Asian multinational Companies Co-Branding as Brand Strategies239880/FULLTEXT01.pdf · Empirical Study ... This research will analyze each case company‟s portfolio with regional

University of Halmstad

School of Business and Engineering

Bachelor Dissertation (Independent Project)

Asian multinational Companies‟ Co-Branding as Brand Strategies

Business, 15 credits

Hand in date: May 26,2009

Author: Choi Yong Chul, 830815-T136

Advisor: Ramona Thomas

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Index

Index .................................................................................................................................................................................................. 2

1.Abstract ........................................................................................................................................................................................ 4

2.Introduction ................................................................................................................................................................................. 4

3.Problem ......................................................................................................................................................................................... 6

4.Purpose.......................................................................................................................................................................................... 6

5.Literature Review ...................................................................................................................................................................... 7

5.1 Brand Theory ................................................................................................................................................. 7

5.2 Brand Strategies ............................................................................................................................................ 8

5-3 Co-branding Theory .................................................................................................................................... 8

5.4 Portfolio analysis ........................................................................................................................................... 8

6.Theoretical Framework ........................................................................................................................................................... 9

6.1 Asian Multinational’s Regional Matrix .............................................................................................. 10

6.1.1 Horizontal Axis ................................................................................................................................... 11

6.1.2Vertical Axis .......................................................................................................................................... 11

6.2 Co-branding Typology ............................................................................................................................. 12

6.2.1 AIMS ...................................................................................................................................................... 13

6.2.2 CATEGORY ........................................................................................................................................ 13

6.2.3EFFECTS ............................................................................................................................................... 13

7.Methodology ............................................................................................................................................................................. 14

8. Empirical Study ..................................................................................................................................................................... 15

8.1. LG Electronics-PRADA .......................................................................................................................... 15

8.1.1 The description of Asian Company-LG Electronics ............................................................... 15

8.1.2 The aim of LG-PRADA Co-Branding ......................................................................................... 16

8.1.3 The category of Co-branding Approach .................................................................................... 16

8.1.4 The effects of Co-branding ............................................................................................................. 16

8.2. SONY-ERICSON ...................................................................................................................................... 17

8.2.1 The description of Asian Company –SONY Group................................................................ 17

8.2.2 The aim of SONY and Ericsson Co-Branding .......................................................................... 17

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8.3. LENOVO-IBM .......................................................................................................................................... 19

8.3.1 The description of Asian Company-LENOVO ........................................................................ 19

8.3.2 The aim of IBM-LENOVO Co-Branding .................................................................................. 19



9.Analysis ...................................................................................................................................................................................... 20

9.1. LG and PRADA ......................................................................................................................................... 21

9.1.1 Regional Matrix – LGE, MOBILE COMMUNCATION (MC) DEPARTMNET ....... 21

9.1.2 Co-branding typology-LGE and PRADA .................................................................................. 22

9.1.3 The linkage Regional Matrix and Co-branding Typology of LG-Prada ......................... 23

9.2 Sony Ericsson .............................................................................................................................................. 24

9.2.1 Regional Matrix- SONY MOBILE COMMUNICATION (MC) DEPARTMENT ..... 24

9.2.2 Co-branding typology-Sony and Ericsson ................................................................................. 25

9.2.3 The linkage Regional Matrix and Co-branding Typology of Sony-Ericsson ................. 26

9.3 Lenovo IBM ................................................................................................................................................. 26

9.3.1 Regional Matrix-LENOVO ............................................................................................................ 27

9.3.2 Co-branding typology-Lenovo and IBM .................................................................................... 27

9.3.3 The linkage Regional Matrix and Co-branding Typology of Lenovo-IBM .................... 29

9.4 Analysis of Asian Multinational Co-branding .................................................................................. 30

10.Conclusion .............................................................................................................................................................................. 31

11.References-literatures, articles and web sites. ............................................................................................................ 31

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1.Abstract

Asian companies have turned to be multinationals. Many factors could be the reasons

of this phenomenon, these days, cooperation strategies, especially, co-branding is an issue.

Therefore, this study pursues to study which contexts Asian companies face and how Asian

firms use co-branding. This study will study three cases: LG-PRADA, Sony-Ericsson, and

Lenovo-IBM of co-branding. This research will analyze each case company‟s portfolio with

regional matrix and study how company use co-branding with co-branding typology. After

reading this paper, readers can have an integrative view over Asian companies‟ contexts and

its co-branding strategy as its growth strategies.

2.Introduction

The introduction part will show you why co-branding is worthy to study by showing

the hardships of doing business, the popularity of cooperation strategies, and the trend of co-

branding. Also, introduction gives some ideas why people need to have an interest on Asian

companies business.

As competitions in business become fierce, launching a new brand into the world

market requires much more efforts for multinational companies than ever. For example, when

Toyota launched Lexus in 1989, the world top 100 brands 2006 ranked by Business weeks

2007, Toyota had to cut down new products prices to penetrate to the established luxury car

market: in the middle six cylinders segment market in US, Lexus priced LS400 $38000

compared to Mercedes-Benz‟s 420 SEL $63000 and BMW‟s 735i, $55000 (Car and Driver,

1989). Because of this lower price strategy, Toyota was accused by competitors of dumping

in 1989. Therefore, Toyota had to spend much time and money on this case, and worse, Lexus

is still undervalued as a reasonable Japanese car brand compared to competitors (Kaho

Sitmizu, 2005). Even though Toyota lunched Lexus into upper segment, it is still hard to be

free from its origin effects. This implies how hard to launch a new brand into markets for

international firms.

Not only launching a new brand but now days, many multinational companies seek

new opportunities with their own established brand. However, more failures are reported than

success cases. One is that Harley Davison, a motorcycle company based in US, expanded its

brand line into the cosmetic industry but this attempt was failed because of Harley Davisons‟s

strong masculine images. Consumers linked smells of oil with Harley Davison cosmetics

lines when they imagined Harley Davison‟s cosmetic lines (Matt Haig, 2005 Pp 65-79). Even

though Harley Davison successfully expanded their business into the logo printed ornaments

in many products based on strong customers‟ loyalty, they met some hard limitations

originated from its strong brand identity. This case implies that how hard for multinational

companies to overcome their established brand identities and images when it comes to

expand their business with their own brand.

Since finding a new opportunity is difficult for a single company, cooperative

strategies become popular. Isobel Doole and Robin Lowe mentioned 3 types of cooperative

strategies in their literature: joint venture, strategic alliance and reciprocal share holding

ownership (Isobel and Robin, 1994). Joint venture means more than two companies establish

a new company for marketing or/and manufacturing, strategic alliance is at least two

companies combine value chain activities for the purpose of obtaining competitive

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advantages and reciprocal share holdings means firms take equity in another firm for the

purpose of influencing the strategies of partners (Isobel and Robin Pp 239-245). Many

empirical cases show the popularity of cooperative strategies. Sony and Ericsson established

a joint venture to compete with Nokia and Motorola (Wei Lun Chang, 2008). The most

representative case of strategic alliance is flight companies‟ alliance. Star Alliance includes

21 flight companies e.g. United, THAI, Asiana Airlines, Lufthansa and SAS. This makes

members take advantages from reducing costs and sharing codes. Lastly, Munich Re and

Allianz, German insurance companies, share their equity for influencing strategies of both

partners, to complement deficiencies as a re-insurance and insurance company.

The past trend was most cooperative strategies

in operational or technological aspects of companies but the recent trend is expanding

cooperative strategies concepts into co-branding, brand Alliance. Sony and Erricson (Mobile),

Daimler and Chrysler (CAR), HP and Compaq (PC) and LG and Phillips (Display) are good

examples of the current trend. Multinational companies are holding partners‟ brands to

broaden their brand image or expand market shares by using partners‟ established brand

power and image, instead of launching a new brand or extending established brands.

Still, most co-branding is used in same/similar industries, but the most recent trend

even moves beyond industrial boundaries e.g. fashion/electronics, sports/car and art/airlines.

Representatively, co-branding between soft industries, fashion, and hard industries,

manufacturing, is popular recently e.g. Apple/Fendi and Hermes, LG Electronics/Prada,

Ferarri/Puma, Samsung Electronics/Anna Suui, Benz/Giorgio Armani, Marriot/Bvlgari (Jang

EunYung,2006). This co-branding helps companies find new opportunities to expand their

brand into different market segments or to open new markets.

