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Case study 10.2 General Motors, GM Daewoo, and Hyundai
Case study 10.3
However, having more new models will only be effective if
they are well designed, of high quality, and competitively
priced. The fact that GM Daewoo has lost market share
yundai, and its American parent has also lost market
share to Hyundai in the US, should be a matter of concern.
One of General Motors problems was that for many
years the company continued to base its plans on assumptions that they would attain a larger market share and
sales, while the opposite continued to occur. Honda and
Toyota continued to gain market share as they simply provided cars that were generally of higher quality and lower
price. It may well be that GM Daewoo’s current problems
include issues of quality, labor productivity, and price as
well as the design of its cars.
The proposal to change its brand name in Korea seems
to be counterproductive. The country’s consumers show
a preference for domestic products when available, and
a change in name would make it seem more foreign.
It would also likely be unpopular with the workers who
don’t want to be seen as employees of a foreign firm.
Griffiths, J. (2004). Daewoo cars to be rebranded Chevrolet
in Europe. Financial Times, September 24, 17.
Moon, I., Edmondson, G. and Welch, D. (2004), Daewoo:
GM’s hot new engine. Businessweek, November 29, 52–3.
Song, Jung-a (2010). GM eyes renaming Daewoo in S Korea.
Financial Times, March 11, 18.
Song, Jung-a and Betts, A. (2010). Hyundai drives ahead as
profits increase fivefold. Financial Times, April 23, 16.
1. Should GM Daewoo go ahead with their plans
to introduce three new models when sales have
already fallen. Why?
2. Should GM Daewoo change the brand name
used on their cars sold in Korea from GM Daewoo
to Chevrolet? Why?
3. Should GM Daewoo examine other factors such
as the comparative prices, quality, design, and
perhaps labor cost with respect to Hyundai? Why?
Case Study 10.3
The Pampered Chef
(Adapted from Erin Casey, ‘Bringing families together’,
Direct Selling News, September 2006, pp. 16–20.
Reprinted with permission of Direct Selling News,
Three things set The Pampered Chef, a direct selling
company, apart from its competition in the housewares
industry: a passion for providing unique, quality products,
a dedication to ensuring customers know how to make
the most of the products they purchase, and a mission to
bring friends and family together through sharing meals.
Chief Executive Officer Marla Gottschalk says all
three elements come together at The Pampered Chef’s
trademark Cooking Shows. ‘Our consultants offer customers a unique advantage that they will not be able to
find anywhere else,’ she says. ‘Retailers can’t show every
customer how to use the products they sell or allow
them to try them out before they buy them. At a Cooking
Show, our customers are encouraged to do exactly that.
And they get to do it in a relaxed, friendly atmosphere.’
The Pampered Chef would not be the successful company it is today were it not for its unique, interactive
approach to sharing its products at Cooking Shows. Consultants teach customers how simple it can be to use the
tools in their own kitchens. A by-product of that education
is consultants and customers learn to enjoy cooking.
In addition to new products and ideas, consultants
share new recipes at Cooking Shows. The company has
a team of home economists, food scientists and culinary
professionals who work in the company’s six test kitchens to test products and develop new recipes. Whether
customers are looking for healthy and nutritious meals,
impressive appetizers or scrumptious sweets, they’ll
always find a tasty selection of goodies on the menu at a
Pampered Chef Cooking Show.
A look back
The Pampered Chef has a history of offering consultants
the resources and support they need to create a life of
their choosing along with an opportunity that encourages
family interaction, especially at mealtime.
That’s what Doris Christopher was trying to do for her
family when she began the business more than 25 years
ago. Christopher and her husband, Jay, worked together,
brainstorming about business options that would suit
their family’s lifestyle.
Chapter 10 Product decisions
As a former home economist and educator, Christopher
was able to draw on her experience to create a business
that fit her life and would, in time, fit the lives of thousands
of men and women around the world. By the fall of 1980,
Christopher decided a home-based party plan was the right
business mode. Christopher headed to Chicago’s famed
Merchandise Mart to find the tools she would offer her
customers. They borrowed $3,000 from Jay’s life insurance
policy for inventory and set up an office in their basement.
Since that humble beginning, the company has
expanded from the basement of the Christopher’s suburban home to a 780,000-square-foot headquarters near
Chicago. With nearly 1,000 employees and tens of thousands of independent consultants in the United States,
Canada, and Germany, the company has expanded its
reach and touches the lives of men and women from
every economic level. The firm was also in the UK, but is
expected to close UK offices in 2015–16.
Christopher had no intention of building a multimillion-dollar business. But through the company’s growth
from a one-woman shop to a successful international business, the company’s mission of bringing families together
has remained constant.
Quality makes the difference
When Christopher began the business, she recognized the
need for quality kitchen tools – items that would stand the
test of time and deliver the desired results consistently. The
professional-quality tools she became familiar with in her
career as a home economist weren’t available to the general
public. Today, while stores carry a variety of kitchen utensils,
the quality, durability and performance of The Pampered
Chef’s products continue to exceed customer expectations.
‘People come back to The Pampered Chef because they love
it,’ says Independent Advanced Director Yolanda Easton,
‘not because they have to keep replacing their products.’
