This is to certify that the
dissertation entitled

SOURCES AND CONSEQUENCES OF BRAND EQUITY
IN THE AUTOMOTIVE INDUSTRY

presented by

JANELL D. TOWNSEND

has been accepted towards fulfillment
of the requirements for the

Ph.D. degree in Marketing

 

 

()0 35: W OW“? if",

 

Major Professor's Sign 9e
9 Moe/m5“ Q5907

 

Date

MSU is an Affirmative Action/Equal Opportunity Institution

V ,

LIBRARY
Michigan State
University

 

 

 

 

—.-.-a-----—.-._t_

L.-l--t->-‘-a-I-l-

+7 WW

 

 

PLACE IN RETURN BOX to remove this checkout from your record.
TO AVOID FINES return on or before date due.
‘ MAY BE RECALLED with earlier due date if requested.

 

DATE DUE

DATE DUE

DATE DUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/05 p:/ClRC/Date0ue.inddcp.1

 

SOURCES AND CONSEQUENCES OF BRAND EQUITY
IN THE AUTOMOTIVE INDUSTRY

By:

J anell D. Townsend

A DISSERTATION

Submitted to:
Michigan State University
in partial fulfillment of the requirements
for the degree of
DOCTOR OF PHILOSOPHY

Department of Marketing and Supply Chain Management

2005

ABSTRACT

SOURCES AND CONSEQUENCES OF BRAND EQUITY
IN THE AUTOMOTIVE INDUSTRY

By

J anell D. Townsend

One of the primary means to achieving a differentiated position in the
marketplace is through the strategic and tactical actions which create a strong brand in the
minds of consumers. While the differential value of a brand has been grounded in
consumer perceptions and related to financial outcomes, what remains to be clarified is
the progression of firm level structures, processes, and actions which contribute to the
creation of these perceptions, as well as the effect of changes in the measurable
dimensions on alternative value propositions. In order to contribute to the understanding
of brand equity, this thesis is structured as three essays as a means to address both broad
theoretical concepts related to the domain of branding within the organization, along with
the consideration of some particular antecedents and consequences of brand equity
dynamics.

The first essay addresses the challenges faced by managers in a global
organization and the processes used to link the organization’s brands with the customer.
The nature of global environmental drivers, value creating internal corporate
relationships and their effect on brand management and global brand portfolio hierarchies
are considered. While previous studies have examined various interactions which are
contained within this framework, none has looked at the phenomenon holistically.

Cultural Materialism, a research strategy used by anthropologists to understand structural

changes that occur within societies in response to environmental forces, is employed as
an orienting strategy to conduct a qualitative study within the context of the world’s
largest automotive manufacturer. The second and third essays explore the relationships
between specific driver and outcome variables associated with brand equity dynamics.
The second essay examines the longitudinal relationship between brand equity
dimensions and value retention. In order to consider the relationship between the
knowledge a consumer has about a product or service, and the assignment of a
probability of the actual quality of the product or service based on this knowledge, a
framework based on information asymmetry is employed. A random effects model with
auto-regressive error terms is utilized to test the research hypotheses developed. The
findings indicate a strong moderation effect by the region of origin, with Asian firms in
particular having significant and positive impact of brand equity on the value retention
rate of automobiles in the US. market.

The third essay provides means to understand the effect of firm level strategic
actions on consumer-based dimensions of brand equity, conceptualized as awareness,
intended loyalty, perceived quality, perceived economy, and image. A seemingly
unrelated regression model is used to test the conceptual model. The results indicate a
positive effect of advertising, as measured by annual expenditures, on all the dimensions
of brand equity, except luxury image. lnnovativeness, as defined by new product
introductions, positively affects all the dimensions except perceived value. The
contextual factors of region of origin and global brand reach have mixed effects on the

consumer-based dimensions of brand equity.

Copyright by:
J ANELL D. TOWNSEND

2005

This dissertation is dedicated to my Mother,

Pamela J. Steffens

ACKNOWLEDGEMENTS

First and foremost, I must thank my family for their patience, understanding and
sacrifice which allowed me to pursue my goals, and finish this dissertation and my Ph.D.
My husband, Rick, for his support, the opportunities he forewent, and commuting to East
Lansing for two years; my beautiful children, Laina and Troy, for their fortitude while
Mommy was working, and their reinvigorating smiles, laughter, and hugs when I was
home; my mother, Pamela, for guidance, a lifetime of lessons, and instilling an eternal
quest for knowledge. Also, I would like to acknowledge the aid and lifelong
encouragement of my grandparents, Alger and Helen Steffens, along with the rest of my
extended family, especially, Ann and Al, Thom, Lesa and Rick, Lori and Dave, and Sara,
Abbey, & Anthony. To all of you my sincere appreciation, most of all, for your love.

This ambitious expedition began with the help and encouragement of two very
special Professors: Ravi Parameswaran of Oakland University and Attila Yaprak of
Wayne State University. I must thank these two fine academics for putting me on the
path which I now travel.

I must also express my sincere gratitude to my Committee for their individual,
and collective, expertise and advice along the journey of completing my Ph.D. The
knowledge they have conveyed, and the advice offered, has given me a strong foundation
for a productive academic career. Professor S. Tamer Cavusgil for his superior
mentoring and teaching me the foundations of publishing; Professor Roger J. Calantone
for helping me to recognize my unique abilities and contribution to academic research;
Dean Marietta Baba for opening my eyes to different perspectives of knowledge

generation; Professor G. Tomas M. Hult for providing an example of what it takes to be a

vi

successful academic. It is without hesitation that I can go forth into the world with my
new degree, confident in the knowledge I gained from these accomplished individuals.

The process of completing a Ph.D. is intense by comparison to many other
endeavors in life. Those people who comprehend the general experience have also
completed a similar program; perhaps those people who understand my personal
adventure best are the members of my cohort. Shen Yeniyurt, my accomplice, my co-
author, my friend, who’s patience and persistence enabled me to learn things I thought
beyond my scope; Chun Zhang, my officemate and “honey”, expert on all things
“relational”; Kwong Chan, an intellectual navigator, builder of black ties, and all around
best fish guy; Linda Shihui, who always brought a fresh perspective and a smile.
Regardless of where life takes us, the bonds we built, will last a lifetime.

In addition, I received significant support from the automotive business
community which allowed me to conduct this research study. In particular, Don Deveaux
and Bob Quigley from GfK Automotive, LLC were extremely generous in providing data
and practical feedback on my dissertation studies. Also, I am grateful to Katy Barclay
and Mark Johnson for facilitating my introduction to General Motors, and to the other
executives from General Motors (who must remain nameless in this document to ensure

confidentiality) who gave me their valuable time and their insights.

vii

TABLE OF CONTENTS

LIST OF TABLES ................................................................................. ix

LIST OF FIGURES ................................................................................ xi

CHAPTER 1

INTRODUCTION .................................................................................... l
CONTRIBUTION AND MANAGERIAL IMPLICATIONS ........................ 10

CHAPTER 2

EVOLVING INTEGRATION OF MARKETING IN THE NEW PRODUCT

DEVELOPMENT PROCESS: CREATING A GLOBAL BRAND

ARCHITECTURE AT GENERAL MOTORS ................................................ 12
ABSTRACT ................................................................................. 13
INTRODUCTION .......................................................................... 14
CONCEPTUAL FOUNDATIONS ...................................................... 16
DATA AND METHOD ................................................................... 27
ANALYSIS AND FINDINGS ............................................................ 31
DISCUSSION AND MANAGERIAL IMPLICATIONS ............................ 50
LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH ............... 54

CHAPTER 3

THE EFFECTS OF MULTI-DIMENSIONAL BRAND EQUITY

ON VALUE RETENTION: AN EMPIRICAL INVESTIGATION

OF THE US. AUTOMOTIVE MARKET ..................................................... 57
INTRODUCTION ......................................................................... 59
DEPENDENT AND INDEPENDENT VARIABLES ................................ 64
CONCEPTUAL FRAMEWORK ........................................................ 73
HYPOTHESIS DEVELOPMENT ....................................................... 76
METHOD .................................................................................... 82
RESULTS ................................................................................... 97
DISCUSSION AND MANAGERIAL IMPLICATIONS ........................... 102
LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH .............. 108

viii

CHAPTER 4
THE EFFECTS OF BRAND INNOVATIVENESS AND
DIFFERENTIATION ON BRAND EQUITY:

A LONGITUDINAL STUDY OF AUTOMOTIVE BRANDS ........................... 110
ABSTRACT .............................................................................. 111
INTRODUCTION ........................................................................ 1 12
THE DIMENSIONS OF BRAND EQUITY .......................................... 115
CONCEPTUAL FRAMEWORK ...................................................... 120
HYPOTHESIS DEVELOPMENT ..................................................... 125
METHOD ................................................................................. 134
RESULTS ................................................................................. 140
DISCUSSION ............................................................................. 160
LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH .............. 165

CHAPTER 5

CONCLUSION ................................................................................... 167

APPENDICES .................................................................................... 176
APPENDIX 1: CULTURAL MATERIALISM ....................................... 177
APPENDIX 2: A BRIEF HISTORY OF GENERAL MOTORS .................. 184
APPENDIX 3: INTERVIEW OUTLINE ............................................. 188
APPENDIX 4: SELECTED QUOTATIONS — ESSAY 1,

GLOBAL DRIVERS .................................................................... 192
APPENDIX 5: SELECTED QUOTATIONS — ESSAY 1,
GLOBAL BRAND PORTFOLIO ...................................................... 194
APPENDIX 6: SELECTED QUOTATIONS — ESSAY 1,
NPD PROCESS ........................................................................... 197
APPENDIX 7: SELECTED QUOTATIONS — ESSAY 1,
DISCUSSION SECTION ............................................................... 200
REFERENCES .................................................................................... 201

ix

Table 1.1:

Table 1.2:

Table 1.3:

Table 1.4:

Table 1.5:

Table 2.1:

Table 2.2:

Table 2.3:

Table 2.4:

Table 2.5:

Table 2.6:

Table 2.7:

Table 2.8:

Table 2.9:

Table 3.1:

Table 3.2:

Table 3.3:

Table 3.4:

Table 3.5:

Table 3.6:

LIST OF TABLES

Global Brand Hierarchy Definitions ............................................ 26
Interview Summary ............................................................... 30
Summary of Findings ............................................................. 32
General Motors Native Categories and Terms ................................. 33

Announcements Regarding Global Reorganizations

at GM Reported in Automotive News .......................................... 38
Perspectives of Brand Equity .................................................... 67
Delineation of Consumer Based Dimensions of Brand Equity

by Author ........................................................................... 69
Construct Definitions and Measurement ....................................... 85
Correlation Matrix for Principal Measures .................................... 87
Factor Loadings for Principal Constructs ...................................... 88
Estimation Results — Random Effects .......................................... 95

Estimation Results — Random Effects with Autoregressive

Error Terms ........................................................................ 96
Main Effects ...................................................................... 101
Estimates of Interaction Effects ................................................ 102
Dimensions of Brand Equity ................................................... 119
Exogenous Variables ............................................................ 133
Factor Analysis of Brand Equity Dimensions ............................... 136
Rating scale of innovation level for car model changes .................... 137
Descriptive Statistics ............................................................ 143
Estimated Main Effects ......................................................... 145

Table 3.7:

Table 3.8:

Table 3.9:

Table 3.10:

Table 3.11:

Table 3.12:

Table 3.13:

Estimated Interaction Effects: Innovation and Advertising ................ 146

Estimated Interaction Effects: Innovation and COO ........................ 148
Estimated Interaction Effects: Advertising and COO ....................... 150
Estimated Interaction Effects: Innovation and Globalness ................. 152
Estimated Interaction Effects: Advertising and Globalness ............... 154
Estimated Interaction Effects: C00 and Globalness ...................... 156
Summary of Findings ........................................................... 158

xi

Figure 1:

Figure 1.1:
Figure 1.2:
Figure 1.3:
Figure 1.4:
Figure 1.5:

Figure 2.1:

Figure 3.1:

Figure 3.2:

Figure 4.5:

Figure 4.6:

LIST OF FIGURES

Contribution and Essay Interaction ............................................... 8
Conceptual Framework: Actualizing Global Brands ......................... 17
Traditional Vehicle Development ................................................ 21
Platform Development ............................................................ 21
New Product Development Process Involvement Timing .................... 42
GM’s Global Brand Hierarchy .................................................... 49
Conceptual Framework: The Effects of Multi-Dimensional

Brand Equity on Value Preservation ............................................ 75
Conceptual Framework: Drivers of Brand Equity ........................... 123
Hypothesis of the Effects of Innovativeness and

Differentiation on the Dimensions of Brand Equity ......................... 132
An Organizational View of Cultural Materialism .......................... 177
Automotive Strategy Board .................................................... 186

xii

CHAPTER 1
INTRODUCTION

INTRODUCTION

Throughout collective human history, there are examples of producers and sellers
of goods and services using brands as a means to differentiate their offerings, or convey
meaningful information to their customers. Yet, the concept of branding only began to
advance in the eighteenth century as producers of commercial goods used names and
pictures to strengthen consumer associations with their products (Farquhar 1990).
Contemporaneously, a brand typically consists of a name, identifying mark, logo, visual
images or symbols, or mental concepts which distinguish the product or service from
competitive offerings (Kotler and Armstrong 2004). Essentially, a brand represents the
holistic sum of all information about a product or group of products. As a binding force
in a complex chain exchange in marketing (Bagozzi 1975), a brand can be conceptualized
as the factor which aligns expectations and actions of stakeholders - from suppliers and
producers, to distribution channels, to the consumers - it represents everything that
makes up the total experience a customer has with a company. The implication is that
there is inherent value to a brand which can be influenced by organizational efforts.
Management of these efforts is most notably undertaken by processes related to
marketing.

Marketing is a complex function which involves strategy, which translates the
marketing concept into actions that create competitive advantage; tactics, or the act of
demand stimulation and selling; and culture, which provides the internal means for
implementing the marketing concept (Webster 2002). The underlying belief being that
marketing-related activities produce measurable intermediate outcomes for the enterprise.