Principally, firms keep trying to find new markets and segments with few risks and

costs as possible as they can. To reach each firms‟ goals, cooperation strategies become

popular. Researchers have defined traditional concepts of cooperation strategies, joint venture,

strategic alliance and reciprocal equity holding with operational or technological factors.

However, marketing approaches were not enough. Especially, brand, one of the most

important multinational companies‟ assets, was out of the mainstream of study.

Particularly, although Asian companies are growing so fast, and their products are

becoming reliable, trustful, stable, their products and brands are undervalued, compared to

western competitors. Even though Asian companies dramatically increase their sales volume,

their products‟ images are still remained as resonable brands. In an effort to overcome this

prejudice, Asian companies consider co-branding as solution of brand strategies nowadays.

Especially, Asian companies‟ business strategies have been highlighted in business

researches because some similar business strategies from Asian firms made companies win

the competitions. For instances, family oriented business, lifetime employment, strong

interconnection with suppliers and sub suppliers, etc have been studied. Recently, Asian

companies use co branding as their brand strategies. As Asian companies have done their

business with distinct strategies, this research expects to find some patterns of Asian

companies co-branding strategies.

Therefore, this study how Asian companies used co-branding strategies for brand strategies

will add lights on future studies and companies strategies.

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researchers can learn from the past. This study will research several practical co-branding

cases. By reviewing business cases, readers can have some ideas about co-branding

This research focuses on Asian companies‟ co-branding. Because Asian companies

have done their business with distinct characteristics, this study is willing to find similarities

from Asian companies co-branding cases. In order to find out similarities, first, the study

analyzes Asian companies‟ business contexts with a relevant theory. Secondly, this research

analyzes how Asian firms do their business in given circumstances with an analysis tool.

Then, after studying this topic, the researcher could discover the facts which conditions Asian

multinationals faced, how Asian mutinationals have enacted co-branding.

The study will tries to view co-branding trend with business context integrated view.

This approach is different from studies have done so far because past researches only show

Asian companies characteristic portfolio or study companies‟ strategies. This integrative

study is necessary because all business strategies come from various conditions of companies.

By studying co-branding with integrative approach, this study will help readers have the

comprehensive analysis view.

5.Literature Review

The literature review part will study key concepts of this research, what is brand, co-

branding and brand strategies: this is related with Co-branding Typology in theoretical

framework. Later, this part elaborates portfolio analysis: this is linked with Regional Matrix.

In order to research about how Asian multinational companies use co-branding for

brand strategies, literature review is composed in a following way. First, this research will

look through some traditional theories about the brand and brand strategies: What brand

means. How company use brand strategy. Secondly, in order to know business trends, co

branding, this paper will refer co-branding theories. For the last, this research needs to review

the portfolio to know what is SBU and how can analyze business position. This can make

research approaches the research question proposed before: How Asian multinational

companies use co-branding for brand strategies.

5.1 Brand Theory

Defining „brand‟ within one sentence is not so easy. Many scholars have tried to

define what „brand‟ is. Kotler mentioned brand „any label that carries meanings and

associations‟ (Kotler, 2003 Pp.8). Kotler argued that every name can be a brand, even name

of cities and people. However this definition is too broad to study what brand is. Thereby,

scholars proposed the definition of brand specifically. Kotelr specified the definition of brand

in his literature that a brand can be defined as a specific name, symbol or design -or more

usually some combination of that is used to distinguish a particular seller‟s brand. More

simply, a brand is an identifiable entity that makes specific promises of value (Patricia, 2000

Pp4). This definition is consisted of some core words. Identifiable means „separate one thing

from other similar to‟, identity means „something that has separate and distinct existence‟,

specific promises means „a claim from products and services that what can they deliver‟ and

value means „something that customer care about extent‟ (Patricia, 2000 Pp4). Beside many

other definitions of brand from many literatures, this study can draw the concept of brand

from similarities of different definitions that a brand contributes products and services to be

identified from others and to impose insisted value to brand holders. Branding is an action

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which names and adds value to products or services. Branding delivers the 4 levels of

meaning which are attributes, benefits, values and personalities. A brand is built from the

coordination of many business activities, advertising, public relations, social events, social

causes, spoke person and so on (Kotler, 2003 Pp9). This concretes brand equity, as a result.

Kotler mentioned that the value of brand based on extent to loyalty, name, awareness,

perceived quality, strong brand associations, other assets, such as patents, trademarks and

channel relationships(Kotler, 1999 Pp572).

5.2 Brand Strategies

Brand decision is covering various topics including going to brand or no brand, what

name they will follow: manufacturers‟, private brand, licensed brand or co-branding. After

brand is built, in order to grow, firms face several choices, launching a new brand, extend line,

extend brand or having multiple brands. Lastly, in the process of keeping brand, firms should

decide reposition or alteration. Every stage is important, so that every part has lots of topics

have studied so far. When it comes to brand strategy, it is divided into 4 methods. According

to Kotler, companies have four options: line extensions, brand extensions, multiple brand and

new brand. Line extension occurs when a company introduces additional items in a given

category under the same brand name such as new flavors, forms, colors, ingredients or

package size. Brand extension is any effort to use a successful brand name to launch a new or

modified product into new category. Brand stretch puts brand into new industry (Kotler, 2003

Pp 11).

5-3 Co-branding Theory

Co-branding is a relatively new concept in business world and is used to encompass a

wide range of marketing activity involving the use of more than two brands (Tom Blackett

and Nick Russell, 1999 Pp 6). On top of that, co-branding is broadly defined as „any paring of

two brands in market context, such as advertisement, products, product placement, and

distribution outlet‟(Grosmann, 1997). Kotler argued co-branding occurs when two

established names of different companies are used on same products (Kotler, 1999 Pp.577).

However, this concept is too broad to study. Researchers put efforts to make narrow

definitions. According to Tom blackett, co branding is the form of co-operation between two

or more brands with significant customer recognition in which all the participants‟ brand

names are retained. Co-branding stands for the combination of two brands to create single or

unique products (Levin et al, 1996).

5.4 Portfolio analysis

Multinational companies have several strategic business units. Strategic business unit

is a unit of a company that has a separate mission and objective, and which can be planned

independently from other company businesses. An SBU can be a company division and

product line with in a division, or sometimes it can be a single product or a brand (Kotler,

1999 Pp.81) Because multinational company is comprised of many strategic business units,

called SBU, it is necessary for companies to evaluate SBU‟s business before making a

strategic decision. Traditionally, in order to assess SBU, portfolio analysis methods are

devised. Portfolio analysis needs to show how much SBU should contribute and receive.

Therefore, portfolio-analysis methods evaluate SBUs on two different dimensions: the

attractiveness of market or industry; and the strength of SBU in market or industry (Kotler,

1999, Pp. 97).

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6.Theoretical Framework

Theoretical framework proposes two theoretical backgrounds for this research which

is Regional matrix and Co-branding Typology. Each framework will describe why this theory

is chosen, how it will be used. Also, the paper will give readers details of each theory: explain

each variable deeply and specifically.

The research intends to research „Asian companies‟ co-branding strategies as brand

strategy. Study will analyze Asian companies‟ co-branding strategically. In order to study this

topic, two theoretical backgrounds are suggested.

Basically, the portfolio analysis is required. It makes researchers analyze companies‟

position and condition. To study Asian companies‟ portfolio, Regional Matrix is proposed.

Regional Matrix is consisted of two axes. The vertical axis shows Firms‟ position in the

market. It is divided into three categories, regional, bi-regional and global based on firms‟

business geographical coverage. This axis shows Asian Multinational companies‟ SBU

position. The horizontal axis shows companies‟ condition based on firms‟ business dimension

they are oriented. It is consisted of Up-stream and Down-Stream, Up-stream indicates

production and resources oriented and Down-stream shows market oriented. By using this

framework, this research aims to analyze companies‟ portfolio before studying co-branding.

The regional matrix will assess Asian multinational companies‟ SBUs‟ regional

position as the one of the SBU from multinational and SBU‟s business condition. Firstly, this

model is suitable in this study because the researcher can find out each SBU‟s position from

the geographical aspect of view. The geographical view is important because this study

intends to study Asian multinational. Thus this model shows SBU does business as a

multinational or not. Secondly, this theoretical frame is appropriate in this research because it

makes researcher evaluate SBUs condition such as what they have strengths or weaknesses.

