linked in facebook twitter rss

  • Interbrand
  • Brandchannel

your chance!
your chance!
 
 
 
 

 

  Local to Global: Easy as 1-2-3?   Local to Global: Easy as 1-2-3?  Randall Frost  
         
 
Local to Global: Easy as 1-2-3? Given the current trend among some global companies of spinning off local brand holdings, it seems worth asking whether local brands can compete effectively against global competitors by means of strategic branding.

For example, consider the airline industry. With the widespread consolidation of passenger airlines in the US, many of the most familiar airline brands have now disappeared. TWA, Pan American, Republican, Allegheny and Pacific Southwest are just a few of the brands that have now either been acquired by larger competitors or simply fallen by the wayside. Given that the US airline industry is today dominated by three major competitors (United, American and Delta), is there still room for direct competition from small or regional players?

 
Not everyone thinks so. Marketing Professor Jagdish Sheth of Atlanta’s Emory University, for example, believes that the number of competitors in most markets evolves to produce the best possible balance between efficiency and competitive intensity, and that mature markets typically consist of two unbridgeable sectors: generalists who cater to mainstream consumers, and local players who provide for everyone else. “Local brands focus on local or regional markets and coexist with the global brands as niche players,” says Sheth. In most cases, he adds, local brands must be satisfied with margin rather than market share. And above all, Sheth feels that local brands should never try to go head to head against the generalists.

In The Rule of Three (Free Press, 2002), Sheth and his co-author Rajendra Sisodia examine dozens of industries in the US and conclude that in most of them, market share is usually held by three major players, with one or two specialists in competition for margin share. According to Sheth, the limitation to three major competitors works to the advantage of consumers by reducing the number of choices that they have to consider when deciding to make a purchase.

But Robert Skitol, an antitrust attorney with Drinker, Biddle & Reath LLP in Washington, DC, is skeptical. “It might be best or a profitable result for the three big firms that end up in any given market but that doesn’t mean it’s a result that is consistent with general efficiency, or consumer welfare interests in any given market,” he says.

 
Skitol also questions whether there is any magic in the number three. He attributes the presence today of several dominant players in many US industries to the way that antitrust laws are currently enforced. “There certainly are industries around where there are five, six or seven major players,” he notes, adding “There was a time in the US when we did not have antitrust legislation, and the result was trusts and monopolies and cartels.”

Sheth admits his Rule of Three actually has limited applicability to many countries outside the US. Consolidation has been less of a driving force, for example, in the European Union, where he says something more akin to a Rule of Four has evolved. But Sheth attributes this difference to disjointed markets and economic nationalism, rather than to the way antitrust laws are enforced in the EU.

But there are significant differences in the ways the European Union and US enforce their antitrust rules. Last October, for example, Coca-Cola agreed to change its sales practices in the EU—specifically to give its rivals greater access to shelf space, in order to settle a long-running antitrust case. Says Skitol, “EU competition law tends to be significantly more protective of smaller rivals than is the case under U.S. antitrust law […] The kinds of practices that Coke will apparently now abandon in Europe but will be free to continue in the US are much harder to challenge and easier to defend under US as compared to EU law.”

According to Bert Foer, president of the American Antitrust Institute, “By and large, the small firm [in the US] must succeed by being a tough and smart competitor rather than by utilizing the tool of antitrust. Usually the key advantages for the local firm include better service, important personal connections to the customer and suppliers, strategies that focus on niches not of the most importance to large competitors, and the ability to make decisions quickly compared to complex bureaucracies.”

While Sheth holds to the notion that specialists should not try to compete directly with generalists, he does allow for the possibility that disruptions or changes in an industry might turn a local brand into a major player. One example of such a disruption might be the chaos created in the US airline industry in the wake of the September 11 attacks on the US. The nation’s three major airlines all suffered great losses, and each airline ended up cutting its workforce back by approximately 20 percent.

Only two airlines ended up making money in the post-September 11 economy. One of them was JetBlue, a start-up founded in 1999. The airline initially flourished by offering low fares and point-to-point rather than network service, and by focusing on second-tier airports rather than going head to head against established hubs. Today JetBlue has a market value that is nearly as large as that of United, American and Delta combined.

