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Merger and acquisition (MandA) is a buzz word in corporate world of today. Companies sometimes merge and collaborate their functions, departments or divisions but for marketing managers, brand mergers are very significant in today’s global business and economy. Brands are valued because it is these brands which represent a firm in the market.
Brand mergers, on one side represent substantial advantages but on the other side, slight error can cause a collapse of whole business and is therefore, practiced with extra care. Some issues and elements are very crucial which can create hurdles for a merger strategy to be successful. There is not much research and academic writings available about this issue which makes it more complicated for managers to understand. This research is focused on any changes caused by a brand change (especially mergers) and their after-effects on the buying behaviour of consumer. The brand selection process and the preference of a brand after a successful brand-merger are also discussed.
The research is helpful for decision makers and enables them to understand the future position of a brand and the expectations of customers and their perception about new brands. The corporate mergers, brand mergers, brand importance and there effects on the potential buyers is also focused in this research. After understanding all these factors, managers can make right decisions at both, strategic and operational levels and can lead to the success of business.
Consumer is the main focus of all the marketing activities, and brands in particular, play a vital role in today’s marketing activity. Brands make the first contact with consumers before the provision of service or value. A small change in brand, its design or name can have a very big impact on its equity and market positioning. Brands also, have a lifecycle and they get old with the passage of time.
Wilson (2000) comes with the idea that the implicit distinction in the buyer behaviour literature between the contexts of consumer markets and organisational markets has a lead to a bifurcated approach to the development of buyer behaviour theory. While useful, even necessary, for the research and planning purposes, this distinction is inhibiting the development of a generic theory of buyer behaviour and should be questioned.
Companies merge, in order to rejuvenate an existing-aging brand, to compete or remain in the market and sometimes more importantly, to change with the changing needs of their customers. These mergers can change a firm’s operational status, culture and the strategic planning for the future. Also, it makes consumers think more carefully before adopting or continuing with the new/existing brand. Today’s increasing globalization and competition force firms to identify new and creative ways to perpetuate their businesses and possibly make a profit. Mergers and acquisitions (M&A) are one of those ways. When the news about an M&A appears, emotions range from fear and confusion to acceptance and excitement (Appelbaum et al. 2007).
Fandos and Flavia´n (2006) examine the growing competitiveness of markets and said that it requires firms to generate competitive advantages. From a marketing standpoint, this can be achieved by establishing long-term relations with customers, as argued from the position of relational marketing. This research is aimed at consumers changing behaviour with the post-merger effects of brands and their changing needs and wants.
Objectives of research:
The positive & negative effects of brand merger on consumer’s attitude and changes in consumer’s behaviour.
The strengths & weaknesses of brands after ‘mergers’ which can attract or distract customers.
The risks, opportunities, hurdles and benefits to the merged brand in the market.
Why mergers fail and what are the measures that can be adopted for survival of a new brand in market?
Importance & Scope:
The research is focused on the consumer’s behaviour and brand selection process after the merger of two existing brands (with reference to Sony- Ericsson Mobiles). Because every customer is different and their perception and adoption level also differs, it is valuable for the marketers to understand the behaviour of its existing or potential customers.
Mergers are very common in today’s corporate world and sometimes considered as ‘a corporate marriage’. In most cases, every existing company has a market-share and brand equity which is a valuable asset for them. Companies sometimes merge to gain the competitive advantage, to add value and to get the bigger share in the market (Appelbaum et al. 2007).
George et al. (1994) examine that during the 1980s, when brand managers were writing their annual brand plans, it was assumed that growth in market share would be achieved by getting more consumers to buy a particular brand. It is very important and helpful for marketing managers to understand the after-effects of mergers (corporate & brand) on its consumers and their attitude towards the new products or services. Calderón et al. (1997) stated that nobody disputes the importance of the brand for the company or the consumer. Over the past 20 or 30 years its definition, functions and characteristics have been widely studied. However since the early 1990s, brand has been the object of new questions and concerns.
According to Aaker & Alvarez del Blanco (1995), in the type of competitive market in which companies act, brands are the strongest, most stable values through time that they can count on. Kim (1993) says that for many companies, therefore, the brand name and what it represents is their most important asset: the basis for their competitive advantage and their present and future profits.
As per Raju (1995) consumer behaviour in global markets is a topic that is not well understood by marketers and consumer behaviour, in particular, is likely to be somewhat different in different countries since it is largely influenced by social, political and economic conditions. Alvarez and Casielles (2005) mention that any changes in brand or consumer will also depend on the consumer’s characteristics and they point to the existence of three types of consumer segments:
(1) Those that find these actions attractive and are therefore likely to buy the product;
(2) Those who find these change neither attractive nor necessary, and will therefore act by reducing their choice probability; and
(3) Those that remain indifferent and are therefore not affected by these actions in their final decision.
