According to BusinessWeek, America's big auto makers appear to be getting ready to boot some of their brands. You only have to spend a few hours walking along a strip of auto dealerships to understand why. Over the past two decades, the growing number of models under a given brand and the increasing reliance of the industry on cutting the number of "platforms" on which their cars are based means that differentiation among brands is disappearing.
And yet, something is starting to change in the global automotive market.
Glocal, not Global, brands
As manufacturers in the U.S., Europe, Japan, and now China pursue their quest to build global brands and create global cars, a counter-trend is emerging in the growth of what I would call "glocal" brands, brands owned by a major global company but used in a small number of markets.
General Motors (NYSE:GM) has followed this approach almost by accident in Australia for 77 years since the company bought local automaker Holden - and left the marque alone, rather than trying to transplant American brands Chevrolet, Pontiac, or Buick on its acquisition. Today it holds the second largest market share (behind Toyota) in the Antipodean market.
The most compelling example, however, may be in China. Buick was among the weakest of GM's brand stable when the company launched it in the PRC, lagging because it had failed to retain a niche as GM developed, but mostly because the marque had become staid, boring, and uncool. It lacked that baggage when it came to the Middle Kingdom, and as a result GM has done extremely well for itself here, giving Buick a new lease.
All of this is an illustration that the approach automakers are taking to globalization - let's sell all of our brands everywhere - may be missing the point. The global industry is going to go through another paroxysm of consolidation, and as a result brands will be shuttered with greater alacrity than factories, mostly because it is just getting too darned expensive to build and maintain huge stables of brands.
But rather than try to replicate the success of Chevrolet, Mercury, or Saturn in China, or rather than simply toss marques like Buick, Peugeot, or SEAT into the brand dustbin, why not take a more local approach, drawing from your pool of brands in each market based on the specific local conditions? I mean, if GM can do it in China with Buick, why not Ford (NYSE:F) with Mercury in Russia?
Or, for that matter, if GM can win in Australia by buying Holden and hanging onto the brand, doesn't it make sense to do the same thing when a multinational acquires a local brand? If people are still thinking good things about a brand, maybe it makes sense to hang onto it, rather than trying to create a brand entirely from scratch.
Kill the "Brand Organization"
What stands in the way of such common sense, however, is the way many auto companies (and, indeed many companies in other industries) are organized. Rather than have one company with a host of brands and local subsidiaries focused tightly on the specific opportunities and challenges of markets, companies create brand organizations that become independent constituencies within the organization. Eventually, each brand has its own people, its own business strategy, and is in constant conflict with its sibling brands and the parent company for resources.
All of this works great while the brand is hot, but when a brand begins a long, slow decline, it is politically difficult (if not impossible) to dismantle the organization and put the brand on ice. The business begins to service the brand, rather than the other way around. Frequently, the only way to get rid of a brand is to sell it - and its attached organization - allowing the buyer to cull head count and more intelligently guide the future of the brand.
Brand-centric structures also mean that as a company goes global, so does the brand. But should every brand be global?
More to the point - does every brand belong in China? Or are there some brands with attributes that don't necessarily mesh with local values and aspirations? Does Fatburger belong in China? Does Peugeot? Rolling Stone magazine? Taco Bell? Vanity Fair? Trader Joe's? NASCAR?
Or do these things need to be changed so much before coming to China that they lose their very essence?
In so many cases, it would be just as easy to buy or create a local brand
Or, more to the point, to reach into a company's bag of retired or dormant brands, bring it to China and inject new life - and local characteristics - into it. GM did it with Buick, and Colgate (NYSE:CL) could even get away with it with Darlie toothpaste, the creation of glocal brands should be high on the list of strategies for companies who own multiple brands, and a real alternative to the default strategy of globalizing everything with a recognizable marque.