ANTECEDENTS OF BRANDED HOUSE ARCHITECTURE IN BRAND … · 2016. 5. 17. · HSBC with branded house architectural strategy while indirect naming strategy is derived by parent brand

International Journal of Business and Management Studies,

CD-ROM. ISSN: 2158-1479 :: 05(01):161–176 (2016)

ANTECEDENTS OF BRANDED HOUSE ARCHITECTURE IN

BRAND ACQUISTION

Arup Barua

University of Vaasa, Finland

Alexandra Ioanid

University Politehnica of Bucharest, Romania

Post acquisition branded house architectural formation possesses a significant strategic value in relation

to consumers’ evaluation. Nevertheless, diminutive consideration has been given to the tactical aspects

of firms from emergent countries that affect the deliberate extensions of branded house in the foreign

acquired market. Concentrating on the international business and branding literature, this conceptual

work has an apprehension and specified focus on the group of factors e.g. customer, market and firm

level. Accordingly, ‘consumer level factors’ like uncertainty avoidance, long term orientation, customer

innovativeness, power distance and ‘Market level factors’ like Market concentration, emerging industry

and ‘firm level factors’ like prior experience, localization, country of origin and brand equity would be

emphasized and assessed. Decisively implication and direction of future research would be endeavored

to clarify.

Keywords: Branded house architecture, Brand architecture, Brand acquisition, Emerging countries.

Introduction

The degree of global competitiveness compels the firms from emerging countries to accentuate to extend

their brand through acquisition rather than inaugurating the entire new one in the international market

(Hsing-Ming, et al. 2011). Brand acquisition might be the most influential strategy for acquirer to enter

the foreign market (Schweizer, 2005). Nonetheless, previous studies demonstrate that companies

generally concentrate on the financial performance and cost cutting approach rather than putting an

emphasis on the consumer perception in brand acquisition (Hsing-Ming, et al. 2011) and that

inattentiveness persuades the future performance implausibility of acquiring companies (Homburg and

Bucerius, 2005). Though parent brand leverage is lucrative in the brand architecture, failure rate of

acquirer brand extension is more than 80 %( Dens and De Pelsmacker, 2010). However, Taylor and

Bearden (2003) noted that success rate is less than 50%. Hence, acquirer should consider the brand equity

for the brand acquisition success (Shahrokh, 2012). Besides, brand name and brand equity is extremely

co-related (Shahrokh, 2012), during the brand acquisition, stakeholders’ and consumers’ main focus is

immensely influenced by the potential brand name since it reassures the value for them (Gregory, 1999).

Therefore, feeble brand name extension strategy might obliterate the parent brand equity and brand

expansion (Xie, 2012).

161

162 Antecedents of Branded House Architecture in Brand Acquisition ...

However, branded house strategy builds the core brand image (Aaker, 1990). For instance, 85%

brand extensions in consumer goods use parent brand name (Ernst & Young and ACNielsen, 1999) to

escalate the acceptance of the new products (Blichfeldt 2004) though failure rate is extremely high in the

fast moving consumer goods which is about 80 percent (Ernst & Young and ACNielsen, 1999). In the

brand acquisition, acquiring companies keep the acquired brand name to maintain the brand equity such

as “P&G” kept the “Gillette” brand name as a subsidiary (Jaju et al., 2006) and Lenovo kept the

“ThinkPad” product brand name after acquiring IBM pc division (Ille and Chailan, 2011). As an antidote,

in some cases, acquirer eliminates the acquired brand name such as HSBC acquired smaller French Bank

CCF (Basu, 2006). Having influenced by the above issues, this paper will endeavor to place a study

concentrating on the companies from emerging countries who have product lines with parent brand name

in the host market (Xie, 2012) and also have a vivid intention to extend their corporate brand image

through acquiring brand from foreign markets.