Typically, these outcomes or performance metrics revolve around customers, branding,

channels, and innovation (Cavusgil 2002). While there is an emergence of the
recognition of the need to understand the value of marketing’s impact on the firm’s
performance (Srivastava et a1. 1998), there is a distinct gap in the literature which
incorporates intermediate outcomes associated with marketing activities and how they
influence more traditional financial performance indicators such as sales, market share,
profits and stock returns. Further, there has been relatively little work that has considered
the effects of these intermediate outcomes on the enduring value held by the marketplace
for a firm’s products and brands.

Modern technological advances have created an infrastructure which allows for
the interaction between individuals and organizations, nations and regions in such a way
that transcending traditional boundaries of time and space are now the norm, rather than
the exception. Since boundaries are more permeable, the result is an openness to
markets which has increased the speed, frequency and magnitude of access to national
markets, including all tangible and intangible aspects of commerce, by a new and more
diverse set of competitors (Wolf 2000). Corporations are evolving in response to these
environmental and competitive pressures. In effect, as suggested by Kogut (1985) the
primary impetus driving the globalization of the firm is the comparative and competitive
advantages that are gained by integrating the various value-added activities performed
throughout the organization.

The actual key to success for companies in this era of consolidation and
integration comes from the ability to accommodate the forces that create common
desires; the true challenge for marketing managers is to implement the marketing concept

through the processes which link the organization with the customer. One of the primary

means to achieving a differentiated position in the marketplace is through the strategic
and tactical actions which create a strong brand in the minds of consumers of a firm’s
products, allowing the company to lower risks and enhance future profits (Srivastava and
Schocker 1991). The value creation activities related to building and maintaining
manufacturing, marketing, distribution and services which present the face of the
organization to their constituent groups is becoming more harmonized (Townsend et al.
2004).

Evidence of the importance of the value creation and measurement phenomenon
is the interest of both academics and practitioners alike. Marketing Science Institute
(MSI), a collaborative organization between academia and practice, has designated the
role of branding and brand equity as sustainable means of differentiation, along with
ways to evaluate new product design and introductions, and the changing role of
marketing in a global environment among their research priorities. MSI’s selection
criteria include the importance and relevance of a topic to its member organization as
well as its ability to be researched effectively, with potential to have an impact on the
field of marketing. The business press has also highlighted numerous examples of how
global firms are attempting to focus their value creation activities such as new product
development and advertising on the building and maintenance of strong brands. Thus,
identifying and defining the role of marketing in the evolution of the firm, along with the
relative contribution of various marketing activities which contribute to brand equity and
the long term outcomes associated with marketing activities are of fundamental value.

Understanding the nature of branding in a globally competitive market is a

complex phenomenon requiring consideration of both the expansive context and the

specific components of the issues. Broad theoretical frameworks tend to be
comprehensive and require conceptualization that may not be testable through statistical
means, and may require a research strategy which allows for the identification and
understanding of phenomena from a more holistic perspective (Porter 1991).
Ethnographic approaches allow for the identification and development of these
theoretical foundations (Strauss and Corbin 1998). On the other hand statistical
techniques provide opportunity to test specific relationships between factors and the
impact of individual variables within this broader context (Porter 1991). Bringing
together the broad and the focused is a challenging task; yet, one that has inherently
enables the expansion of knowledge. In order to achieve the objective of understanding
the nature of strategic branding and the implications of global competition, this thesis will
take the form of three essays meant to uncover various aspects of the brand equity
phenomenon utilizing different methodological approaches.

As a means of contributing to the advancement of knowledge, this thesis will
address broad theoretical concepts related to the domain of the organization and the
development of a culture which supports brand objectives, as well as some particular
sources and consequences of brand equity. Specifically, the research questions to be
addressed and the methodology to be applied include:

1. Identify and define the nature of environmental drivers, value creating internal
corporate relationships and their effect on organizational culture; relate these
activities to brand management objectives and offerings in a globally competitive
market.

Method: Ethnographic

2. Explore changes to the after sale value preservation of goods due to the effects of
the dimensional values of brand equity, moderated by the region of brand origin.
Method: Random Effects Model

3. Consider longitudinal effect of marketing related antecedents of the dimensions of
brand equity in a globally competitive market.

Method: Seemingly Unrelated Regression Estimation

These essays interact through the progression from the theoretical to the detailed
application of concepts to the practical level of understanding, as detailed in Figure 1.
The first essay will invoke a research strategy founded on the principles of ethnographic
research, enabling the delineation of propositions in the design stages of the process
(Harris 2001). This approach allows for an explanation of how the environment, firm
structure and cultural orientation interact to create brand portfolios in the context of a
global firm. Theoretical underpinnings at each level of the framework provide a
foundation, and aid in analysis of the findings.

The enduring value created for the firm by the various dimensions of brand equity
has been a topic of interest for some time; yet, studies have not considered the
longitudinal effects of the brand equity dimensions on the degree of value retention of
consumer durable goods. The second essay will examine these dimensions and how
their values impact the value retention rate of automobiles in the US. domestic market.
The third essay will explore firm level capabilities and attributes on the dimensions of
brand equity. Although research has considered the effects of marketing mix variables
on specific dimensions of brand equity (Nowlis and Simonson 1996; Sullivan 1998; Yoo

et al. 2000a), none has addressed the impact marketing related activities on a holistic

conceptualization of the consumer based measures, longitudinally and simultaneously.
Thus, the third essay will provide means to understand the nature of dynamic firm level

strategic actions on the consumer-based dimensions of brand equity.

 

 

 

__ Emwm

 

___ Emmw . _ Emmw

 

 

 

 

 

 

 

           

 

 

   

 

 

  

 

o:_m> mco_mco..xm_
umESom m EoEommcmE
m ” 639d 859mm:
wc0_mcmE_D

o2m> xooaw .

22m 5x55. .555 ucmcm

3655“.
“$2053: c2890 o:_m>

 

”moEooSO

3quer manna was 55:55.50 :4 953%

Empirical evidence from the US. automotive market will be employed to address
the research questions. This market offers an interesting context to study the branding
and brand equity phenomena, as it is one of the most competitive in the world, with most
of the major players participating. Over the last 20 years, increasing competition from
foreign manufacturers has continuingly eroded the domestic companies’ market share,
with new entrants like Korean companies poised to make further inroads. While there
has been considerable consolidation at a macro level of both OEM’s and Tier 1’s, there
continues to be a proliferation of new brands and models (Stein 2004). Even with the
reality of continuous quality improvements, the domestic makers still have trouble
improving brand image and related brand value. Concurrently, shorter product
development cycle times and platform approaches have allowed for the announcement of
a myriad of new product initiatives requiring an ever greater focus on the marketing of
the brand (Stein 2004). Volkswagen currently enjoys a price premium of 6-8% over its
competitors and has spent billions to develop new models which it hopes will further
boost its brand image (Mackintosh 2004). GM has turned around Cadillac with a variety
of exciting new models that coalesce the brand’s image; executives are concerned with
the need to safeguard brand identity and differentiation in an increasingly competitive
market (Economist 2004). What this research will address is how this process of new
product development interacts with marketing in such a way as to support brand
positioning and image objectives, the intermediate value of these activities as they impact
the dimensions of brand equity, along with the impact on value preservation of the

brand’s products.

Contribution and Managerial Implications

Although inter-related, each essay in this dissertation is distinct and makes a
unique contribution to knowledge about the generation and implications of brand equity
in a global marketplace. The first essay contributes by the inductive development of
knowledge with respect to the association between marketing and other functions in the
new product development process as related to the brands offered by the organization.
This study. employs ethnographic research methods to describe and explain the
environmental influences on a manufacturing firm operating in a globally competitive
marketplace, and the structural changes which ensue.

The second and third essays begin to coalesce consumer-based measures of brand
equity to serve as an intermediate measure of marketing related value creation activities.
This is of inherent value to marketing managers as they gauge the effects of their work,
and convey this to other areas of the organization. Further, essay two will also contribute
to the literature by exploring the dimensions of brand equity and their effects on the rate
of the depreciation in value of automobiles. The implications are significant as the
maintenance of value is of considerable concern to managers in the industry. In addition
to being a factor considered by consumers when purchasing a new car, it also has a direct
impact on the leasing options available for the firm to offer. The lower the rate of capital
decline, the lower the monthly payments available to the customer. Additionally, it will
contribute by exploring the boundary condition established by the region of origin of the
brand with respect to the equity dimensions.

The research study conducted in essay three addresses the nature of the effects of

marketing related value creation activities and firm specific attributes on intermediate

10

outcomes, as measured by the impact on the consumer based dimensions of brand equity.
The value creation activities considered are new product introductions and advertising.
Understanding the relative importance and degree of contribution of each of these
activities will provide insights for managers when allocating resources and organizational
emphasis. The firm specific attributes considered include the region of origin of the
brand and the global reach of the brand. The effects of brand origin are important to
managers when communicating with their consumer base, as illustrated by Toyota’s
recent effort to emphasize their production base in North America in advertising
messages. How this moderates the effects of their value creation efforts is also of
interest. The degree of a brand’s global reach is also an important consideration as firms
increasingly rationalize their international operations. While recent literature indicates
perceived brand globalness is and important indicator of quality and purchase intentions
of consumers (Steenkamp et al. 2003), the question of the actual brand dispersion has not
been considered. This has potentially important implications for managers as they
consider whether they need to achieve greater reach in order to achieve a higher degree of
perceived globalness.

In aggregate this dissertation will contribute to a broad range of issues related to
achieving and maintaining branding equity in a global marketplace. The contribution to
the literature and implication of managers are correspondingly extensive and will offer

insights with practical application for managers.

11

CHAPTER 2
EVOLVING INTEGRATION OF MARKETING

IN THE NEW PRODUCT DEVELOPMENT PROCESS:
CREATING A GLOBAL BRAND ARCHITECTURE AT GENERAL MOTORS

12

EVOLVING INTEGRATION OF MARKETING
IN THE NEW PRODUCT DEVELOPMENT PROCESS:
CREATING A GLOBAL BRAND ARCHITECTURE AT GENERAL MOTORS
ABSTRACT

This essay addresses the challenges faced by managers in an organization with a
broad global footprint as they integrate the product development process and the portfolio
of brands across the expansive organization. The underlying motivation of this study is
to identify and define the role of marketing in the new product development process and
the relationship with global brand creation. The intent is to understand and explain how
different organizational units within the new product development process interact under
the external pressures of globalization, to develop global brands. Qualitative research
methods are employed, and propositions explored within the context of the world’s
largest automotive manufacturer. A cultural materialist framework is employed as an
orienting strategy to understand the evolution of the firm’s global brand architecture, as a
symbolic indicator and artifact of the organization’s culture. The findings provide
support for the view that an organization’s global brand architecture develops through a
complex process of structural interactions between functional groups involved in new
product development. Ultimately, the global brand architecture evolves as a response to

environmental drivers.

13

EVOLVING INTEGRATION OF MARKETING
IN THE NEW PRODUCT DEVELOPMENT PROCESS:
CREATING A GLOBAL BRAND ARCHITECTURE AT GENERAL MOTORS

INTRODUCTION
“The thing with GM, we need to find ways to really mix this crazy quilt of companies
and brands and regions into a strong global company without losing all of the nuances...”

Executive, Advanced Vehicle Development

General Motors, 2004

Globalization has emerged as a ubiquitous term to encompass many aspects of the
process leading toward a more interdependent world; with implications that span the
gamut from governmental policies to consumer choice decisions. These environmental
forces have spurred changes to the means through which many firms conduct business.
Among the most notable business phenomena of this ongoing environmental
transformation is the advent of the global firm, spanning distance and national culture,
organizations interact in such a way as to integrate both operations and orientation. The
implications are significant for both home markets and distant shores, which can provide
both resources and customers.

Perhaps one of the most overt manifestations of this phenomenon is the
emergence of global brands; as noted by Shocker et al. (1994b), globalization is one of
the most important factors impacting brand management. The intention is to understand
and explain how different organizational units within the new product development

process interact under the external pressures of globalization, to develop global brands

14

and architectures. As such, the overarching research question to be addressed by this
study is how do the organizational units respond to challenges imposed by the
globalization drivers and interact to create global products and brands? In order to
address this issue, a sub-set of research questions emerges. First, what are the effects of
globalization on the new product development process of the firm? What is marketing’s
role in the new product development process? And finally, how do organizational units
interact within the new product development process to build global brands?

The research questions are investigated via a qualitative study in the context of
the world’s largest automotive manufacturer, General Motors. Although the company
has long maintained a global footprint, with operations on every continent except
Antarctica; historically, the company’s various regions, brands (previously divisions) and
product development teams have operated relatively autonomously (Briody et al. 2004).
The weight of competition created by globalization has set in motion changes which
previously were inconceivable. As the very survival of the entire domestic U.S.
automotive industry is called in question, the executive leadership of GM has undertaken
the daunting task of revitalizing the firm’s products and brands through an aggressive
new product development process focused on core image attributes and a product
portfolio based on leveraging the firm’s global footprint. The nature and context of the
study proved to be timely, with GM providing an ideal context for observation.

This essay first delineates conceptual foundations by employing a framework
derived from a materialist perspective (Harris 1968), focusing on the implications for

brand architectures impacted by the response of the new product development process to

15

environmental drivers]. Next, specific propositions are developed from the literature by
considering the drivers of globalization, marketing’s role in the new product development
and the implications for brand portfolios. The findings of the qualitative study are
presented in the following section. A discussion of the findings, managerial implications

and directions for future research conclude.

CONCEPTUAL FOUNDATIONS

Cultural materialism, as proposed by Harris (2001; 1968) seeks to comprehend
trajectories of structural and cultural change through the exposition of relationships
between and among components of a social system in dynamic interaction with its
environment. Various parts of the system are interrelated, and when one part changes,
the others will also change. An underlying assumption of cultural materialism is that any
organization or group cannot be considered in isolation (Elwell 2001). For a detailed
description of cultural materialism refer to Appendix 1. As pointed out by Briody and
Baba (1991), it is expected that formal organizations such as General Motors (GM)
display a “universal pattern” of internal elements reflected by materialism, and evolve
over time as a result of environmental change.