What makes The Pampered Chef’s tools and cookware
special? Since 1980, when Christopher first searched
the Chicago Merchandise Mart for the perfect tools for
her business, The Pampered Chef has looked for kitchenware that meets the company’s strict standards. ‘Superior functionality and quality are our key criteria – that’s
what makes a Pampered Chef product unique,’ says Lisa
Flynn, Vice President of Product Development. ‘Our
Product Development Team is composed of experienced
specialists who have their finger on the pulse of the marketplace, and are trained to identify emerging trends and
new opportunities,’ she says. ‘We add new products to our
line based on the needs of our customers and our ability
to improve upon what’s currently in the marketplace. And
we constantly re-evaluate existing products to determine
which need to be updated with improved features and
Test, test and retest
Once the team determines a product’s specifications, they
work with a manufacturer to re-develop a prototype. ‘The
prototypes are tested in our own test kitchens,’ Flynn says.
‘Here, they’re used and reused in an actual home environment – in the dishwasher, microwave, freezer and oven.
That way, we can accurately assess how they will hold up
to normal daily use and whether they will perform the way
we want them to.’’’ Staffed with home economists and culinary professionals – individuals as demanding of the products as their customers – the test kitchens are busy places.
‘We often go through several rounds of prototype development before a product meets our standards,’ Flynn says.
The company also submits products to abuse testing to
determine potential breakdown points and how the product
can be made more durable. ‘Every test that’s done provides
learning that enables us to make the product easier to use,
and more functional and durable than what’s available on the
market,’ says Fran Coursey, Director of Product Development.
Along with in-house testing, the company’s Quality
Assurance Team sends some products, such as cutlery and
cookware, to a third party for a more extensive and scientific
testing. ‘We send out anything that requires a high level of
repetitive testing, for example to test the quality of steel in
our cutlery and its ability to maintain sharpness,’ Flynn says.
Thorough testing, continuous evaluation and a highly
collaborative relationship between the company and its
vendors are critical elements in the product-development
process, as are the opinions of the company’s consultants. ‘Our consultants are another important source of
information and inspiration,’ Coursey says. ‘They are our
front line, so to speak, because they’re out there every day
talking to customers, hearing what their needs are. We
encourage our consultants to share their product ideas
with us. They often give us feedback on new products
they would like added to the line, as well as suggested
improvements for existing products.’
Dishing out cooking skills in a fun way
With so many women entering the work force full time
in the late 70s and early 80s, Christopher knew that, in
addition to offering quality kitchen tools, educating her
customers about using them would be important. ‘What
I considered simple, basic, essential tools were things
others didn’t have in their kitchens, much less know how
to use,’ she says. Cooking Shows continue to provide customers with tools and resources that help them save time
in their kitchens. Retail stores simply can’t compete with
Case study 10.3
this fun, hands-on approach. For many consultants, the
knowledge that they’re helping customers by offering
them a valuable service is extremely rewarding.
‘I’m teaching my hosts and guests something that allows
to decrease the stress around family mealtime by giving
them the tools to make cooking so much easier,’ Independent Director Deb Skrzynecki says. ‘I love seeing their faces
light up and hearing them say, “Hey, I can do that!”’
Consultants learn not only about tools through The
Pampered Chef, but about ingredients and meal preparation. That education gives consultants the confidence to
put their own twists on Cooking Shows. Theme shows are
one way consultants share their enthusiasm for particular
culinary tastes. From ‘death by chocolate’ shows and Italian feasts, to Cooking Shows focusing on health-conscious
cooking, consultants can express their creativity while sharing some of their favorite tips. Some consultants enjoy putting on a performance, while others keep the presentation
simple, making a point to encourage guest participation.
Regardless of the consultant’s style, guests enjoy spending
time with friends, learning about the products and easy
food-preparation techniques and tasting new recipes.
The Pampered Chef’s business model serves up rewarding
careers to tens of thousands in the United States, Canada,
the United Kingdom and Germany. They are drawn to the
company’s unique service, innovative products and powerful earnings opportunity. ‘When it comes to meal preparation, people want three things: They want to spend less
time in the kitchen, they want to enjoy the time they spend
there, and they want what they prepare to be easy to make
yet spectacular to look at and wonderful to taste,’ says Rick
Voke, Executive Vice President, Global Operations and
Strategy with The Pampered Chef. ‘This is true whether you
live in Kansas City, Mo.; Toronto; or Birmingham, England.
Our products are so simple to use, and our recipes so creative and easy to make, their appeal transcends borders.’
The Pampered Chef creates recipes specifically for every
taste. ‘We have food professionals who specialize in the
taste preferences and cooking styles for each of our markets,’ Voke says. And, to make sure customers get consistent
results, recipes destined for the United Kingdom and Germany are tested in a kitchen styled after a typical European
kitchen. The success of The Pampered Chef in Canada, the
United Kingdom and Germany shows that people everywhere love the products and the business opportunity. ‘We
have large, independent sales forces in Canada and in the
United Kingdom, and we have a growing sales force in Germany,’ Voke says. ‘Obviously this model has tremendous
global appeal.’ That global appeal has been evident since
The Pampered Chef opened its doors in Toronto in 1996.
