brand,

most of the work is made by the MDO at the entry level management. Generally,

marketing is mainly managed by entry level management and middle level

management.

Focus on Stakeholders

For P&G all stakeholders are important, and the most important

stakeholders are the customers. It is vital for the company to understand and

please the customers. Other important stakeholders include employees (since it

is a very strong focus on personal development within P&G), local governments,

shareholders, and investors. P&G has a commitment to invest in about 20 billion

dollar in sustainable products and grow 5-6% per year; hence the investors are

important to consider. P&G has a long-term focus measured in both financial

success, as well as sustainability. When it comes to brand-building a long-term

focus means up to 20 years, and when it comes to investors it means at least 5

years.

Standardization versus Adaptation

P&G tries to position all the brands similarly in all markets. However, some

brands may have a stronger position in some markets, and a weaker position in

others. There are some markets such as South America where some special

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brands, for example shampoo, is positioned differently because of different

income structures. P&G tries to standardize as much as possible, and the aim is

that the product should work throughout at least one continent. Hence, there are

many different languages on the packages. The same type of product branding

strategy is used all over the world.

P&G sees what works in one market and takes it to another market, and tries to

do it the same way. A lot of research is made before entering a new market in

order to find out if the brands have to be adapted. Research is made in order to

get to know the customers, the culture and the country. Adaptation is made only

if it is necessary, so in some cases there might be adaptations made to each

local market when needed. The color green for example cannot be used in the

Near East due to cultural reasons.

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ANALYSIS and INTERPRETATION

Branding Strategies of MNCs in International Markets

Similarities and differences between the two companies’ type of branding strategies

are provided in the discussion that follows.

Strategy

P&G has a typical product branding. P&G has around 300 different brands

worldwide; therefore the best suited strategy is to use a pure product brand strategy

since each individual brand has its own identity.

Since P&G has several diverse kinds of products, it has a more functional approach.

Each brand is positioned differently and towards different segments in different

markets.

Management of the Brand

In the case of P&G, the whole company is about product branding. However, it is the

marketing function within P&G which manages the product brands and specifically it

is the entry level management and middle level management who mainly manage

the marketing. It is the market development organization (MDO) within P&G which

delivers the brands.

Focus on Stakeholders

When it comes to drawing attention from stakeholders, P&G state that the most

important stakeholders are the customers. In the case of P&G it is vital to

understand and please the customers.

However, there are other important stakeholders such as employees, local

governments and investors.

Standardization versus Adaptation

P&G is a global company acting on multiple international markets.

For that reason, it strives for using a standardized strategy. P&G’s aim is to try to

standardize as much as possible and to use the same type of branding Strategy all

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over the world. However, even if the intend is to standardize as much as possible,

it is sometimes needed to adapt to the local markets. P&G’s aim is that the product

should work at least throughout a whole continent. The reason for P&G to use a

standardization strategy is to reach economies of scale and scope. Before launching

a product on a new market there is careful research made in order to find out the

preferences of the customers and so on. When the preferences differ, there are

adaptations made before launching the product.

Factors Determining MNCs’ Choice of Branding Strategies in International

Markets

Stakeholder Interests

The first variable discussed in this section is stakeholder interests. The stakeholders

are

Important for all companies, and it is important to have good relations with them.

Since P&G is a public company that is listed on the New York Stock Exchange

(NYSE) it is Important to take the investors in consideration because this affects the

quotation.

However, since P&G uses a product brand strategy the corporate brand has less

connection with the products since they are individual with individual brands. The

customers are very important for the companies since they need to have a good

relationship with these in order to increase sales. But the relationships are different

between the companies. Since P&G uses a product brand strategy the customers

have no relation with the P&G corporate brand, but with the individual products and

it is important to know the customers’ needs and demands. The employees are

important for both companies since they create the perception of the brand. The

government relationships are an important factor for P&G. This depends on the

major differences regarding rules and regulations in international markets.

Companies acting on a global scale need to have satisfactory relationships

with the government in order to maintain the business in that market.

There is no information whether P&G has partnerships with manufacturers; however,

the company sometimes acquire already existing global brands such as Wella and

Gillette.

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Corporate Image and Reputation

For P&G the corporate reputation is not that important since the corporate name is

not visible on the products. However, the expectations of stakeholders are

important for both companies. For P&G stakeholder expectations are important first

of all since the company is listed on the NYSE, but also since customer expectations

create customer demands.

For P&G the brand personality does not have to be inline with the core values of the

company since the company has different sorts of brands that suit different target

groups. Hence, it is not important to have consistency throughout the company.