This foundation allows for a means to understand the way that organizational
units within the firm interact in response to environmental change. The cultural
materialist view provides a dynamic framework with the critical result being how the

units of the organization collaborate to focus on the development of products and the

 

' Cultural Materialism in its classic form is not utilized as a framework, but as a base
orientation for the qualitative study.

16

management of brands in the global marketplace. The conceptual framework is

illustrated in Figure 1.1.

Figure 1.1: Conceptual Framework: Actualizing Global Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

l' """"""""" I l’"""""""""" :‘""""""“""':
j Competitive g j j j j
: Drivers : : E : 5
E E E Marketing’s : 5 Individual :
E Market 5 E R013 5 5 Brands 5
5 Drivers 2 s j i e j i
3 Government E'_—‘)§ New Product E————"§ Global Brand E
5 Drivers 5 5 Development 5 E Hierarchy j
5 Cost 5 l E l E
5 Drivers 5 E E I l
j j j Organization I j g
5 Global 5 E Strum“, i i Ma-rkei i
: Drivers : : Processes, l : Posrtronmg I
E E 5 Culture 5 j 5

Globalization: Drivers and Responses

Over the last few decades, cross-border business has experienced phenomenal
growth. This escalation is due to a combination of factors including advances in
telecommunication, information and transportation technologies (Boudreau et al. 1998);
a shift toward market economies due to deregulation in emerging markets; the emergence
of the global consumer; and a proliferation of global products. These environmental
changes clearly represent fundamental shifts in the foundation of society.
Correspondingly, the literature has captured the phenomenon as it relates to the business

enterprise, conceptualizing the transformation of leading business organizations from

17

multi-national corporations to those with broad global scale and scope (Kogut 1985;
Perlmutter 1969). To a large extent, the trend has been rationalized as an extension of the
process of global integration as nation-states break down barriers to international trade
and consumer preferences converge (Douglas and Craig 1989; Levitt 1983; Ohmae
1989).

Based on the premise that firms react to extemal conditions through the alignment
of strategy and structure (Ruekert and Walker 1987), global firms need to create
synergies in response to the external market drivers. In order to implement a viable
global strategy, it is necessary for the firm to develop operational capabilities to manage
inter-dependencies between and among various resource flows (Roth et al. 1991). It is
the marketing processes through which the organization implements marketing strategy
and utilizes structural components (Bonoma 1984; Ruekert and Walker 1987).

The drivers influencing the dynamics of operating in a global market reflect and
parallel those of globalization; they can be broadly categorized as the market factors, cost
sensitivity, governmental influences and competitive considerations (Yip 1992). New
product development is a key component of the marketing related processes in a global
company (Townsend et al. 2004). Arguments can be made for the importance and degree
of impact of each of the global drivers on the new product development process. Further,
given that the functional roles of each organizational unit are different, the globalization
drivers are expected to have different implications for each of the units involved in the
new product development process. In this study, the roles of design, engineering and
marketing are specifically considered. Therefore, it can be expected that different

functional units involved in the new product development processes within a large multi-

18

national corporation will respond to these drivers in a different fashion based on relative

positions and responsibilities.

P1: Each of the functional units involved in the new product development process
(design, engineering, marketing) are influenced differently by the environmental
drivers of globalization.

Global Brand Portfolios

A brand is broadly defined as a name, term, symbol, design, or a combination thereof,
which identifies a seller’s products and differentiates it from competitor’s products(Kellcr
and Lehmann 2005). A study by LaForet and Saunders (1994) indicates that firm history,
corporate culture, company policy, product range, and market structures are underlying
drivers of a company’s brands and brand portfolios. This suggests that brands are a result
of the marketing strategy, structure and processes, including new product development.
Further, Mizik and Jacobson (2003) conceptualize innovativeness, defined as the “degree
of discontinuity in marketing and/or technological factors” (Garcia and Calantone 2002),
as a significant means of market value creation. The inference is the new product
development process is one of the major marketing value added activities that contribute
to the development of brands.

The implications of a globalizing industry environment are that the firm will
develop a global market orientation in response to environmental change. Global
orientation refers to organizational emphasis on the global success of the firm, as opposed
to accentuating nation or market based measures (Ohmae 1989), and is consistent with
Perlrnutter’s (1969) original conceptualization of the geocentric firm. In a global context

there is particular concern with the values and beliefs that help develop an organizational

19

mindset oriented toward the complexities of global strategies, leadership, structures, and

processes (Yip et al. 1997).

Global New Product Development

The new product development process is considered to be among the mediating
events that determme the extent of an effect that a particular skill or resource has on a
firm’s ability to differentiate itself in the marketplace (Day and Wensley 1988), giving it
opportunity to achieve a competitive advantage. New product process is defined as “a
series of activities that move the product from idea to launch”(Cooper and Kleinschmidt
1987). The focus of this study is the global new product development process, which, in
line with the extant global marketing literature, is defined as “the activities related to
understanding the global customer needs, and shaping new product development and
global brand creation processes according to those needs” (Townsend et al. 2004).

The cultural materialism framework posits that the social interactions are
delineated through the formal and informal structures of the new product development
process with respect to the interaction between marketing and the other functional groups
within the firm (Harris 2001). The automotive industry has transformed over the last
decade from a “smokestack” type of organizational design, to one of a “platform”
approach (Lutz 1998). The smokestack approach was an ordered process with distinct
responsibilities conducting their activities sequentially, with relatively little interaction
between functional groups (Figure 1.2). As illustrated in Figure 1.3, the implication of
the platform structure is that each of the functional areas has equal input into the new
product development process and the introduction of new products. Conceptually, this

supports the findings of Cummings (2004) which suggest that diverse work groups are

20

more effective through the exchange of information between a broad base of internal and
external constituent groups. As suggested by Calantone and di Benedetto (1988), both

the technical and marketing skills possessed by an organization are contributing factors to

new product success.

Figure 1.2: Traditional Vehicle Development

 

Sequential, Component-Based Process

 

 

 

 

Design Engineering Procufement Manufacturing —H Sales/Marketing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

       

& Supply a
Lutz,1998
Figure 1.3: Platform Development

Concurrent, Whole—Vehicle-Based Process

,’ Design Engineering ‘4“.

'1 Sales/ 3

Marketing

\‘x Manufacturin ;
---------------- Lutz, 1998

 

 

 

21

There is further complexity involved when broad geographical considerations are
added to the equation. Barczak and McDonough (2003) found that global new product
development teams are established to address the needs of common global markets,
incorporate the unique needs of local markets, and to bring together globally diverse
resources and expertise. While often difficult to manage because of the geographic and
cultural diversity, these groups can achieve a higher level of performance if there is a
significant degree of information exchange (Cummings 2004). Yet, there can be
inherent conflict between functional group members such as engineering and marketing
(Maltz and Kohli 2000), which impedes the effective development and ultimate success
of new products and can be even greater in culturally diverse groups. Thus, it is argued
that how work centers are structured, and their relationship to the international network
should be based on the underlying characteristics of a firm’s knowledge based assets
(Birkinshaw 2002).

While previous qualitative studies in the marketing literature have focused on the
limited impact of marketing on the new product development process (Workman, 1993),
the consideration of this study is how a firm’s new product development process is
affected by the environmental drivers, and how the relationship between marketing and
R&D (design and engineering specifically) evolves under the external pressures of
globalization and internal organizational structural constraints. As such, in line with
previous research in global marketing and the cultural materialist framework, it is
postulated that the external globalization drivers and the internal processes dictate the

role of marketing in the new product development process.

22

P2: The relationship between marketing and R&D is dependent on the configuration
of the global new product development process.
The Role of Marketing in Global Brand Development

While there is an emergence of the recognition of the need to understand the value
of marketing’s impact on the firm’s performance (Srivastava et al. 1998), there is a
distinct gap in the literature which integrates the value added of the marketing functions,
as a whole, particularly from a global perspective. Marketing is a complex function
which involves strategy, which translates the marketing concept into actions that create
competitive advantage; tactics, or the act of demand stimulation and selling; and culture,
which provides the internal means for implementing the marketing concept (Webster
2002). The basis of the argument made here is that in order for marketing to be
institutionalized in organizations, it must be infused into the actions of managers,
influencing the process of work that gets done (Srivastava et al. 1999).

Evidence suggests that marketing tends to have relatively little influence in the
new product development process, in the context of a high technology firm (Workman
1993), and it is the influence of individuals rather than mere participation in the process
which is significant (Atuahene-Gima and Evangelista 2000). Yet, the literature supports
the premise that the interface between marketing and research and development (R&D) is
one of most important relationships in the organization (Song and Parry 1992).

As firms have entered broader and more diverse geographic regions, a
phenomenon has occurred where marketing strategies and brand names are being
transferred across markets; the term coined for this is global branding. A global brand is

denoted by a product which is sold across multiple country markets, but the core essence

23

of the brand identity remains unchanged, even if the execution is adapted to local
marketing models (deChernatony et al. 1995). Essentially, a global brand is one whose
positioning, identity, look and feel maintain a high degree of consistency across multiple
markets worldwide (Board 2001). Fundamentally, a brand conveys a consistent image
globally through its distinguishing characteristics which include attributes, associations
and identifiers (DeSimone 1998).

Global branding may be the most readily observable outcome of corporate
attempts to adjust to globalization, as the face with which a firm portrays an image to a
more diverse customer base. Although the academic argument related to the
globalization of product marketing has its roots in the debate about the relative level of
standardization (Buzzell 1968), the extant literature and observations from the
marketplace seem to support the idea of finding an appropriate balance (Cavusgil et al.
1993; Jain 1989). The basic tenets embrace the concept of being global, but acting
locally as necessary (Wills et al. 1991). Although studies have found that there is no
performance advantage to standardizing globally (Samiee and Roth 1992) and adaptation
is preferred for export products (Cavusgil and Zen 1994), utilizing a hybrid approach
appears to have merit; for example, IBM has globalized its marketing by unifying its
worldwide business strategy, including their advertising and marketing campaigns, but
tailors their campaigns to contain local associations (McCullough 1996). The underlying
firm characteristics of global branding appear to be based on similarities garnered from
centrally coordinated marketing strategies (Steenkamp et al. 2003).

Global brands offer a number of compelling benefits: (1) efficienCies of scale, (2)

responsiveness to global customers, (3) leveraged agency relationships, and (4)

24

efficiencies in scope (Board 2001). A company utilizing global branding strategies can
achieve scale economies in manufacturing, sourcing, and sales and distribution networks.
Global branding, facilitated by the integration of marketing and centralization of product
selection and positioning allows for the transfer of knowledge across markets (Kim et al.
2003), and speeds up a brand’s new product introductions by minimizing the number of
modifications necessary for individual markets (Neff 1999; Steenkamp et al. 2003). This
has implications from the brand level with respect to the acquisition and utilization of
knowledge across markets, where experiential learning allows for the application of
knowledge gained from successive markets to other markets.

It appears global branding is becoming more predominant as firms focus on core
brands, and are increasingly implementing unambiguous international brand architectures
as a strategic means of facilitating brand consistency across international markets
(Douglas et al. 2001). Global brand positioning strategies have developed in parallel
with the growth of the global marketplace (Alden et al. 1999b). The portfolio of brands
can be conceptualized as based on a continuum of geographic scope and degree of
consistency. As illustrated in Table 1.1, a reasonable expectation is for the hierarchy of
brands to follow the basic tenets of the internationalization process (J chanson and Vahlne
1977), where increasing knowledge and commitment by a brand to global markets will

yield a brand architecture based on degrees on international integration.

25

Table 1.1: Global Brand Hierarchy Definitions

 

Brand Scope

Definition / Criteria

 

Domestic Brand

A brand with presence only in the home market.
Local management.

 

International Brand

Sold across a few country markets.

Typically in the early stages of internationalization.
Positioning, identity, image, distinguishing
characteristics including attributes, associations and
identifiers of the brand virtually identical to the
home market.

Management largely dictated by home market, often
using local agents in international markets.

 

Multidomestic Brand

Sold across multiple country markets.

Intermediate stages of internationalization
Positioning, identity, image, distinguishing
characteristics including attributes, associations and
identifiers of the brand varying across markets.
Decentralized management with local control.

 

 

Global Brand

 

Sold across multiple country markets and having
reach to the three major developed continents.
Mature internationalization.

The core essence of the brand remains unchanged;
positioning, identity, image, distinguishing
characteristics including attributes, associations and
identifiers maintain a high degree of consistency
across worldwide markets. (Corporate Executive
Board 2001; DeSimone 1998)

Centralized brand management coordinating local
execution.

 

In the cultural materialism framework, societal interactions are influenced by the

relationship between the economic and technological structure (Harris 2001). As such,
the formal and informal structures of the new product development process delineate the
interaction between marketing and the other functional groups within the new product

development process. Hence, the contribution of marketing to global brand development

26

 

through the new product process is bound by the structure and super-structure. Yet,
evidence in the marketing literature suggests there is a positive relationship between the
development of customer knowledge, new product advantage, and market performance
(Atuahene-Gima and Evangelista 2000; Li and Calantone 1998). To achieve this, it is
necessary to engage in demand articulation which is conceptualized as a process which
includes the translation and integration of market data into a product concept (Song and
Parry 1997). Essentially, this is a capability used to absorb critical knowledge from
external sources and amalgamate it for use by the various internal constituencies (Verona

1999). Therefore:

P3: The greater the role of marketing in the global new product development process,
the more systematic and balanced will be the global brand portfolio.

DATA AND METHOD

Consistent with the exploratory nature of this study, the method used to develop
and extend the cultural materialism framework to the organizational level is qualitative in
nature, utilizing content analysis and interpretation of a range of observations. The data
is based largely on thirty five semi-structured interviews of twenty eight GM employees
across the spectrum of the new product development process, ranging from mid-level
management to the Executive Vice President level. The key respondents represent
members from Human Resources, Corporate Communications, Design and Styling
Management, Planning and Portfolio Management, Engineering, Vehicle Line Executive
Teams, Marketing and Brand Management, and Executive Leadership. The sample set
was not randomly chosen, but the result of a snow-ball technique with the Human

Resources group from the Advance Vehicle Development group providing the first 7

27

contacts, and the subsequent respondents garnered from referrals of these initial
interviewees. A summary of the interviews can be found in Table 1.2.

