Integrating Branding Strategy Across Markets: Building International Brand Architecture

Submitted August 1999 Revised February 2001 © Journal of International Marketing Vol. 9, No. 2, 2001, pp. 97–114 ISSN 1069-031X Susan P. Douglas, C. Samuel Craig, and Edwin J. Nijssen line basis, without considering the overall balance or coherence of branding in international markets from a strategic perspective. However, as international markets evolve and become more closely interlinked, firms need to pay closer attention to the coherence of branding decisions across national markets and build an effective international brand strategy that transcends national boundaries (Caller 1996). In addition, the firm must decide how to manage brands that span different geographic markets and product lines. It must determine who should have custody of international brands and who is responsible for coordinating their positioning in different national or regional markets, as well as making decisions about use of a given brand name on other products or services. As a first step, the firm must examine its branding strategy and formulate the basic principles to guide the effective use of brands in the global marketplace. These principles must also establish a rationale for harmonizing branding decisions at different levels of the organization and across different geographic locations. These decisions should provide strategic direction and indicate which brands should be emphasized at what levels in the organization, how brands are used and extended across product lines and countries, and the extent of brand coordination across national boundaries. This process and outcome can be termed the firm’s international brand architecture. Just as architectural plans provide the basis for a sound building, international brand architecture establishes the plan for developing a sound branding strategy. The purpose of this article is to examine the issues involved in building this architecture. We examine current perspectives on international branding. This is followed by a discussion of the underlying drivers of brand structures, that is, firm characteristics, product-market structure and market dynamics, and emerging patterns in international markets. We next discuss the importance of designing a clear and effective brand architecture and managing brands in order to maintain a harmonious balance within this architecture. We conclude by emphasizing the need for an annual audit of the firm’s brand architecture and its fit with changes in the underlying drivers as well as an assessment of key strategic brands within this architecture. Most discussion and research on branding, whether domestic or international, focuses on the equity or value associated with a brand name and the factors that create or are the underlying source of value (Aaker 1996; Keller 1998). Although this focus is appropriate for relatively few high-profile brands, such as Nike, Marlboro, or McDonald’s, it ignores the challenges faced by the vast majority of multinational firms that own a variety of local and international brands at different levels in the organization, spanning a broad range of diverse country markets. Typically, these brands differ in their 98 Susan P. Douglas, C. Samuel Craig, and Edwin J. Nijssen PERSPECTIVES ON INTERNATIONAL BRANDING strength, target market, and associations and the range of products covered both within and across markets. Equally, the use of brands at different organizational levels may vary from country to country. The questions faced by the firm in developing an international branding strategy depend on how it has expanded internationally and how its international operations are organized. Some firms, such as Procter & Gamble (P&G) and Coca-Cola, have expanded through leveraging their domestic “power” brands in international markets. Consequently, as they seek to expand further, they must consider whether to develop brands geared to specific regional or national preferences and how to integrate these into their brand strategy. Other firms such as Nestlé and Unilever have traditionally adopted country-centered strategies, building or acquiring a mix of national and international brands. Such companies must decide how far to move toward greater harmonization of brands across countries and how to do so. Such issues are particularly salient in markets outside the United States, where the concept of “power” branding is relatively new (Court et al. 1997). Markets are often fragmented and characterized by small-scale distribution and often lack the potential or size to warrant the use of heavy mass media advertising that is needed to develop strong brands (Barwise and Robertson 1992). Relatively little attention has been paid to the question of brand structure or brand architecture. Here, brand structure is used to refer to the firm’s current set of brands across countries, businesses, and product-markets. At any given point, brand structure is in large measure a legacy of past management decisions as well as the competitive realities the brand faces in the marketplace. Brand architecture, in contrast, refers to a formal process and outcome by which management rationalizes the firm’s brands and makes explicit how brand names at each level in the organization will be applied. Brand architecture also indicates how new brands, whether acquired or developed internally, will be treated. Some authors (Laforêt and Saunders 1994; Olins 1989) have developed frameworks of branding structure or brand architecture in relation to a single national market. Typically, these focus on identifying different levels related to the brand name and/or visual associations of the brand. Olins (1989), for example, has identified three branding structures: monolithic (a corporation uses one name and identity worldwide, e.g., Kellogg or Shell), endorsed (the corporate name is used in association with a subsidiary or product brand, e.g., Cadbury’s Dairy Milk), and branded (emphasizes multiple product-level brands, e.g., P&G using brands such as Tide and Camay). 99 Executive Insights: Integrating Branding Strategy Across Markets Laforêt and Saunders (1994) examine the structure of brands among a sample of 20 grocery manufacturers in the United Kingdom and conclude that brand structures are inherently more complex than Olins proposes. They identify three principal categories similar to those identified by Olins: corporate brands, mixed brands, and brand dominant. Each of these categories includes subcategories. The corporate-dominant group is divided into corporate brands, for which the corporate name was used, and house brands, for which the subsidiary or product division names were used, such as Ford with Jaguar. Mixed brands include endorsed brands (a product-level brand is endorsed by a corporate name), such as Rowntree’s Chocolite, and dual brands, for which two or more brands are given equal prominence, such as ColgatePalmolive or Cadbury’s Dairy Milk. The third category, brand-dominant, consists of single product-level brands such as Ariel (P&G) Tabasco sauce (SmithKline Beecham) and furtive brands, for which the corporate identity is omitted. For example, Unilever identifies its detergent brands as made by Lever Bros. and its margarine as van den Bergh. Not only is the structure considerably more complex than commonly assumed, but also most companies studied used more than one approach, often adopting different options for different product lines or businesses. As the firm expands in international markets, issues related to brand architecture or brand structure become even more complex. In addition to determining the position and role of each brand in the firm’s architecture, management also must make decisions related to another dimension, namely, its geographic scope. Issues of brand coordination and consistency of brand positioning across countries also must be resolved. Especially if the company expands through acquisition or strategic alliances, the question of whether and how the brands of different firms are merged arises. In essence, a firm’s international brand structure is fashioned by three major factors: firm-based characteristics, productmarket characteristics, and underlying market dynamics (see Figure 1). The firm’s history shapes its current brand strategy, but market dynamics and the growth of economic and political integration as well as rising media costs create pressures to harmonize branding across country-markets to achieve economies of scale and scope. As a result, brand structure, similar to a living organism, is continually changing, both shaped by and evolving in response to these drivers.1 Brand structure inevitably reflects the imprimatur of previous generations of management directives. In the first place, the firm’s administrative heritage—and in particular its organizational structure—establishes the template for its brand architecture. Also, the firm’s international expansion strategy 100 Susan P. Douglas, C. Samuel Craig, and Edwin J. Nijssen DRIVERS OF INTERNATIONAL BRANDING STRUCTURE