Thus, researcher can find out what possible alternative growth strategies companies can have,

and what companies pursue to actualize with strategic decisions.

The second framework is Co-branding typology. The Co-branding typology is

consisted of aim, category and effect. This framework will be used to analyzing companies‟

strategic co-branding approaches. What firms want to attain from co-branding decision

(aim), market share, brand extension or global branding, how firms proceed co-branding,

merging or joint venture(category), and what is gained from co-branding, image or

quality(effect). This frame work will help this research access the answer of co-branding

strategy as brand strategy.

The co-branding typology will be used in analyzing how companies use co-branding

as strategic tools. Specifically, co-branding typology makes the researcher study companies‟

strategic behaviors under the condition from regional matrix. This co-branding typology is

appropriate for this study because this model evaluate co-branding strategically. What

companies want, how they make efforts, and what they actualize. Thus this research can

analyze the entire process of co-branding.

These two theoretical frameworks make this paper study co-branding strategically

because the research can assess each case from both sides from analysis and implementation.

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This approach is principle for strategic study because the researcher can realize where

companies are and how they react.

6.1 Asian Multinational’s Regional Matrix

Regional matrix is proposed as the one of the portfolio analysis methods. Since some

articles pointed out that Asian multinationals are doing business not in the global level, this

regional matrix is introduced to find out these arguments. The Regional matrix shows Asian

multinationals‟ SBU business level from the aspects of geographical sales coverage. This is

analyzed by the horizontal axis. The horizontal axis classifies business level according to

sales distribution of SBU. The Regional matrix also shows which business dimension Asian

multinationals are originated. This can describe each SBU‟s different characteristics. This is

analyzed by vertical axis. The vertical axis classified companies whether it is market oriented

or not.

This theoretical framework is proposed because this model can show Asian

multinational companies characteristics which are insisted by researchers that Asian

multinationals are not real global firms. Also, the model can describe each company‟s

business resources and place in the global market. Thus this model can elaborate not only

Asian multinationals characteristics but also case companies‟ positions and conditions.

Geographic Scope of FSAs

FSA Types

Regional Bi-regional Global

Downstream FSAs 1 3 5

Upstream FSAs 2 4 6

(Figure1, Simon Collinson and Alan M. Rugman)

These days, Asian companies are growing fast not only in their size but also business

areas. It is not difficult to find Asian companies‟ trademarks anywhere in the world. However

researchers pointed out Asian multinational‟s business mainly based on home or regional

bases even though their size has grown. To support this, Simon Collinson and Alan M.

Rugman propose Regional Matrix. Home region firms are defined as having over 50% of

their sales from their home region; bi-regional firms have less that 50% of their sales from,

home and over 20% of sale from another triad region; host region firms have over 50% sales

from another triad region, outside of their home region and global firms have less than 50%

of their sales from their home region and over 20% from each region of the triad (Rugman

and Verbeke, 2004).

According to mentioned criteria, only three companies from 500 biggest companies

in Asia in the world are distinguished Global firms, Sony, Canon, and Mazda motors, five

firms are bi-regional: Toyota, Nissan, Bridgestone, BHP, and Flextonics, two firms are host

regional: Honda and Hon Hai precision industry, and other firms are defined home regional

companies (Simon Collinson and Alan M. Rugman, 2007).

The basic model of internationalization business is distinguishing between country

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level effects and firm level effects which called „matrix of country specific advantages

(CSAs) and firm specific advantages (FSAs) (Rugman 1981, Rugman & Verbeke, 1992). The

FSAs can be possessed by a firm, more specifically, internal assets, such as production,

knowledge, managerial, or marketing capabilities. The CSAs affect firms‟ strategies, for

example, cultural, political and financial factors (Collinson and Rugman, 2007).

Analytical regional matrix is devised to classify companies‟ business level. This

matrix excludes CSA: country specific advantages, government supports, demands in specific

regions, etc factors but it only includes FSA factors: firm specifics advantages: upstream

(resource and production oriented) and downstream (market oriented) (Collinson and Alan M.

Rugman). Researchers did not mention why they exclude CSA factors in their paper.

However this study has obvious reasons to use FSAs factors. First of all, this research can not

cover overall aspects of business in given period of time. This study wants to concentrate on

elements which companies can control. Then, information of this study is worthy for

companies from other external background.

6.1.1 Horizontal Axis

Horizontal Axis divides companies‟ business in the aspects of geographical coverage

of sales. This assumes that sales volume shows the position of companies in global market. If

the half of sales occurs in home, it is regional, if most sales is focused on two regions, it is bi-

regional and if sales are well distributed, it is divided to global.

Regional- 50% of SBU‟s sales in home region

Bi-regional-less than 50% of SBU‟s sales in home, over 20% of sales another triad

Global-less than 50% of SBU‟s sales in home, over 20% of sales each triad

6.1.2Vertical Axis

Vertical axis shows companies business conditions. Which resources each company

has, which strategic dimension company is oriented. This dimension shows how companies

are doing business, market oriented or not. Upstream FAS indicates market orientation, and

down-stream FSA means production or other resources oriented.

The research finds out what is Market orientation or Resources orientation from the

marketing management philosophy. Upstream FSAs, marketing orientation, can be explained

by the marketing concept from marketing management philosophy. The marketing concept

holds that achieving organization goals depends on determining on the needs and wants of

target market and delivering the desired satisfactions more effectively and efficiently than

competitors do (Kotler, 1999, Pp.19). Downstream FSAs, resource, production orientation,

can be described by the production concept and product concept. Production oriented

companies focus on offering products which is available and highly affordable. Thereby, the

managements put efforts to improving production and distribution efficiencies (Kotler, 1999,

Pp 17). Product concept means companies offer products which have most quality,

performance and features. Thereby, companies devote their energy to improve products

continuously (Kotler, 1999, Pp.18)

Downstream FSAs: Resource and Production oriented

Upstream FASs: Market oriented

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Regional matrix has following 6 dimensions.

1. Regional Downstream FSAs

Company does business in regional base with resource oriented strategy

2. Regional Upstream FSAs

Company does business in regional base with market oriented strategy

3. Bi-regional Downstream FSAs

Company does business in bi-regional base with resource oriented strategy

4. Bi-regional Upstream FSAs

Company does business in bi-regional base with market oriented strategy

5. Global Downstream FSAs

Company does business in global scale with resource oriented strategy

6. Global Upstream FSAs

Company does business in global scale with market oriented stratefy

6.2 Co-branding Typology

Co-branding typology is a theoretical framework which can analyze co-branding case

from the aims and approaches to results. Co-branding typology is chosen because it can make

the researcher study co-branding strategically with broader view. Instead of focusing on one

aspect of co-branding, this model covers three dimensions: Aim, Category, Effect so the

researcher can evaluate how co-branding is used in a certain case. The researcher will analyze

co-branding cases with co-branding typology: two cases of three are already studied by Wei

Lun Chang, so the researcher details it later with various sources.

Many researchers study bout brand strategies but the research about co-brand

strategies is still not enough. What drives companies use co branding (objectives), how

companies implement co-branding strategies (category), what are the effects of

companies(effects). Wei Lun Chang proposed one typology to study co-branding strategy

deeper. This research adopt this typology (figure1) to study about proposed research question:

How Asian multinational companies use co-branding as brand strategy.

(Figure1. Wei lun chang, 2008)

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6.2.1 AIMS

Researcher, Wei Lun Chang, regards that firms which implement co-branding has

three aims. Global Branding, brand extension and market share. Market share is similar to

line extension. When it comes to line extension intends to extend product line in given

category: market share aims to enlarge own markets share from their own category,

companies adopt co-branding to penetrating the market in order to increase market share in

given category. Brand extension is similar concept to brand extension, companies attempt to

broaden their brand into new category based on their own brand equity. Global branding aim

is similar to brand stretch. Brand stretch aims new industry but global branding targets enter

new markets geographically (Wei Lun Chang, 2008). Considering both strategies target to

entering new business circumstances, those two variables can be matched in this study.

Figure 2 simply compares the description mentioned before.