The interviews were conducted from July, 2004 — March, 2005, at the GM
Technical Center in Warren, Michigan, as well as at the GM World Headquarters located
in the Renaissance Center in Detroit. Interview duration ranged from 30 minutes to 3
hours. The interviewee’s experience with the company ranges from 10 years to 44 years.
Also, 3 presentations by senior management to external groups were observed, with
presentation materials provided for review, and one interview included a presentation of
the evolution of the product development process at GM. Communications with
respondents and their representatives included a multitude of phone calls and emails, in
addition to the in person interviews. Multiple respondents were in transition to new jobs
or had recently moved to new positions. This offered opportunity to garner information
from these individuals from alternative perspectives. Several sets of internal company
documents related to product and brand marketing were also made available for review.

In addition, interviews with industry experts and analysts were conducted in order
to provide an etic perspective of the organization and its position. An etic perspective is
one that is exogenous to the firm, in this case the respondents were people with specific
knowledge of both the company and the global industry. This data is further
supplemented with secondary data sources, including historical industry records,
company oriented manuscripts and current periodicals.

The majority of interviews were recorded electronically, except for a few people
who felt they could be more candid in their responses and examples if they weren’t on

record. Subsequently, the recordings were transcribed into written text format, as were

28

hand written notes taken during interviews. These documents serve as a data set
comprised of a collection of narratives suitable for analysis. Atlas ti was then employed
to build explanations through a unique pattern matching technique, distinguished by the
emic constructs identified in the new product development process, to match the
conceptual development with the data (Yin 2003). Atlas ti enables the categorization of
qualitative data by keywords and the extraction of quotes associated with a particular
category (Muhr 1991). As suggested by Eisenhardt (1989), cross case (in this case,
functional groups) pattern matching allows the researcher to derive insights through

multiple lenses while looking for within-group similarities and inter-group differences.

29

 

59 £25 mazes

 

 

 

X
X
XX
XX
X X X Acoufiaomemv
XX
XX X XXXXXXXX
XX
X XX
X X X
XX X
Ace—=38 Ame—oak 95 SEER 8300 :wmmon Engage—gen 380900
2&6 Ba :38 B3 8:85 203; a 3:55
7 -33: SEQ .55 voo§>e< ozobuom
SoN

 

350M
338258800
Reese—:85

cam E 3:55

. 56.83::
20 BooSomoM SEE:
EMS—.32 oomtomkofim
wetoofiwcm

:wmmon

oZSooxm 0:3 2oEo>
ofiSooxm

\ 28285 03>
notion— 138855

 

 

SEE—am Burr—8:— unA ~35.

30

ANALYSIS AND FINDINGS

The substantive findings of this study are presented in the materialist framework,
based on the propositions developed. This is because the purpose of this study is to
identify effects of the environmental drivers of globalization on functional units involved
in new product development process, and the way in which they react and interact to
develop global brands. A synopsis of the findings from a pattern matching process,
where the narratives from people within the various groups within the organization
involved in the new product development process were matched together by the
categories considered in the conceptual model is presented in Table 1.3.

In the first section of the table, the relative influence of the global drivers on each
functional area studied is presented. The classification of the findings is based on
whether each of the drivers is considered to be a catalyst of global integration, 3 neutral
factor, or an impediment. The next column considers the formal and informal
involvement, and influence of marketing at each level of the new product development
process. The final column identifies the relative role in the brand management portion
of the new product process. A summary of some key terms and acronyms that are native
to GM’s culture is provided in Table 1.4. In general, as will be illustrated in the
following sections, the findings suggest the cultural materialist framework provides an
adequate strategy for considering the complex dynamics of the research study. A
description of the findings as they relate to each of the propositions is presented in the

following sections.

31

 

BEE—80G - Q

 

 

 

 

 

 

 

 

 

 

 

 

855:5 -_ EBB—0095 -—
0300xm - m 833395" - m REBZ - Z
museum. - H
328% - m Bani - 4 £38 - o
$53.82
Acumen—ea a G G U D Z 5 .05" 003.com
8.0m 0_0£0>
0800 825.5
2.25 gm .— U U U U 3:222:85
03300me
E a A D Z n a 0:3 0—038,
mean as
a a o _ have 202$
“00033.4.
8080352
0500825 m .— U 0 Z Z ozobuom
Ea mafia—m
€8.83 ~0th “moo 88:09:00 noun—:wom €082,280
Eon—ounces .50.:— Satoanm wage—.32 9.02.5

 

 

 

 

 

ages..— a 555m ”3 sea.

32

Table 1.4: General Motors Native Categories and Terms

 

GM Acronyml Phrase

Complete Title

Description

 

Vehicle Line Executive

The head of an
architecture or platform.
Responsible for inter-
functional coordination.
Signs a “contra ” at the
beginning of an
architecture and each
vehicle program built off
an architecture.

 

AVD

Advanced Vehicle Design
(Development)

Styling and design group.

 

Zeta, Delta, Sigma, etc.

Architecture names

Greek symbol name used
for each unique GM
architecture

 

PPD

Portfolio, Planning and
Development

Strategic group which
analyzes the environment
and makes corporate
product and portfolio
decisions. Members act as
organizational
administrators on
architectures

 

International Product
Center

Responsible for managing
operations by geographic
region; integrating and
rationalizing globalization
activities throughout the
oganization

 

VSSM

Vehicle Sales, Service and
Marketing

Responsible for
generating and analyzing
market data, brand
management, and
coordinating dealer
networks

 

PET

Product Evaluation Team

Individual product units
within each architecture

 

 

Homeroom

 

 

The regional vehicle
development center
assigned global
responsibility for an
architecture

 

33

 

Global Drivers

In this section, the effects of globalization drivers on the new product
development process are investigated. Based on the emergent theory of globalization, it
is expected that the convergence of consumer needs and wants, and the decrease in
international regulatory pressures would have a significant impact on the firm’s product
development and brands. Yet, this does not seem to the general perceptions of managers
at GM; moreover, this is the general impression of GM’s managers with respect to the
industry overall, with several people making comments to the effect that “there is no such
thing as a truly global car”. Customer requirements different across geographic markets
due to cultural differences in the use of vehicles, and segments which exist in the US.
market often don’t exist in other markets (see Appendix 4, Quote 1). Overall, consumer
convergence appears to be the weakest driver of globalization within the firm. Although
there are two groups, Vehicle Sales Service and Marketing (VSSM) and the International
Product Center (IPC) in particular, who recognize that their may be greater synergies
which can be harnessed due to convergences which may exist (see Appendix 4, Quote 2).
The IPC groups are working on developing metrics to determine in a broad sense where
these synergies may reside, as well as implementation factors. Additionally, the Brand
Strategy group within VSSM has been undertaking studies across multiple markets across
Europe, Asia, Latin America, and the Middle East with respect to specific brands to-try to
understand what commonalities may exist across markets in order to tap into efficiencies

that could be gained.

While the decrease in intra- governmental trade regulations, and multi-lateral trade

agreements have facilitated a greater amount of cross-border trade, and are considered to

34

be major factors impacting industry globalization, it is the internal regulations of nations
that are more significant to the automotive industry, and directly effect how products are
developed (see Appendix 4, Quote 3). Additional regulatory considerations directly
impact how markets are segmented. For example, in Australia, for tax reasons, many
vehicles are purchased by businesses as a perk for employees, rather than by consumers
directly. This dictates to a large degree how products specifications are configured, and
results in a great degree of fragmentation of a limited number of segments. Again, it is
the IPC group which is considering how regulations across markets can be rationalized,
with several interviewees referring to this group with respect to the consistency of
adhering to regulatory issues.

Cost drivers, without fail, are the biggest concern for the managers of GM as they
move towards being a global company, rather than just having disparate independent
operations in many places around the world (see Appendix 4, Quote 4). Across the
spectrum of the new product development process, managers indicated this is the greatest
concern with respect to globalization. Although direct costs are a major consideration, it
is through the efficiencies which can be obtained and “centers of excellence” where it is
expected the greatest rewards can be reaped (see Appendix 4, Quote 5).

GM has been undertaking a major effort to adapt and cope with the intense
competition now found in all geographic and product markets (Briody et al. 2004).
Perhaps, most profound is the effect of competition on the home U.S. market, where it’s
market share has slide from over 60% in the 1960’s to the mid-20% range in the first
years of the new century. A multi-domestic company treats competition in each country

or region on a stand-alone basis, a global company takes an integrated approach across

35

countries and regions (Birkinshaw et al. 1995; Zou and Cavusgil 2002). In particular, the
trajectory of Toyota in the global marketplace is a major competitive challenge.
Harnessing GM’s global footprint is seen as means to counteract this threat, with several
people commenting along the lines that “Toyota’s fear is that we will learn how to
operate as a global company”. As noted by Bob Lutz in a recently published interview,
“Toyota and Honda run this business on a global basis, and we were maybe a little bit
late. The regional model worked very well for us about 10 years ago. Now the scale of
the business has changed” (Lutz 2005). There is recognition that competition from a
variety of players is a reality in all markets of the world and there may be means to
extracting advantage. Therefore, it appears GM is beginning to view the world as a
global marketplace as opposed to a series of independent markets.

This study was, in fact, timely as a number of public announcements published in
Automotive News related to global re-organizations of various functional and product
development processes were made during the course of the investigation. A list of select
announcements is noted in Table 5. There are some interesting points which arise from
reviewing these announcements. The initial announcements indicate the individual
functional units are being globalized independently, but subsequent moves are related'to
broader integration of the functional groups via the VLE. Another interesting point is
that all the announcements refer to cost savings and efficiencies which are expected to be
gained, supporting the findings from the interviews conducted with individual executives.
However, what is conspicuously lacking in these announcements is the anticipated
structural interaction between functional groups as well as the relationship with brand

management in the organizational evolution.

36

Overall, support is found for the Proposition 1, positing that each of the ftmctional
units involved in the new product development process are influenced differently due to
differences in perceptions of environmental drivers of globalization. Across the new
product development process, the functions are unwaveringly driven by cost reductions
and efficiencies which can be gained through global integration. The Planning and VSSM
groups are concerned primarily with competitor and cost considerations, while the AVD
and VLE groups appear to find consumer preferences and regulatory issues an
impediment to globalization. The IPC, perhaps by the very nature of the group’s mission,
is motivated by the drivers of globalization in a much broader sense than other
organizational groups. The differences in perceived drivers of globalization by

department have a resulting impact on the degree of globalization by each functional

group.

37

Table 1.5: Announcements Regarding Global Reorganizations at GM Reported
in Automotive News

 

 

 

 

Automotive News Date Summary
Announcement
GM to unify global February 2, 2004 GM's engineering centers will work as a
engineers unified global organization that
constantly shifts work back and forth to
smooth fluctuations in engineering
workloads & create cost efficiencies.
I Common work practices
I Uniform Computer system
- Single product-development process
with global architectures and
components
GM centralizes March 15, 2004 Subsidiary firms will lose control in
product design and quest to build a lean global company.
manufacturing Key decision-making power will be
concentrated in GM’s executive strategy
boards and global leadership councils. '
Middlebrook named August 16, 2004 Middlebrook to “work in partnership”
to new GM job: with marketing chiefs in GM’s regions

Veteran moves to
global marketing

post

with some global teams reporting to him
to spread best practices among regions.

 

5 GM vehicle
programs go to
global units

January 10, 2005

GM announces the assignment of three
major engineering centers worldwide
and the appointment of one chief
engineer and one vehicle line executive
for each lead center.

 

GM creates global
product board

March 7, 2005

GM announces the creation of the
Automotive Product Board to cut costs,
create innovative niche products and
speed up GM's ponderous product
development through centralization of
control. The Board will enjoy equal
status with GM's Automotive Strategy
Board, and include the company's top
global executives. Previously, GM's four
regions developed vehicles
independently.

 

 

GM creates global
program
management post

 

May 10, 2005

 

GM appoints Jon Lauckner to the newly
created position of vice president of
global program management. All global
and regional vehicle line executives will
report to Lauckner.

 

38

 

Marketing’s Role in NPD
“I am sure we all realize. . ..how much appearance has to do with sales; with all cars fairly

good mechanically, it is a dominating proposition and in a product such as ours, where
the individual appeal is so great, it means a tremendous influence on our future

prosperity.”
Alfred P. Sloan, Jr.

July 8, 1926

This quote appears under a picture of the CEO widely credited with creating the
structure of the organization which dominated the automobile industry for much of the
20th century. The picture is hung on a landing near a zen like fountain under the stairs in
the sleek marble floored lobby of the Design Center at the General Motors Technical
Center in Warren, Michigan. It illustrates the historical depths of the functional
interface within the organization. The characterization of the interaction between the
marketing/brand management and other groups in the new product development process
is necessary to gaining an understanding of how the relationships between these sub-
groups influence the culture of the organization and orientation of the firm in a global
marketplace. In the materialist framework, clarifying the evolutionary nature of intra-
organizational roles with respect to relative group influence and control is insightful for
this purpose.

At GM, Planning is a distinct functional area from VSSM, and gained a great
degree of power when the divisions were integrated. In the early stages of the NPD
process, they have responsibility for determining where there is a gap in the entire GM

portfolio, and then determining which brand within the portfolio should sell the product

39

to fill that gap in the product line up (see Appendix 6, Quote 1). From an academic
perspective, these would clearly be considered elements of the furn’s marketing strategy.
However, over time, as a product moves into the VLE system, Planning’s role changes
and it becomes responsible for the administrative aspects of coordination through the new
product development process on behalf of the V LE (see Appendix 6, Quote 2). It was
made clear by many managers that Marketing is involved in all teams, and has a distinct
place in the Flaming function (see Appendix 6, Quote 3). However, Marketing’s role in
the design process appears to have diminished greatly from earlier structures. The AVD
group is very cognizant of the importance of market research and clinics, but seems to
resent any interference or interpretation from the marketing group (see Appendix 6,
Quotes 4, 5 and 6). There is an inherent protectionist sentiment towards the creative
nature of the design process. The customer is not seen as someone to set the identity of
the product but rather to provide feedback to it (see Appendix 6, Quotes 7 and 8). Yet, as
marketing’s role may have become more limited in the design process, there is clearly a
reflection of an appreciation for the fact that customers will ultimately be the
authoritative judge of a product (see Appendix 6, Quote 9).