Previous brand extension researches were based on domestic context such as Norway (Hem and

Iversen, 2009) and USA (Yorkston et al, 2010). There are insufficient studies on international context

(Buil et al, 2009; Ng 2010). Most of the researchers examined the parent brand association and perceived

fit between product and corporate brand in the brand extension studies (Buil, Martinez, and de

Chernatony 2009). Besides, petite concentration was put on brand management challenges (Blichfeldt,

2004) and determinants of retailer acceptance and marketing support (Volckner and Sattler 2006). Few

recent studies have been gone through where it has been seen that Xie, (2012) studied on the foreign

firms’ brand extension in the host country while Shahrokh (2012) studied on customer attitude to parent

brand extension and Damoiseau, et al. (2011) studied on brand creation vs. acquisition in portfolio

expansion strategy and Hsing-Ming, et al. (2011) studied on brand extension using parent brand

personality as leverage. But, existence of any precedent researches has not been found grounding on the

brand extension factors of firms from emerging countries using branded house strategy after brand

acquisition. Besides, Brand portfolio expansion using existing brand is motivated in the concurrent

research area expansion (Damoiseau et al, 2011). Even though it has a very limited research attention,

brand acquisition has been the strategic alternative in brand portfolio expansion (Damoiseau et al, 2011).

Angelina Nhat et al, (2012) noted that more studies on the factors on brand extensions along with the

consumer motives are imperative. So, this study aims to bridge the gap by finding the factors influencing

the branded house strategy when firms from emerging countries acquire renown brand in the host market

to extend their parent brand. Thus this paper has a definite goal to establish a relation between the various

factors and branded house architectural strategy.

To fill the gap, this study intends to draw a conceptual framework from the international marketing

and international business literature contributing an expressive theory building (Staelin, 2005) and

knowledge enlargement in the brand name extension using branded house strategy in the international

market. This framework will consider the consumer, market and firm level factors. There is an optimism

of future contribution to the literature in international business and marketing studies based on the

branded house. Accordingly, a brief review of the related literature is obvious to enable this study to

propose the allied conceptual framework along with the proposition, which will subsequently lead

towards the implication and future research direction.

Literature Review of Branded House Architecture

Branded house structural strategy is followed to achieve two general goals (Iversen and Hem, 2008) such

as perceived risk reduction and quality confirmation of the extended brand (Veronique and Raluca, 2012).

It generally allocates the parent brand’s equity to all the brand partners (Aaker, 2004). It also influences

customers to migrate to the new extended brand which is ensuring the quality (Veronique and Raluca,

2012). Consequently, it spreads out the brand recognition for customer to identify and take decision about

the extended brand since well-known parent brand transfer their brand image (Xie, 2012) using parent

brand name into the acquired brand (Bao et al, 2010). Basically, branded house strategy exists to rebrand

Arup Barua and Alexandra Ioanid 163

the acquired brand (Dechernatang, 2006). Hence, parent brand name stretching is the effective strategy in

the brand acquisition (Aaker, 1991). Brand acquisition is the legal transfer of brand elements as name,

logo and color combination and shape to acquire as ownership recorded by USPTO (United States Patent

and Trademark Office) (Damoiseau, et al. 2011) Benefit of brand acquisition is the evaluation of cost

against the actual outcome and potential synergies to reduce cost of new brand and to increase the

marketing competence (Damoiseau, et al. 2011). However, new brand creation offers several benefits

such as new brand introduction; addressing the customer needs and managing pace of brand expansion

(Kahn and Isen, 1993) But Jones (2004) noted that brand creation is risky venture due to high probability

of failure rate. Besides, new brand establishment needs marketing budgets and increases the complexities

of the firms (Tybout and Calkins, 2005). So, firms from emerging counties prefer brand acquisition in the

global or foreign market.

Brand architecture manages the relationship among the corporate, subsidiaries and product brands

(Balmer and Gray, 2003). It constructs the brand leverage, synergy, clarity rather than brand building

dissipate, confusion, marketplace and diffused focus (Aaker, 2000a). Also it drives the competitive

advantage (Muzellec and Lambkin, 2008) and takes away the prolonged heritage (Mercer, 2010). It is the

synonym of company name and its existence (Wheeler, 2006). Brand architecture strategy should be

grounded on the brand equity (Basu, 2006). Branded house is one of the brand architectural strategies. It

means parent brand name is used in the acquired brand having the dominant dynamic position; there is

little or no responsibility of acquired brand (Aaker, 2004b). Brand name might be similar such as Virgin,

BMW, HSBC (Aaker and Joachimsthaler, 2000a). It has following characteristics such as new offerings

cost and strong brand establishment (Aaker, 2004b). It has clear identification of the brand by which

internal and external stakeholders as well as customers can realize the clarity of the brand identity and

product line visibility. Conversely, frail side of this strategy is that if acquired brand affects the

reputation, parent brand might be affected. Basu, (2006) proposed branded house architecture where one

message strategy is preferred by the M&A firms during the product branding; for instance, HSBC

“World’s local bank”. However, this type of strategy does not always denote a happy family as

competitors can influence the corporate brand equity. On the other hand, ‘Integration Strategy’ is similar

to branded house refers to product brands and business unites under a single identity as master brand

name leveraging brand associations according to hierarchy (Muzellec and Lambkin, 2008).