Co Branding Objectives Branding Strategies

Market Share Line Extension

Brand Extension Brand Extension

Global Branding Brand Stretch

(Figure2)

6.2.2 CATEGORY

In Wei Lun Chang‟s research, the researcher shows how a company implements co-

branding. First, through M&A companies can buy a established brand by merging brand from

the whole company level (Enterprise) or the separate level (department). Merging strategy

refers buying an established brand from other companies and using it with a company‟s own

brand. Second, joint venture, a company makes a contract with partner for using partners‟

brand (Wei Lun Chang, 2008). Joint venture indicates each participant make a contract to

build one new organization to conduct business. For the joint venture category, instead a joint

ventured company builds a new brand, it uses participants‟ brands.

6.2.3EFFECTS

Then, in effects part, researcher explains the effects which companies can expect from

co-branding. By using co-branding companies can improve their brand image or

product/service qualities impression. Because each company faces different contexts, a

company pursues improving weakness by using co-branding. When firms use a well establish

brand with good impression on image or quality from other companies into their product or

services, firms make customers revalue products or services.

The typology of co-branding from Wei Lun Chang 2008 makes possible for researchers to

study about co-branding from the companies‟ point of view. It is different from studies before,

because those mainly studied synergy effects from co-branding. However, Wei Lun chang‟s

typology is constituted of objectives of companies, approach methods, and the effects of co-

branding. Thereby this study can approach from the perspective of a subjective of co-

branding strategy. Why and how companies adopt co-branding strategy and what are the

results of co-branding are studied with co-branding typology.

Even though, this typology gives chances for researchers, researchers should be aware of

limitations and risks of this model. Since this model proposed in 2008, not many discussions

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have been conducted for this model. Therefore, critical opinions of this model are still not

enough. However, the most important thing to consider when researchers want to use this

model is that this typology simplifies the business world into the one model. In real business

contexts are much complex than model, so researchers should consider empirical

circumstances when they want to apply this model into co-branding cases.

7.Methodology

Methodology part will show readers firstly, which research method are chosen for

this study and why. Secondly, this part will explain how proposed theories will be used in this

research and lastly, this will describe criteria of cases.

The goal of this study is to understand how Asian multinational companies use co-

branding strategies for their brand strategy. This study will conduct exploratory research:

exploratory research attempts to discover general information about that is not well known to

researchers (knowthis.com, 2009). Exploratory research is suitable in this study, because co-

branding has not been studied so that this research aims to have general knowledge about

topic with less structured research than descriptive research. This research tempts to open a

new perspective of study, the strategic approach to co-branding as brand strategy. Research

mainly will use a secondary data: gathering information which is already collected by third

parties (Konwthis.com 2009) from articles and case companies‟ annual reports because the

proposed research topic is too broad to study within given period time and as a student,

abilities to access information is limited. This research will use qualitative research: interpret

data without helping statistic tools. Qualitative data collection is appropriate for this study

because data for regional matrix and co-branding typology are hard to be quantified. Case

study will be adopted to understand practical companies‟ businesses.

Later, mainly, this study analyzes cases in respect of Wei Lun Chang‟s co-brand

typology mentioned theoretical framework. From this frame work, this paper will study

purpose, approach method, and effects. On the top of that, in order to study about Asian

companies‟ business level, this paper adopts regional matrix. This regional matrix analyzes

Asian companies‟ business area and firms‟ internal competitiveness.

This study will adopt cases based on following criteria. 1. Cases should include, at

least, one Asian company to meet research question 2. Easy to access information, because of

time/financial limitation, and 3, Companies co-branding cases should be long term and

strategic decision in order to specify co-branding concept: avoiding cases sponsorship,

advertisement, and short term event: because the concept of co-branding is quite broad , it is

necessary to narrow research cases.

Three cases are chosen because those satisfy criteria. LG electronics (South Korea) –

Prada, Sony (Japan)-Ericsson, and Lenovo (China) and IBM case will be studied in this

research. 1)LG Electronics, Sony and Lenova, all come from Asia, 2) Because three cases are

renowned, information related these cases are relatively easy to access, and 3) Those cases

are not short event cooperations according to above companies‟ announcement. Companies

all cite strategically concrete cooperation.

Except LG-PRADA, other cases are already studied Lee Lun Chang‟s, researcher

who proposed the co-branding typology, studied in 2008. He or she studied cases to support

15

his typology. Lee Lun Chang‟s article cases are briefly classified from the fact of co-branding

to enrich typology but this study will describe cases fully and analyze cases from strategical

views. Furthermore, in order to have strategic view, in this research regional matrix is

proposed. Thus each companies or department‟s portfolio analysis will be added.

8. Empirical Study

Empirical study will give the three cases of Asian companies’ cases: LG-Prada,

Sony-Ericsson, and Lenovo-IBM. Cases will be describe in four parts, the description of

companies, the aim of co-branding, the category of co-branding and the effects of co-

branding. After studying empirical data, the research collects information for analyzing the

cases.

In order to research Asian Companies Co-branding, empirical data is gathered from

Wei Lun Chang‟s article, researches which studied each case, annual reports from case

companies and articles from business magazines. The information is not collected with the

same criteria because the sources of information are various, but this paper tries to elaborate

data parallel with the criteria for the description method.

In empirical study, cases describe into 4 parts, a short description of case firm, the

strategic aim of co-branding operation, the category of co-branding approach, and the effects

of co-branding. First, this study will briefly mention entire company or department. This part

shows companies information in general: their position, the number of employees, and its

goal. Second, this study figures out what is the purpose of co-branding for each case: Wei

Lung Chang‟s Typology and it is supported by supporting ideas which are gathering by the

researcher. LG-PRADA is done by the researcher itself. Third, the research is going to study

how each company approaches to attain its goal: this data comes from each company press

release or annual report which shows how cooperation is conducted with the partner. Fourth

and last, will draw what are the results of companies‟ efforts. How customers react

companies ́ co-brand. This data comes from sales record or the brand position from the

business magazines.

8.1. LG Electronics-PRADA

8.1.1 The description of Asian Company-LG Electronics

LG Electronics is a manufacturer which produces home appliances, mobile

communications, employing more than 82000 employees around the world. With annual

worldwide revenues exceeding $40 billion, LG Electronics comprises five business units,

home entertainments, home appliances, air conditioning, business solutions, and mobile

communications (LGE, 2007). Specifically, for mobile handset, LGE is the one of the leading

producers in the world, ranked 5th

with 6.3% market share, after Nokia, Motorola, Samsung,

Sony-Ericson (HKEPC, 2007).

LGE purses making technological advances and identifying business opportunities

by cooperating with various world leading companies. LGE‟s Global website mentions that

LGE is striving to become world No.1 by mingling with world famous companies in various

technological fields and marketing with strategic alliance strategy. Strategic association with

corporations in which companies have different infrastructures in fast developing 21st

business field is a key significance in terms of strengthening the existing industry and

16

creating a new one. In 2007, representatively, LGE cooperates with PRADA, GE, Schneider,

Nortel, Toyota, Qualcomm, Hitachi, Microsoft, and Sun (LGE, 2007).

For mobile handset, LGE works together with world luxury famous brand PRADA

and signed exclusive marketing strategic deal for cooperative marketing. As a result of this

cooperation, LG launched Prada Phone by LG which has advanced technologies from LGE

and classic and luxury brand from PRADA in 2007.

8.1.2 The aim of LG-PRADA Co-Branding

LG-PRADA co branding could be classified to brand extension by criteria from Lee

Lun Chang‟s co branding typology because LG broaden its product into new category. LGE

with using its co-branded brand, LG-PRADA, launched a new concept of mobile handset in

2007, LG-KE850, so called PRADA by LG as a luxury accessory. Before LG KE850, similar

concepts of mobile handsets were introduced into the market, but those were limited edition,

which were sold in given period of time and limited the number of units. However, LGE with

LG PRADA brand opens a new category of mobile handset market, luxury, masstige.

LGE opens a new category for the mobile handset by establishing LG-PRADA, co-

brand. LGE shows a new segment of mobile handset as an accessory like fashion items. LGE

recognizes that some consumers start to use their mobiles handset to show their social

position and status as like people use watches. In order to open this market, LGE is required

to attain luxury and fashionable brand images. However, especially, luxury and fashionable

brand identity is not built in a short period of time, so LGE was finding a suitable partner.