‘We made the decision to expand into Canada because, as
the company grew in the United States, there was quite a
demand for our product on the Canadian side of the border,’ Voke says. ‘The business took off right from the start.’
The company enjoys success in all Canadian provinces. In
July the company celebrated its 10-year anniversary in
Canada. After a successful launch in Canada, The Pampered Chef researched European markets and determined
the United Kingdom would be a good fit for its products and
business opportunity. ‘We started in the UK in 1999, and it
is currently our fastest-growing operation,’ Voke says. With
continued record growth the company has independent
consultants in Scotland, Northern Ireland and across Great
Britain. The most recent international expansion was in
Germany in 2000, where the company continues to experience growth in its independent force and sales.
Preparing for the future
Doris Christopher set out to create a business that would
meet her family’s financial goals and the needs of a changing society. The Pampered Chef’s phenomenal growth and
stronghold in the marketplace persuaded Christopher
that her business would continue to thrive, regardless of
her position in the company.
‘A business leader has a responsibility to her stockholders, employees, vendors and customers, to assure them
that their future is intact,’ Christopher says. ‘Over the years,
Jay and I have seen a lot of good people hurt because they
worked for, or did business with, a company that did not
have a succession plan in place.’ With concern, and respect,
for the company’s consultants, co-workers and vendors,
the Christophers established a company succession plan. In
October 2002, The Pampered Chef was acquired by Warren Buffett’s holding company, Berkshire Hathaway.
While the decision wasn’t simple, it was solid. Buffett’s
management style allows The Pampered Chef to operate
as it always has on a daily basis. At the same time, the
ownership transfer, coupled with The Pampered Chef’s
solid team of professional management, offers the company a stable and secure future [ . . . ].
Wisdom and sincerity are words that come to mind
when Doris Christopher’s name is mentioned. From the
beginning, her leadership set the foundation for a company whose mission to bring families together is as relevant today as it was 25 years ago, when the first Cooking
Show was held.
1. Evaluate Pampered Chef’s approach to new
product development for the global market.
Chapter 10 Product decisions
Case Study 10.4
The internationalization of Chinese brands
(Adapted from a presentation made by Andrew Papadimos, Australian Catholic University, at the International
Business and Economy Conference, Honolulu, Hawaii,
January 5–8, 2006.)
China’s entrance into the World Trade Organization in
December 2001 meant the opening of China’s domestic
market to foreign competition. However, it also opened the
doors of other member countries to Chinese competition.
When Western and Japanese multinational corporations
enter foreign markets, they also carry with them their own
brands, capital and technology. Can Chinese corporations
do the same? Chinese companies like TCL and Haier have
taken the first successful steps in the internationalization
of Chinese enterprises, and have demonstrated that Chinese corporations do have limited success overseas. Their
experiences have also become templates for the increasing
number of Chinese enterprises that are stepping out into
the international market. However, there are still many
problems facing Chinese companies on their path to internationalization, as the famous Chinese wool manufacturer
Hengyuanxiang discovered when it ventured abroad.
While Hengyuanxiang has great brand recognition at
home, its name is meaningless internationally. Also, the
names of other famous Chinese companies such as Lebaidi
and Yangzi die out once management has been handed
over to international corporations.
For Chinese brands to survive, therefore, they must
develop, but to develop they need to internationalize. Brand
internationalization for enterprises from developing nations
faces all sorts of challenges, and this piece will examine the
problems and issues surrounding Chinese companies in
their journey toward brand internationalization.
Changing the name
Chinese brand names originate with the Chinese enterprise, and all copyrights are owned by that enterprise.
They are registered as Chinese characters at startup,
and, as in the West, the company tries to make the name
catchy, sometimes even including geographic and personal names. Chinese brand names may also be registered using Pinyin Romanization, eg. = Changhong =
Rainbow. Chinese brand names have two major flaws:
1. Because international recognition of Chinese brand
names is low, Chinese companies are unable to enter
host markets in the same way as globally recognized
US brands such as IBM, DELL or Coca-Cola.
2. Even if Chinese brands do have a Romanized version,
Westerners will still have difficulty pronouncing it
because of linguistic differences. This issue alone can
mean the death of Chinese products in foreign markets.
The basic principles of brand name development are
that brands should be easy to recognize, easy to remember
and easy to pronounce. Chinese brands meet none of these
requirements when they enter international markets.
All of the internationally successful Chinese brands
changed their names long ago. [ ] has become Haier;
(Haixin) has become Hisense; TCL (simply no Chinese
name); (Meide) has become Midea, etc. The first step for
internationalizing Chinese companies, therefore, is to
make their brand more globally recognizable.
During the 1970s and 1980s, Japanese companies
were faced with similar problems when they first entered
the international market. When Matushita arrived in the
United States, it changed its name to Panasonic; became
Canon; and in an attempt to hide its Japanese trace, was
renamed Konica. Adapting Chinese brand names to the
linguistic styles and customs of the local country is at the
core of Chinese brand internationalization.