Since P&G has different individual products with individual brands it cannot give

added value to products and services. Since P&G is listed on the NYSE, it is

important to have a good reputation, and a good reputation makes the stock more

attractive and might increase the stock price.

The benefit with a product brand such as P&G is that there is less harm if one

individual product fails, because this product can easily be taken out of the market.

Because of the fact that P&G has many different products, the marketing costs are

therefore higher since the company needs to put marketing actions on every single

product. This is therefore an important factor for a product brand acting on an

international market. Market Complexity

For all companies market complexity is an important factor when determining the

choice of strategy in international markets. Since P&G and others act on a global

scale, it is important to have a strategy that can be adapted worldwide. Although

companies use a standardized strategy, they adapt different dimensions of the

marketing mix in order to maximize customer value. Different factors have to be

taken into consideration such as consumer characteristics, because this varies

around the world and customers have different preferences depending on culture

and/or values.

Competition is another factor to consider since there might be other companies that

are cheaper or have more market shares.

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Marketing Costs

For P&G, the marketing costs are very important to consider when deciding strategy

in

international markets. Since P&G uses a product brand strategy, the company has

to invest in all individual brands and there are high costs related to this and also

when acting in different diverse markets. However, P&G uses a standardized

strategy, and therefore, the company can benefit from that.

Case 2: McDonalds: Behind the Golden Arches

The McDonald’s Story – Genesis

The story of McDonald’s started in 1954, when its founder Raymond Kroc saw a

hamburger stand in San Bernardino, California and envisioned a nationwide fast

food chain. Kroc proved himself as a pioneer who revolutionized the American

restaurant industry. Today McDonald’s is the world’s largest fast food chain serving

47 million customers daily. McDonald’s is now one of the most valuable brands

globally, worth more than $25 billion. The Golden Arches and its mascot Ronald

McDonald have gained universal recognition. Though the company has roots in the

US, McDonald’s today has become an accepted citizen of the world.

Year Events

1955 Ray Kroc opens his first restaurant. McDonald’s Corporation is

created

1957 Quality, Service, Cleanliness and Value (QSC & V) becomes

company motto

1963 Ronald McDonald makes debut

1965 The company goes public

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1968 Big Mac is introduced`

1974 Happy Meal is launched

1996 McDonald’s opens in India, the 95th country

McDonald’s in IndiaMcDonald’s entered India in 1996. McDonald’s India has a joint venture with Connaught

Plaza Restaurants and Hard Castle Restaurants. Connaught Plaza Restaurants

manages operations in North India whereas Hard Castle Restaurants operates

restaurants in Western India.

Apart from opening outlets in the major metros, the company is now expanding to Tier 2

cities like Pune and Jaipur.

Challenges in Entering Indian Markets

Regiocentricism: Re-engineering the menu - McDonald’s has continually adapted to the

customer’s tastes, value systems, lifestyle, language and perception. Globally

McDonald’s was known for its hamburgers, beef and pork burgers. Most Indians are

barred by religion not to consume beef or pork. To survive, the company had to be

responsive to the Indian sensitivities. So McDonald’s came up with chicken, lamb and

fish burgers to suite the Indian palate.

The Vegetarian Customer – India has a huge population of vegetarians. To cater to this

customer segment, the company came up with a completely new line of vegetarian

items like McVeggie burger and McAlooTikki. The separation of vegetarian and non-

vegetarian sections is maintained throughout the various stages.

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Positioning of McDonalds in India

It is established that kids reign supreme in FMCG purchase related to food products in

India. So to attract children McDonalds has Happy Meal with which toys ranging from

hot wheels to various Walt Disney characters are given (the latest in this range is the

toys of the movie Madagascar). For this, they have a tie-up with Walt Disney. At several

outlets, it also provides special facilities like ‘Play Place’ where children can play arcade

games, air hockey, etc. This strategy is aimed at making McDonald’s a fun place to eat.

This also helps McDonald’s to attract the young urban families wanting to spend some

quality time while their children have fun at the outlet. To target the teenagers,

McDonald’s has priced several products aggressively, keeping in mind the price

sensitivity of this target customer. In addition, facilities like Wi-Fi are also provided to

attract students to the outlets like the one at Vile Parle in Mumbai.