Therefore, PRADA is selected because PRADA is a world famous luxury brand and it is

famous for modern design so it is matched with LGE‟s pursing strategy.

8.1.3 The category of Co-branding Approach

LGE and PRADA entered exclusive strategic alliance, which is not mentioned

method in co-branding typology, in 2006. LGE and PRADA‟s cooperation is not only limited

share their brands but both companies decide to involve management process: product

development plan, marketing plan, and distribution. Instead of PRADA and LGE takes

charge of what they are specialized in, technological or innovative design, both involves in

overall aspects of product development process such as developing product concept, outer

design, contents, accessory, and product interface. Through co-branding, between LGE

pursues to open a new segment of mobile handset industry and obtaining each partners‟

positive brand images.

8.1.4 The effects of Co-branding

LGE‟s growth strategy is a fast innovation according to LGE‟s vision. Under this

vision, its core competencies are establishing the product, market, people leadership. The

examples of this efforts are innovative designs and strong brand identities. However, making

possible innovative designs and well established brand identity requires a lot of time and

money. Thereby above two factors are not suitable if LGE does its business itself.

LGE and PRADA, launched Prada phone by LG in Europe, England, France,

Germany, and Italy with innovative design, technological breakthroughs such as advanced

touch screen in 2007 (LGE Annual report, 2007). After launching PRADA Phone by LG in

17

European market, LGE expanded its markets into Asia, Hong Kong, Japan and Thailand in

2007. In 2008, it launched LGE‟s home market, South Korea. In spite of its high price, 600

Euros, PRADA Phone is sold well, in 2008, PRADA Phone by LGE, hits million sales.

Prada phone by LGE improves LGE‟s mobile headset image. Since LGE cooperates

with the luxury brand is an issue, this LGE-Prada co-branding is reported by many mass

media as an industrial issue. Therefore LGE can put Prada‟s image on its brand. On the top of

that, when PRADA gives a guideline for mobile merchandisers as a luxury product, LGE‟s

image is improved as luxury. Effective PR and comments from celebrates i.e. the price of

UK‟s make LGE improves brand image.

8.2. SONY-ERICSON

8.2.1 The description of Asian Company –SONY Group

Sony Corporation is the one of the renowned electronic device manufactures from

Japan. It started globalization process from overseas sales, and after international

manufacturing and financing is followed. Also, from the 1980, Sony started overseas R&D.

From the start, Sony strongly pursues internationalization. Mr. Morita, the co-founder serving

as a president of Sony America from 1960 to 1971 drove Sony group to be an international

group. By the end of this period, more than half of its sales were from overseas. In 2004,

Sony Group consists of Sony Corporation and a large number of subsidiaries and total

employment is 160,000 people (Jon Sigurdson, 2004).

From the Sony website, Sony group describes itself, Sony Corporation is a leading

manufacturer of audio, video, communication, and information technology products for the

consumer and professional markets. With its music, pictures, computer entertainment and

online business, Sony is uniquely positioned as a leading personal broadband entertainment

company in the world (Sony, 2001).

For the mobile handset industry, Sony group started its business in 1990s. Because

Sony did not have valid technologies, Sony Group first entered a soft strategic alliance with

Qualcomm in US to access to technologies. Sony Group entered another soft strategic

alliance with Siemens till 1998. However, both alliances ended with separation (Jon

Sigurdson, 2004).

In 2001, Sony announced a major organization reform from its earlier strategic

business to Global Hub. Global Hub is consisted of 6 cores, digital telecommunications,

semiconductor, display, home electronics, broadband solutions, and mobile

telecommunication. For the Mobile communication, Sony group needed to find a solicit

partner for new business context, GSM and WCDMA instead of soft alliance which ended

with separation. Therefore, Sony group signed 50:50 Joint Venture contract with Ericsson in

October 2001.

8.2.2 The aim of SONY and Ericsson Co-Branding

Sony wants to build a global brand by co-branding: the criteria from Lee Lun Chang.

By cooperating with Ericsson which has strengths in technological aspects, Sony intends to

compensate its weakness and goes into the global market. This co-branding makes possible

for Sony to contend with competitors because Sony can have competitiveness in technologies

18

as long as traditional strong points: designing and planning.

Sony group has strong brand identity for international consumers for their main

products, electronics and entertainment products, game, picture and music. Sony is a global

company from a long time ago, from 1st generation of Sony. More than half of its sales come

from overseas (Sony, 2008).

However when it comes to mobile handset, Sony group has the lack of technologies

and brand power. In order to overcome this shortage, Sony group tried to cooperate with

partners having advanced technology, Qualcomm and Siemens. Especially, with Qualcomm,

Sony developed a handset model (Jon Sigurdson, 2004).

Also, Sony mobile handset had a good domestic market but for the global scale, it

had only one percent of market share. Sony Group board suggested Sony‟s market share

should be 10% of all, and should be 20-30% after 6-7 years under the condition which

Samsung, the late competitor, surpasses Sony mobile.

Form this context, Sony decided to establish Co-branding with Ericsson to

compensate its lack of technology and brand identity and to build global brand to compete

with its competitors, Motorola, Nokia and Samsung.


From fast changing business contexts, Sony Group find a more solid partner: Sony in

the early 2000 needed a partner for GSM and W-CDMA technologies after having failed in

its earlier relations with Qualcomm in developing CDMA business (Jon Sigurdson, 2004).

Thereby, Ericsson becomes an alternative because Sony has excellences in AV technology,

product planning and designing and possesses brand expertise, while Ericsson brought

excellences in mobile telecommunications, operation relations, and infrastructure business

(Jon Sigurdson, 2004). Therefore, Ericsson and Sony established a joint venture, Sony

Ericsson Mobile communication. Both Sony and Ericsson have 50 shares each.


Before establishing Sony and Ericsson, Sony‟s market share was only 2%, and it

would be difficult to expand its market although the company has excellences in design. For

Ericsson, handset business was losing money and the market share kept going down (Jon

Sigurdson, 2004). Sony was not a top leading company such as Motorola, Nokia and

Samsung (Wei Lung Chang, 2008).

Two years after co-branding, Sony and Ericsson turned to be profitable and reported

profits 62 million Euros, the third quarter of 2003 (Jon Sigurdson, 2004). Also, Sony and

Ericsson stands up the top 4th in terms of market share. Although its position stayed 4

th, it

shows dramatic market growth rates (Wei Lun Chang, 2008).

This positive results based on both companies compensate brand awareness to

customers, Sony is famous for innovative design and technology, and Ericsson is renowned

for its advanced technologies in mobile communication industry.

19

8.3. LENOVO-IBM

8.3.1 The description of Asian Company-LENOVO

Now Lenovo is the leading IT company and the 3rd

PC manufacture in the world,

after acquisition of IBM PC division. More than 19000 employees are working for Lenovo

with executive offices in Raleigh, Beijing, and Singapore. Lenovo takes 27% of Chinese

market share and is ranked 1st computer producer in Asia pacific market with 12.6% market

share (people‟s daily, 2004).

According to the history of Lenovo, Lenovo was founded in 1984 in Beijing, China,

as the New Technology Developer Inc, the predecessor of the „Legend Group‟. In 1990

Legend group launch their first PC into the market, c.f. legend imported computers from

oversees. In 1994 Legend Group was listed Hong Kong Stock Exchange. In 1996, Legend

became a market share leader in Chinese market and introduced the Legend brand laptop. In

1999, Legend became the top PC vender in Asian-Pacific region. In 2000, Legend ranked in

the top 10 of world‟s best managed PC venders. In 2003, Legend announced the birth of new

„Lenovo‟: taking „Le‟ from Legend, a nod to the heritage, and adding „novo‟, the Latin word

for „new, to reflect the spirit of innovation at the core of company, logo to prepare for its

expansion into the overseas market. In 2004, Lenovo and IBM announced an agreement by

which Lenovo will acquire IBM‟s Personal Computer Division, its global PC business. This

acquisition forms a top-tier global PC leader. In 2005, Lenovo completed its acquisition of

IBM PC division. In 2007, LENOVO-IBM PC is launched world market for the first time

(Lenovo.com, company history).