JetBlue’s success appears to be due to more than weakened competition, however. From the start, the airline has paid close attention to its identity as a brand. While it is true that the company’s business model, which included new planes, low fares, and non-unionized labor, had the effect of catching the big carriers off-guard, there has also been a consistency and coherency in the company’s brand ideology of putting a human element back into flying that has resonated deeply with passengers.

Says Gareth Edmondson-Jones, JetBlue’s Vice-President of Corporate Communications, “JetBlue has prospered more significantly by its brand work than by disruption after 9/11. It’s certainly a combination, but more so the brand. More importantly, it was the pre-9/11 era that did most damage to the legacy carriers—when they were making massive profits with poor quality, indifferent service and high fares. That was the platform upon which JetBlue launched. September 11 certainly meant that the big guys were distracted while we grew.”

JetBlue reportedly has plans to have 290 planes and 25,000 employees within seven years, putting it within striking distance of the majors. Meanwhile the airline is now focused on gaining market share in existing markets. The plan is ambitious—no new airline has managed to join the top three in many years. In fact, since industry deregulation in 1978, only a few startups have even survived out of more than 100 launched.

Can JetBlue succeed where others have stumbled? Given that the airline has grown at breakneck speed and now wants to take on its Big Three competitors—two cardinal sins in Sheth’s book, it is hardly surprising that Sheth is less than optimistic. “I don't believe JetBlue can become an integrated carrier,” Sheth told us recently. “More likely, it will slide into [unprofitability] with its aggressive growth strategy.”

There may be more at stake for those who follow brands than whether JetBlue ultimately becomes a dominant player in the US air transport industry, however. JetBlue’s quest for a major role in the industry could well end up as just the sort of litmus test that is needed to ascertain whether strong brand identity can counterbalance the ongoing trend toward brand consolidation.    

[3-Jan-2005]

 
  
  

Randall Frost, a freelance writer based in Pleasanton, California, is the author of The Globalization of Trade. His work has appeared in Worth, The New England Financial Journal, CBSHealthWatch and a variety of educational publications.

     
 commenting closed Add Social Bookmark bookmark  print
 suggest topic  recommend ( 12 )  email

  brandchannel home archive   2013  |  2012  |  2011  |  2010  |  2009  |  2008  |  2007  |  2006  | 2005  |  2004  |  2003  |  2002  |  2001
 
 
Dec 19, 2005 Cava Uncorked: Sparkling Interest Abroad -- Joe Ray
  Spanish sparkling wine brand Cava competes with Champagne on cachet but keeps costs at a level to be enjoyed every day.
   
 
Dec 12, 2005 School Reform: Branding for Extra Credit -- Edwin Colyer
  As state schools begin to specialize in the UK, they must teach prospective students what their brand stands for.
   
 
Dec 5, 2005 Hot Shops: Retail Revamps -- Alicia Clegg
  It’s not enough to offer a sale anymore. These days retailers are creating theater to draw customers into a complete brand experience.
   
 
Nov 28, 2005 Virtual Packaging Lacks Sense -- Randall Frost
  Products sold online lack the benefit of three of the five senses. How does the lack of touch, smell and taste affect consumer shopping behavior?
   
 
Nov 21, 2005 A Competitive Edge in a Cutthroat Market -- Slaven Marinovich
  Close shave: The cutthroat business of trademarks in the world of wet-shaving equipment manufacturers sharpens between Gillette and Wilkinson Sword.
   
 
Nov 14, 2005 Fidelity and McCartney: Mutually Invested -- Renée Alexander
  Celebrity endorsements: When ex-Beatle Paul McCartney joins forces with Fidelity Investment do consumers suddenly want to buy mutual funds?
   
 
Nov 7, 2005 Rendering Your Brand in 3D -- Vincent Grimaldi de Puget
  An opportunity to wrap customers in the complete brand experience starts at the front door. What is environmental or retail branding and why should we bother?
   