This certainly does not mean, though, that all Chinese
brands must change their names when going abroad. For
example, Chinese companies which trade on their products’ unique Chinese qualities and characteristics would
be foolish to change names. Examples include the company Tongren Temple, which is a maker of Chinese medicine or Chinese restaurants. In these instances, Chinese
characters and Pinyin Romanization become a distinct
marketing advantage in the sale of such products to Western consumers.
Establishing international brand recognition
After many years of competitive low prices, an impression
has been created that Chinese goods are inferior to those
produced by other countries, especially in Europe, the
United States and Australia. As a consequence, even more
barriers to the internationalization of Chinese brands are
created. But where are the greatest difficulties? It is in
establishing brand recognition, for without brand recognition and prestige value, a brand has no value at all.
How can Chinese companies establish brand prestige
overseas? One method is to proceed gradually, and first
establish market prestige and brand consciousness in developing nations and regions. For example, if Konka opens a
Case study 10.4
factory in India and TCL opens one in Vietnam, and their
operations slowly take root, brand prestige will establish itself gradually. But there are still some serious flaws
in this method: although establishing brand recognition
in developing countries’ markets is easier and quicker than
in developed markets, establishing brand prestige always
needs to follow a course of moving from the unfamiliar to
the familiar, and from initial suspicion to trust. Opening
up a market in an undeveloped country, then a developing
country, and finally a developed country is time-consuming
and strenuous. Moreover, the easier the access to a country or area, the more is its capacity to be limited. While the
company may have established prestige in the undeveloped country, it cannot translate this experience to other
countries in the region. For example, establishing brand
prestige in Vietnam does not help brand recognition in the
Malaysian or Thai markets, and the so-called easy markets
may actually not be that easy to enter. They may possibly be
already crammed full of other multinational corporation’s
products (such as in the case of Vietnam), or be politically or
economically unstable (such as Afghanistan).
Therefore, starting with the seemingly easy markets,
and moving on to more difficult ones to establish international prestige is usually time-consuming and ineffective.
This is also a major reason why Chinese enterprises give
up on exporting their brands in favor of producing OEMs.
If we hark back to the experience of Japanese companies, we can then see that the only way to really achieve
brand internationalization is through the process of
starting with the difficult markets, and then moving
on to the easier ones. It took Sony a decade of hard
work before it first entered the American market in the
1950s, and then found it easier to expand to other parts
of the world. Japan’s domestic electrical appliance and
automobile industries soon followed the same pattern.
Brand internationalization is therefore best achieved
by companies taking the difficult road before the easy.
For example, the reason Haier entered the international
market was not because it had entered the Southeast
Asian and South American markets first, but because
it had come to a standstill in the US market. Matushita,
Sony, Toyota also captured the American market first,
and then moved on to the European, Latin American and
African markets. Moreover, Hisense entered the South
African market after it discovered a blank spot, and rapidly expanded across other borders. Why did it do this?
Because South Africa is the most developed country on
the African continent and is where competition is at its
most intense. Acceptance of a brand name in the South
African market meant acceptance throughout Africa.
But Hisense’s success in Africa did not help its success in
developing the European and American markets. Haier,
however, had a different experience. Success in the American market was akin to global approval of its quality and
good standing, and helped it establish markets in more
than 100 countries in a very short time frame. A market may therefore seem impenetrable at first, but once a
niche market has been found in a country, further breakthroughs become easier and market expansion continues.
Is Chinese brand internationalization
exportation or localization?
Another issue regarding Chinese brand internationalization
is whether products should be domestically produced with
a view for sales overseas, or whether Chinese companies
should carry out production overseas. There are currently
two opposing views in regard to this issue. The first view
is firmly opposed to establishing factories overseas. It sees
China’s large population and cheap labor as the chief reason for its cheap manufacturing costs. It is also why China
has become the world’s production processing base for
electrical appliances, clothing and electronic products. The
argument goes that while Europe, the US, Japan and other
developed countries are moving their production bases to
China, if China sets up factories in these countries, it will
sacrifice its cost superiority. Therefore, proponents of this
view approve the internationalization of Chinese brands,
but also place Chinese labels on Chinese products that are
being sold overseas, thus being a form of localization.
Another viewpoint suggests that, while Chinese companies should exploit the cost superiority of domestic
production, when the time is ripe, and the Chinese market has reached its capacity, China must internationalize
its production base and establish factories overseas. What
are the advantages of this? On the one hand overseas
market information can be better understood, and faster
market responses made. On the other hand, it relays a
message to the customer that Chinese corporations are
ready to solve problems as necessary, and meet the needs
of overseas customers.
The latter opinion is the more convincing. The internationalization of Chinese brands is not an urgent demand,
but rather one that is more of a long-term strategy. China
possesses cost superiority today, but, in ten or twenty
years, this advantage may vanish. Brand names need to
live much longer. Therefore, it is inevitable that Chinese
brands will internationalize, and this demands both overseas managed factories and internationalization. Even in
the short term, Chinese corporations must leave China.