8.3.2 The aim of IBM-LENOVO Co-Branding

Even though Lenovo was the most promising IT company in China, its position was

threaten by both internal and external factors. Lenovo faced the limitation of growth and

expansion: increasing the fierce competition from foreign rivals make Lenovo pressure on its

margins (Lau, 2004). Lenovo is also suffered from financial problems in 2004. Lenovo

confessed that its performance over three years had fallen short of internal targets (Lau, 2004).

Lenovo lost its direction and does not know how to grow (Lau, 2004). Under this business

context, Lenovo decided to go global market rather than concentrating on its domestic market,

China (Lili Jiang 2007).

Lenovo aspired to become a global company. Since 2003, Lenovo started laying the

groundwork for globalization. Legend group (predecessor of the Legend group) adopted a

new logo and English brand name that could be used without restrictions in world market. To

attain this goal, Lenovo group started to expose its „Lenovo‟ brand to world sports event,

Olympic game. Lenovo becomes exclusive computer equipment provider for 2006 Turin,

Italy winter Olympic game, 2008 Beijing summer Olympic Games (Lenovo Annual report

2004/2005). By exposing its brand worldwide, Lenovo wants to expand market share into the

global market.

Concerning these two facts, Lenovo pursue entering into the world market with its

existing products, PC and its co-brand. Lenovo group is eager to go to the world market with

changing its logo from Legend to Lenovo, sponsoring Olympic game. By co-using well

known „Think‟ brand with Lenovo groups‟ brand, Lenovo can easily attract world consumers

with its product, PC and laptop. In sum, Lenovo group purses to establishing a global brand

20

and entering world market by co-branding.


Lenovo merges IBM Global PC division in the department level as its co branding

approach. Lenovo group takes over the low profitability IBM Global PC division in 2005.

Specifically, in December 8, 2004 Lenovo group announced that it would acquire IBM

Global PC business for US$ 1.25 billion. The acquisition included IBM‟s desktop and

notebook businesses as well as PC related R&D centers, manufacturing plants, global

marketing networks and service centers. Also, under the agreement, Lenovo has the right to

use IBM brand for 5 years and permanent ownership of the renowned „Think‟ trademark

(Lenovo annual report 2004/2005). Therefore IBM PC division is under control of Lenovo

Group.


Lenovo has no presence in the world market before merging IBM PC division with

very low brand awareness. Thereby, one main motive for Lenovo to form alliance with IBM

is to gain the chance to build its brand globally by sales through the IBM sales force and

using its well known brand (Lili Jiang 2007). Since IBM PC division had high quality and

high image, Lenovo can improve its low brand impression in the global market (Wei Lun

Chang, 2008).

Many people are worrying Lenovo-IBM co-branding because it would arise brand

confusion and inconsistent brand image from the market. The main concern about this co-

branding is that even though IBM has strong brand identity, after being integrated with

Lenovo, it would start to lose its brand power. On top of that consumers are curious about

Lenovo groups‟ abilities to do business with IBM PC division because its merge bigger IBM

than its business entity (Lili Jiang 2007).

However, according to the Business Week, 2006, the IBM brand rank has not

changed by 2006 from 2001, ranked the 3rd (Business Week, 2006). This supports IBM‟s

strong brand is not damaged by co-branding. Also, after 2005, after acquisition, Lenovo put

its name the 10 of most renowned brand from China (Chief Executive China Magazine,

2006). These two factors indicate IBM – Lenovo co-branding helps Lenovo establish global

branding.

9.Analysis

The analysis part, the empirical data, LG-Prada, Sony-Ericsson, and Lenovo IBM

will be analyzed by each proposed theoretical framework, regional matrix and co-branding

typology. Then, the researcher presents integrated analysis of each case. The last part of

analysis will assess to the research question of this research.

In analysis part, empirical cases will be analyzed based on the theoretical

frameworks, regional business matrix, and co-branding typology. Since empirical cases are

descriptive, this part tries to analyze the data in a concrete way to give the explanation of

research question proposed.‟ How Asian multinational companies use co-branding as their

brand strategy‟.

21

First, in order to show business context which Asian firms‟ SBU face, Regional

Matrix will be used in researching case companies‟ SBU. As from the side of view from the

portfolio analysis, the portfolio analysis intends to show the attractiveness of the market and

the strength of SBU in the market or industry. However, Regional matrix focuses on

evaluating individual SBU. Regional matrix shows companies geographical business level

and their business oriented dimension. Therefore, this part, the research can indicate

companies‟ positions, what are their weaknesses and strengths, and its possible growth

strategies.

Second, for the purpose of researching how co-branding is used, co-branding

typology will be followed in the analysis part. Specifically, in the second part, research will

study how companies react to their circumstances and how company use co-branding to grow

beyond its position. In order to know these aspects, co-branding typology, which is

mentioned in empirical study, will be repeated and interpreted with regional matrix.

9.1. LG and PRADA

9.1.1 Regional Matrix – LGE, MOBILE COMMUNCATION (MC)

DEPARTMNET


FSA Types


Downstream FSAs

1 3 5

Upstream FSAs 2 4 LGE, MC

DEPARTMENT

LGE‟ Mobile Communication Department is classified into the global because LGE

MC does its business in global scale. This can be supported by market share data, LGE

mobile takes the 3rd

biggest market share in world market, Nokia 38.5%, Samsung 18%, LGE

8.7%, Sony Ericsson 8.2%, and Motorola 6.5%. In Western Europe, LGE takes the 3rd

, 8.6 %,

Nokia 34.8%, Samsung 24.6% (GFK group, 2008). In North America, LGE takes the 2nd

place, 23.7%, LGE, 20.9% (SA group, 2008).

LGE MC Department has upstream FSAs. LGE MC Department does market

oriented business. In order to catch up, rapidly changing market conditions and customers‟

demands, LGE tries to introduce a new model which can meet customers‟ needs and

requirements in a right timing. LGE have launched many new mobile handsets constantly.

LGE‟s first full screen touch handset (LG-PRADA), stainless steel phone (Shine), advanced

camera with multimedia capabilities (Viewty) and chocolate phone (black label series) are

good examples of this.

Therefore, LGE MC Department is positioned as Global Upstream FSAs. LGE has

several well established markets beyond its home market (South Korea), Western Europe,

North America, and CIS (China, India, South America) regions and well operating marketing

and design team with advanced technologies in CDMA and 3G.

From the Regional Matrix, this study can analyze below

22

LGE has two options to grow up: excluding global branding because it already does

business global scale. LGE can expand its market share in the world market or it can

open a new category of market to grow up.

LGE has enough technological and business resources to maintain current business

scale. LGE‟s upstream position is backed from its own business assets, LGE business

has grown with its internal assets.

From condition what regional matrix showed, LGE‟s reactions with co branding are analyzed

with co-branding typology.

9.1.2 Co-branding typology-LGE and PRADA

(Classified by Choi Yong Chul, the author, 2009)

Co-branding aim is BRAND EXTENSION

From the given condition, LGE chooses brand extension as its growth strategy from

two alternatives, expanding market share in world market and extending brand into another

category. Because, in the world market, strong competitors, Nokia, Samsung and Sony-

Ericsson, already exist, so that LGE pursues to detour competition and to open new market

segments.

In reality, LGE uses Co-branding in the following way. LGE-PRADA, branded

mobile, pursues opening a new market, luxury fashion mobile segment by using masstige

strategy. This is a new concept in industry because before LG-PRADA, some fashionable and

well equipped models have launched but those were limited edition. Hence, this study asserts

that LGE opens a new segment of mobile headset market. Though LGE launched co brand

LG-PRADA, LGE still doing its existing business areas, normal or underpriced mobile areas.

Therefore, Co-brand LG-PRADA aim is concluded brand extension into new market.

Co-branding category is STRATEGIC ALLIANCE, not described in Wei Lun Chang’s

model1

1 Limitation of model, too simplify the reality

23

Since LGE has enough abilities to do its business in given market conditions without

great difficulties, LGE prefers to avoid risks when they want to cooperate with partners.

However, because LGE pursues to set up the new segment of mobile headset, it requires

additional values to put LGE‟s products: it is not really necessary but needed to open new

market segments. Thus, LGE selects strategic alliance as LGE‟s co-branding approach.

Strategic alliance is appropriate for LGE because LGE can attain what they want, creating a

new category, with taking few risks compared to other two categories, joint venture or M&A.

In order to establish co-brand, LGE and PRADA enter strategic alliance contract.