Although the equal piece of the pie conceptualization of the platform
(architecture) presented in Figure 3 was referred to by respondents as the model of the
relationships between functional groups, the evidence from the interviews indicates that
Marketing’s overall role in the new product development process is more participatory,
rather than influential, in nature for much. of the operation (see Appendix 6, Quote 10).
The question then becomes one of Marketing’s actual vs. perceived role in the product

development process. On many occasions and by a large number of the respondents

40

through the course of this study, it was noted that Marketing “brings the numbers”, and
“Marketing’s job is to sell”. Perhaps the simplest, but most profound statement made an
executive from the Planning group reflects the perceive role of marketing in the overall
scheme of the organization: “Marketing is focused on today, not tomorrow.”

Relative roles within the new product development process are illustrated in
Figure 4. This graphic depicts the relative timing and authority over resources. The
actual role of marketing changes over the life of a vehicle development process.
Although there is participation during the process, the majority of influence actually
occurs in later stages. The Planning group is primarily responsible for the initiation of a
new project, with the AVD and VLE groups having responsibility for development.
While marketing participates in the VLE, it is the informal interactions and initiatives of
individual product managers (members of VSSM) which take the lead prior to the thrust
towards “selling”. Marketing’s influence and relative control escalates just prior to the

time that prototype builds begin.

41

 

 

 

 

 

 

08: 00080202: :5. 3:030:5—

 

 

 

E0E0ZGZ: 9:333:02

 

 

 

 

E08033:— wcc00£

wcm

 

 

 

 

 

 

E06020>E :w_m0o

 

 

E06033:— wEESE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

maroocmwcm 0% wE—bm 0% cwmm0Q 05w:
"Sangria wagoflsfiw—Z :wmm0Q .00xm 0_0_:0> osomtom
Ea 003m 0:5 0—0E0> v0oee>v< 0:0 wince—m
- ,l I _
0.0000...— :mZ

 

 

 

sdnoag) lauouaung

 

 

wan—fl. 2.05029»:— 0000e0m 2.0892025 00300.5 30 Z "v.“ 9.53

42

In addition to the relationships between functional areas that comprise the new
product development process, there are also issues of the balance of power between
brands housed within VSSM. Due to the historic competition between GM brands, there
are remnants of this competition which continue to exist. There were several examples
given by managers within VLE’s with respect to product overlap. Even when styling
cues are different between models, the more powerful brands typically win out over the
weaker brands with respect to product attributes and superior specifications. This seems
to occur in a manner that is irrespective of brand positioning concerns.

The nature of marketing’s role in the current structure is explained by the
complexity of designing, developing, manufacturing and selling a vehicle. There are
over 15,000 parts in a car, and huge investments are required to actually bring a vehicle
to market. Automotive executives generally rise from within the industry as it is
considered difficult for “outsiders” to understand. In recent years, consumer goods
executives were brought in to help re—vitalize the company’s brands. However, there
were some problems it turns out with the approach taken, and these managers attempted
to brand individual products, rather than vehicle makes. Also, there were apparently
attempts to have a great deal of influence in the design process that was not conceived as
being based on research, but based on feelings. A significant amount of resentment
seems to have built up as a result, a legacy effect that appears to persist (see Appendix 6,
Quotes 11 and 12).

Leadership plays a significant role in the perceptions of marketing management
from the perspective of the technical groups, and the VSSM and Planning groups. In

several interviews it was mentioned that Bob Lutz is a product guy, but he is also really a

43

“marketer”. The people in Planning and VSSM feel as if their work is finally being paid
attention to within the new product development process. There were examples given
where Bob Lutz will immediately review research reports and fax back comments.
Apparently he has also instituted a system where all clinics and studies should be
reviewed by relevant managers within two days and comments and/or follow up
considered within the week. This is an important consideration, as findings from
empirical research indicate that leadership’s perceived importance of market knowledge
has a positive impact on the processes of market knowledge competencies (Li and
Calantone 1998). Harnessing the “good tension” between and among groups is a major
challenge for managers as they continue the journey of globalization and the structure
becomes even more complex (see Appendix 6, Quote 16).

There is clearly a strong-role for Brand Managers to play, if it is approached from
a more informal manner. Savvy product managers have learned to negotiate the system
in somewhat of a “back door” way, finding means to identify and implement
characteristics and features expected by the marketplace. Further, there is recognition
that there must be a resident base of understanding the vision and direction of a brand.
Recently, “brand summits” have been conducted where the various groups of the
development process are brought together to review the direction of the brand in future
years. While this is carried out primarily to show the work of the design group, it is
VSSM who will ultimately bring it all together (see Appendix 6, Quotes 13 and 14). As
the company moves to a more global structure, it can be expected for the ecological

adaptations of various groups to continue to evolve (see Appendix 6, Quote 15).

In summary, there is support for the Proposition 2 stating the relationship between
marketing and R&D is dependent on the new product development process design, as
predicted by the cultural materialism perspective. Marketing’s role is relative to the point '
of process completion in New Product development process. The new product
development infra-structure has a strong emphasis on engineering and design which is
considered to be a function of the complexity of the development process in the industry.
Marketing’s relative influence through much of the process is a function of individuals
acting in an informal manner, and the relative orientation of leadership. However, there
is evidence from the interviews that some things may be changing in response to

organizational structure changes being implemented.

Actualizing Global Brands

In this section, the involvement of different functional units on global brand
development within the new product development process is investigated. Rationalizing
the brand portfolio has been a major challenge for GM. In the early years of integrating
the divisions from strong individual strategic businesses, there were many instances of
“badge engineering” which took place. In this paradigm, individual products were
produced for multiple brands, with minor modifications and trim levels made for each
brand. The advent of the architecture structure minimized the obvious commonalities
between products sold under different brand names, as the models are now significantly
different, particularly on the exterior. In the US. market, GM has 8 brands under its
direct management, although there are others with which they have alliance or some

ownership relationships.

45

Due to the legacy of the organization (see appendix 2), one problem that has
plagued the company is the continued over-reach of many of the brands. The “brand
pyramid” documents used to communicate the message of the brand characteristics to
internal constituencies has become broader and broader, making it difficult for each
brand to remain distinct in its positioning in the marketplace (see Appendix 5, Quote 1).
The proliferation of products has been such that there is increasing overlap between what
is being offered by the portfolio of brands. This can be partially attributed to the product
development time and the structure of the new product development process (see
Appendix 5, Quote 2). In order to mitigate these effects, several new processes are being
implemented. First, the concept of a “brand house” has been introduced to the company.
In this new paradigm, not only will the functional benefits which can be derived from
owning a vehicle be addressed, but the sensory and experiential will take an equal role.
Many of the concepts related to brand personality (Aaker 1997) are being incorporated
into this new brand pyramid model, where each brand will fill a distinct and specific role
in the overall corporate portfolio based on a reverse segmentation approach. Also, in
order to communicate more effectively with the AVD group and VLE’s, a graphic
approach will be taken to represent the “brand house”. The purpose of this approach is
not only to communicate more effectively, but also to help infuse the marketing concept
into other functional areas. Additionally, designers and engineers are increasingly
participating in traditional marketing activities like focus groups in order to derive more
meaningful feedback directly from consumers at earlier stages in the new product

process.

46

As illustrated in Figure 3, the company’s brands have traditionally been managed
individually by country market. Similar to the approach taken in the US. market, there is
now a plan in place to rationalize the brand portfolio on a global basis. This is not a
new idea, as mentioned by one executive: “The last false start we had was in 1996 when
we identified that Chevrolet and Cadillac, I think and maybe there was a third, were
going to be global brands.” Based on the tenets of the materialist framework, it is
understandable why these initial attempts did not succeed; the structural layers were not
in place to support such a transformation.

As seen in Table 3, until recently, the only functional unit that engaged in an
active form of global brand development was the International Product Center.
Moreover, the IPC is the only functional unit that recognizes all of the globalization
drivers as catalysts and none as impediments. The drivers of globalization are not only
being identified, but responded to by VSSM and the IPC. In addition to the cost factors
considered throughout the organization, the establishment of global brands is also seen as
means to counter competitive moves by both global and local competitors alike,
particularly in emerging markets (see Appendix 5, Quote 3). The first step in the process
has been related to the defining the brands that would be “global”, as in earlier iterations,
a clear standard based on the business structure had not been identified. In this recent
approach, however, this was among the first considerations (see Appendix 5, Quote 4).
The expectation is that executive leadership utilizing the resources of the IPC’s can
influence the integration process (see Appendix 5, Quote 5).

The next logical step was to determine within the organization what would

distinguish the stratum of the brands based on geographic location and degree of

47

centralized management. It has been determined that all brands should continue to have
strong local brand management reporting back through the regional and global structure.
This has led to the establishment of a hierarchy of brands based on the structural
components in place to support the brand (see Appendix 5, Quote 6).

As illustrated in Figure 4, in the hierarchy, Chevy is intended to be the GM value
brand around the world, and managed by a Global Brand Board made up of
representatives from the various regions, chaired by the North American Brand Manager.
While Chevrolet is present in as many as 70 markets worldwide, because of the existing
structural components, it was not being managed globally. When this study first began,
one respondent commented: “Brent Dewar does not manage the Chevrolet brand
globally.” This made it difficult to achieve synergies across markets (see Appendix 5,
Quote 7). However, a transition was made during the course of this investigation. As
one respondent put “Chevrolet will be a global brand. Well, really from the first quarter
of 2005 can we say that Chevrolet is a global brand.” However, because of the
international heritage of the brand and other portfolio considerations, there will be
differences in positioning around the world. In Europe it will be positioned below the
Opel and Vauhall brands. Saab will also be a global brand, but retain its Swedish
character; it will also be globally managed by a Global Brand Board. For these brands,
because they have had multiple country managers operating through the IPC’s, the
Global Brand Boards have historic structural components which make this a logical

progression in the globalization process.

48

020! 3.0.0030. E0095. 00:03

 

 

 

)
0030!. 200.51 44410345
00 0
8005‘. 5.02 00:02.2 5.52
25.2w 04......200
Moan“ .00:0E< 5.02 swam 0.00:2 .0093.
g ”5—D @JNQO
(

 

000002 55:06 .3

00.555 0520 .220 “.20 "3 250E

.0004

300005005

.820

49

Although the pre-existing infrastructure has an inhibiting effect, by limiting the
marketing function to a perception of “sales”, there is a general tendency among the GM
executives to accept the need for a more influential marketing department in the new
product development process. As such, the findings with respect to the brand portfolio
support the idea that under the pressures of globalization, the organization recognizes the
important role marketing plays in the development of global brands. Therefore, it can be
concluded that the greater the role of marketing in the global new product development
process, the more likely are the global brand development efforts to be more systematic

and balanced as predicted by Proposition 3.

DISCUSSION AND MANAGERIAL IMPLICATIONS

This study provides some interesting insights for products and brands in a
globalizing firm from a cultural materialist perspective. In recent history, the greatest
emphasis in the marketing literature has been related to market orientation, or the
implementation of the marketing concept; the tenets of which, along with performance
implications, have been explored widely (J aworski and Kohli 1993; Kohli and Jaworski
1990b; Narver and Slater 1990a). The key mediation effects of innovative capabilities
have also been explored (Han et al. 1998; Hurley and Hult 1998). This essay begins the
progression of understanding the evolution of interactions among different functional
units under the pressures of globalization and the role they play in the global brand
development process. Conventional wisdom at GM follows that of the automotive
industry at large, and is focusing on unifying its brand looks and image in conjunction
with a new product development process that harnesses efficiencies from the scale of the

corporation. Simultaneously, it is globalizing its new product and brand architectures,

50

converging previously disparate functional and geographic groups in order to build a
cohesive whole.

The study results provide support for the idea that the environmental global
drivers influencing the organization are perceived differently by different groups within
the new product development process. While cost is the overwhelming consideration,
according to one source, two products released off the same architecture could share as
few as 10—20 parts. It is for this reason that one executive indicated that the architecture
structure actually accounts for less than 20% of the total cost of a vehicle; it’s in the
remaining 80% where there is true opportunity for savings.

According to the findings of this study, the IPC is most cognizant of, and is
instrumental to, responding to the drivers of globalization, while the AVD group appears
to be more insulated overall. This is interesting because the people interviewed within
AVD tend to have a great deal of international experience in comparison to most of the
other employees. This may be because the AVD group is primarily concerned, at this
point, with the creative process. The VLE’s, overall, while aware of the drivers of
globalization, are more sensitive to the differences rather than the similarities across
markets. This may be because they are responsible for finding the engineering and
manufacturing solutions necessary to implement the necessary local adaptations. VLE’s
are also closer to the process of itself, and have responsibility for being responsive to
customer needs within the constraints of other aspects of the new product development
process. Historically, these functions have not been integrated internationally, suggesting
residual effects are in place, which need to be addressed. As such, this qualitative study

indicates that there are significant differences in the perception and effects of

51

globalization drivers across different functions within the organization. This could be
attributed to the roles each function assumes in the new product development process.

Previous research indicates the interface between marketing and research and
development (R&D) is one of most important relationships in the organization (Song and
Parry 1992). Yet, this qualitative study indicates that marketing’s role in GM is
somewhat marginalized by other groups. This is consistent with the findings of studies
in other industry contexts where marketing has relatively little influence in the new
product development process (Workman 1993). Although there is clearly participation
by members of brand management and other VSSM employees, there seems to be a
relatively low level of influence when compared to other functional areas. Research has
suggested it is the influence of individuals, rather than mere participation in the new
product development process which is significant (Atuahene-Gima and Evangelista
2000).