Basically, brand name extension is only used into the different product category (Aaker and keller,

1990). However, it can be applied in the new product and modified product lines (Kotler, 1990). The

extended brand name strategy is classified as direct and indirect naming (Vanhonacker, 2007). Direct

naming is denoted as the use of parent brand name for instance Marlboro clothing and Harley Davidson,

HSBC with branded house architectural strategy while indirect naming strategy is derived by parent brand

but indirect way as house of brand, endorsed brand, (Angelina, 2012). Direct naming strategies are mostly

dealt by classic brand name extension studies (Olavarrieta et al, 2009) while many of world’s renowned

brands use the indirect name strategies as P&G, Apple Inc. (Vanhonacker, 2007). Generally, Parent brand

expresses its brand personality (Phau and Lau, 2000), the meaning of brand name (Kressman et al., 2006)

and representative benefits to consumers (Diamantopoulos et al., 2005) by the direct brand name (Lau and

Phau, 2007). Parent brand knowledge is kept in the brand name extension following branded house

structure (Olavarrieta et al., 2009). In contrary, indirect brand name extension, brand knowledge is less

transferred and less associated with parent brand (Angelina, 2012). Direct name strategy transfers more

brand personality and association using branded house strategy comparing to sub brand, endorsed and

house of brands (Olavarrieta et al. (2009). Basically the parent brand name extension is a popular

approach in brand acquisition due to media cost, supply availability and competitors’ promotions (Xie,

2012). However, the extension of parent brand name is not constantly successful depending on the brand

positioning of acquired brand and the parent brand. Nan (2006) states that parent brand name is evaluated

by the two factors such as brand association and perceived fit. Bottomley and Holder (2001) noted that

the success of parent brand name can be evaluated by product information and fits between the new

product category and brand name. Nonetheless, Aaker and Keller (1990) noted about the fit between

existing brand and the extended category along with the parent brand perceived quality. Also, brand


image and fit positively influence the band name extension performance (Xie, 2012). Parent brand

association derives the customers’ brand knowledge for brand attitudes and personality (Keller, 1993). If

the customers have positive attitudes with parent brand, new brand structure will be positively treated

(Nan, 2006). Brand extended relevance and salience are crucial for perceive fit which may be achieved by

the effective communication (Xie, 2012). Parent brand name extension is not only transferring the

positive association but also negative association to the acquired brand which is a menace for the failure

of overall brand acquisition (Xie, 2012). Brand name extension does not provide the significant advantage

for the new product release (Xie, 2012). New brand development is time consuming and costly than

parent brand transfer (Shahrokh, 2012). Firms generally acquire brand to leverage their parent brand

association (Bambauer-Sachse et al. 2011).

But success of the brand name extension depends on the firms’ characteristics such as firms’ size,

brand numbers in the target market, market share, brand strength, marketing support, advertising and

distribution (Xie, 2012). Besides, high brand concept consistency and product feature similarity is the

focal point of success for the parent brand name assortment (Xie, 2012). Volckner and Sattler, (2006)

noted that parent – product fit, retailer acceptances and marketing support, parent product experiences are

the main determinant of M&A brand portfolio. But Nijssen and Agustin, (2005) noted that brand

positioning, extension product’s value, fit between extension and parent brand are prerequisite for brand

name extension success. Country of origin (Klein 2002) and cultural effect on the parent brand name

extension are the factors as well because of brand dilution by different conflicting information and

responses in the Eastern and Western countries (Ng, 2010). Branded house architecture is succeeded

when effective marketing strategy is initiated (Sattler et al, 2010).

Conceptual Framework and Proposition

Branded house architecture is relatively complex task in the cross border market than domestic market

since various dimensions need to be considered after brand acquisition. This study carries on brand name

extension following branded house structure after acquiring the brand and the antecedents of branded

house structure as consumer, market and firm level factors (Damoiseau, 2011; Xie, 2012). Those factors

consider the marketing environment, evaluation of brand association, fit and brand equity perception (Xie,

2012).