“Mc Donald’s mein hai kuch baat” projects McDonald’s as a place for the whole family to

enjoy. When McDonald’s entered in India it was mainly perceived as targeting the urban

upper class people. Today it positions itself as an affordable place to eat without

compromising on the quality of food, service and hygiene. The outlet ambience and mild

background music highlight the comfort that McDonald’s promises in slogans like “You

deserve a Break Today” & “Feed your inner child”. This commitment of quality of food

and service in a clean, hygienic and relaxing atmosphere has ensured that McDonald’s

maintains a positive relationship with the customers.

McDonalds Marketing Mix (5 P’s)

The 5 P’s used by McDonalds are:

1. Product

2. Place

3. Price

4. Promotion

5. People

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Product: How should the company design, manufacture the product so that it enhances

the customer experience?

Product is the physical product or service offered to the consumer. Product includes

certain aspects such as packaging, guarantee, looks etc. This includes both the tangible

and the non-tangible aspects of the product and service.

McDonalds has intentionally kept its product depth and product width limited.

McDonalds studied the behaviour of the Indian customer and provided a totally different

menu as compared to its International offering. It dropped ham, beef and mutton

burgers from the menu. India is the only country where McDonalds serve vegetarian

menu. Even the sauces and cheese used in India are 100% vegetarian. McDonalds

continuously innovates its products according to the changing preferences and tastes of

its customers. The recent example is the introduction of the Chicken Maharaja Mac.

McDonalds brings with it a globally reputed brand, world class food quality and

excellent customer specific product features.

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Place: Where should be the product be available and the role of distribution channels?

The place mainly consists of the distribution channels. It is important so that the product

is available to the customer at the right place, at the right time and in the right

quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald’s outlet.

There is a certain degree of fun and happiness that a customer feels each time he dines

at McDonalds. There are certain value propositions that McDonalds offer to its

customers based on their needs. McDonalds offers hygienic environment, good

ambience and great service. Now McDonalds have also started giving internet facility

at their centres and they have been playing music through radio instead of the normal

music. There are certain dedicated areas for children where they can play while their

parents can have some quality time together.

Price: What should be the pricing strategy?

Pricing includes the list price, the discount functions available, the financing options

available etc. It should also take into the consideration the probable reaction from the

competitor to the pricing strategy. This is the most important part of the marketing mix

as this is the only part which generates revenue. All the other three are expenses

incurred. The price must take into consideration the appropriate demand-supply

equation.

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McDonald’s came up with a very catchy punch line “Aap ke zamane mein ,baap ke

zamane ke daam”. This was to attract the middle and lower class consumers and the

effect can clearly be seen in the consumer base McDonalds has now.

McDonalds has certain value pricing and bundling strategies such as happy meal,

combo meal, family meal etc to increase overall sales volumes.

Promotion: What is the suitable strategy and channels for promotion of the product?

The various promotion channels being used by McDonald’s to effectively communicate

the product information are given above. A clear understanding of the customer value

helps decide whether the cost of promotion is worth spending.

There are three main objectives of advertising for McDonald’s are to make people

aware of an item, feel positive about it and remember it. The right message has to

be communicated to the right audience through the right media. McDonald’s does its

promotion through television, hoardings and bus shelters. They use print ads and the

television programmes are also an important marketing medium for promotion.

Some of the most famous marketing campaigns of McDonald’s are:

“You Deserve a break today, so get up and get away- To McDonald’s”

“Aap ke zamane mein ,baap ke zamane ke daam”.

“Food, Folks, and Fun”

“I’m loving it”.

People: How to converge the benefits of internal and external marketing?

McDonald’s understands the value of both its employees and its customers. It

understands the fact that a happy employee can serve well and result in a happy

customer.

McDonald continuously does Internal Marketing. This is important as it must precede

external marketing. This includes hiring, training and motivating able employees. This

way they serve customers well and the final result is a happy customer.

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The level of importance has changed to be in the following order (the more important

people are at the top):

1. Customers

2. Front line employees

3. Middle level managers

4. Front line managers

The punch line “I’m loving it” is an attempt to show that the employees are

loving their work at McDonalds and will love to serve the customers.

The McDonald’s Experience

McDonald’s has consistently excelled due to its ability to successfully integrate the

customer’s perspective in its products and operations in a comprehensive manner. The

revamped menu in India is an example of McDonald’s strategy of integrating the

customer’s perspective in its products. And, the operational integration is evident from

McDonald’s emphasis on its suppliers as its customers as well as its treatment of its

consumers as co-producers of services.