What can Chinese corporations learn from Western
MNCs? All MNCs have their antennas in the global market, and are extremely aware of market conditions. They
Chapter 10 Product decisions
possess brand superiority, and their brands (such as CocaCola, Sony etc.) have taken root in consumers’ minds.
Compared with Chinese corporations, they also have vast
superiority in research and development, and are able to
design products that meet the needs of the international
market. China’s only advantage is its low production
costs. But now that Western and Japanese MNCs are using
Chinese OEMs (original equipment manufacturers) on
a large scale, and taking away this cost advantage from
local companies, how can Chinese enterprises compete?
Chinese brand internationalization must do the opposite of what Western and Japanese MNCs have done in the
past. Western and Japanese MNCs have entered China,
and so Chinese MNCs must venture out so that they too can
have an equally keen market antenna and reaction capacity. Hisense has said that nobody can understand local
people more than local people. Just as important is the low
international confidence level in Chinese brands. In order
to express the determination and sincerity of Chinese corporations, China must establish manufacturing bases and
retail networks overseas and gradually establish local consumers’ confidence and trust. In summary, Chinese brand
internationalization must continue, and go along the road
to overseas factories sooner or later. If it doesn’t, it will be
impossible for Chinese companies to internationalize their
brands’ images and international prestige.
To OEM or not to OEM?
At present China’s manufactured goods, especially consumables, are mostly exported as rebadged products.
This is the case with Changhong, Midea, Gree Airconditioning, Shinco, and Galanz, who rebadge for companies
such as Sanyo, Mitsubishi, Carrier, etc. In an article entitled ‘The two sides of Galanz’ in the March 2002 edition
of Sino-Foreign Management, Galanz’s Vice President
Yu Yao Chang stated ‘What are brands? Brands are gold
stacks.’ He then asked himself, ‘How many stacks of gold
do we have?’ His meaning was that China does not have
the money nor resources to internationalize its brands,
and is only capable of manufacturing OEMs. With this in
mind, Galanz has positioned itself to be one of the world’s
largest production workshops, and allows multinational
corporations to manage the marketing networks. Galanz,
therefore, makes brands to order.
China’s largest DVD manufacturer, Shinco, is also
doing the same. Midea’s President, He Xiangjian, clearly
said in an interview for the same article, ‘I have yet to see
one Chinese factory that has been set up overseas become
successful in selling its own products under its own brand,
including Haier. While it may be true that TCL’s operations
in Vietnam posted a profit at the end of 2002, this one
instance to date is hardly sufficient to give Chinese enterprises sufficient courage to enter the international market.
Certainly there is another viewpoint which believes
that producing OEMs is a way of better understanding the
needs of the international market, and is a way of preparing Chinese organizations for the eventual internationalization of their own brands. There is a lot of validity to
this argument. Manufacturing OEMs can enable Chinese
companies to grasp the product’s production technology,
enhance the enterprise’s management level, and allow it
to understand what types of product foreign markets are
seeking. But, after all, the manufacturing process and
marketing networks are in the hands of the foreign corporation, and consumers purchase not only the product, but
the brand. Ultimately, it is the owner of the brand that is
responsible for the consumer. Most consumers recognize
a brand more than a product.
Also, once a multinational corporation finds a better
production base, it will move there. Even though rebadging
raises the management levels and technical abilities of Chinese corporations, they will always be behind with those
of the multinational corporation. The Secretary-General of
China’s Electrical Appliances Association, Mr. Jiang Feng,
has frankly stated that OEM products are popularist and
mainly used for mid- to low-grade products. The Vice President of Siemens (China) responsible for sales of electrical
appliances, Dong Quanxin, also indicated that, because
it will be very difficult for Chinese producers of electrical
appliances to reach Siemens’ technical standards within
the next 3–5 years, Chinese producers will not be manufacturing high-end products for Siemens. Obviously, therefore, it is highly unlikely that producing OEMs will greatly
enhance the technical ability of Chinese enterprises, and
is also unlikely to bridge the gap in technical disparities
between them and foreign multinational corporations.
It is impossible for Chinese enterprises to truly understand the international market by producing OEMs. International markets are constantly changing, and, by only
producing OEMs, Chinese corporations are closing themselves off by staying in their workshops and passively
responding to orders from outside. An understanding of
global markets and economic fluctuations is vital to the
success of international corporations. Chinese companies
therefore have to try and break the cultural and linguistic
constraints and venture forth into the open world.
Therefore, by producing only OEMs, it will be impossible for China to attain the technical support abilities,
the HR skills and the ‘combat readiness’ that is needed
for the internationalization of Chinese brands. Only
the products made in China will be for sale in international markets. But brand internationalization and
Case study 10.5
product internationalization are two completely different
Product internationalization occurs when your products are available for sale in many countries, but consumers don’t care where they are made. They only care about
the prestige and quality guarantees that are manifested
through the brand name. OEMs cannot influence the internationalization of Chinese brands, and so Chinese companies must persist in exporting their own local brand names.