Consumer Level Factors

Consumer in the host country plays a significant role for the establishment of brand architecture.

Generally, consumer behaviors, norms and beliefs in the host country affect the brand name extension

(Xie, 2012). So, brand structure should be evaluated considering the consumer perception. Consequently,

in this paper, uncertainty avoidance, long term orientation and customer innovativeness in the host

country perspective after brand acquisition have been given precedence.

Uncertainly Avoidance

In the international business, the cultural dimension is considered while firms accomplish the global

market segmentation. Hence, cultural knowledge is the dominant part to understand the target customers’

behavior (Krueger and Nandan, 2008). Hofstede (1991) denoted five cultural dimensions about the

national cultural differences - uncertainty avoidance, individualism/collectivism, masculinity/ femininity,

and power distance, long and short-term orientation. These dimensions are more adopted in the

international business and marketing literature since cultural dimensions influence the perception of brand

image (Hsieh 2002). Generally, uncertainty avoidance is the weaker dimension than others (Henseler

et al, 2010). Nevertheless, this dimension influentially makes role on substitutability and quality


(Henseler et al, 2010). Uncertainty avoidance dimension shows the specific cultural risk and uncertainty

tolerance. Therefore, high uncertainty avoidance society is reluctant for any types of risk and opposes to

modify the brand names due to predictability, stability (Hofstede, 1980). Henseler et al, (2010) got the

positive relation between uncertainty avoidance and the direct brand name extension as a branded house

for parent brand extension success. However, there is other close relation between uncertainty avoidance

and consumer behavior regarding brand image (Hsieh 2002). In the high uncertainty avoidance society,

perceive risk and uncertainty take important part for consumer perception, information cost, brand

attributes, and beliefs (Erdem, Swait, and Valenzuela (2006). This dimension is incredibly imperative to

examine the consumer perception about the branded house extension, acquiring brand in the host market.

In contrast, new brand name is risky in the high uncertainty avoidance society due to product quality

assurance by which companies face the consumer’s perceived risk. So, company tries to reduce perceived

market hazard with the quality assurance using branded house structure because high uncertainty

avoidance society prefer consistent brand (Xie, 2012).

Nevertheless, parent brand has higher image, branded house strategy is more influential due to low

perceived risk with the less marketing cost (Erdem, Swait, and Valenzuela, 2006). Branded house strategy

provides the product knowledge to consumer (Nan 2006). Also, brand extension reduces the new brand

associated risk (Aaker and Keller 1990). During the parent brand extension, acquirer would take branded

house architectural strategy as in the high uncertainty avoidance society; consumers might not be

motivated for the other brand structure (Henseler et al, 2010). Basically, consumers trust the credible

brand architecture in the high uncertainty avoidance society which is linked to the parent brand

(Chaudhuri and Holbrook, 2001), with the less risk involvement (Erdem et al, 2006). Consequently,

branded house strategy can alleviate the perceived risk and increase the consistent brand association in the

high uncertainty avoidance host market (Xie, 2012). Subsequently, branded house strategy is more

beneficial for company in the society with high uncertainty using direct name strategy. Considering the

above issues, the following proposition is initiated-

Proposition 1- The High Uncertainty Avoidance has an affirmative consequence on the branded house

strategy in the host market at the post brand acquisition by the firms from emerging economies.

Long Term Orientation

Long-term orientation is an approval of values associated with potential rewards, particularly insistence

and carefulness (Henseler et al, 2010). Generally, every cultural dimension has significant influence on

brand architecture. Henseler et al, (2010) got that there is a noteworthy relation between long term

orientation and direct or indirect brand name extension in the brand architecture for parent brand

extension success. Researcher also got the significant direct effect of long term orientation on brand

extension as branded house strategy are successful in the long term oriented society rather than short term

(Henseler et al, 2010). Accordingly, in the long-term society, parent brand with high image oriented brand

gets the facilities to use the branded house strategy for their existing brand equity. In the long term

oriented society, consumers are intended to have long term relationship with the parent brand Henseler

et al, (2010).

Nevertheless, acquired brand has high brand equity influence to parent brand to leave that brand

name and following the house of brand or highly endorsed brand strategy in the long term oriented

society. If the parent brand has strong relation with customer, branded house strategy can be the superior

strategy in the long term oriented society. Because, consumer in the long term oriented society take

decision with their previous experiences and they also trust the parent brand (Monga and John, 2007).