These two companies decided to cooperate in an entire process of development of new

product, planning, producing, marketing and distributing. Since LGE and PRADA do not

establish one company or do not acquire a counterpart, this approach can not be defined as

joint venture or merge. Because both companies business is based on reciprocal contract for

both corporations‟ business strategic decisions, it could be defined as strategic alliance.

The effect of using co-branding is IMPROVING IMAGE

LGE MC Department has the competitiveness in technology in mobile handsets, 3G

and CDMA, but it lacks fashionable and innovative brand identities. Therefore LGE MC

Department wants to use PRADA‟s well established luxury image. LGE-PRADA‟s

cooperation results the success in attaining a purposed result, attaining luxury image. As the

result of this effort, LG KE850, so called PRADA Phone by LG has sold million devices in

spite of its high price, 600 Euros by 2008. LGE aims to reposition its image as luxury mobile

handset, and it succeeded in the market. Thereby, the effect is defined as improving the image

of LGE MC.

For the growth of LGE, LGE uses co-branding to open a new category by improving

its image with few risks. This strategy is justifiable in the sense of LGE‟s conditions

analyzed with regional matrix: growth alternatives, expanding the market share,

extending brand and LGE‟s resources, enough internal capabilities, and risk avoidance.

9.1.3 The linkage Regional Matrix and Co-branding Typology of LG-Prada


FSA Types


Downstream FSAs

1 3 5

Upstream FSAs 2 4 LG

PRADA

After using co-branding, LGE‟s regional position, and business dimension is not

changed because LGE pursues brand extension. LGE‟s market is expanded into another

category, the luxury mobile headset, not into another geographical market, so in Regional

matrix LGE MC Department remains as Global, Upstream FSAs. LGE improves its image

with Prada to do business in the luxury category, it does not change LGE MC Department‟s

business dimension. LGE MC SBU does its business still in Upstream Market dimension

because it improves its brand image in certain category and product, Prada phone by LG. Also,

this product concept is from market demand, not from push strategy. Thus, after co-branding,

Co-branding

24

LGE MC SBU‟s is global and Upstream FASs in regional matrix.

9.2 Sony Ericsson

9.2.1 Regional Matrix- SONY MOBILE COMMUNICATION (MC)

DEPARTMENT


FSA Types


Downstream FSAs

1 3 5

Upstream FSAs SONY MC

DEPRATMENT 4 6

Sony Mobile Telecommunication department did their business in regional level.

Before, Sony Ericsson, according to Jon Sigurdson, Sony had the 5-6 % of market share in

home region (Japan) and the 1.5% market share in the global scale. Sony had a relative good

position in Japan but it was the outside of mainstream in world the market for developing

GSM2(Jon Sigurdson, 2004).

Sony Mobile Department has Upstream FSAs. Although Sony Mobile

Telecommunication Department is weak at some critical technology parts, such as GSM and

WCDMA3 , it has strong industrial design team, software base, and entertainment which can

satisfy customers better than competitors can do. Sony-Ericsson‟s innovative mobile handset

designs still come from Japan.

Therefore, this research classifies Sony Telecommunication Department into

Regional Upstream FSAs. Entire group positioned global company, when it comes to MC

department, it has limited sales in home market. However MC division is strong in new

product development and design as other Sony group departments have strength in mentioned

parts.

From the regional matrix, this study can analyze below

Sony has two options for growth strategies. First, Sony can enlarge its domestic

market share or second, it can go into the global market. For Sony, brand extension is

excluded because it does not have critical technologies for the mobile headset

industry.

Sony‟s upstream market position comes from its design, entertainment, and product

development process. Sony does not have focal technologies to do business in

Mobile communication industry.

2 Technological jargon, Global System for Mobile communication

3 Technological jargon, Wideband Code Division Multiple access

25

From condition what regional matrix showed, Sony‟s reaction with co branding is analyzed

by co-branding typology.

9.2.2 Co-branding typology-Sony and Ericsson

(Classified by Wei Lun Chang, 2008)

Co-branding aim is Global Branding

Sony chooses Global Branding from the two options, market share or global

branding. This is because, as other strategic business from the Sony units doing business

globally, Sony MC Department pursues doing its business in the global scale. For another

reason, since developing a new headset requires lots resources, Japanese market is too small

to cover the product developing expenses. Hence, Sony decides to go to the world market.

In real business world, Sony pursues a following goal. Before establishing Co-brand,

Sony Mobile Telecommunication Department was doing their business mostly in Japan,

though it started mobile telecommunication business before its competitors, Samsung

electronics and LG electronics. AS Sony‟s other department does, Sony Music and

Palystation etc. Sony Mobile Telecommunication Department aims to build global brand to

do their business in global scale. Therefore it decided to cooperate with Ericsson because

Sony itself has not enough abilities to do business in global scale.

Co-branding category is Joint Venture

Sony MC Division does not have important technologies to become a global

company but it has precious resources to be a global firm such as design power,

entertainment and strong new product development process. Technology is an essential part

of the industry, so Sony wants to build a strong relationship. M&A and joint venture could be

the options in these aspects because both can make Sony strict relationship. Sony adopts joint

venture method because joint venture is a more suitable option for Sony: Sony only needs

certain elements, technology, for being a global firm without jeopardizing its‟ backbone.

26

Co-branded company, Sony Ericsson clearly mentions their co-branding approach in

official web-site as joint venture: electronics powerhouse Sony and telecommunication leader

Ericson established joint venture in 2001. Both Sony and Ericsson have 50% shares each.

Sony put the knowhow of design and entertainment, Ericsson put their telecommunication

technology.

The effects of using co-branding is Improve Quality

Sony wants to enter the mobile handset industry in the global scale from the start of

its business. Sony has enough potential for aiming this because it has know-how how it can

develop new products which can satisfy customers well with Sony‟s innovation power.

However, Sony does not have core telecommunication technologies. If Sony develops itself,

it requires lots of time and capital. Therefore, from the early stage, Sony has done business

with some technology leaders, Qualcomm and Simens: these ended with seperation. Sony

needs more concrete and well organized technology sources under the condition which is

changing faster and faster. Thereby, in order to improve its quality Sony makes co-brand with

Ericsson, a technology leader. In sum, Sony-Ericsson co-brand effect is concluded as

improving quality.

For the growth of Sony, Sony exploits co-branding to go into the global market by

improving its quality with a solid partnership. This strategy is understandable in the

aspects of Sony‟s context studied by regional matrix: growth options, expanding

market share in Japanese market or building global brand, the lack of focal

technologies, and the pursuit of strong relationship.

9.2.3 The linkage Regional Matrix and Co-branding Typology of Sony-Ericsson


FSA Types


Downstream FSAs

1 3 5

Upstream FSAs SONY MC

DEPRATMENT SONY Ericsson

The Co-branded brand, Sony Ericsson, is positioned in Global Upstream FSAs in

regional matrix. This is because Sony-Ericsson‟s co-branding pursues global branding

strategy. After co-branding, Sony-Ericsson‟s sales are well distributed compared to Sony Mc

department, ranked the third biggest market share. Sony strengthens its Upstream FSAs

dimension by co-branding because Sony compensates its weakness, the lack of technologies,

by cooperating with a technological leader Ericsson. Sony improves its quality by co-

branding in Upstream FSAs: Sony maintain its market oriented product development process.

Thereby, after co-branding, Sony MC SBU moves its position from regional Upstream FSA

to Global Upstream FSA.

9.3 Lenovo IBM

Co-branding

27

9.3.1 Regional Matrix-LENOVO


FSA Types


Downstream FSAs

LENOVO 3 5

Upstream FSAs 2 4 6

LENOVO has the regional business scale. Before it launched co-branding with IBM,

its business is limited in the home market, China, Hong Kong and Taiwan. Since in the global

market, not only several big market leaders but also regional competitors exist in each market,

for a new market entrant like LENOVO, is hard to penetrate the fierce competition. Lenovo‟s

regional scale can be supported by its employment distribution, in 2004, there were only 133

people employed in overseas including Hong Kong branch, compared to 9527 employees in

mainland in China.

LENOVO has downstream FSAs because affluent demand in Chinese market

following economic growth and preferences in reasonable price, considering Chinese

customers‟ buying Power. Lenovo was oriented in production. In 2002, according to annual

report, Lenovo expects Chinese PC market will be doubled. Thereby, Lenovo put efforts on

how company could produce products in efficient ways.