 
Oct 31, 2005 Capitalizing on Creative Differences -- Edwin Colyer
  In the saturated field of consumer goods, what is it that makes a new product really fly?
   
 
Oct 24, 2005 Branding, a Job Well Done -- Dale Buss
  How do major brands like Costco and Ritz-Carlton become household names without relying on traditional advertising? By tapping into their greatest resource: Employees.
   
 
Oct 17, 2005 Attracting a Positive Market -- Cristian Salazar
  HIV treatment medications must confront a difficult subject and still offer hope. A competitive analysis of how various drug companies approach the market.
   
 
Oct 10, 2005 Marketing and Tweens: BFF -- Alycia de Mesa
  Brands target the narrow but lucrative demographic of the tween.
   
 
Oct 3, 2005 Packaging Your Brand's Personality -- Randall Frost
  What's in the box? A well-designed package should convey the brand's personality.
   
 
Sep 26, 2005 Product Placement: Making the Most of a Close-Up -- Abram Sauer
  Product Placement: Are you getting the best exposure for your brand?
   
 
Sep 19, 2005 Lose the Jargon, Voice Your Brand -- Rob Mitchell
  Companies need to listen to their inner voice.
   
 
Sep 12, 2005 Assigned Reading: Branding Gets Credit at University -- Edwin Colyer
  Universities take a tip from the corporate world in trying to brand their institutions.
   
 
Sep 5, 2005 Has French Wine Outgrown the AOC? -- Joe Ray
  Is AOC bringing clarity to the French wine industry or just causing more confusion?
   
 
Aug 29, 2005 Sambazon Squeezes into the Juice Market -- Dale Buss
  Will consumers get juiced up for Sambazon?
   
 
Aug 22, 2005 Counting on Your Brand's Name -- Chris Grannell
  Running the numbers: Brands like 3 Mobile, neuf and 118118 seek to differentiate from their alpha competitors.
   
 
Aug 15, 2005 The Myth of Authenticity -- Alicia Clegg
  How important is authenticity in your brand story? Brands like Häagen Dazs and Baileys Original Irish Cream stretch the heritage myth.
   
 
Aug 8, 2005 Hotel Brands Break the Chain -- Rob Mitchell
  After decades of perfecting the known experience at chains around the world, hotel brands are now trying to create boutique hotels as guests go on a quest for the one-off experience.
   
 
Aug 1, 2005 Naming: Entering the Chinese Market -- Doris Ho
  How will your name be received in China?
   
 
Jul 25, 2005 Best Global Brands: Focus on UBS -- Robin Rusch
  Among the top five fastest growing brands on the list of 100 Best Global Brands 2005, Swiss financial services company UBS reflects the work in progress of growing and sustaining a global brand.
   
 
Jul 18, 2005 Magazines Circulate Their Brand Licenses -- A.K. Cabell
  Magazine publishers like Ebony mine their brand awareness for licensing opportunities.
   
 
Jul 11, 2005 GE Imagines a Greener Future -- Ron Irwin
  What can GE learn from Shell’s past experiences as it implements a commitment to the environment called ecomagination?
   
 
Jul 4, 2005 Brand Gamble: Mergers and Acquisitions -- Alycia de Mesa
  The marriage may be made in heaven, but did anyone check with the children? Mergers and acquisitions can be great for business but lousy for the customer.
   
 
Jun 27, 2005 Brands Suffer Youth Indecision -- Edwin Colyer
  Cheatin' heart: Youth are fickle, lacking loyalty, and high maintenance. Why do brand owners target them so heavily?
   
 
Jun 20, 2005 Growing Pains Small Brands -- Alicia Clegg
  How can a brand remain true while broadening its reach? Popular but small brands like Innocent Drinks, Tyrrells and Hill Station risk losing their original fans in their quest to grow bigger.
   
 
Jun 13, 2005 That's Rich: Redefining Luxury Brands -- Edwin Colyer
  As the masses rush to acquire luxury does it negate the original prestige of the premium brand?
   