Previous research on the cross cultural psychology showed that Asian background society accepts the

parent brand extension with low level of categorical and conceptual fit while western society opposes

(Monga and John, 2007).Henseler et al (2010) got that in the long term oriented society, transferability

aspect of fit are important and consumers also tolerate any offers with non-complementarities. In contrast,

complementary offers are most important in the short term oriented society (Monga and John, 2007).


Brand image transferability from the parent brand to the extended brand is influential. Hence, the

proposition arises here is as follows-

Proposition 2- Long term orientation has a positive effect on the branded house architectural strategy after

brand acquisition in the host market by the firms from emerging economies.

Consumer Innovativeness

Consumer innovativeness creates circumstance where individuals are eager to get new ideas and innovative

decisions independently (Xie, 2012) with less concern about the fit. It directly influences the fit and quality

dimension of Aaker and Keller’s (1990), brand extension model (V ö lckner and Sattler, 2006). Generally,

masculinity society moderates the consequence of fit and quality (Henseler et al, (2010). In the high

masculinity society, parent brand quality is usually higher (Henseler et al, 2010). Previous researches clarify

that masculinity society is positively interrelated with the consumer innovativeness (Sing, 2006).

Complementarities have a higher influence on masculine society while transferability is critical for feminine

cultures. Besides, complementarities have a high impact in masculine culture while transferability in the

feminine culture (Henseler et al, 2010). Innovative consumers can easily adopt new brand’s communication

and message as well as offer (Citrin et al. 2000). Consumer behaviors and characteristics are associated with

consumer innovativeness in relation to communication and personality and socio-economic variables (Xie,

2012). The elements of the innovativeness are generally decision making ability, relationship, interpersonal

communication and independence (Xie, 2012). In the host market, few social groups are innovative which

might be the segmented for indirect brand name extension as the endorsed band or house of brands instead

of branded house because consumers are relatively ready to take high probability to accept new products

(Xie, 2012). New brand name or house of brands reduce the probability of parent brand equity dilution and

spread the risk in the acquired and acquirer level. However, innovative customers can neglect the branded

house due to lack of innovativeness (Klink and Smith, 2001). They are keener to have new brand without

any associations while brand name extension transfers the association and brand knowledge by the side of

reducing the associate risk (McCarthy et al, 2001). Finally, this is concluded that consumers have higher

propensity to accept house of brand and endorsed brand strategy rather than branded house. Accordingly, it

is conceptually proposed that

Proposition 3- Consumer innovativeness has a negative influence on branded house architectural strategy

after the brand acquisition in host market by the firms from emerging counties.

Power Distance

Power Distance is more likely an autocratic structure accepted by the social members who allow the

power variation in the society (Hofstede, 1991). Generally, parent’s indirect brand name extension is

successful instead of branded house strategy in the low power distance society concerning the fit and

quality of the extended brand (Henseler et al, 2010). Previous research shows that consumers in the low

power distance society are more quality concerned rather than being responsive and reliable (Furrer et al,

2000). Consumers are less loyal to the parent brand in the low power distance society, which is

challenging for companies to use branded house architecture (Palumbo and Herbig, 2000). Transferability

and complementarities are influential in the individualistic society. However, in the collective society,

consumers do not consider the fit between parent and extended brand. If they get the strong parent brand

link with the extended brand, they will accept the extended brand where branded house architecture

strategy can be successful. Previous study showed that linked names in the extended brand are successful

in Asia while fit would not be considered under the one brand name (Han and Schmitt, 1997). Hofstede’s

index shows that collectivist society has high power distance while the individualist society has a low

power distance. Consumers in the individualist and low power distance society are less devoted to brand

being negatively related to branded house strategy while consumers in collectivist and high power


distance society are brand loyal and hence branded house strategy might be successful (Henseler et al,

2010). Therefore, the fourth and fifth propositions of this paper are as follows-

Proposition 4 - Low power distance has a negative effect on branded house strategy after brand

acquisition in the host market by the firms from emerging countries.

Proposition 5 - High power distance society has a positive consequence on branded house strategy after

brand acquisition in the host market by the firms form emerging countries.