It appears both Flaming and the VLE’s take some responsibility for components
of what academics consider marketing activities. However, integrating all these
functions in a meaningful way becomes inherently more complex in a global
environment. In order to facilitate this, the literature suggests a greater level of
formalization of the interaction of other functional areas involved in product development
with marketing and brand management, as well as adding variety to the means of
compensation provided to members of the teams (Maltz and Kohli 2000). The
components of increasing influence functionally is to change the infra-structure which
creates the environment for the social interactions. The implication of these findings is

that although the importance of marketing is acknowledged by the executives of the

52

company, the exiting organizational structure and procedures may impede its
contribution.

The new brand hierarchy being pursued, both domestically and globally, there is
an increasing acceptance of the importance on marketing in new product development.
This is reflected in the degree of centralization of brand management, which has inherent
strengths from an evolutionary perspective. One caveat, however, is the definition of the
individual brands as local, foreign or global. It appears, based on published reports that
Cadillac is currently being aimed at being positioned as “foreign” in markets outside
North America. This is because the indications are that it will be marketed as an
“American” luxury brand. However, recent research suggests there is a higher degree of
prestige and quality perceptions on the part of consumers of “global” brands (Steenkamp
et al. 2003). Again, using Cadillac as an example, it does not have an existing global
foundation, and the positioning alternatives are not bound by legacy effects as other
brands, such as Chevrolet may be.

One consideration not accounted for in the materialist framework is the role of
leadership in evolving and creating the organizational framework. However, one
accepted perspective of organizational culture holds that it is leadership which creates
and manages culture (Schein 1992). This implies that leadership’s real power is thought
leadership; there is a need on the part of executives to recognize they can guide culture,
and not just assume it will change itself. Although changes have been made at the top
and the bottom of the framework, the real challenge is making changes at the structural

level related to human interaction (see Appendix 7, Quote 2).

53

Day and Montgomery (1999) discuss points that are salient to markets and
marketing, among these are that customers are more demanding; they have more choice,
there is less time to respond to their demands, and global demographics are also
changing. In response, organizations must be more adaptive to respond to growing
competition and develop more interactive strategies, while being able to operate across
boundaries and functional lines. There is a blurring of traditional industries and the
balance of power is being shifted to the customer and channel members. Their
perspective captures alot of what GM is contending with while pursuing a radical change
to the materialist framework. The challenge for GM, beyond recognizing the need to
facilitate the changes in place, is reducing the time lag to catch up. It is crucial that the
transformation in place occurs before the environmental drivers change again, and make

the framework obsolete.

LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH

While this study provides some interesting insights in to the workings of an
organization as it struggles with the environmental forces of globalization and the
resultant offerings to the marketplace, there are limitations to the extent of knowledge
generated. The study is limited to one firm, and therefore cannot automatically be
generalized to other firms in the industry. Furthermore, it cannot necessarily be
construed to other industry applications.

The sample set for the study was based on a snow-ball sample, which provides
potential limitations with respect to the narratives obtained from the respondents, as it is

possible that I was referred mainly to like minded individuals within the organization.

54

Also, the sample consisted of a limited number of senior executives. As noted by one
respondent, when he first began attending corporate wide executive retreats
approximately twelve years ago, there were over 6,500 participants; today there are just
over 3,000. Therefore, the overall number of people included in the study is a small
percentage of potential pool. Additionally, there were a number of referrals made who
could not be contacted, whose input may have improved the nature of the findings. A
non-disclosure agreement was not in place during the course of this investigation, which
inhibited the responses of a few respondents, and limited the number of internal
documents which were made available for review. Finally, although many of the people
interviewed had international experience with the company, the sample was limited to
executives located in the United States. 3

Since the initial reference group encompassed a relatively broad cross-section of
people involved in the new product development process, the sample set should provide
some degree of reliability with respect the general thinking and actions of management.
Also, since the majority of the concepts are related to strategic issues, the sample set
provides a degree of validity regarding future actions and intent of leadership.

The limitations identified, however, provide opportunity for future research
directions. Comparison with another company that has had a different evolutionary
history and country of origin would be interesting. Correspondingly, a study of an
organization from a different industrial sector would provide further opportunity for
comparison and extension. Within the organization, a more in depth ethnographic study
considering specific VLE’s and their interaction with the brand managementpersonnel

would allow for delineation of a greater understanding of the nature of the structural

55

changes. Input from a deeper set of personnel within each of the groups would also give
opportunity to determine if there are synergies between the executive ranks and those
who are responsible for tactical level execution. Further, a survey instrument distributed
to a large number of people throughout the areas involved in the new product

development process would allow for the quantitative testing of research propositions.

56

CHAPTER 3
THE EFFECTS OF MULTI-DIMENSIONAL BRAND EQUITY ON VALUE

RETENTION: AN EMPIRICAL INVESTIGATION OF THE U.S.
AUTOMOTIVE MARKET

57

THE EFFECTS OF MULTI-DIMENSIONAL BRAND EQUITY ON VALUE
RETENTION: AN EMPIRICAL INVESTIGATION OF THE U.S.
AUTOMOTIVE MARKET

ABSTRACT

The enduring value created for the firm by the various dimensions of brand equity
has been a topic of interest for some time; yet, a distinct gap in the literature exists
regarding the long-term effects of brand equity dimensions on preserving the value of
durable consumer goods. As such, this essay investigates the relationship between
brand equity and the rate of retained value (i.e. the rate at which the original value of
the product depreciates) of a durable consumer good, moderated by the region of
brand origin. A framework based on information asymmetry is employed to develop
hypotheses that are tested within the context of the U.S. automotive market. The data
set consists of a three year, semi-annual time series panel of brand equity dimensions
for 30 automotive brands and the associated average aftersale-value retention rates.
A random effects model with autoregressive correlation of the errors is utilized to test
the research hypotheses. The findings indicate a strong moderation effect by the
region of origin, with Asian firms in particular having significant and positive impact

of brand equity on the value retention rate of automobiles in the U.S. market.

58

THE EFFECTS OF MULTI-DINIENSIONAL BRAND EQUITY ON VALUE
RETENTION: AN EMPIRICAL INVESTIGATION OF THE U.S.
AUTOMOTIVE MARKET

INTRODUCTION

The return on marketing efforts persists as one of the major issues. of interest to
both academics and practitioners alike. In particular, developing metrics to value the
current brand assets of the firm has remained elusive. This is because accounting ~
approaches do not allow for the delineation of organically grown brand value, and only
attributes it as a component of goodwill at the firm level when a company is sold.
Therefore, alternative means of evaluating the return of brand related marketing efforts
needs to be employed. Brand equity is an intermediate measure of particular significance
because of the advantages it is believed that can be provided to the firm through price
premiums in the short term and a competitiveadvantage in the long term. It is accepted
that the primary means to achieving a differentiated position in the marketplace is
through the strategic and tactical actions which create a strong brand in the minds of
consumers, allowing the company to lower risks and enhance future profits (Srivastava
and Schocker 1991). This suggests developing brand equity should have an impact 0n
the enduring value of products and services, since it is fundamentally the means through
which value is conveyed to, and perceived by, the consumer.

Measuring the value of a brand, or its level of equity, has been addressed by
scholars from two distinct perspectives: fmancial-based measures and consumer-based
measures. The financial based methods are more closely related to traditional financial

valuations of assets (Farquhar 1990; Schultz 2000; Simonin and Sullivan 1992). In

general, these methods employ firm level measures extrapolated to the brand level. One

59

often cited sources of this type of valuation was developed by Interbrand and relies on
seven different criteria: market share and ranking, brand stability and track record,
stability of product category, “internationality,” market trends, advertising and
promotional support, and legal protection (Farquhar 1990; Keller 1993; Schultz 2000;
Wentz 1989).

The alternative method, and the focus of this study, relies on customer-based
metrics related to the value customers place on a brand. These are often attitudinal
measures which attempt to determine either future consumer choice decisions (Argarwal
and Rao 1996), consumer utility (Kamakura and Russell 1993; Swain et al. 1993) or the
premium price willing to be paid for a product bearing the brand name, as opposed to a
generic one (i.e., one that does not have a specific brand associated with it) (Aaker 1996;
Keller 1993). The commonality in approaches to consumer-based brand equity is the
focus on the factors, derived from cognitive psychology, that contribute to brand equity,
how to measure them, how to manage them and consumer evaluations of the trend
toward the extension of core brands in order to leverage the value of built up equity
(Aaker 1992a; Aaker 1996; Aaker and Keller 1990; Bottomley and Holden 2001;
Farquhar 1989; Keller 1993); (Simonin and Sullivan 1992). Recent contributions extend
the concept of brand equity to consider the level of relationships consumers have with the
brands they choose (Foumier 1998). Yet another important area of study which is
emerging integrates the cognitive psychology approach to measuring brand equity with
information economics (Erdem and Swait 1998; Erdem et al. 1999). As called for by
Erdem et al. (1999), this study furthers the attempt to integrate these two streams of

literature.

60

The focus of this study is the automotive industry, which has been of particular
interest to marketing academics due to its economic importance and the wide variety and
complexity of issues presented by a multifaceted industry. As noted by Pauwels et a1
(2004), the automotive industry is one of the most important industries in the U.S., and in
conjunction with the related systematic value chain, supporting a significant portion of
economy. Also, a broad array of marketing literature has considered the automotive
industry as a research context, with issues such as the performance implications of new
product introductions and promotions (Pauwels et al. 2004), product portfolio
management (Bordley 2003), the factors that influence satisfaction with product quality
(Slotegraaf and Inman 2004), Intemet-based solutions to identifying customer
requirements (Urban and Hauser 2004) and as a source of information (Ratchford et al.
2003), and customer satisfaction with dealership service (Mittal et al. 2004) being
addressed. With respect to brand equity, a financial perspective based on firm level
drivers was taken by Sullivan (1998) as she considered the effects of quality and
advertising on the value of automobiles in the secondary market. Yet, what has not been
considered is the aggregate effect of the brand equity — operationalized through the
dimensions of brand awareness, intended loyalty, perceived quality, image, perceived
economy - on the rate at which a vehicle depreciates over time, which is a direct
reflection of the retention of a product’s value in the market place.

It is important to understand how the dimensions of brand equity contribute to the
value retention of automobiles for several reasons. First, it is a well known fact that once
product ownership is transferred from the company to the consumer, considerable value

is lost. This is posited to be the result of information asymmetry, and the fact that a buyer

61

does not have complete information regarding the quality of a product (Akerlof 1970).
An understanding of the relationship between the perceptions of a brand held by
consumers and the rate at which value is lost has not been explored in the literature.
Second, the depreciation rate, and resulting residual values of the product, correspond
directly to the payment options automotive dealers offer to customers. This provides an
interesting paradox, as brands which have flatter residual curves (i.e. lower depreciation
rates) can offer lower monthly payments than comparably priced products with steeper
declines in capital value (i.e. higher depreciation rates). Since the total capital to be
financed is lower, more favorable payment options can be offered to the customer. While
brand equity has been operationalized as a “price premium”, when there is a greater value
retention rate, the monthly price actually decreases. Exploring this relationship offers the
potential to derive interesting insights.

Third, manufacturers are beginning to look increasingly downstream as they attempt
to garner a larger share of the vehicle life cycle value chain (Belzowski and Smith 2001).
This implies that the residual value associated with a brand will make a fundamental
impact on the way in which a firm conceptualizes the strategy to attain value chain
synergies via engaging in downstream activities such as leasing, second hand quality
guaranties, and rentals. The question becomes whether the brand premium can be
maintained over the useful life of a durable consumer product, and how each of the
dimensions of brand equity contributes to the performance of the brand in terms of value
preservation. Therefore, the rate at which value will be sustained can contribute to both

marketing strategy formulation and consumer choice decisions.

62

Additionally, there are natural boundary conditions which exist based on the
region of origin of a brand. In the U.S. automotive market, increasing competition from
foreign manufacturers and global consolidations has continuingly eroded the domestic
companies’ market share, with new entrants poised to make further inroads. As recently
stated by Dieter Zetsche, CEO of the Chrysler Group, a division of DaimlerChrysler,
“The U.S. auto market is the battleground for the global industry. It is the most open
market in the world. As a result, the U.S. market is under attack from all sides, in every
segment and by very competent competitors.” (Zetsche 2004). Recent announcements
indicate future entrants will include those from both Asia and Eastern Europe. These
market entries present the question of whether or not the origin of the brand has an
inherent impact on the perception of the products offered, and what resulting effects on
depreciation rates can be expected.

Thus, brand evaluations, as measured by the dimensions of brand equity, residual
values, and region of origin are important factors affecting the decision making process
of , the automotive customers, along with corresponding strategic and tactical actions
taken by managers. The firm level actions are “signals” sent to potential customers and
the retained knowledge from these signals result in a probability assigned by the
consumer with respect to expected product performance (Akerlof 1970). Brand equity
can be viewed as a reflection of brand knowledge (Keller 1993). This indicates the
importance of identifying the contribution of the disentangled components of brand
equity (i.e., awareness, loyalty, perceived quality, image and perceived economy) on the
enduring market performance of a brand through the evaluation of its residual value over

time in conjunction with the origin effects.

63

This essay will first contribute to the literature by exploring the dimensions of
brand equity and their effects on the after sale value retention of automobile brands,
under conditions of information asymmetry. Further, it will contribute by exploring the
moderation effects of the region of brand origin, (i.e., Europe, Asia or North America) on
the relationship between brand equity dimensions and value preservation.

The remainder of this essay is presented in the following manner. First, the
concepts of brand equity and value retention. are explored. Next, a conceptual framework
based on the foundations of information asymmetry is presented. Hypotheses are then
developed and a method for testing the proposed model presented. The data, the context
of the study, the results and a discussion of the findings follow. To conclude, limitations

and directions for future research are presented.

DEPENDENT AND INDEPENDENT VARIABLES

Brand Equity

As long as there have been exchanges between buyers and sellers, producers have
attempted to differentiate their goods and services from that of their competitors. Yet,
branding as a concept only began to advance in the eighteenth century as producers of
products used names and pictures to strengthen consumer associations with their goods
(Farquhar 1990). In contemporary marketing, a brand is broadly defined as a name, term,
symbol, design, or a combination thereof, which identifies a seller’s products and
differentiates it from competitor’s products (Kotler 1997). Yet, the term “brand equity”

appears to have first been used by advertising practitioners in the early 1980’s as a broad

expression to denote the financial value of long term customer relationships (Barwise
1993).