In conclusion, there are huge hurdles facing the internationalization of Chinese brands. The time line is long and
the costs will be enormous. But in order to create truly
international brands on the scale of Coca-Cola, McDonald’s, Toyota, Sony, Phillips, or the like, China’s entrepreneurs cannot base their decisions on the poor short-term
results for one specific time period at one location, such
as the case with Haier to date. Establishing a brand name
and brand prestige needs patience and a lot of money. But
the payback for China in terms of economic profits, and
indeed its national dignity, is potentially enormous.
1. Evaluate the process followed by Chinese
companies to gain brand-name recognition
2. Is the experience of Japanese companies in
the 1950s and later really applicable to Chinese
companies today? Explain.
3. Can Chinese SMEs internationalize their brands
or is this only possible for larger firms? Why or
Case Study 10.5
Royal Philips Electronics
(This case is adapted from Capell, K. (2006). Thinking
Simple at Philips. Reprinted from December 11 2006
issue of Bloomberg Businessweek, p. 50, by special
permission, copyright © 2006 by Bloomberg L.P. and
from the Philips website www.philips.com, accessed
23 June 2010.)
In late 2004, British fashion designer Sara Berman
received an unexpected telephone call from Andrea
R agnetti, chief marketing officer for Royal Philips Electronics. Figuring the Dutch company wanted her to design
some sort of wearable technology, she was prepared to
politely decline the proposal. Instead, she spent an hour
engaged in a freewheeling discussion on the meaning of
simplicity, and by the end of the chat she had accepted
Ragnetti’s invitation to join Philips’ Simplicity Advisory
Board, a new panel of outside experts.
What does a fashion designer know about technology?
Not much. But that’s the point. To drive change following
a radical restructuring, Philips reckoned it needed a fresh
perspective from creative types with no ties to the company. So it formed the simplicity board, a group of specialists in health care, fashion, design, and architecture.
‘Philips was too inward-looking,’ Ragnetti says. ‘To really
embed simplicity into the company’s DNA, we needed an
element of vision.’
The five-member board’s mission is to help Philips focus
on ‘sense and simplicity,’ which is what the company
called a new branding initiative to underpin its transformation from a high-volume electronics maker into a
design-led company concentrating on health, lifestyle,
Each member of the Simplicity Advisory Board comes
from a different cultural and professional background.
While the board members bring a mix of experience and
cultures, they all share the company’s passion for simplicity.
Berman, who heads a successful clothing label, is helping
the company explore new opportunities in consumer products. Dr. Peggy J. Fritzsche, a radiology professor in California, advises Philips on its $8 billion medical-equipment
business. Gary Chang, a leading architect in China, serves
as a brand ambassador in the mainland. John Maeda, a
graphic designer and professor at Massachusetts Institute of Technology, is working to fine-tune the emotional
appeal of the company’s wares. Ken Okuyama is active in
automotive and transportation design and is a professor at
the Art Center College of Design in the United States.
On a practical level, the board is helping Philips
rethink what its customers want. For two years, members
Chapter 10 Product decisions
met for several days every month or two in cities such as
Rome, Paris, or New York. Today they no longer meet as
a group, but each is on call to help Philips create intuitive, easy-to-use products that meet specific needs. ‘In the
past, companies just developed the technology and hoped
someone would buy it,’ says Ragnetti. ‘Now we are starting from the point of discovering what exactly consumers
want a product to do.’
Philips has given the board members free rein to kick the
tires. When the consumer electronics unit was ready to
launch its Wireless Audio Center, a system for listening
to different tunes in multiple rooms around the house,
Maeda gave it a whirl. His verdict: Too much computer
jargon such as ‘booting up, please wait.’ ‘His suggestions
were mind-opening,’ says Geert van Kuyck, Philips’ senior
vice president of global marketing. Maeda’s input ‘made
us ask questions we hadn’t asked before.’
The outside perspective came in handy when assessing
Philips’ fast-growing medical business. As a practicing radiologist, Fritzsche noted that medical equipment is often too
complex. Although the quality of images has grown dramatically, Fritzsche says the greater detail and quantity have
increased the burden on radiologists. Offering so much data
led to information overload instead of better diagnoses.
With Fritzsche’s insights, Philips is working to make its gear
more intuitive, allowing doctors to spend more time with
patients and less grappling with technology.
For Philips, the promise of simplicity isn’t just about
making products that are easier to use. The bigger challenge is rewiring the entire organization. The board’s primary contribution, says Berman, is ‘using creative chaos to
affect lasting change.’ That’s trickier than it might sound.
‘Simplicity,’ says Maeda, ‘is actually a very complex topic.’
In practical terms, the board acts as a think tank and
sounding board for Philips, providing counsel and guidance on a number of projects and issues in the healthcare,
lifestyle, and technology areas.
1. Evaluate the use of the Simplicity Advisory Board
by Philips. Is this really a good idea for such a
company? Explain your answer.
2. Could other types of companies find value in
creating similar boards? If so, what types of
3. Is the use of advisory boards limited to one on
the desire for simplicity or could other types of
advisory boards be valuable giving advice on
such matters as cost savings, market penetration,
etc.? Explain your answer.
Case Study 10.6
The Boeing Company
(Reprinted with permission from Marketing News,
published by the American Marketing Association,
Elizabeth A. Sullivan, ‘Building a better brand,’ 15
September 2009, pp. 14–17.)