The ultimate aim of Service Marketing is not just to become a Service Leader but to

create a Service Brand. The Service Delivery Process is the key to achieving this aim of

Service Market

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Core Product

Supplementary Process

Service Delivery Process

During the Service Delivery Process, each moment of interaction between the firm and

the customer, called “Moments of Truth”, helps understand the opportunities that a firm

has to win or lose the customer. For example, these “moments of truth” are created for

McDonald’s every time the guard at the McDonald’s outlet meets the customer, every

time an attendant takes down the order from the customer waiting in the queue, every

time the cashier interacts with the customer, every time the attendant helps the

customer guided the customer towards the table, every time the attendant cleans the

table, etc.

Managing these “moments of truth” is a great challenge in Service Marketing especially

due to customer’s involvement as a co-producer of services (e.g. McDonald’s self-

service concept wherein the customer not only collects the order but also cleans the

table after consuming the food). However, McDonald's has been able to create a great

experience for its customers by understanding the nature of the entire Service Delivery

Process and the various stages in the process that are exposed to the customers.

Transparency in the processes at its outlet has helped McDonald’s bring the back office

in its outlet at the front so that the customer is able to know the operations and provide

feedback on service design improvements.

Internal Customer Focus is equally important as External Customer Orientation in order

to win these “moments of truth”. McDonald’s focus on its People and their service

delivery methods therefore plays a very important role in creating a successful Service

Brand. The quality and the consistency of the service delivered by McDonald’s have

been greatly enhanced by the combination of the factors mentioned above. This has

helped McDonald’s become Service Leader and a successful Service Brand. This is

evident from the fact that very few of its customers opt for take-home parcels or home

deliveries while most of them prefer to eat at the outlet and enjoy the McDonald’s

experience.

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SUMMARY OF FINDINGS

How can the branding strategies of MNCs in international

markets be described?

Companies focus either mainly on a product branding strategy or mainly on a corporate

branding strategy. However, there may be mixtures of the two types, but in most cases

there will be a dominant use of one of the mentioned strategies.

Product branding is suited when a company offers multiple products that are targeted

towards different segments. In that way, each product brand can have its own

brand identity. Additionally, different products belonging to the same product category

can be targeted towards different segments in order to increase sales. Although product

branding is being used, it is still possible to create brand extensions under one of the

individual brands. In this way, companies might be able to increase sales by taking

advantage of an already existing strong brand.

The advantage with using a product brand strategy is that the corporate brand will most

probably not be affected if one of the individual product brands fails or is put under the

pressure created by bad publicity. Companies using a product brand strategy rely

heavily on each individual brand. Since each product brand has its own brand identity,

large investments are required in order to create and sustain a strong brand. Due to the

above mentioned factors, a product brand is therefore more functional than a corporate

brand.

Corporate branding is used when the corporate name and the brand is the same. The

strategy is suited when a company offers several products which go under the corporate

name. With this strategy companies may use the corporate brand as the master brand,

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and under the master there may be sub-brands. With this strategy companies invest in

the master brand and the sub brands rather than in the different products. This strategy

has a strategic approach, and the values of the company affect the brand. The

advantage with this type of strategy is that each product offered can benefit from the

corporate brand. However, that also makes it more complicated since it is very

important for the company to have a good reputation as well as having a strong and

stable corporate brand. If there is bad publicity for the company, that will affect the

products negatively.

There are some differences between product branding and corporate branding

regarding brand management. When it comes to product branding, it is mainly the

marketing function which manages the product brand, whereas management of the

corporate brand is on a higher level i.e. the senior manager. In addition, the

corporate brand is delivered by the whole organization, whereas the product brand

is delivered by the marketing function.

For MNCs, regardless of the strategy being a product brand or a corporate brand

strategy, the customers are the most important stakeholders. However, there are

naturally other important stakeholders such as employees, local governments and

investors.

Regarding the dilemma of whether to standardize or adapt the branding strategy, our

research clearly indicated that MNCs prefer to standardize as much as possible

regardless of the company using a product brand strategy or a corporate brand

strategy. When acting on different markets, companies standardize in order to reach

economies of scale and scope.

Efficiency is a lead word for MNCs; including efficiency in production, distribution and

marketing. However, it seems like it is not possible for MNCs to use a standardization

strategy exclusively due to heterogeneous markets. MNCs acting on the global

marketplace need to adapt to local preferences and different income structures in order

to succeed.

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How can the factors determining MNCs’ choice of branding strategies

in international markets be described?

Based on our findings, the following conclusions can be made:

• The factors determining the choice of strategy used by MNCs in international market

differ between product brands and corporate brands.

• Stakeholders is an important factor for MNCs when determining what strategy to use

in international markets.

• The most important stakeholder for MNCs in international markets is the customers.

• Corporate image and reputation is a very important factor for MNCs using a

corporate brand strategy in international markets.