Financial perspectives of brand equity consider the values of traditional firm
based measures with respect to the differences between intangible and tangible assets.
Simonin and Sullivan (1992) investigate the relationship between stock market prices and
brand value by separating the financial market value of the firm and the value of its
tangible assets. Brand equity has also been defined as the profit potential of a brand, as
expressed through market share, relative price, and other outcomes at the market level
where brand reputation acts as a mediator of the effects of brand advertising, brand
familiarity, and brand uniqueness on firm and product level outcomes (Chaudhuri 2002).
Additionally, Aaker and Jacobson (2001) found that brand equity, as measured by brand
attitude, has an effect on financial based returns.

There is also a line of thought that posits a brand as an effective relationship
partner with consumers (Foumier 1998). It has been argued that if consumers and
brands are bound by relationships, then there is also a larger population of people who
also share this bond. Thus, it has been proposed that a “brand community” is a
specialized, non-geographically bound group of people who are admirers of a brand, and
share a set of rituals, traditions, consciousness and sense of responsibility (Muniz and
O’Guinn 2001). This is somewhat similar to the idea “Utopian Enterprise” where
cultures and sub-cultures develop based on the consumption of meanings derived from
mass-media objects and images (Kozinets 2001). Conceptually, these ideas-bring

people together from various market segments to form groups with homogeneous needs

65

and expectations. Essentially, the argument is that these relational aspects form the basis
of brand equity.

Customer based brand equity has been defined as the differential effect of brand
knowledge on consumer response to the marketing of a brand (Kamakura and Russell
1991; Keller 1993). Keller (1993) stated “in terms of the marketing effects uniquely
attributable to the brand - for example, when certain outcomes result from the marketing
of a product or service because of its brand name that would not occur if the same
product or service did not have that name”. Thus, brand equity can be summarized as the
difference in consumer choice between the focal branded product and an unbranded

product given the same level of product features (Yoo et al. 2000b).

66

 

8% 00:0M

0005 05
.«0 5000008 00 00000000 00800000 00

$000500: 0005 .5 000.00 000000005

 

SON
0800.0 000 0802

002 02880

b88800
005000050.”—

 

woa 003m 000 0005

0050a0000080
0 .«0 .0030 050000 0 00 0005 0 .5 050>

 

 

 

 

 

 

 

 

 

moi
=0000M 000 005083— 00.00005 0000003
503 008.800 000.005 050> 00000 05:00 00800000 . 32000.30 00005
00800000 0>E0w00 5 00000000 00800000
00.5005 0000005
003 00M 000 03.030. 000.005 050> 00000 03:00 00800000 .
00000.5 00000.50: 00 0000000
00 .0800 000.5 05 900005 00000.5
003 .00x0< 0 000 E00 05 00 w8=05 0000 85805 ..
”0005 0 00 0003 000800000
050> 05 00 000000 0050008 0500000..
82 50:00 90 08020 30.05 020 00:80 :00 20
08085 ”coca 00055 00 08000 0053 030: 0000 000080000— . 000000 .00 00005? 30008.“ 00050000. 3000003
, ”000000 05%0008
000 05%000 00 0000008 00005 00050 0000_0m
0000000 00.80002 000000.: 0.000000000—

 

 

 

 

 

580M 000.:— .5 8>m0000000m an 030,—.

67

One of the most accepted conceptualizations of brand equity, and that which has
been published in textbooks (Aaker 1991; Keller 2003; Kotler 1997), proposes that a
strong brand has four key dimensions: loyalty, perceived quality, associations, and
awareness, along with other proprietary brand assets such as patents and copyrights
(Aaker 1991). Also, variations of Aaker’s (1991) dimensions have been proposed,
specifying that customer based brand equity is based on five elements: performance,
value, social image, trustworthiness and commitment (Lassar et al. 1995). From this
perspective, brand equity can be regarded as the combination of brand strength, based on
brand associations held by customers, and brand value based on the financial leverage
derived from brand strength (Lassar et al. 1995; Srivastava and Schocker 1991),.

Keller (1993) elaborates on two of the basic dimensions of brand equity by
defining them in terms of brand knowledge which has two underlying components, brand
awareness and brand image (Keller 1993). Brand awareness is defmedby brand recall
and brand recognition. Brand image is a complex concept based on the various
components of brand associations: the types of associations which include attributes,
benefits and attitudes, the favorability of associations, the strength of associations, and
the degree of uniqueness of the associations (Keller 1993).

Erdem and Swaite (1998) present a perspective which integrates the concepts of
cognitive psychology and information economics to derive the expected utility of the
brand. In this conceptualization, there is an effect of marketing mix variables,
operationalized by brand investments and brand consistency, on a causal string of
relationships between brand credibility, brand clarity, perceived quality, perceived risk,

information costs saved, with the final outcome of expected utility.

68

Brand Equity by Author

f

Imenswns 0

ion of Consumer Based D

Table 2.2: Delineat

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kumntwva El
wastsg
putm JO :3qu
iuatuitunnoc)
ssautquomtsmj, IS]
939w] [atoos
KJEAEIOV El
iuatuqoellv
apnltllv
51111111 paioadxg / emu A
paxas sisoo uotmquJUI
X918 paxtaorad
Kumlz)
Kuuqtpmo
siassv puma K181911d01d
ssauammv IS]
)suonetoossv
aomzuuopad / Argent) peAEOOJGd El E]
[(119501
In
0\
3 § 8
0 8 N
.0 8 52 3
; agegé
@ "D O\ "U '_‘ C6 .
g 2 5 2 5 S 8 7‘5 “U
03§§§§§°§
§0EEBEWSO
0<000 30>

 

 

 

 

 

 

 

 

 

 

Interestingly, there are a wide variety of managerial solutions cited in the
literature which have been developed to attempt to measure the consumer based value of
brand equity. These range from single variable models based on consumer perception of
quality, to more complex multidimensional models. Jeri Moore of DDB Needham
Worldwide defines brand equity as the multiplicative sum of brand awareness, brand
liking and perceived quality based on five attributes (Winters, 1991). Another model, the
"Equity Engine", evaluates three constructs of a brand to assess its equity base. The first
construct is brand "authority" as measured by heritage, trust, and innovativeness. The
second is "identification" based on the personal relevance generated by a brand, and the
last construct is "approval" as a measure of the perception that a brand will meet a
person's needs (Morgan, 2000).

Landor Associates has built a model to evaluate brand strength and brand stature
based on a total of 64 measures derived from self administered questionnaires completed
by 100,000 people in 32 countries evaluating 10,000 local and global brands (Johansson
and Ronkainen, 2002). Another practitioner based approach, coined the "Consumer
Value Model" attempts to reconcile the financial and consumer based methods by
assigning a financial value to consumer equity, based on the dimensions of brand images
and associations, which is considered to be dependent on loyalty. (Dyson et al., 1996).
The commonality between all these methods of exploring brand equity is their grounding
in cognitive consumer psychology approaches to measurement.

The conceptualization of brand equity proposed in this essay is an integration of
the basic definitions offered in the literature, where the four primary dimensions of

customer-based brand equity - awareness, image strength, perceived quality, and brand

7O

loyalty (Aaker 1991), along with the congruence of brand value are modeled as
individual factors impacting the value preservation of a brand.

Since it is accepted that brand equity represents the biased behavior a consumer
has for a branded product versus an unbranded equivalent (Faircloth et al. 2001), it
should have both immediate and long term consequences. A firm possessing a brand
with a substantial amount of built up equity has higher resilience against competitors,
along with organic barriers of entry, and the opportunity for successful extensions to the
brand (Farquhar 1989). Further, a brand with a strong amount of equity can avoid price
competition and command a sustainable price premium in its product category (Aaker
1992a; Morgan 2000b). The question in this case, is whether the advantage achieved
through brand equity can contribute to the retention of value of a durable consumer good,

such as an automobile.

Value Retention

Residual values are the remaining capital values associated with the end of an
investment period (Shillinglaw 1955). In the case of automobiles, it is the estimated
worth of a vehicle at the end of a lease period, reflective of the anticipated re-sale value at
that future point in time; (lease terms typically run between 24 and 60 months, in annual
increments). The amount of value expected to be retained is important to consumers
because the difference between the selling price of the vehicle and the residual value is
the basis for a lease payment and is an indicator of the total cost of owning that particular
car (Solheim 2004). The expected value at a future date is a function of the performance

expectations of the consumers in the market (Akerlof 1970); thus, the rate at which value

71

will be sustained can contribute to consumer choice decisions. As such, value retention is
defined as the rate at which the original value is maintained after the sale of the product.

For the manufacturer, residual values are an important tool for establishing their
leasing sales and promotion strategy; it is estimated that General Motors alone obtained
at least 125,000 more customers in 2003 than they would have without an attractive
leasing plan (Kiley 2004). Recent advertisements by Chrysler, the U.S. division of
DaimlerChrysler, focus on the greater value retention rates of their brands than the
competition, indicating the company’s view that this is the source of a competitive
advantage. Additionally, manufacturers are beginning to look increasingly downstream
as they attempt to garner a larger share of the vehicle life cycle value chain (Belzowski
and Smith 2001). Vehicles returned at the end of a lease period supply automotive
manufacturer’s certified used car business (Kim 2004). This implies that the residual
value associated with a brand will make a fundamental impact on the way in which a firm
conceptualizes the strategy to attain value chain synergies.

The question becomes whether this premium can be maintained over the useful
life of a durable consumer product, and how each dimension of brand equity contributes
to the performance of the brand, as measured by the rate of value retention. The forecast
value retention rate is an accessible dependent variable which serves as a proxy for
performance expectations held by the marketplace. Moreover, considering that second
had values differ considerably across products and transactions, an average depreciation

rates need to be considered across brands.

72

CONCEPTUAL FRAMEWORK

Buyers and sellers hold different information about a product; it is expected the
seller holds a greater degree of information about the performance of their wares (Akerlof
1970). “Signals” are sent by the seller in order to communicate product quality, influence
buyer’s pre-purchase perceptions of their products, and ultimately sway purchase
behavior. One such signal is a brand name (Akerlof 1970). A brand signal has been
defined as a function of the present and past market mix activities associated with the
brand (Erdem and Swait 1998). Thus, a brand name is a specific signal sent by the
manufacturer to the consumer regarding the expected quality of their product (Dawar and
Parker 1994). If the signal proves to be inaccurate (i.e., signals high quality falsely),
then the result will reduce the net profits to the firm reflective of the extra costs of
signaling (Wemerfelt 1988). Further, the brand will be punished in the marketplace
through acts of retribution such as the withholding of repeat purchases, negative word of
mouth, or the instigation of product recalls (Rao et al. 1999).

The concepts of information asymmetry assert that product cues are used by
consumers as means to mitigate the effects of uncertainty (Akerlof 1970). Consumer
product evaluation cues are either extrinsic, where the cue is not physically part of the
product, or intrinsic, where the cue is a core product attribute (Richardson et al. 1994).
Signals mostly serve as heuristics for consumers assessing product quality (Rao et al.
1999). Tellis and Wemerfelt (1987) found that on average, superior quality will produce
a higher price.

Information economics posits a relationship between the information a customer

has about a product or service, and the assignment of a probability of the actual quality of

73

the product or service based on this knowledge (Akerlof 1970). Consumer-based brand
equity is conceptualized in the literature as “brand knowledge” (Keller 1993).
Transitively, brand equity can be viewed as the probability a consumer believes the brand
of car they purchase is a “good” car versus the probability they will purchase a “lemon”
(Akerlof 1970). The residual value assigned to the branded vehicle at the point of
purchase is the anticipated market price at a future date, based on performance
expectations. This future value should be near the point of equilibrium between supply
and demand; thus, the residual value is the market clearing mechanism built into the
purchase price based on the probability of a vehicle being a “lemon”. Therefore, the
expectation is that consumer based dimensions of brand equity should help to predict the
rate of value retention of an automobile. The conceptual model which results is
presented in figure 2.1.

The effects of these dimensionson the value retention of the brand are considered,
as moderated by the region of origin of the brand. As import brands have garnered a
larger share of the U.S. market, distinctions between brands from Asia (most notably
Japan and Korea) and brands from Europe (e.g., Germany, Sweden, England) are often
made reference to in a general sense. As such, the boundary condition is considered with
respect to by region of origin in order to delineate the effects on a more specific scale

than imports versus U.S. based brands.

74

 

 

owflfi

 

 

 

0:? > Binocum

 

 

 

 

EwtO mo :Bwom

 

 

 

 

 

839.885
“53>
38m

5:30 3:5

 

 

 

 

 

nemeaiomoum 2.3.? no mas—.m— eafim 356559552 .8 floor—m— 2:.
"fake—nah 3:38:90 "fin «Sara

.2934 32.85

 

 

 

mmocosaxx

 

 

 

axiom 28cm

 

 

75

HYPOTHESIS DEVELOPMENT
The following section considers the individual dimensions of brand equity and
hypothesized effects on the value retention rate based on previous research presented in

the existing literature.

Brand Awareness

Awareness is considered to be a basic component of brand equity. This is a
significant consideration because a great deal of corporate resources are focused toward
increasing the awareness of brand names. Automakers spent $508 on marketing
activities in 2000, an expenditure greater than any other US industry and representing
200+% of the total net global income of the top five automakers combined (Chatterjee et
al. 2002).