Therefore, before Co-branding Lenovo is classified into Regional Downstream FSAs.

Lenovo did their business into concentrating on improving efficiency and controlling costs

based on favorable home region market conditions, Chinese market.

From regional matrix

Lenovo has two strategies for growth. Because Lenovo doing its business regional

scale, it can go to the world market or go into another category. Market share is

excluded from the options because Lenovo‟s threats come from harsh competition in

Chinese market.

Lenovo‟s downstream position comes from its market affluence and production

ability. Lenovo have not done its business from market side because its home market

condition. Thus, Lenovo did not have powerful brands or marketing divisions.

From the conditions what regional matrix showed, Lenovo‟s reaction with co branding is

analyzed by typology

9.3.2 Co-branding typology-Lenovo and IBM

.

28

(Classified by Wei Lun Chang,2008)

Co branding aim is Global Branding

From alternatives proposed by regional matrix, Global branding or brand extension,

Lenovo chooses global branding. Brand extension in Chinese market is not favorable for

Lenovo because PC is hard to be differentiated, and Chinese people prefer reasonable

products. In this condition, it is more reasonable for Lenovo targeting the global market.

In reality, before establishing Lenovo-IBM, Lenovo targeted as a global brand by

Legend Group. However, because well established brands, IBM, HP, etc already exist in the

global market, entering global market with a new brand is hard for Lenovo. One good way to

have a strong brand identity in mature market is working with well established brand.

Therefore, Lenovo group decided to cooperate with IBM. Since this decision aims to go

global, IMB-LENOVO Co-brand is classified into Global branding.

Co branding category is Acquisition

Since Lenovo‟s strength comes from its downstream position, making product

effectively, Lenovo prefers to have a strong control over its business units. Then, it can

manage price and quality. Also, Lenovo needs to have strong brand equity beyond Lenovo

itself. M&A can satisfy both of them. Because there is a no better option for the control than

M&A, for Lenovo, to keep its backbone of business: production control, M&A is a good

option for Lenovo. Therefore, Lenovo decided to merge IBMs‟ PC division.

Practically, in order to gain a Global brand, Lenovo decided to acquire IBM‟s PC

department. It merged unprofitable IBM PC part and made a contract to use IBM well

establish „Think‟ brand. Lenovo takes over all PC related parts from IBM, developing,

producing, distributing, and marketing divisions. As Lenovo group clearly mention its annual

report, its co-branding approach is classified into acquisition.

The effect of using co branding is Improving Image

There are a lot of PC makers, not only global makers but also regional manufacturers

because PC industry does not require high technologies. Market barrier is so low, so any

competitors can enter PC market. In order to overcome this situation, establishing brand

29

identity is crucial for becoming global company. For Lenovo it also applied. As starting from

a regional manufacturer from Asia, it is needed to improve its brand image. After launching

Lenovo –IBM co brand though entire IBM image is threatened, it still maintains its brand

identity in the global market. Therefore, Lenovo succeeded improving its brand image by co-

branding.

For the growth of Lenovo, Lenovo adopts to co-branding to expand its business

coverage into global market with well established IBM‟s brand identity. This co-

branding strategy is comprehensible from the points of Lenovo‟s background

interpreted by regional matrix: growth options, enlarging market share in Chinese

market or entering global market, the lack of brand equity, and the strength in

production competences.

9.3.3 The linkage Regional Matrix and Co-branding Typology of Lenovo-IBM


FSA Types


Downstream FSAs

LENOVO LENOVO-IBM

Upstream FSAs 2 4 6

The co-branded brand, Lenovo-IBM positioned global downstream FSAs. This is

because Lenovo‟s co-branding pursues Global branding strategy. After co-branding, Lenovo

group‟s sales come from all around the world market: it is ranked the 3rd

in business week,

before Lenovo group‟s sales inclines to Chinese market. Lenovo-IBM maintains its business

dimension in Downstream FSAs because Lenovo‟s backbone is in Downstream FSAs.

Lenovo tries to keep this business dimension by M&A. Through co-branding with IBM,

Lenovo attains not only the well established brand image, also the production and distribution

facilities. Hence, it strengthens downstream business dimension. Thus, Lenovo moves from

Regional Downstream FSAS to Global Downstream FSAs in regional matrix by using co-

branding strategy.

Co-branding

30

9.4 Analysis of Asian Multinational Co-branding


FSA Types

Regional Co-branding typology Global

Downstream

FSAs

LENOVO

Aim: Global branding LENOVO-

IBM Category: M&A

Effects: Improve Image

Upstream FSAs Sony

Aim: Global branding

Sony-Ericsson Category: Joint Venture

Effects: Improve Quality

Upstream FSAs

Aim: Brand extension LGE

Category: Strategic alliance

Effects: Improve Image LGE-PRADA

Grey cell-before Co-branding

Red cells-after Co-branding

This research tries to fulfill the research purpose proposed before: have an idea of co-

branding, which condition Asian multinationals‟ SBU face and how SBU enacts co-branding

by studying three cases: LG-PRADA, Sony-Ericsson, and Lenovo IBM. This research uses

two different theoretical approaches, Regional matrix and co-branding typology in the

analysis part. Then, this study integrates above two theoretical views to have a strategic view.

From the Regional matrix, the researcher can have an idea about Asian multinationals‟ SBUs‟

position and market oriented dimension and from the co-branding typology, the author is able

to have ideas how Asian multinationals‟ SBU enacts co-branding strategies. After analyzing

cases with two theoretical backgrounds, by integrating two aspects, this research study co-

branding cases strategically.

From the regional matrix, all cases companies face different market positions and

market oriented conditions before co-branding. LGE is in Global Upstream, Sony is in

Regional Upstream and Lenovo is in Regional Downstream. This fact is different from what

the researcher expected before studying this topic: Asian Multinationals faces some similar

business context.

From the Co-branding typology, each company enacts co-branding in the favorable

ways under SBU‟s conditions. LGE pursues brand extension by improving the brand image

with the strategic alliance approach. Sony aims global branding by improving the quality with

the joint venture approach. Lenovo intends global branding by improving the image with the

M&A approach. As a result of these co-branding strategies which are suitable for cases, all

the companies are successfully launched co-branded brand into the market. This phenomenon

is different from what researcher assumed, Asian multinationals have some similar co-

branding strategies.

From the integrated view, the researcher can see all the Asian multinationals SBUs

face various business contexts. Therefore, companies try to conduct the suitable strategies

under the business environments. Hence, these distinct approaches for the certain company

lead the company to succeed in the market. Thus, the researcher can conclude that all the

Asian multinationals‟ SBUs faces different business circumstance and they react with co-

branding in the favorable ways. Further, one point, the author finds in this research is that all

multinational SBU units are pursuing doing business in global level with global brand. Since

31

every SBU is under multinational, SBU is trying to harmony with the entire organizations

business goal.

10.Conclusion

Asian companies are doing business more actively in the global market. Recently,

many companies from Asia use co-branding to expand its business area. In order to study this

business trend, this research proposed a research question “How Asian multinational

companies use co-branding as brand strategy”. To access this question three practical co-

branding cases are handled in this research: LGE-PRADA, Sony-Ericsson, and Lenovo-IBM.

Three cases are studied based on mainly two theoretical backgrounds which are regional

matrix and co-branding typology. From the start of this study, the researcher assumed that

these cases show some common characteristics of Asian companies, common aims,

approaches and results. However the result of this study is far from this hypothesis. Since

case from multinational companies SBUs, SBUs are using co-branding very effectively.

Business contexts company faces are very different from case to case. Based on these

contexts, each multinational company‟s SBU adopts co-branding very strategically to the

every different situation, pursuing growth, compensating what they lack of. This can be

ended with that already Asian Multinationals‟ businesses are beyond regional characteristics.

Thus, every SBU has different strategic approaches and suitable strategic access to co-

branding could be a good growth strategy. Lastly, multinational companies‟ SBU units are

pursing doing business the global level and establishing global brands.

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Lili Jiang (2007), Strategic Alliance Case study of Lenovo and IBM, University of

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Asian multinational Companies Co-Branding as Brand Strategies239880/FULLTEXT01.pdf · Empirical Study ... This research will analyze each case company‟s portfolio with regional