1.case study - examples of brand extension and stretching
Tesco extends “finest” brands into home ware segment
Tesco is extending its Finest brand into the home ware market and other non-food products such as crockery, cutlery, cotton bed linen and towels, gifts, vases and glassware.
Tesco is also re-launching the Finest brand with new packaging that uses metallic-based ink to create better depth and shine, and hundreds of new lines. It plans to increase the product range from 900 to about 1,250 product lines.
Some of the new lines will only be sold during the run-up to Christmas, but if they sell well they may become permanent lines.
Tesco - the UK's leading supermarket - has already stretched its Finest brand into health and beauty products, such as Silk Creme Bath, Smoothing Body Polish and Whipped Body Souffle, talcum powder, body mist and bath salts.
The Finest range, which was launched nine years ago, is understood to be worth between £400m and £500m a year in turnover.
Rival Sainsbury's has extended its own-label brand, Taste the Difference, to more than 650 product lines. The supermarket plans to increase the annual turnover for the brand, which was launched in 2000, from £400m to £500m by the end of next year.
Safeway is also re-launching its The Best range next February, extending the brand into new categories.
Boots to sell fitness equipment and foods
Boots is to start selling fitness equipment, along with a range of exclusive products that include weight-management foods and organic snacks, in 100 of its larger stores.
Boots has unveiled this new product range to replace the gifts and electrical items that the retailer removed from its stores some time ago.
The new products will focus around several key areas, including exercise, detox, relaxation and sleep. The gym equipment is thought to include treadmills and step and rowing machines.
Recently, Boots has launched a number of well being services, including dentistry, laser eye clinics and health and beauty treatments. The retailer has even launched its own gym in West London.
2.
The second caselet is about Apple Inc.'s (Apple) pricing of iPhone in the US. In 2007, Apple raised many eyebrows by reducing the price of its much hyped iPhone by one-third within 10 weeks of the launch. While some analysts felt that adoption of such market skimming strategies and subsequent price cuts by companies selling technological devices was nothing new, others felt that Apple's decision to reduce the price so drastically just a few weeks after the launch was a public relations fiasco.
3. Inspite of major difficulties, Unilever was committed to building and sustaining a successful business in China. The company therefore adopted several measures like enhanced research and development, modern management systems and large scale organizational restructuring to anticipate and integrate the needs and aspirations(热望, 渴望)of the Chinese customers into its growth plan. In the mid 1980s and 1990s, the large number of joint ventures entered by the company failed to earn profits for the multinational and also proved unsuccessful in integrating Unilever to mainstream Chinese economy. Therefore, in 1999, the company entered into large scale consolidation(巩固, 合并) and integrated(结合) its various units under one holding company. Special localized strategies like hiring of local employees, setting up an R&D unit, and planning for stock market listing were initiated to strengthen the company’s position in China. Unilever China responded to the complex needs of the country’s consumers by developing a portfolio of brands-both local and global, and incorporated traditional Chinese sciences with technological enhancements. The company aimed to identify itself as the brand that was quality conscious and consistently endeavored to meet local needs and tastes. Global brands-Dove, Lux, Ponds, Lipton-promised international expertise in their formulation and development but had local professionals to manage them to ease communication between the company and its customers. Similarly, local brands such as Hazeline and Lao Cai soy sauce benefited from Unilever’s extensive knowledge and resources, without losing their local character. Thus, Unilever China endeavored to balance global and local needs by developing solutions that satisfied the demands of its target consumer segment.
Questions for Discussion:
Unilever adopted the joint venture route to enter the Chinese market. Procter and Gamble also adopted a similar strategy, but while P&G was a success, Unilever's joint venture policy failed. Describe in details what went wrong with Unilever's strategy.
In your opinion, what are the various issues that multinationals should keep in mind before entering a new market? Do you think it is possible for established players to fail in a foreign market if they continue with a pre-existing strategy without heeding local needs? How can a player ensure maximum synergy between established practices and local market requirements?
Discuss the various localization strategies adopted by Unilever to strengthen its position in China? What is your opinion on the effectiveness of these strategies?
4. Ericsson’s relationship with China dated back to the 1890s, when the first batch of Ericsson handsets was shipped to Shanghai. Since then, China has gradually developed into one of Ericsson’s primary markets. The Chinese market presented huge opportunities in terms of volume and size. The telecom and IT industry in China was growing at the fastest rate in the world and Ericsson was determined to have a share of the pie. The company set up its first office in Beijing in 1985 and in 1994 Ericsson (China) Co. was established. Ericsson adopted a well laid out localization strategy to optimally exploit the Chinese market. Between the late 1990s to the early 2000s, Ericsson shifted the procurement(获得, 取得)and supply side of its wide range of business to China. It also brought in its traditional partners. This offered huge employment opportunities for local Chinese and also contributed to the country’s economic growth. Besides, huge investment in R&D by Ericsson and commitment to develop the country’s 3G technology contributed to China’s telecom and IT growth. However, in the early 2000s, the market for Ericsson products in China lost out to stiff local competition. Analysts observed that Ericsson needed to rethink its strategy on pricing and quality of its products.