Any of the above segments can not be neglected and it is important for marketers to consider all these three types of consumers for any brand changes and other product related activities. But more focus is given to the existing customers because they are the most valued and important group among stakeholders of a firm. Also, customer’s expectations, needs and wants can be changed with a changing product or service. Understanding of the future trends and behaviour of customers can help managers to plan as per the changing environment and to be successful in the market (Alvarez & Casielles, 2005).
Chapter 2 Literature Review
To build up initial understanding of the concepts in brands, mergers and consumer buying behaviour, this chapter will be focusing on the topics such as brand definition, brand equity, types of brands, mergers strategies and consumer’s behaviour. We will further discuss the main merger strategies and models that are available to companies.
Harrison and Hartley (2007) expressed that the opportunity for researchers is to move beyond transactional and simplistic self-interest, notions of relationships with brands focussed on customer service, product performance, or value, and examine the underlying human need to belong, whether it manifests itself around traditional groups such as families and friends, or, in this world of consumption as part of culture, around a brand.
Miller and Muir (2004) defined the brand in five themes:
A brand enhances the value of a product or service beyond its functional purpose – thereby supporting volume and price.
A brand is link between an organisation and its stakeholders – providing a badge of continuity and trust.
A brand is the result of behaviour – everything an organisation does has the potential to impact the brand.
A brand exists only in people’s minds – it is a collection of feelings and perceptions in the mind of the consumers.
A brand can provide an organisation with purpose and direction – providing a source of motivation and interest for stakeholders.
Historical importance of brand
Branding began many centuries before the term acquired its modern usage. The Greeks, Romans and others before them had various ways of promoting wares or goods, whether they were wines or pots, metals or ointments. Messages would be written informing the public that the man at this address, could make shoes and that the man who lived over there, at that address, was a blacksmith (Room 1998).
With the separation of production and exchange, the merchants started to play an important role in the market. The merchants collected products and sold them to consumers. To merchants, they had to guarantee product quality to maintain consumer trust, and therefore they wanted producers to place identifiable marks on their products, which made it easier to trace the person who should take responsibility if the product had problems. For example, an English law passed in 1266 required bakers to put their mark on every loaf of bread sold, “to the end that if any bread is faulty or less in weight, it may bee then known in whom the fault is” (Keller 1998).
The brand, in the modern sense, first appeared in nineteenth century Europe. Intense competition had made it necessary for manufacturers to provide differentiated products to satisfy the manifold needs of customers. Therefore, they had to adopt new technology in production, and communicated the differentiated benefits to customers on the basis of the brand. Besides, many major manufacturers had turned to branding and to advertising in order to reduce the dominance of wholesalers (De Chernatony & F. D. Riley, 1998).
Meanwhile, the establishment of trademark law after the Industrial Revolution had enabled brand owners to protect their unique product characteristics by legal registration. France is believed to have introduced the first law on trademarks in 1857. Britain also promulgated the “Trademark Registration Law” in 1875, which affirmed the trademark as a private property protected by law. Such a step encouraged manufacturers to invest in brands which could last many more years than physical assets (De Chernatony, 2006).
Consumers and brands
As per Anand (1993), consumers often perceive high risk due to being imperfectly informed about the product attributes and being given an overwhelming amount of commercial information. Brand is a remedy in such a situation, which acts as a contract with consumers, which is based on the firm’s strength and reputation. The contract is in fact, a promise to consistently deliver a specific set of features, benefits and services to the consumers.
The brand can also reduce the consumer’s search cost and effort. With the increase in the variety of products, it is impossible for a consumer to try and compare every single product. Therefore, a brand name serves as an effective extrinsic cue to help consumers to find out which one satisfies their needs and which one does not. Brand names save shoppers time, effort and worry (Zeithaml. 1988).
Brands are best understood in terms of a particular “logical structure” that channels consumer perceptions. Being names that are associated with experiences, brands can be considered logical structures that are akin to metaphors, allegories, or other representations. As associative representations, brands are used to explain why products and services have meaning for consumers. The function of a brand is to create meaning, and there are myriad ways of making meaning “happen” (Kay, M. J. 2006).
Brands, mergers and consumer’s buying behaviour
The influence of any changes of a product or service on the consumer also depends on the consumer’s characteristics. Alvarez & Casielles (2004) pointed the existence of three types of consumer segments which are considered while making any product related changes:
(1) those who find these actions attractive and are therefore likely to buy the
(2) those who find them neither attractive nor necessary, and will therefore act by reducing their choice probability; and
(3) those who remain indifferent and are therefore not affected by these actions in their final decision.
Importance of mergers:
Nguyen and Kleiner (2003) analysed and as per them, the prime reasons for most mergers and acquisitions are to maintain or increase market share and to increase shareholder value by cutting cost and initiating new, expanded and improved services.