• Corporate image and reputation is not important for MNCs using a product brand

strategy in international markets since the products are sold on an individual level.

• Corporate image and reputation is to some extent important for an MNC using a

product brand strategy that is public owned.

• Stakeholders’ expectations is an important factor to consider for an MNCs acting in

international markets.

• It is important for a corporate brand to have a brand personality that is inline with the

core values of the company.

• A corporate brand provides added value to the product since it delivers certain

messages about qualities etcetera.

• For an MNC using a product brand strategy it is not important to have a brand

personality that is inline with the core values of the company since the individual

products carry its own brand personality.

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• It is not important for an MNC using a product brand strategy to have consistency

throughout the company, and therefore a product brand is more flexible and can

exclude failure brands.

• Market complexity is an important factor to consider for MNCs in international

markets.

• MNCs implement a standardized strategy with some local adaptations to some

markets.

• Consumer characteristics, competitors and environmental factors are important to

consider for MNCs that act in international markets.

• There are high marketing costs for an MNC using a product brand strategy since it

needs to market every product individually.

• An MNC using a corporate brand strategy has a central marketing function, and low

marketing costs.

• MNCs strive to benefit from economies of scale through standardization when acting

in international markets.

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SCOPE OF FURTHER RESEARCH

Throughout this thesis, we have been trying to investigate branding strategies used by

MNCs in international markets, and the factors determining which strategies to be

used.

We have held our discussion on a somehow general level, and more research could

be made within some specific areas. Therefore, the following areas can be explored

for further research:

The importance of innovation (product innovation and/or commercial innovation) for MNCs related to product brand strategy as well as corporate brand strategy.

Research on a private owned MNC using a product brand strategy.

Research on a MNC’s in commoditized businesses like steel.

The country-of-origin effect, and how that affect MNCs’ strategies.

If a strong successful brand is connected to the type of strategy used.

Study of how branding strategies of MNC’s impact different stakeholders.

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CONCLUSIONS

Our research indicated that MNCs using a product brand strategy differs from MNCs

using a corporate brand strategy (Procter & Gamble – Sony Ericsson). The studies

also showed that innovation is important for MNCs acting globally. However,

emphasis seems to be put more on commercial innovation; i.e. brand management,

when it comes to companies focusing on product brand strategy. Regarding

companies using a corporate brand strategy, the emphasis seems to be more on

technological and product innovation.

Based on our findings, the following conclusions can be made:

• MNCs acting on international markets use a product brand strategy, a corporate

brand strategy or a mixture of the two.

• A product brand strategy is suited when a company offers multiple products that are

targeted towards different segments.

• A corporate brand strategy is suited when a company offers several products which

go under the corporate name.

• With a product brand strategy the corporate brand is not affected if one of the

individual brands fails or received negative publicity.

• The corporate brand may be affected negatively if one of the products fails when a

company uses a corporate brand strategy.

• With a corporate brand strategy, all products will benefit from a strong corporate

brand.

• The products will not benefit from a strong corporate brand if a product brand

strategy is used.

• The product brand is managed by the marketing function.

• The corporate brand is managed by the senior manager.

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• Customers are the most important stakeholders for all MNCs, regardless of whether

a product brand strategy or a corporate brand strategy is used.

• A standardization strategy with some adaptations in local markets is preferred for all

MNCs, regardless of whether a product brand strategy or a corporate brand

strategy is used.

In the competitive Fast Food industry, in the new environment, fast, convenient

service is perhaps no longer enough to distinguish the firm. At this time, a new critical

success factor may be emerging:

the need to create a rich, satisfying experience for consumers. This brings us to service

and experience based competition which McDonald’s can use for competitive

advantage against KFC or the local Jumbo King.Competition also reduces product

lifecycle; inducing firms to revise their products portfolios and to revisit their

product market to understand changing needs, expectations and perception of different

market segments.

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BIBLIOGRAPHY

1. www.pg.com

2. www.allbusiness.com/ procter - gamble -co

3. www.annualreport.pg.com/annualreport2009/ brand s

4. www.docstoc.com/.../How- McDonalds -evolved-its-marketing-in- India

5. www. mcdonalds india.com

6. Marketing Management – Kotler Philip, Keller Kevin, Jha Mithileswar

7. www.brandchannel.com

8. Corporate Branding - Perspectives And Experiences by Devi R J

9. www.marketingprofs. com

10.

11. ``Andersen brand now fights for its survival’’, Business Post

12. International Marketing - Czinkota and Ronkainen

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