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Research

The Cross-Border Brand Management of MNC and SMEs

Masato Inoue/Professor, Faculty of Commerce, Chuo University
Major: Global Marketing and Brand Management

1. Global marketing and global brand management

Global marketing refers to marketing carried out across national borders, primarily by Multinational Corporation (MNC, also known as Multinational Enterprise or MNE in United Kingdom). Regardless of a corporation's nationality or industry, it is now common for companies to procure, produce, and sell parts, raw materials, intermediate (partly finished) products, and finished products overseas. Generally speaking, the term "marketing" refers to the market activities performed by individual entities such as manufacturers to realize product sales. When a corporation begins to engage in activities such as procurement, production, sales, and Research and Development (R&D) overseas, issues arise that cannot be adequately explained using domestic-based marketing theories. Global marketing is a unique field that explains these issues.

In recent years, MNC have placed particular emphasis on a small number of global brands (product brands deployed throughout the world) from among the vast number of product brands owned by those corporations. Although MNC have a far greater number of local brands (product brands that are introduced in only one country) and regional brands (product brands that are introduced in multiple geographically adjacent countries and regions) than global brands, the reality is that global brands contribute to global consolidated sales more significantly. Although the percentage varies by company, it is generally said that global brands account for approximately 70% of the global consolidated sales of MNC. As a result, global brands are receiving much more attention both in practice and in research.

The research that I am currently conducting on global brand management has two main orientations. The first is how MNC manage the global brands they own. The second is how Small and Medium Enterprises (SMEs), which are much smaller than MNC, manage their local brands and take on the challenge of developing overseas markets.

2. Management of global brands at multinational corporations

For example, in regard to global brand management, it is socially recognized that the world's food and beverage industry is dominated by 10 multinational corporations, as shown in Figure 1. Each of these corporations owns multiple global brands and is leveraging those brands to further increase its market dominance.

Figure 1. 10 multinational corporations with global domination of food and beverage industry

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(Source) Oxfam website (accessed on March 20, 2024)
https://www.oxfamamerica.org/explore/stories/these-10-companies-make-a-lot-of-the-food-we-buy-heres-how-we-made-them-better/

There are consumers in developing countries who habitually purchase global brands from MNC for consumer nondurables such as food, beverages, and detergents, even if similar product brands sold by local corporations are cheaper. Figure 2 shows the shelving allocation of detergents in a supermarket in central Manila, the Philippines. Although there is a small display of Unilever's global brand Breeze, most of the products are Procter & Gamble's (P&G) global brands Ariel and Tide. There is not a single product brand from a local corporation or Japanese corporation. P&G has been established in the Filipino market for more than 100 years, so the supermarket is likely to have a product lineup that aligns with the established buying habits of local consumers, including parents and grandparents.

Figure 2. Shelving allocation for detergent at supermarket in Manila, the Philippines

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(Source) Photographed by Masato Inoue

3. Management of local brands at SMEs

As discussed above, global brands are used by MNC as an important weapon to further enhance their competitive advantage in national and regional markets. On the other hand, there is also a growing number of cases in which global brands are unable to demonstrate a competitive advantage over the local and regional brands of their competitors. Furthermore, recent research trends in this field have been criticized for being biased towards global brands. In other words, it is considered that it is problematic to examine only the contribution to global consolidated sales and focus research on global brand management, despite an overwhelmingly larger number of local and regional brands than global brands in MNC and a certain role fulfilled by local and regional brands. Instead, it is also important to look at local and regional brands that have the potential to grow into global brands in the future. Accordingly, I am researching various management issues from the perspectives of both global brands and local/regional brands.

Of course, when researching local brand management (particularly the regionalization of local brands), it is important to focus on MNC; however, it is also important to see SMEs. SMEs may develop unique strategies that differ from those of MNC, or they may adopt behaviors that are essentially similar to MNC, despite the relative scarcity of management resources at SMEs. Therefore, researchers believe that much can be learned from the brand management of SMEs.

For example, Hakuryu Sake Brewery produces and sells the Japanese Sake "Ganbare Tochan," which is a beloved brand in Agano City, Niigata Prefecture. The brewery is experiencing significant sales growth in the South Korean market. This is an easy-to-understand example of a regionalization of a local brand.

In Korea, there is an extremely high tax on alcoholic beverages imported from abroad. For example, a 900-milliliter pack of regular sake costs about 600 yen in Japan, but it costs more than 3,000 yen in Korea. In addition to the markups, transportation costs, and storage fees which are added to the cost of the product itself at each distribution stage, tariff (15%), liquor tax (30%), education tax (10%; for improving the quality of education), and value-added tax (10%) are also added.

When compared to Japan and other countries/regions, the Korean market is a rather difficult environment for selling Sake. Nevertheless, since "Ganbare Tochan" was sold in 2006 by a small local importer named Taesang Liquor, the number of bottles sold increased dramatically from 8,700 in 2006 to 460,000 in 2016, which is an increase of approximately 53 times. Furthermore, thanks to the initiative taken by Hakuryu Sake Brewery in the last few years to actively advertise "Ganbare Tochan" through Korean dramas and the social media accounts of Korean idols, the current sales of "Ganbare Tochan" have grown to the extent that the Sake is now handled by TRADERS WHOLESALE CLUB(formerly of E-MART TRADERS), which is a large-scale discount store operated by the Shinsegae Group (see Figure 3).

Figure 3. Large display of "Ganbare Tochan" (Hakuryu Sake Brewery) at TRADERS WHOLESALE CLUB

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(Source) Photographed by Masato Inoue

4. Future research themes in global brand management

In 2017, the American research company Nielsen conducted an online survey of 31,716 people in 63 countries. As shown in Figure 4, Nielsen surveyed which of local brands or global brands consumers would choose depending on the product category. Figure 4 shows that higher percentages indicate consumers who prefer local brands and lower percentages indicate consumers who prefer global brands.

However, it is still unclear why consumers perceive products in this way. It can be inferred that some MNC have introduced products to the market using global brands, and that they should have introduced local brands. The opposite may also be true. In this way, there are many other frontiers for research on global brand management. I hope that my research will be of assistance in elucidating new areas.

Figure 4. Consumer preference for global/local brands by product category

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(Original Source) The Nielsen Company (2017), "Made in" Matters...or Does It?: How Consumer Perceptions about Country of Origin are Translating to Purchasing Behaviors around the World, p.3.
(Source) Masato Inoue (2020) "Global Brand Management," in Basics: Global Business Strategies (Third Version), written and edited by Masami Kajiura, Ch.23, p.344.

Masato Inoue/Professor, Faculty of Commerce, Chuo University
Major: Global Marketing and Brand Management

Masato Inoue was born in Fukuoka Prefecture in 1976. He graduated from the Faculty of Business Administration, Meiji University in 1999. He obtained a Ph.D. degree in the Graduate School of Business Administration, Meiji University in 2006. He assumed his current position in 2023 after serving as an Assistant Professor in the Faculty of Economics, Shiga University, Associate Professor in the College of Commerce, Nihon University, and Associate Professor in the Faculty of Commerce, Chuo University.

His current research themes are mainly management of global brands at multinational corporations (MNC) and regionalization of local brands at SMEs.

His major publications include Graphic Global Business (Shinsei-sha, 2020), edited by him.