Boeing, the Chicago-based aerospace giant, is known
for its commercial aircraft. The 93-year-old company is
the no. 2 manufacturer in the world of such planes, behind
Blagnac, France-based Airbus. But Boeing produces much
more than just commercial jets. It also makes military aircraft, integrated defense systems, missiles, satellites and
communications systems. It’s the no. 2 contractor for the
Pentagon, second only to Lockheed Martin Corp. It works
with NASA to help operate the space shuttle and International Space Station, and with the US Army as a systems
integrator. Boeing employs more than 158,000 people in
the United States and 70 other countries, has customers
in more than 90 countries and is one of the United States’
In short, Boeing is a multifaceted B-to-B behemoth.
But while the Boeing brand might be familiar to the marketplace, until recently the company lacked a cohesive
brand identity or communications strategy to unify its
disparate enterprises. A few years ago, Boeing set out to
integrate its various businesses into one company, one
visual identity and one brand. And in early 2008, Boeing
launched the One campaign, a comprehensive internal
and external branding effort to drive a ‘one brand’ culture
and unify how the company connects with the outside
Boeing execs understand that, regardless of its size, a
company needs to present a cohesive identity to clearly
define where the company stands within the marketplace
Case study 10.6
and how it intends to serve its customers. In other words,
every company needs to leverage the power of ‘One.’
For a B-to-B brand whose power and legacy already resonate within the marketplace, a comprehensive brand
overhaul, many years in the making, might seem unnecessary. But ‘the choice for the company is a house of brands
versus a branded house. Boeing chose the branded house.’
A strong, cohesive brand lends instant recognition to new
products, positions a company well against competition
and withstands any negative impacts within the marketplace. And probably one of the most important [benefits of a unified brand] is internally, it makes us more
Many years ago, Boeing’s visual identity was all over
the map. Boeing grew over the years through a series of
mergers and acquisitions, and although every business
segment shared the Boeing label, each had its own marketing material, signage, color palette, you name it. There
were more than 200 different styles of letterhead and
Over the years, Boeing execs have worked to create
a cohesive communication style. And with the ‘current
brand refresh,’ as company calls it, Boeing is taking
hold of the aforementioned rope to tie the company’s
visual dements, culture and outwardly facing brand
The aerospace industry’s as whole is becoming more
sophisticated in how it approaches the marketplace. So in
2006 and 2007, Boeing conducted a series of audits of all
communication materials to see how it was measuring up.
The company found that cohesion was sorely lacking, and
marketing materials appeared dated and disjointed.
In early 2008, Boeing execs put together a cross-departmental, ‘super-unwieldy’ team of employees from
communications, creative services, customer relations,
marketing, sales, HR and other ‘internal organs’ to hash
out what the Boeing brand’s visual identity should be.
They called in assistance from the company’s ad agency,
Chicago-based Draftfcb; Seattle-based corporate design
firm Methodologie Inc.; and Paul Haverly, an aviation
design consultant. They all set out to cut through Boeing’s visual clutter, create a unified brand, reduce costs
and drive efficiency by promoting consistent design
The team researched the brand’s personality, promise and mission. Team members understood that to create an authentic sense of ‘oneness,’ they had to identify
which characteristics Boeing’s many enterprises have in
The first phase of the process concluded with ‘the initial distillation of all of [the gathered information] into
the brand DNA,’ says Dale Hart, Methodologie’s partner
and creative director. The team came up with a triple
helix; enterprising spirit, or why Boeing does what it
does; precision performance, or how Boeing gets things
done; and defining the future, or what Boeing achieves as
Using that simply stated but carefully honed framework, the team created a design roadmap for the Boeing
brand called the brand visualizer. Methodologie, which
had experience building brand mapping systems for other
clients, assembled the brand visualizer to guide all design
decisions – creating a company color palette, pinpointing
one company typeface, defining the company’s voice and
communications style, and determining how photos and
images should be used.
‘In a company the size of Boeing … they have many,
many agencies articulating their brand, as well as many
people on the staff articulating the brand,’ says Janet
DeDonato, Methodologie’s founding partner and strategic director. ‘It had to be a really broad and encompassing
system … It’s hard to figure out a system that will work for
For example, one employee who worked with military
customers said the design was trending toward a light,
ephemeral typography that wouldn’t correctly convey
who Boeing is to his customers. He said the company
needed something with enough weight to suit both commercial and military enterprises. The team then spent five
days doing type studies to find a font with some edge and
eventually chose Helvetica, Newcomb says.
The resulting system is structured enough to keep
everyone on the same page from a branding and design
perspective, but flexible enough to accommodate products ‘from zero elevation up to 30,000 feet and beyond,’
Of course, it’s all well and good to create a comprehensive system like this, but the true test of a company’s
success is employee buy-in. For that, the brand visualizer’s simplicity is key, says Sandy Kolkey, executive vice
president and group management director at Draftfcb
and manager of the Boeing account. ‘It’s like the difference between getting a 400-page PowerPoint deck and
getting the executive summary. No one reads the 400page deck.’