A new study by the IBM Institute for Business Value suggests that limits to growth are often self-imposed and, as such, can be overcome. Contrary to conventional wisdom, firms with the will to be successful growers can break free of perceived constraints related to size, industry boundaries and geographic neighbourhood. In addition, despite the widely held belief that mergers and acquisitions inherently destroy value for the acquirer, companies that learn to become successful growers use M&A strategies effectively (Kapur et al. 2005).
Why ‘mergers’ fail?
Appelbaum et al. (2007) say that ‘the multiple organizational factors impacting upon a merger as well as those processes being impacted upon throughout the merger process needs to be examined with extra care.’
As per Lynch and Lind (2002), many mergers fail because business integration is handled badly and the most common mistakes are as follows:
Slow post-merger integration. The first 100 days are crucial; they set the tone not only for initial integration but also for the future of the new business. Inertia must be avoided.
Cultural conflicts. The organizational culture that made the acquirer successful may be totally alien to the core values of the acquired company. The newly merged organization will need new relationships and new ways of working.
No risk management strategy. Organizations must consider and prepare for all likely “what if” scenarios. The newly merged organization will need new ways of coping with business environment changes.
The A-B-C-D paradigm of consumer’s buying behaviour:
Raju (1995) after an extensive review of the literature reveals that there is no simple framework that lends itself to a comprehensive study of consumer behaviour in international markets. Problems with the existing frameworks make it essential to provide some structure to the study of consumer behaviour across cultures. Different aspects are analysed in this paradigm which makes it easy to analyse and understand different aspects of consumer’s buying behaviour.
The paradigm proposes four sequential stages to represent the purchase and consumption processes within any culture. These four stages are termed access, buying behaviour, consumption-characteristics, and disposal (with the acronym A-B-C-D). A thorough understanding of each stage is essential for the global marketer since the overall effectiveness of the marketing function is contingent on all four stages being facilitated within any culture. These four stages of the paradigm identify the major factors within each stage which are as under (Raju, 1995).
Can consumers obtain your product/service?
(1) Economic access – income distribution, affordability
(2) Physical access – international trade barriers, distribution system, infrastructure
How is the decision to buy made by consumers?
(1) Perceptions -Country of origin, Brand equity, Price – quality
(2) Brand loyalty/store loyalty
(3) General attitudes toward marketing/consumerism
(4) Deeper analysis of consumer psyche, e.g. impact of social norms, psychological orientation, etc.
What factors impact consumption patterns?
(1) Product versus service consumption in culture
(2) Cultural orientation (traditional versus modern)
(3) Social class/reference group influences
(4) Urban versus rural sector consumption patterns
What are the implications of product disposal?
(1) Resale, recycling, and remanufacturing considerations
(2) Social responsibility and environmental implications of product disposal
Figure 1: The A-B-C-D paradigm (Source: Journal of Consumer Marketing)
These stages are briefly described by P.S. Raju (1995) as under:
(1) Access. The first step in global marketing is to provide access to the product/service for consumers within a culture. Access pertains both to physical access as well as to economic access.
(2) Buying behaviour. This stage encompasses all factors impacting on decision making and choice within a culture. Examples of these factors include perceptions, attitudes, and consumer responses such as brand loyalty.
(3) Consumption characteristics. The specific products/services that are purchased and consumed may be different in each culture. The cultural orientation (traditional versus modern) and social class distribution, among other factors, will determine consumption patterns within a culture.
(4) Disposal. Most countries, including the developing countries, are becoming more environmentally conscious and moving away from throw-away products. Hence marketers need to design systems to facilitate the safe disposal, recycling, resale, or remanufacturing of products. They must also meet their social responsibilities in other countries, especially in relation to public safety and environmental pollution (Raju, 1995).
Chapter 3 Methodology
The main objective of this research is to understand the changing behaviour of consumers with any changes in brands especially after merger of two brands. The research is qualitative based and different books, articles, websites, literature and questionnaire will be used to compile this research. The key elements of the research are consumer’s buying behaviour, brand equity, brand management, mergers, brand functions & positioning, and other marketing elements that help consumer to perceive a new brand and enables the acceptance of brands.
The data will be collected from both primary and secondary sources. Primary- data will be collected from consumers through questionnaire related to the research from the users of mobile phones (with reference to Sony Ericsson Mobiles). Sources of secondary data include books, journal articles, related websites and other related literature.
Sample size is 20 members of public which will be selected on random basis and data will be collected through questionnaires.
Time frame for completion of research is as under:
12th Jan, 2008
8th Feb, 2008
4th Feb, 2008
15th March, 2008
15th Feb, 2008
20th Feb, 2008
Data Collection (Primary & Secondary)
20th Feb, 2008
15th March, 2008
16th March, 2008
23rd March, 2008
Drafting & Composing
20th Feb, 2008
15th April, 2008
16th April, 2008
20th April, 2008
30th April, 2008
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