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Local Brands and Global Brands

Local brands are defined by Wolfe (1991) as brands that exist in one country or in a
limited geographical area. It is also noted by Schuiling et al (2004) that local brands
belong to a local, international, or global firm. Local brands provide a link between
the national economy and individual well-being. Levitt (1983) defines global brands
as brands that use the same marketing strategy and mix in all target markets.
Johansson and Ronkainen (2004) assert that global brands benefit from the scale and
scope of having presence in multiple markets. The researchers define global brand as
“a brand that is marketed under the same name in multiple countries with similar and
centrally coordinated marketing strategies.” However there are some selected global
brands that don’t have the same name but share some marketing program elements.
For example, “Mr. Clean” also sells under the “Mr. Proper” and “Maestro Limpio”
names, among others. Although global brands play a dominant role in today’s world,

Consumer Perception of Global vs. Local Brands: The Indian Car Industry

the advantages of the local brands are still stronger and this is reviewed in the
following part.
2.4. Pros and Cons of Local brands and global brands
An exploratory research on the Y&R (Young & Rubicam’s) database was conducted
by Schuiling et al (2004) across four largest European countries: the United Kingdom,
Germany, France, and Italy. The study affirms that local brands benefit from strong
brand equity and specifically, local brands benefit from higher consumer awareness
than international brands do, and they enjoy a strong brand image. Local brands
benefit not only from a good quality image but also from a better value and trust
perception than international brands do (Holt et al, 2003). Value is linked with the fact
that prices of local brands are usually lower than those of international brands,
providing consumers a sense of better value for the money (Schuiling et al, 2004).
According to the research by Schuiling et al, (2004), local brands are also perceived
as more “down to earth” than international brands, meaning that local brands offer a
more basic/no frills brand proposition. The study also indicates that local brands are
perceived as more traditional than international brands, because local brands are
linked more to local traditions and local cultures than international brands are. It was
also found that trust is an important advantage for local brands, because it provides a
unique relationship with consumers that take years to develop. It also indicated that
there is no significant difference between the perception of prestige for international
brands and that for local brands. Another significant finding was that consumers are
attracted to international brands but in reality, they prefer to purchase local brands
(Schuiling et al., 2004). In the words of Johansson and Ronkainen (2004), although

Consumer Perception of Global vs. Local Brands: The Indian Car Industry
global brands may have more success in high-profile, high-involvement categories,
consumers may still give local brands preference in purchasing every day products.
The advantages cherished by local brands can be dominated by the enormous
advantages enjoyed by global brands. Eckhardt (2005) avows that local brands are not
more flexible than global brands in terms of their marketing activities when they
compete in a foreign product category due to cultural categories being associated with
the product category. Just as global brands need to conform to international marketing
dictums, local brands sometimes need to conform to deeply held preconceptions about
the product category in which they operate.
Johansson and Ronkainen (2004) assessed brand realities on the global - local
continuum using data from Young & Rubicam’s Brand Asset Valuator (BAV). This
database is considered to be the most exhaustive of its kind, covering 20,000 brands
across 40 countries. Data have been collected since 1993 across a wide range of
industry sectors to measure brand perceptions of more than 100,000 consumers. It was
noted that local brands exhibit higher familiarity among consumers, but when
familiarity levels are similar, global brands enjoy higher levels of esteem. Also that
Global brands were known for their perceived quality. The researchers asserted that
global branding will arguably face different challenges by product category. Certain
categories, such as automobiles and computers, are deemed more global in terms of
the similarity in consumer preferences. Apart from discussing the pros and cons of
local and global brands, it is necessary to comprehend the shifts that occurred due to
increased consumer preference from local brands to global brands.