 
Jun 6, 2005 Oops, I Merchandized It Again -- Alycia de Mesa
  Popular musicians say forget the concert or the album, the real money is in the merchandise.
   
 
May 30, 2005 Brands Go Beyond Product Placement -- Edwin Colyer
  Brands like BMW and Stella Artois team up with film directors for mutually beneficial branded entertainment sponsorships and partnerships.
   
 
May 23, 2005 Favored to Win: Branding professional sports -- Alycia de Mesa
  What does it take for an alternative sports league to win against the established national leagues?
   
 
May 16, 2005 Building Confidence in Your Brand -- Randall Frost
  What are the economic efficiencies of reaching confidence in your brand?
   
 
May 9, 2005 Is Fashion Design a Team Sport? -- Rob Mitchell
  Sports brands team up with fashion designers for a more competitive offering.
   
 
May 2, 2005 Local Success on a Global Scale -- Randall Frost
  How do huge global companies like Philips, McCain Foods and McDonald's achieve "multi-local" status?
   
 
Apr 25, 2005 Does Selling Science Take a Genius? -- Edwin Colyer
  The ultimate brand icon, Einstein is being used to promote every type of science initiative. Is this genius or mad?
   
 
Apr 18, 2005 Dove Gets Real -- Alicia Clegg
  Unilever’s Dove is the latest beauty brand to use "real" women to sell product. But can this campaign turn ugly?
   
 
Apr 11, 2005 Pharma Co-Marketing: Possible Side Effects -- Edwin Colyer
  When two pharmaceutical companies ally, so must their marketing efforts. Unfortunately, there’s no pill to make two competitors promotional partners.
   
 
Apr 4, 2005 Zen and the Art of Brand Maintenance -- Vivian Manning-Schaffel
  Disaster and fear offer hope to spiritual brand owners.
   
 
Mar 28, 2005 Is Ikea for Everyone? -- Elen Lewis
  Ikea reassembles only slightly to reach new markets.
   
 
Mar 21, 2005 Exposing Your Brand Internally -- Alycia de Mesa
  A brand is more than skin deep. Internal understanding of the brand is imperative to consistency in communication.
   
 
Mar 14, 2005 Churches Put Their Faith in Branding -- Edwin Colyer
  In doing god’s work, churches find themselves reaching beyond the congregation to spread the brand message.
   
 
Mar 7, 2005 Should Global Brands Trash Local Favorites? -- Randall Frost
  When P&G, Unilever and Nestlé clean house, they risk losing local markets for beloved brands. Companies like Henkel, on the other hand, retain a portfolio of national and international brands to satisfy both global and local tastes.
   
 
Feb 28, 2005 Fairtrade: The Business of Ethics -- Alicia Clegg
  The Fairtrade mark allows brands to identify as in support of fairness to trade and promotion of economic development in the world’s poorest countries.
   
 
Feb 21, 2005 brandchannel's 2004 Product Placement Awards -- Abram Sauer
  Awards and commentary for the best and the worst of 2004.
   
 
Feb 14, 2005 Beer Brands and Homelands -- Edwin Colyer
  Is country of origin the most important quality of your beer brand?
   
 
Feb 7, 2005 Anti-Globalization: Are You Serious? -- Edwin Colyer
  Is anti-corporate sentiment a real threat to brand owners? What does the activist movement want and what benefit (if any) is that to the corporation?
   
 
Jan 31, 2005 Readers Pick Apple in 2004 -- Robin D. Rusch
  Apple, Google, Ikea, Starbucks and Al Jazeera: Brandchannel readers choose the brands that had the most impact on them in 2004.
   
 
Jan 24, 2005 Putting You in the EU -- Dafydd ab Iago
  Selling Europe: The EU has a constitution, now all it needs is citizen support and interest.
   
 
Jan 17, 2005 Branding with Chinese Characteristics -- Edwin Colyer
  Western brands hoping to break into China need to reconsider their brand identity and positioning for the local market.
   
 
Jan 10, 2005 Cars Make Inroads Online -- Edwin Colyer
  Automakers take risks online with co-branding and interactive options not seen offline.