Market Level Factors

Market Concentration

Market concentration is an aspect of market structure (Xie, 2012) and is defined by market share (Scherer,

1980). It means the specific market when few competitors dominate the specific market (Zhao and Zou,

2002). This is noted that high focused market can be dominated by the few giant companies while low

focused market is controlled by many competitors and this market formation influences to competitors to

take different market oriented brand structural strategies (Varadarajan, 2001). Besides, market

concentration is positively related with brand acquisition in the cross border brand expansion (Damoiseau,

et al, 2011). Because brand acquisition does not force to increase the supply and to down the price while

new brand establishment is riskier with more supply and down price in the market (Damoiseau et al,

2011). However, market demand can be classified by core and tangential areas according to resource

partitioning theory (Xie, 2012). Core demand in the market is the common demand while tangential

demand is the segmented demand of customers. Generally, companies compete each other in the high

focused market for the core market demand and therefore, segmented demand will be identified by

companies (Xie, 2012). In that consequence, specialized companies focus on the segmented market

(Swaminathan, 2001). So, mass marketing is not necessary to pick the specialized market. Current

research shows that when few competitors are dominating the market, large volume of companies

concentrate on the niche market (Zhu et al, 2009).

So, companies acquire the brand in the international market can focus on the niche market (Toften

and Hammervoll, 2009). In the multi-dimensional market, customers belong to the heterogenic economy,

social structure and culture. Also companies should gradually compete in the core market structure by

developing the brand development (Xie, 2012). Hence, targeting group of customers in the market is the

wisest decision during the brand structure (Xie, 2012). Branded house architecture provides the same

brand features and concept to the certain similar customer after brand acquisition. Also brand association

and perceived fit are factors for the brand expansion success (Nan, 2006). New brand development is cost

effective while branded house strategy is effective to target market for brand expansion. Accordingly, this

is shown that where customers demand is common in the core market structure, parent brand name

expansion with product brand is usable (Xie, 2012). If market is highly focused, specialized companies

serve into the niche market. Niche market does not show that parent brand association will be highly

associated. In the low focused market, firms might take the branded house strategy in the market center

due to homogenous demand (Xie, 2012). Banded house strategy might be viable and proper in the post

M&A to compete in the market center.

Proposition 6 - Market concentration has a negative effect on branded house architecture after the brand

acquisition in the host country by the firms from emerging countries

Emerging Industry

Besides the market structure, market growth also influences the brand expansion strategy. Damoiseau

et al, (2011) found a significant relationship between market growth and brand acquisition However,


other researcher proclaimed that to speed up the market entry, brand acquisition is effective (Caves and

Mehra, 1986). Basically companies’ global brand expansion depends on whether they are entering in the

market as mature, growing or emerging (Eisenhardt and Schoonhoven, 1990). New companies can

survive easily in the emerging industry (Mata and Portugal 2002). Even companies get more profit in the

emerging industry than the matured market (Xie, 2012) since emerging market increases firms’

efficiencies and productive capacity (Brouthers, 2002) and simultaneously matured market influences

companies to place less investment due to uncertainty (Brothers, 2002). Emerging industry stimulates

companies’ behavior to take successful branding strategies. In this situation, companies can acquire brand

in the host market and take the branded house strategy to minimize the high uncertainty and risk as well

as expenditure (Xie, 2012). Hence, companies can take the branded house strategy to get benefited in the

emerging industry. Therefore, it is proposed that --

Proposition 7- Emerging industry has a positive effect on branded house architecture after acquiring brand

in the host market by the firms from emerging countries.

Firm Level Factors

Prior Knowledge

Prior international experience motivates the expansion strategy (Brouthers and Brouthers, 2000). Besides,

previous particular experiences on brand acquisition or new brand development also influence the further

brand acquisition strategy (Damoiseau et al, 2011). International experience increases the inaccessible

experiential knowledge. Tacit knowledge is important for companies to acquire the brand. So,

international experience immensely assists companies to take branding decisions and leverage the

acquirer brand in the host market (Collionson and Houlden, 2005) as in the cross border investment, cost

will be increased without international knowledge. High cost and risk orientation induces firms to take

branded house strategy (Aaker and Keller, 1990) though success is dependable on acquirer brand

association and fit (Nan, 2006). Branded house is also interrelated to brand benefits. With the

international experience, company should have host market knowledge (Xie, 2012). Before acquiring

brand, local market knowledge should be as far as realistic. However, specific knowledge might not exist

in the firms before brand acquisition (Downes et al, 2000). In the cross border brand extension,