‘The main thing is getting people to understand the concept … That’s the hard part,’ Newcomb adds. Once employees understand the reason behind the branding strategy
and design, they can implement the guidelines, tools
Chapter 10 Product decisions
and best practices correctly, he says. Employee training is
underway and the company has held design and branding
workshops. Every employee in the company has access to
the brand map and to a company brand network online,
whether or not his job description requires it, for one simple reason: ‘Everyone should be managing the brand.’
Over the past few years, Boeing has leveraged its brand’s
silo-busting power wherever and however possible,
extending that thickly threaded rope throughout the company to create a sense of camaraderie and shared purpose
among the disparate enterprises.
Even before embarking on the brand refresh project, the company began working to bond its employees
together through internal communications. A set of newsletters, for example, are sent out to managers and employees to keep them up to speed on the company’s daily
goings-on. And the company has been working on a series
of internal motivational videos featuring Boeing employees taking about their jobs and achievements.
‘In 2007, Boeing parlayed the internal motivational
video effort into an external B-to-B-to-C advertising
effort known as the ‘That’s Why We’re Here’ campaign.
Like the motivational videos, the ads feature real Boeing
employees from a diverse range of business segments talking about what Boeing does and what the Boeing brand
The campaign has been a huge hit with Boeing employees, which has served to strengthen the ‘One company’
strategy. In a company survey, seven out of ten respondents said that the campaign ‘expresses the way I feel about
Boeing’ and nine out of ten found the campaign appealing. ‘It was a 65% increase over the previous campaign.’
Prepare for Takeon
Richard Aboulafia, vice president of analysis at Teal
Group Corp., a Fairfax, VA-based aerospace and defense
industry research group, says Boeing has an ‘extremely
strong’ brand, but he’s wary of giving an all-out endorsement for the external manifestations of the ‘One brand,
One company’ strategy.
‘Is branding important? Sure. Is creating a unified company and making it look like you’re one company? Sure,’
he says. ‘On balance, I think it’s good’ to have a cohesive
brand. But if Boeing’s brand is intrinsically unified, negative occurrences in one area of the company can reflect
poorly on other areas as well. For example, issues that
occur in the construction of Boeing’s much-anticipated
and much-delayed 787 Dreamliner aircraft also could
reflect poorly on Boeing’s military or information systems
businesses, Aboulafia surmises.
The flipside of that coin is that a cohesive, well-executed brand can create more favorable perceptions of the
company and can act as a buffer for the company’s image,
says Richard Ford, executive creative director of the New
York office of Landor Associates, a global branding firm.
‘It’s more about keeping stock prices high and about making sure that Boeing has some kind of halo around it …
a positive impression of the brand that would protect the
brand from damage, should it occur,’’ says Ford, an expert
in aviation branding. ‘I think they’re on the right track, at
least as far as the [brand] clean-up goes,’ he says. ‘But I
think there’s a lot more for Boeing in the future and this is
just the beginning.’
A global, multipronged business, Boeing is making
strides in branding itself as one company versus a conglomerate of smaller businesses, banking on the power
of internal branding and a cohesive marketing communications strategy to put it ahead of its competitors. And
as mentioned earlier, when it comes to branding, a true
measure of success is employee buy-in. If the Boeing
brand rings true to the people who represent it, and those
people want to take care in representing it well, then the
brand is well-positioned to succeed.
1. Evaluate Boeing’s strategy for ‘Becoming One.’
2. Is the approach used by Boeing suitable for other
companies, including B-to-C companies? Discuss.
3. What did Boeing’s team on brand identity come
up with as the three elements they thought should
be considered as making up ‘the company’s
DNA?’ Do you agree with their list?
4. Why did Boeing go to three outside groups (ad
agency, design firm, aviation design consultant)
to assist in developing ‘one brand’?
5. In very brief summary, what methods did the
company use to get people to understand the
6. Do you think that it is really possible for a brand
to help create a sense of camaraderie and shared
purpose among employees? Why or why not?
7. What has been the reaction of the employees to
8. Discuss any potential downside to such broad
and strong branding.
In Chapter 11 we look at:
fundamental export pricing strategies and relationships to domestic price
factors that must be considered in determining an export price: costs,
competition, legal/political considerations, company policies
the effects of the Internet and World Wide Web, and other advances
in communications, on pricing as:
— a threat to prices and brands
— an opportunity for balancing demand over time, and
— a means of improving economic growth and social welfare
problems from changing exchange rates, the choice of currency to be used,
and hedging possibilities
price quotations, terms, and calculations
Three cases are provided at the end of the chapter. Case 11.1, RAP Engineering and Equipment Company, requires the student to develop two different price calculations and to
explain the implications regarding responsibilities for arrangements and liabilities for each.
Case 11.2, Capitool Company, explores the issue of transfer pricing policies. Case 11.3,
Strato Designs, involves questions regarding the possible use of hedging.
The management of prices and price policies in export marketing is somewhat more complex than in domestic marketing. Due to increasing complexity of markets, price decisions
are becoming more critical than ever. All markets are becoming more segmented, which
results in firms having to broaden their product lines with different products aimed at different types of customer. Gone are the days when Coca-Cola could offer a single brand to