Consumer Perception of Global vs. Local Brands: The Indian Car Industry

2.5. Shifts from Local Brands to Global Brands


During the recent years, a number of multinational companies are reducing their
brand portfolios to manageable sizes in favor of global brands. For example, both
Procter and Gamble (P&G) and Unilever have greatly pruned the number of brands
they market around the world, often disposing of those with limited global potential
(Pitcher, 1999). Massive presence of Global brands is fuelled by the increasing
similarity that consumers display in their consumption habits and preferences. It has
also been argued that Global brands, are perceived to be more value-added for the
consumer, either through better quality (as a function of worldwide acceptance) or by
enhancing the consumer’s self perception as being cosmopolitan, sophisticated and
modern (Johansson and Ronkainen, 2004). Consumers throughout the world are
becoming increasingly sophisticated and international brands offer a measure of
exclusivity or even eccentricity that are increasingly sought after and valued because
such appeals are universal (Interbrand, 1990). According to Schuiling et al (2004),
this trend has been occurring not only in fast moving consumer goods sector but also
in other industrial sector including services. Although global brands are becoming
more significant, it is asserted that there are many local brands than international
brands in Europe. As examples, in Germany’s oil industry, British Petroleum acquired
the local leader Aral and decided to retain the local brand name due to its strong brand
equity; In Belgium, Spa being the local leader in mineral water, has shares above
international leader Evian (Schuiling et al, 2004).
A number of reasons have been presented by various researchers for the moves
toward global brands. Out of which, the main reason would be the one given by
Hassan and Katsanis (1994), being meaningful segments of consumers around the
Consumer Perception of Global vs. Local Brands:
world develop similar needs and tastes. According to Neff (1999), globalization
speeds up a brand’s time to market by reducing time- consuming local modifications.
Another important reason given by Shocker et al. (1994) for moves toward global
brands would be consumer preference for brands with ‘global image’ over local
competitors, even when quality and value are not ‘objectively’ superior. Conversely,
in the view of Terpstra (1987), consumer preference has not has not been the primary
reason for companies to decide to move to international and global brands. As an
example, P&G accelerated its development of global brands since the early 1990s and
its aim being to achieve competitive advantage in markets (Schuiling et al 2004).
As the world is shrinking in to a global marketplace, it is increasingly significant to
understand the consumers’ perception of global brands to local brands. There is also
need to uncover the reasons for consumers’ preference for global brands over local
brands.
Consumers become perceptive to global brands when consumers believe the brand is
marketed in multiple countries and is recognized as global in these countries
(Steenkamp, 2003). This perception occurs in two forms; consumers realize that the
same brand is found in other countries through media exposure, word of mouth, or
during travel overseas. Secondly, as studied by Alden et al., (1999) that a brand may
assert or imply its ‘globalness’ through marketing communications that use brand
names, endorsers, advertising themes, etc.. Consumers prefer brands that they
perceive as originating from a non-local country, especially from Western countries,
more than they do local brands and that preference is linked not only to perceived
quality but also to social status (Alden et al., 1999). In the words of Peterson and

Basic factors that effect consumer preference for Global Brands


Research shows that perceived brand globalness for global brands could create
consumer perceptions of brand superiority (Shocker et al., 1994). International and
global brands have been associated with high prestige or status, in addition to quality
(Batra et al., 2000). Empirical study conducted by Steenkamp et al (2003) has
revealed that prestige is the second factor driving global brand preference. Foreign
brands of most consumer durables and non-durable categories were given
significantly higher mean attribute ratings on “status and esteem” except where “cold
drinks” and “ice creams” were concerned. A study conducted by Kinra (2006) held
that COO credibility of foreign brands was a significant factor influencing consumer
attitudes and preferences as it was correlated highly with “quality” and “status and
esteem”.
Consumer Perception of Global vs. Local Brands: The Indian Car Industry

Steenkamp et al (2003) made a study on consumer preference for global brands to


local brands. The researchers framed three pathways through which perceived brand
globalness (PBG) influences consumers’ purchase likelihood were hypothesized. The
pathways were higher perceived quality, higher prestige, and the psychological
benefits of PBG. The hypotheses were tested in Korea and the United states, across
different product categories and brands.

This research can help us understand why people may gravitate toward one brand or another.
"The findings reveal how multinational or local firms can solidify consumers' preferences for
global or local products if their consumers' global or local inclinations are compatible with their
products' positioning,

Consumers prefer local soft drinks rather than global brands like Coca Cola or Pepsi due to their
built-in mindsets connected to their desire, a new study said.

“Global-minded consumers prefer global products and local-minded consumers prefer local
products (different specifications for consumers from different parts of the world)” the study
authors explained.
“Due to rapid globalisation, local products… such as Mecca Cola (France) and Fei-Chang Cola
(China) and global products… Pepsi and Coke, routinely compete against each other,” wrote
study authors Yinlong Zhang (University of Texas San Antonio-UTSA) and Adwait Khare
(Quinnipiac University).

The authors set out to answer the question “why global products fare better than local products in
some markets and local products better than global products in other markets?”

The inclination toward global or local mindsets is connected to people’s desire for
distinctiveness (local) versus their desire to be similar to others (global).

In three subsequent studies, the authors enhanced the accessibility of participants’ local or global
identities to investigate their responses to products.

They then manipulated consumers’ preferences by informing participants of the unsuitability of


their global or local inclinations, said an UTSA release.

“A reversal in preference occurs when global-minded consumers’ desire for distinctiveness from
others is enhanced and when local-minded consumers’ desire for solidarity with others is
enhanced,” the authors wrote.

“The findings reveal how multinational or local firms can solidify consumers’ preferences for
global or local products if their consumers’ global or local inclinations are compatible with their
products’ positioning,