companies generally seek familiarity based on institutional, cultural and stakeholders of the host market

since host country knowledge incredibly depends on country-to-country and seldom transferable in the

dynamic market (Xie, 2012). Most of the diversified firms are linked to the brand acquisition than less

diversified firms (Damoiseau, et al, 2011). Customer preference is also contingent according to country

characteristics (Hunt 2000). Firm’s strategy is an important driver to develop the brand and to

communicate the customers in the host market. Local knowledge increases the competitive advantage in

the host market (Delios and Beamish, 2001). Without host country knowledge, parent brand association

and perceived fit is hard to attain. As host market is unique in the global market, its knowledge helps

companies to deal the local branding strategies. Therefore, the proposition arises here is -

Proposition-8 Host market prior knowledge has a positive effect on branded house strategy after

brand acquisition in the host market by the firms form emerging countries.

Localization Strategy

Localization strategy denotes that parent brand operates the acquired brand with local circumstances; for

instance- staffs might be recruited locally to manage the acquired brand (Zhu & Huang, 2007). However,

own cultural practices may be inappropriate into the cross culture (Hofstede, 1985). Standardization is the

cost effective marketing and production strategy regarding economic of scales and culture (Xie, 2012). It

drives the firms to minimize the cost and to establish the consistent relationship and control over the

customer needs. Standardized brand and marketing strategies increase the company performance. But


marketing standardization has various constraints such as local management resistance, operational

incompatibility, local government regulation and so on (Cavusgin and Zou, 1994). Nonetheless,

localization strategy is more essential for the local marketing environment (Xie, 2012) as variety of

factors affect the branded house strategy such as marketing efficiency, over brand extension, promotional

sales, brand acquisition etc (Buday, 1989). Branded house strategy might increase or destroy the brand

equity of the parent brand (Xie, 2012).If it is preferred in the right host market; it would increase the

market share. However, standardization is likely to construct the perceived fit and association and it

affects branded house strategy favorably than localization in the host market (Xie, 2012). Generally,

marketing strategy, customer’s lifestyles and values differences influence companies to modify the host

market. Besides, according to network perspective, acquired brand should not only pursue the local norms

and origins but also follow the international competitors, inter-organizational global network and the

standard or best fit strategies (Evans et al. 2002; kraatz, 1998). Schneider (1998) noted that cultural

distinction should be considered in the cross border investment. Subsequently, parent brand name and

features fit can be the success of branded house strategy in the host market (Zou et al, 1997). Hence, it

might be proposed that

Proposition-9 Localization strategy has a negative effect on branded house strategy after brand merging in

the host market by the firms from emerging countries.

County of Origin

Most of the companies from emerging countries face the county of origin (Coo) deficiency to enter the

global market. Hard technologies are not only the basis of innovation rather marketing is an influential

driver for innovation (IBM 2010). For instance, Chinese companies are less global brand as China is not a

brand developer and innovator yet (Wei and Li, 2000) and is not matured in marketing strategy along with

the cultural background (Ille and Chailan, 2011). Generally, western companies develop any product or

services along with the brand image and goodwill (Ille and Chailan, 2011). Usually, factor endowed

countries get positive Coo effect as companies from Germany or African countries get benefits to be

global brand in the manufacturing industry while France for luxury goods (Ille and Chailan, 2011).

Emerging countries mostly acquire global renowned brand and keep the acquired brand name for instance

Lenovo, Jaguar and Land Rover (Kumare et al, 2009) by following endorsed brand architectural strategy

to brand image along with country image.

Nevertheless, Chinese brands have been succeeded with parent brand name in the global market by

the strong management, western marketing principles and host country oriented strategy (Chailan, 2010).

For instance, Chinese Haier brand got global brand recognition with strong management (Larcon and

Haier, 2010). Furthermore, global customer perception is for China as bad quality while Japan is for good

quality (Ille and Chailan, 2011). Empirical studies show that only 17 percent Americans show their

interest to buy Chinese origin brands (Tucker, 2006). So, emerging countries should improve the image

that is influenced by Coo effect (Ramo, 2007). Until improving the country image for the certain industry,

companies from emerging countries might not be benefited to take branded house strategy after M&A.

