The power of a brand
- October 23, 2012
“What’s in a name? That which we call a rose
By any other name would smell as sweet.”
Juliet, speaking to Romeo in William Shakespeare’s famous play about the star-crossed lovers—who believes what matters is what something is, not what it’s called—would have disagreed with the concept of the power of a brand name, but in truth, brand loyalty is a powerful business tool.
Even when branded products take a rap—automotive recalls—loyal customers continue to purchase the same brand.
That’s why one company acquiring another with a well-known and popular brand name typically maintains that name. The same holds true for companies that agree to cooperate instead of consolidate. Indeed, in recent years we’ve witnessed more examples of cooperation instead of consolidation, or what some call joint venture agreements.
There are, of course, other reasons for cooperation between two strong competitors where consolidation is not an option—sharing of technologies to improve existing product lines and strengthen respective brands, joint creation of new innovative products, and access to new markets or customers.
For many companies that agree to cooperate and share technologies, brand loyalty typically plays an important role in the decision to participate in such business arrangements.
There are numerous examples among OEMS. GM and PSA Peugeot agreed to share car underpinnings and pool purchases of parts and services. BMW and Toyota have signed a deal to jointly develop a sports car, hydrogen fuel cells and electric car technology. Fiat—which now has close to 60 per cent ownership in Chrysler—formed an alliance with Mazda to develop and build a new roadster for the Mazda and Alfa Romeo brands.
And among the machine tool builders, the joint venture between DMG and Mori Seiki, announced in 2009, is an example of how two well-known brands with respective strong customer loyalties have worked together using both brands under one banner to create new machine tools with technologies from both companies.
Joint venture agreements are not new—one of the earliest in the automotive industry dates back to 1979, when Ford and Mazda formed a joint venture and cooperated on development of small cars and pickup trucks, resulting in the joint development of the Ford Explorer.
What is new is that more and more companies are participating in joint venture or cooperative agreements. And while mergers, acquisitions and consolidations will continue to be part of the corporate landscape, cooperations and other similar joint ventures will continue to grow because of the power of the brand