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The more international brands invest in the target countries of their expansion and are perceived as local producers, the more difficult it becomes for them to communicate their origins clearly. German car manufacturers, for example, have become heavily involved in China. Do Chinese consumers still see Germany as the brand’s home market? Is it high-tech “Made in China” or high-tech “Made in Germany”? Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain how brands can respond to this schizophrenia problem. All details can be found in our new Springer publication “Successful brand building in the large emerging markets” (written in german).
Brand schizophrenia can confuse consumers in local target markets. As a result, the brand value weakens and the brand image loses its contours. For consumers, however, it is still extremely important whether a vehicle was imported or manufactured locally. For consumers, the non-domestic origin of trademarks is usually indicated by a reference to the country of origin. Sometimes the country of origin is further differentiated into the country of manufacture and the country in which the product was developed (country of design). In principle, the country of origin is the country in which the Group headquarters that markets the product or brand is located. However, the product does not necessarily have to be manufactured there. In the discussion about possible brand schizophrenia, three response strategies have emerged so far.
1. Purity strategy: strict commitment of a brand to its country of origin
According to the so-called purity strategy, brands should decide against producing all or most of their premium products outside the developed markets such as the US, Japan or Germany. Strictly linking the brand and its design and manufacturing base to a particular country of origin helps to protect the brand’s image from damage and to prevent a reduction of its pricing potential. Italian sports car manufacturers, French perfume developers or Swiss watch manufacturers are therefore generally well advised to leave their production base in their brand’s home country. As soon as a company decides to transfer significant parts of its manufacturing or research and development capacities to an emerging market, the situation becomes increasingly complex.
2. Obfuscation tactics: do not communicate local production
The use of disguise tactics avoids communication about local production in emerging markets. Instead, the country of origin of the brand is strongly emphasized through a variety of references (for example “Made in Downtown L. A.” or “Designed in California” etc.). In this approach, the companies try to make it clear that all research, development, design, concept and quality standards are at the level of the actual country of origin and are completely separate from the local market. This also applies if production takes place in the local market itself. The advantage: the price premium can still be skimmed off at cheaper production costs. The risk: The credibility of the company can suffer considerably, especially when it comes to labor law standards, which may be much lower in the country of production than in the country of origin.
3. Balance strategy: emphasize local production and foreign origin equally
A third, the “balance strategy”, provides for local production to be communicated in a balanced manner together with the brand’s foreign origin. This approach is usually chosen when a brand is very active and already firmly established in a local market, so that it is hardly possible to conceal the largely local character. In some countries, this approach is also used when there is a need to respond to government demands to take greater responsibility on the ground. When a brand is perceived as too “foreign” and appears only interested in generating sales in the local market, local governments often urge the company to engage and integrate through local R&D or by expanding procurement. In parallel with the implementation of the equilibrium strategy, the foreign company will significantly strengthen the references to the foreign origin of its brand and the fact that the quality standards of the home market apply in full to local production. The latter in particular serves to counteract the perception that the brand has become too “local”. In the German car industry this mantra is expressed as follows: “German quality remains German quality, regardless of where in the world the vehicle was manufactured”. So far this strategy has worked quite well.
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