How Important is Price?

While writing my last post on Havaianas I began to think about the model for successful global brands. Almost all of them seem to compete through quality or luxury products and branding. Havaianas is an example of a company competing with the quality of its products over the cost of its products. Other examples would be Swis Army, Nike, adidas, VISA, and Coca-Cola. Even global brands like McDonald’s, Starbucks, and Apple compete based on the quality of their products and their service over low prices. McDonald’s in the U.S. is considered a lower-price option. Not so internationally. Many McDonald’s globally are sit-down restaurants with prices that are often higher than other restaurants that are considered fast-food (like kabobs in Central and Eastern Europe or hole-in-the-wall pizza joints throughout Italy). Luxury seems to be another very successful model when operating globally. Although not as prevalent as Starbucks or McDonald’s locations, almost every major city in the world has stand-alone luxury brand locations like Rolex, Gucci, Coach, and Salvadori Faragamo. Price is no object at these locations. When you can charge $10,000 for a watch or $500 for a small purse, then its about status as much as it is about quality.

I struggled to find global brands that operate on low price. The closest that I could think of is IKEA. IKEA is a global brand. An IKEA store in Prague, Czech Republic looks identical to an IKEA store in Oakland, California. The logo is the same. The store layouts and products are the same. The services are the same. IKEA isn’t a luxury brand like Ethan Allen. IKEA seems to operate on low prices. Its operation is standardized. Locations tend to be in lower rent areas just on the outskirts of major cities. Most products are sold flat, needing assembly that is done by the customer. I have purchased many items from IKEA. I think most people that have wouldn’t classify IKEA products as low quality. Quality of design is certinly essential to an IKEA way of life. I would be very interested to meet with IKEA executives to see how they want the IKEA brand to be seen by the global community. Do they see the successful sales of its products as being a product of low price, or a product of perceived quality?

Havainanas

Some say that you need to create a brand that will become “local” with every community that you sell in.  Most consumers in China believe that KFC (Kentucky Fried Chicken) is a Chinese company.  The same can be said about Coca – Cola.  I think about having a Lenovo laptop for many years and believing that it was a U.S. company because of it’s partnership with IBM.  One company that goes against this school of thought is flip-flop maker Havaianas.  Havainanas is a Brazilian company and has recently made a name for itself around the globe.  When deciding to enter foreign markets, Havainanas didn’t change or shorten its name to blend in.  It kept a name that it knew would appear foreign to most international markets.  Not only that, but after it’s name, most Havaianas branding includes the Brazilian flag.  While visiting Barcelona, Spain a friend and I were walking around a mall near the main harbor.  While looking at the mall directory on the main floor he became very excited and yelled out the name, “Havainanas”.  I had no idea what he was talking about, having never owned a pair of flip-flop sandals.  We quickly made our way to the top floor where I saw a stand-alone store with the name Havainanas with a Brazilian flag after it.  Immediately, I knew that this was not a Spanish company.  My friend and the beautiful girl working in the store told me a lot about the Havainanas brand.  It is proud to be Brazilian and wants the world to know where this quality product comes from.  Havaianas has no interest in the Spanish believing that Havaianas is a Spanish brand.  Would Havaianas sell more product if it did?  Since that day in the Barcelona mall, I have noticed Havaianas flip-flops everywhere.  At $20 per pair for one that is authentic, Havaianas aren’t inexpensive.  However, they are when compared to a laptop computer or an automobile.  KFC did very well in China even before most Chinese thought of it as a Chinese company.  I don’t think country loyalty is a major purchasing factor with lower priced products.  Many Americans want to buy cars from U.S. companies like Ford and Jeep.  Consciously, or subconsciously, buying these higher priced items means buying from larger companies that employ more American workers (whether true or not).  The same can’t be said for flip-flop sandals, fried chicken, or sodas.  Havaianas is smart to focus on quality and on creating a loyal following of customers, like the friend I was traveling with in Barcelona, rather than on altering its brand to fit with each local community interest.  

Chipotle’s Global Branding Strategy

Chipotle is the king of all global branding companies. They have managed to enter several markets internationally without changing a single thing on their menu, business model, or marketing strategy. Their core competency is their ability to offer high quality food at a reasonable price. They have been doing very well in London and have been looking to enter other markets as well.

They keep with the assembly line setup in all of their restaurants which helps cut down on time/resources when helping customers as well as keeping a small amount of offerings fresh and high quality. They really only have 4 different meats in their restaurant at one time which keeps the food from spoiling and allows for rapid replacement.

Chipotle entered London because it was a fairly similar market to the states where they know their clientele and can offer services based on the similarity of the markets. I believe they would do just as successful in vastly different markets like Russia or Thailand. The simplicity in their model allows for them to figure out exactly why a branch would not be doing as well as one in a different country or continent.

Their marketing campaign is nearly identical around the world, their billboards consist of one giant ‘Chipotle’ burrito against a white or black background with the Chipotle logo. Internationally people are slowly understanding what this means without an explanation necessary. If Chipotle decides to change their food offerings they would surely suffer from having to increase costs and change their business model. By keeping with what has been successful in the past they are able to see the same success year after year.

Coca-Cola

Coca-Cola is one of the most popular brands in the world. It is not a surprise that they stick to a global branding approach due to having a very standardized product around the globe. It seems that every corner of the earth has Coke and the flavor is nearly identical around the world except for some localization (US use high fructose corn syrup while Mexico uses cane sugar). The one thing you can always count on is the taste of a Coke. They have managed to make every single bottle taste exactly the same and still be able to sell to all parts of the world. They market this globally by focusing on the same great taste aspect and really keep to it.

Coke also keeps with the same colors and graphics such as the polar bear. Even in colder regions this bear is used. The Coke Santa Claus is very popular in the US during Christmas time however since not all cultures understand who Ol’ Saint Nick is they don’t use him to market their products. It seems that a company as large as Coke can stick to their global branding with a few exceptions and they should be sticking around for the long haul.

In the past they would offer different slogans for different countries: Australia: “Coke is it!” Japan: “No reason”?? and of course India’s: “Burrrrrrrrrr”. But as the years went on Coke started keeping with the same slogans globally. Currently they are using “Open Happiness” In most countries throughout the world and it seems to be working. Happiness is something that every culture can understand and most languages have a word for.

Converse International

The standard “Chuck Taylor” shoe is sold throughout the world appealing to the same age groups and demographics internationally. Usually products such as shoes can not be standardized due to differing cultures and fads but Converse has managed to keep with the same old fashioned shoe and keep it up to date and relevant. Their marketing internationally is very similar as well. The standard billboard is just an image of their simple black and white shoe and maybe some motto in a regional dialect below. Converse stores also are very similar internationally, using a similar business model as Vans, usually pushing to enter larger malls or supermarkets and keeping with the same store models as in the states.
Converse also sells their products in larger stores like Ross and Marshalls. By selling their products in these stores they are able to access a demographic that would usually not be cost worthy for them to target.
All of Converse’s variations of their classic shoe (high tops, etc.) have been brought abroad as well. From my own visits to Europe I saw many different colors and styles of Converse being used, as well as the typical black and white shoe. Converse are also one of the only shoe brands that I’ve seen all ages wear. From being back in Southern California I have seen many young high-schoolers wearing the shoes as well as middle aged men.
It will be interesting to see how Converse will do in the future; cultures and fads all inevitably end. It seems that Converse however, has been able to find the secret of a timeless brand.