We are overwhelmed by brands. Everywhere one looks, everything one touches these days has a brand name, even the so called own store products are fast becoming in store brands. The questions one asks is therefore, if companies are branding everything, what is the advantage of branding and for the focus of this article, where will they be sold?
Where are all the brands going?
Competitive and growth focused companies are now seeking opportunities in new regional and global markets as domestic markets become saturated or as the economic environment in the home countries reduces buying power. Clothing, furniture,banks, grocery, car brands etc, are increasingly going our of their comfort zones and venturing into overseas markets. Brands that once relied on domestic markets in Europe are spreading their winds to China, India, Russia, the Middle East and UAE in search of growth and customers. In many European countries that have been hard hit by the recession , it is now dawning on them that they may have lost the plot and should have headed the same way with the rest of their competitors a few years ago.
Within Africa there is a steady movement of companies into each other’s markets. This is especially evident amongst South African companies. Brands such as MTN, Edgars, Pick and Pay, Vodacom, have made significant inroads into the African region. However regionalisation and globalisation has been slow in Africa owing to many factors amongst them, political uncertainty,conflicts, negative economic environments ,restrictive tariff’s, protectionism and perceived poor quality of products and in many countries, the perception that foreign and overseas products have better quality.
Why do brands leave home?
Studies done on the movement of brands show that companies initially choose markets based on geographical and cultural proximity. Companies try to minimise the risk of moving into new markets by entering into countries that are similar to home, gaining experience and then venturing into more foreign markets. The decision making processes to enter into new markets are complex and highly individual to each company, and depend on the prospective country’s socio-political environment, the mode of entry , the market segments being targeted and the ability of the company to meet and deal with the challenges in the new markets. Companies are thus influenced by both push and pull factors to venture into new geographical regions
10 Reasons to take your company into global markets.
- You can increase sales and profits especially if your company’s fixed costs are tied to your domestic operations.By expanding, you are increasing the reach of your products without incurring any substantial additional costs especially if you are entering a new country through a franchise, distributor or existing retailer. The international brand ZARA that recently entered the South African market makes all its clothes in Europe. While the company has rented retail shops, its production costs are tied to its home country.
- Internationalisation enables you to leverage on your core competencies. By doing what you are really good at, your company can earn greater rewards. If what you are good at is innovation and conceptualising unique products, that will enable you to leave the manufacturing, management or the marketing to other professionals in the host country. The mobile technology giant Apple manufactures most of its products’ components outside the United States. Apple HQ therefore focuses on design, retail, distribution ,marketing and management.
- Your brand will generate economies of scale in production if you are able to use the same marketing and advertising mix, and the same products and suppliers. Coca cola has perfected the art of advertising and promotion of its products worldwide. Its marketing communications are used unchanged in most countries and only localised in non English speaking and culturally foreign countries.
- Entering global markets provides a company with opportunities to learn and become more competitive in the home country. It also paves the way to more lucrative customers. Luxury brands such as Chanel, Hugo Boss, Gucci , Guess, DKNY, Porsche, are reaping the rewards of doing business in the UAE where oil rich customers spend millions on luxury brands.
- Global and regional expansion creates jobs, increases productivity, company growth and wealth and allows brands to create further employment and perfect their products in their home countries. WalMart’s renowned distribution technologies have been recreated all over the world where the company is doing business. This has created local expertise and has allowed the company to refine its technologies to cater for different markets.
- Investors are always interested in growing companies and international growth increases the pie for them.The growth of most of the world’s global brands is on the back of regional and global expansion. Barclays bank’s entry into the South African market, the growth of Chinese and other Asian country brands into the Americas, the entry of Mobile brands such as Nokia and Samsung into African markets have created significant revenue streams and in many cases have sustained the companies when their home markets shrank.
- Internationalisation insulates your company from domestic economic fluctuations. The economic fallout in the European Union has resulted in many companies seeking foreign market entry. Car manufacturers in Asia, Germany and America are been seeking new markets in China, India and the UAE because of the economic developments and rise in wealthy customers in these regions.
- Global companies are able to cut costs through global outsourcing. This enables manufacturing brands to offer products at competitive costs. IKEA, a leading manufacturing brand sources its products from around the world. This, coupled with its core competency of tailor-making products gives it competitive edge.
- You company reduces dependency on existing markets. Expansion into regional and global markets opens the company’s products to new customers and new product requirements increasing revenue. The expansion of McDonald into China and India added a potential 2.6 billion customers to the company, an enviable target market.
- Many countries are now attracting foreign companies by offering tax incentives to incoming companies. Tax incentives allow companies to trade for periods of time without remitting tax. These incentives are welcome by new entrants as they allow businesses to get off the ground before making monetary payments to the host country.