Questions for Discussion:
1. Discuss the various localization strategies adopted by Ericsson to strengthen its position in China. What is your opinion on the effectiveness of these strategies?
2. What were the various contributions of the company towards the growth and development of the Chinese telecom industry? Also discuss the contribution of Ericsson China towards the development of the general economic environment in China.
3. In your opinion, what are the various issues that multinationals should keep in mind before entering a new market? What reasons would you assign towards the failure of Ericsson China despite the initial euphoria? How do you think the company should rectify its position in the country?
5.Questions for Discussion:
1. Wal-Mart started its global operations in the early 1990s when it opened its first international store in Mexico. Analyze the reasons for Wal-Mart's decision to go global.
2. When Wal-Mart announced that it would be entering the German markets, analysts were surprised. Usually, the cultural affinity between the US and the UK led American companies to target the UK first, before launching onto the European continent. Do you think Wal-Mart's decision to enter the German market was correct? Justify your stand.
3. Even after fives years of doing business in Germany, Wal-Mart had failed to make an impact on the German market and had been incurring losses year after year. Analyze the reasons for Wal-Mart's problems in the German market. Do you think the company would be able to improve its performance in Germany?
Hints: You can analyze the problems in Operating Environment, External Environment, Cultural Mismatch.
Business Segments
Wal-Mart had two types of divisions - Retail divisions and Specialty divisions. Retail divisions were further classified into - Wal-Mart Stores, Sam's Clubs, Neighborhood Market, International and walmart.com (Refer Table I). The specialty division was divided into - Tire & Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations and Wal-Mart's Used Fixture Auctions (Refer Table II)...
Wal-Mart's International Operations
In early 1990s, Wal-Mart announced that it would go global. It wanted to look for international markets for the following reasons:
» Wal-Mart was facing stiff competition from K-mart and Target, which adopted aggressive expansion strategies and started eating into Wal-Mart's market share.
» Wal-Mart also realized that the US population represented only 4% of the world's population and confining itself to the US market would mean missing the opportunity to tap potentially vast market elsewhere...
Wal-Mart in Germany
Most American companies entering Europe started with the UK due to the similarities between the US and the UK in culture, language and legal environment. Wal-Mart, however, decided to enter Germany first. Analysts were critical of this decision as the German retailing industry was experiencing slow growth rates and retailers were indulging in price wars which eroded margins badly. Additionally, Germany had high labour costs, high real estate prices and a very inflexible business environment.
Soon after acquiring the stores, Wal-Mart hurried through with their renovation and put its brandname on them to make sure its EDLP message went across. But it was unable to cash in on its EDLP selling point, chiefly because of the strong competition from German retailers (Refer Exhibit II). Whenever Wal-Mart lowered its prices on commodities, German retailers such as Aldi, Lidl, Rewe and Edeka also lowered their prices to keep their customers, so Wal-Mart found it difficult to get a foothold...
Wal-Mart faced several problems on the legal front as well. It was accused of breaching various German laws. The company was accused of having violated Section (IV) (2) of 'Act Against Restraints of Competition' - (Gesetz gegen Wettbewerbsbeschrankungen or GWB) and Section 335a of the 'Commercial Act' (Handelsgesetzbuch or HGB). Section (IV) (2) of GWB forbids companies 'with superior market power in relation to small and medium-sized competitors' from lowering their prices and engaging in price wars with small companies.
Such large companies were allowed to lower prices only after providing justification for the lower prices...
Apart from the operational and regulatory problems, Wal-Mart also faced cultural problems in Germany. It found it difficult to integrate the two companies (Wertkauf and Interspar), which it had acquired. The companies had completely different work cultures; while Interspar had decentralized operations with independent regional units, Wertkauf was highly centralized with the head office making all decisions. Additionally, Wal-Mart found it difficult to integrate the two companies' cultures with its own...
6.Read the following passage and analyze the reasons that made Nike develop and launch this campaign and the competition it faced from Adidas.
This case is about Nike's “Joga Bonito”campaign for the 2006 FIFA World Cup that was held in Germany from June 09, 2006 to July 09, 2006. Through its Joga Bonito (Play Beautiful) campaign, Nike sought to promote the beautiful aspects of the game of football such as creative play, professionalism, courage, and team spirit.
It was a multi-pronged campaign, which comprised of a series of advertisements (ads) that featured a number of football superstars, an online TV channel dedicated to football called Joga TV, a social-networking website, Joga.com, and a Joga3 futsal tournament.
For the 2006 World Cup, 15 companies were selected by FIFA as the official sponsors of the event (Refer to Exhibit V for a list of the 15 official sponsors). It was estimated that each sponsor had paid amounts ranging between US$ 38 million to US$ 63 million to be associated with the event as an official sponsor.
Adidas was one of the main official sponsors of the World Cup. Adidas had dominated the football sports goods market ever since the 1950s. Adidas also held the distinction of being the official sponsor in all the FIFA World Cups held since 1978. For the 2006 World Cup, Adidas reportedly spent US$ 200 million on its World Cup campaign, which included its efforts to block Nike out of TV ads in Canada and the US...