Besides, product category is another influential matter to follow the branded house strategy as Coo effect

is not favorable in certain instances e.g.- Russian raw materials (e.g.-Rosneft, Lukoil and Gazprom etc)

and diamonds from South Africa (Ille and Chailan, 2011) which are the industries companies from factor

endowment perspectives. Furthermore, Tata group’s Titan watch brand is still not recognized global

brand and allied executives noted to acquire global brand like “Swiss watch brand” with favorable Coo

effect (Khanna et al, 2008). Also, some African local brands suffered lack of foreign countries recognition

(Ille and Chailan, 2011). Under the light of above discussion, it is proposed that –

Proposition-10 Country of origin dimension has a negative consequence on branded house strategy in the

host market after brand acquiring by the firms from emerging countries.


Brand Equity

Brand equity is the customers’ mental association with the certain brand (Hsuabg-Ming, 2011). Brand

equity has five assets - brand awareness, loyalty, brand association, perceived quality and proprietary

brand assets (Aaker, 1991). It is the interior perception of marketing (Buil et al, 2013). Basically, prime

function of the acquirer is to create, transfer, enhance or regain the brand equity (Muzellec and Lambkin,

2006). For instance, 49% of the total Gillette value was brand equity during the acquisition by P&G

(Bhadadir, et al, 2008). Hence, brand name extension is a phenomenal component of brand equity (Aaker,

1991) and brand equity is the functional concept of competitive advantage (Petburikul, 2009) related to

corporate brand name. Most significantly, brand performance is the output of brand equity (Petburikul,

2009). Brand name changes after brand acquisition might dilute the brand equity of both parent and

extended product brand (Muzelled and Lambkin, 2006). For instance, positive brand equity yields 30%

positive stock return while the negative equity outputs 10% negative return (Ettenson and Knowles,

2006). So, in the brand acquisition, parent brand extension from the emerging countries apprehends

acquiring renowned global brand present themselves as global brand; e.g. - Lenovo, Jaguar and Land

rover (Ille and Chailan, 2011). Besides, acquirer from emerging countries can keep the acquired brand

name to sustain the brand equity in the host country. Hence, it is proposed that –

Proposition-11 Brand equity has a negative effect on branded house architectural strategy after acquiring

the brand by the firms from emerging countries.

Customer Level Factors

+

+

_- -

_

+

Market Level Factors

-

+

Firm Level Factors

+

-

-

-

Figure 1. Strategic factors for branded house architectural strategy in the host country by

firms from emerging countries

Branded House

architecture

Uncertainty Avoidance

Consumer Innovativeness

Country of Origin

Brand Equity

Long Term Orientation

Market Structure

Emerging Industry

Prior Experience

Localization Strategy

Power Distance


Conclusion

As it is said in the earlier part, this paper strives to develop conceptually by contributing the theory

development on the branded house architecture in the international marketing research. This attempt is

optimistically advance the knowledge. Concentration on the customer evaluation of brand extension by

the firms from the emerging countries in the host country has been incalculably emphasized. Besides,

there is a conceptual framework concentrating on the three levels of factors such as customer, market and

firm. In practice, uncertainty avoidance, consumer innovativeness and high power distance are positively

related to the branded house architectural strategy while low power distance has a negative output. At the

market level factors, it is seen that highly focused market has negative relation with branded house

extension while emerging industry is positively related. At the firm level factors, prior knowledge is

positively associated to the branded house architecture and other factors such as localization strategy,

country of origin and brand equity has negative relationship. Furthermore, it is revealed that customers in

the host country are unique and so branding strategies should be unique for the respective country. Firms

from emerging countries not only follow the parent brand association and perceived fit but also follow

various factors jointly affect the branded house structure.

The guidelines revealed in this study would be supportive to the managers for the firms of emerging

countries in the multifaceted international market. The exposed three levels of factors are more imperative

when companies design brand architecture after the brand acquisition. This conceptual work also guide

the future researches on branded house structure empirically along with the other architectural strategies

such as house of brand, sub brand, endorsed brand and licensing brand. Besides, a vice-versa research can

be placed study on firms acquiring from developed countries. Finally, the forwarding conceptual model

can be tested with the performance and therefore, it is important to note that the above conceptual model

segmented in three levels is not yet empirically examined. Thus, an emergence of empirical testimony is

obvious in this respect to make this conceptual model building more authentic.

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ANTECEDENTS OF BRANDED HOUSE ARCHITECTURE IN BRAND … · 2016. 5. 17. · HSBC with branded house architectural strategy while indirect naming strategy is derived by parent brand