Brand awareness has two components: brand recall and brand recognition (Keller
1993). Brand recall, or the ability to identify a brand from memory cues is significant to
brand equity because it is an important determinant of consumer’s choices (Nedungadi
1990). It is thought that how a brand name is processed at the time of encoding will
influence its retrieval; this processing has two factors: strength of the brand node and
strength of the association between nodes (Lee and Stemthal 1999; Nedungadi 1990).
Brand recognition, on the other hand, has a lower threshold of processing, and only
requires a consumer to correctly discriminate a brand from other products in a given
category (Keller 1993). Consideration of purchases has been modeled as a function of
awareness; in order to evaluate a brand based on retained knowledge, there must first be

an awareness of the brand (Erdem et al. 1999). Therefore, it is expected:

76

H1: The greater the brand awareness, the more positive is the after sale value retention
of automobiles.
Intended Brand Loyalty

Brand loyalty has been defined as the commitment to re-purchase a preferred
product or service consistently in the future, regardless of situational context or
competitor’s marketing efforts (Oliver 1997). It has been postulated that brand loyalty
results from brand-specific knowledge and increases with the degree of (positive)
experience a consumer has with a product (Ratchford 2001). In the customer’s mind, a
brand symbolizes a consistent value associated with a product (Erdem and Swait 1998).
Therefore, customers develop brand loyalty often as a result of the risk reduction process
in purchasing.

An emerging idea in the literature suggests that the commonality between the
financial and consumer based methods of measuring brand equity is brand loyalty. The
basic tenet behind this argument is that any measure of equity must ultimately rely on this
construct to generate persistent revenues at a premium differential from alternative
products (Schultz 2000). A study of automobile buyers found that a customer’s brand
loyalty increases with age, and buyers will pay more for a product with which they have a
greater degree of experience (Ratchford 2001; Rechtin 1997). Another study found the
brand loyalty construct to have a 51% greater impact on brand equity (Heath 1999). This
supports the idea that brand loyalty is a key consideration when placing value on a
brand’s equity because a dependable customer base will generate sales and profit streams
that are not only predictable (Aaker 1992b), but also economically viable over the long

run. Yet, actual brand loyalty itself can only be measured post—purchase. Since this

77

study is concerned with brand equity at the time of purchase, loyalty is operationalized as
intended brand loyalty based on purchase intentions (i.e., intending consumers who
currently own the brand/ intending consumers who currently own the brand). It is
expected that as intended brand loyalty increases, there will be a positive impact on the
change in the preservation of a brand’s value.

H2: The greater the intended loyalty to a brand, the more positive is the after sale
value retention of automobiles.

Perceived Quality

The perceived quality of a brand is considered to be the subjective judgment of
consumers with respect to a brand’s overall excellence and superiority, which would lead
a consumer to purchase a brand over a competitor brand (Ziethaml 1988). When
consumers evaluate a brand’s quality, they consider the subjective psychological and
emotional benefits in addition to the functional and objective benefits of the product
(Hellofs and Jacobson 1999). A firm which focuses externally on the customer
perceptions of brand quality through marketing activities will achieve superior
performance (Rust et al. 2002). There is a correlation between the information of
perceived quality related to a brand and the firm’s stock price movement when used as a
proxy for brand equity (Aaker and Jacobson 1994).

H3: The greater the perceived quality of a brand, the more positive the after sale value
retention of automobiles. -

78

Perceived Economy

Although the term “brand value” is often used interchangeably with “brand
equity” in the literature, the concept of the perceived value attributable to a brand is a
function of aligning the price of purchase and costs associated with ownership of a
brand’s product with the expectations of consumers (Keller 2000). It is believed that the
cost of ownership will be a significant factor in the equity of consumer durable good
brand. It is expected that as there are positive changes to the perceived economical value
of owning and maintaining a brand, there will be positive change to the slope of the
depreciation rate as indicated by the slope of the value retention curve. Thus,

H4: The greater the perceived economy of a brand, the more positive the after sale
value retention of automobiles.

Brand Image

Brand image is able to capture the effects of brand attitude and other associations
(Faircloth et al. 2001); (Keller 1993) A unique, strong, and favorable brand image
. permits the brand and its meaning to be strategically differentiated and positioned in the
consumer’s mind, contributing to enhanced brand equity (Faircloth et al. 2001; Pitta and
Katsanis 1995). Brand image has been effectively conceptualized as the cluster of
attributes and associations which consumers connect to a brand name (Biel 1992).
Further distinguished as “a holistic construct formed from a gestalt of all the brand
associations” (Faircloth et a1. 2001).

Brand associations are sensory in nature, and become more important to brands as

their images are positioned on the basis of experiences of pleasure, excitement and fun

79

(Holbrook and Hirschman 1982). From a cognitive psychology perspective, the majority
of associations are pre-conscious and non-verbal (Supphellen 2000), the bulk of which
are visual, as opposed to verbal (Zaltman 1997). One theory proposes that associations
are a means of low involvement processing where brand information is stored in the right
brain as sensory associations, and these associations stimulate consumer’s purchasing
behavior without any further processing (Heath 1999). Further delineation shows that
brand specific associations will refer to features, attributes, or benefits that consumers
relate to a brand and that differentiate it from the competition. Thus, brand strength is
the set of associations held by stakeholders that allows the brand to be differentiated from
its competitors and enjoy a sustainable competitive advantage (Srivastava and Schocker
1991). Therefore, changes in a brand’s image should lead to positive changes in the
preservation of value over time.
H5: The greater a brand’s image, the more positive the after sale value retention of
automobiles. ,

Region of Origin as a Moderator

The country-of-origin effects literature has considered the impact of specific country
associations on the evaluation of product quality (Bilkey and Nes 1982; Parameswaran
and Pisharodi 1994). In general, it has been found that the evaluation of a country from
which a product originates has an impact on consumer assessments of product quality,
and is used to choose the best available option (Klein 2002). It can also be viewed from
the categorization literature related to consumer behavior and cognitive psychology
related to the process of evaluative judgments (Pavelchak 1989). Essentially, this

literature suggests that consumers either use a piecemeal or categorization process to

80

evaluate products (Meyers-Levy and Tybout 1989; Pavelchak 1989), and because
consumers will typically take the easiest approach to evaluation, they will categorize
based on known information (Fiske and Taylor 1984; Ulgado and Lee 1998).

Consumer ethnocentrism literature takes this concept to a more granular level, and
has been defined as the belief by consumers that it is inappropriate and immoral to
purchase foreign products because it damages the economy, costs jobs and is generally
unpatriotic (Shimp and Sharma 1995). Findings are that consumer ethnocentrism affects
purchasing behavior, but will be lower when there is a higher quality to the imported
good, and if there is a higher degree of cultural openness (Shimp and Sharma 1995).
Moreover, the variable has been determined to be a factor when consumers make choices
between domestic and foreign goods (Klein 2002). U.S. consumers generally rely on

intrinsic attributes as a basis for evaluating products (Ulgado and Lee 1998).

It then follows that the region of origin should moderate the dimensions of brand
equity on value preservation. Keller considers the country of origin of a brand to be an
association which impacts brand equity (Keller 1993). Even with the reality of
continuous quality improvements, the domestic makers appear to have trouble improving
related brand value; it has been noted that there appears to be a widening gap between the
residual values of U.S. based brands and their foreign rivals (Sawyers 2003). The
external market entrants in the U.S. are broadly grouped into Asian and European brands,
as this classification is a generally accepted industry practice for strategic management
and also a way consumers tend to group brands. Thus, the region of origin, as an
intrinsic product cue, is expected to have a moderating impact on the effect of brand

equity dimensions on the value preservation of a product.

81

H6: The effects of the dimensions of brand equity on the value retention of
automobiles will differ by the region of brand origin.

METHOD

Data

The purpose of this study is to investigate the effects of each component of brand
equity on the after sale value retention of automobiles. The hypotheses presented above
are tested within the context of the U.S. automotive market. Cross-sectional panel data
derived from a semi-annual national survey are used to measure five of the brand equity
dimension scores of each brand. This type of data offers several benefits including the
mitigation of the effects of omitted variable bias by increasing the heterogeneity of
observations, alleviation of the effects of multicollinearity through the combination of
measures and time, the examination of issues which cannot be explored with cross-
sectional or time series data alone, and the analysis of dynamic changes (Kennedy 2003,
p. 302). The time span of the dataset used in this analysis covers three years, from 2001
to 2003, a critical time range in the automotive industry due to the continued erosion of
domestic manufacturers’ market share and increased performance of imported/transplant

brands.

The dataset has been provided by GfK Automotive, LLC a member of the GfK
Group, a leading supplier of syndicated market research to the automotive industry in the
U.S.. GfK Automotive, LLC maintains the largest database of pre-purchase automotive
information available in the U.S. market. An automotive consumer panel is developed

from a monthly survey of on average 200,000+ households that demographically

82

represents the U.S. population. This initial survey measures the expected timing of the
next household purchase of an automobile, and the make/model intended to be purchased.
A follow up study is conducted semi-annually among new vehicle intenders. Each
intender rates all brands/models in the segment with questionnaires collected until a
minimum ending sample size of n=300 per brand, per wave is achieved. Thus, utilizing
this dataset, the brand average dimension scores of 30 brands sold in the U.S. light
vehicle market are computed for 6 semi-annual time points from 2001-2003. This is a
particularly important time frame for the automotive industry in the U.S. market, as
interest rates remained low and an emphasis of incentive-based promotions pervaded the
industry. J .D. Powers provided the initial quality data used in the analysis, and the
residual values of the vehicles sold within the period of analysis were acquired from
Automotive Leasing Guide (ALG), another standard industry data source and the primary

provider of automotive residual values to financial institutions.

Independent Variables

In this study, as illustrated in Table 3, awareness is measured via two
questionnaire items; the first is based on a 3 point Likert scale, which asks the
respondents’ familiarity with the brand, and the second is based on a 4-point Likert scale
which asks the respondents’ recall of advertising recently seen or heard.

Intended loyalty is measured through purchase intentions with respect to current
brand ownership. The respondents are asked to list the current make and model. they
own, as well as the make and model they intend to purchase. These responses were

cross-tabulated and aggregated to the brand level to find the percentage of intended

83

loyalty to a brand. This method is consistent with common industry practice and
provides suitable means for evaluating the intended loyalty of survey respondents.

Perceived quality is measured by the J .D. Powers Initial Quality Study which is
based survey data of owners and lessees and asks the number of “things gone wrong” on
a vehicle during the first 90 days of the vehicles service. The results of the survey are
tabulated to calculate the number of reported problems per every 100 vehicles. While
this quality measure is based on actual vehicle performance in the field, it is a sufficient
proxy for perceived quality due to the wide reporting of the figure in the general and
industry specific media, as well as a standard resource for those considering a vehicle
purchase.

Perceived economy and the image constructs are measured via multiple
questionnaire items on a 5-point likert scale, which has been converted by the marketing
research firm to a 10-point scale in order to improve managerial evaluation. In order to
capture the perceived economy of the vehicle, the questions are industry and product-
specific, including the degree to which the brand is “economical to operate”, “excellent
gas mileage” and “good value for the money”. Image can be a difficult construct to
capture since it deals with a variety of associations and conditions. Automobiles,
however, fit relatively distinct categories; in this study, the constructs of “dynamic”
image and “luxury” image are operationalized via four and two measures, respectively.
Although it is common industry knowledge that the average age of a new car buyer is in
their mid-to late-forties, automakers attempt to portray many vehicles with a youthful
image characterized by active lifestyle associations. In this vein, a “dynamic image”

factor is constructed by measuring the degree to which a vehicle brand is “fun to drive”,

84

“has trend setting vehicles”, is “sporty” and “good looking.” Another common marketing
approach for vehicle brands is to build associations with classic extravagance and high
levels of esteem. As a means to capture associations of this nature, a “luxury image”
factor is measured through questionnaire items which ask the degree to which a vehicle
brand is “luxurious” and the degree to which it is “prestigious.”

The region of origin was coded as North America, Europe and Asia using a set of
two dummy variables, with the base case being North America. This allows for
differentiation of model results with a comparison of European and Asian brands versus

North American brands.

Table 2.3: Construct Definitions and Measurement

 

 

 

 

 

 

 

 

 

 

Construct Definition Measures
Customers’ ability to identify a brand

Awareness from memory cues and correctly I Familiarity
discriminate a brand from other I Advertising recall
products in a given category.

Intended Customers commrtment to re—purchase - Intended/Current

Lo alt a preferred product or servrce Ownershi

y y consistently in the future. p

Perceived The subjective judgment of consumers I Initial defects per 100 as

Quality with respect to a brand’s overall perceived by customers
excellence and superiority.

. The alignment of price of purchase and . Economical to operate
Perceived costs assocrated wrth ownershrp of a .
Econom brand’s roduct with the ex tations . Excellent gas mileage

y of consuliners pec I Good value for the money
. I riv
. The cluster of sporty attributes and Fun to d e . .
Dynamic . . . I Has trend settrng vehrcles
assocratrons Wthh consumers connect
Image ' Sporty
to a brand name. _ .
Good looking
The cluster of luxury attributes and .
Luxury . . . I Luxurious
assocratrons Wthh consumers connect . .
Image I Prestigious
to a brand name.

 

85

 

Factor Analysis

The independent variables representing the dimensions of brand equity are
derived from the panel data set covering six consistent interval time points over three
years. Multiple measures are available for the latent factors with proportional values
used for the remaining factors. A complete table of the correlations between the
measures employed is presented in Table 4. The correlation matrix indicates that all

items correlated better with items intended to measure the same construct.

The measures presented above are used to form the dimensions of brand equity at
the make level through the use of exploratory factor analysis. A six factor solution is
constructed using the Principal Component Analysis method of extraction and Varimax
with Kaiser Normalization used for the method of rotation. The variance extracted for
this six factor solution is 96.96%, effectively creating the variables of brand awareness,
intended loyalty, initial quality, perceived value, and two dimensions of image: luxury
and dynamic; the factor loadings are presented in Table 5. The identification of these
distinct factors allows for the elimination of potential multi-collinearity and enables the

identification of the effect of each of the dimensions on the retention rate.

86

 

53 ammo : Ed ammo $33 :93 .. So So :26 5o :86. .25. 32.? .26 85$:

2: $95.30 a: .. E. :3 is? .8658? .. :3. 3.3 .03 :2 ”323.28
8.. .. E .26 L: :2 $3 33... 8°. :36. as. so. .. mg 35:5:

2: .86 .86 $3 is .858? ..§..§ .80 .. so 928.8025

2: :03 .53; L2 is E. 2.0 8... :6 game:

2: L: .33 .353? :80. .. ad .03 :3 22322 a

2: L; .:.o...:.?.g.o..2.o 23 22 2:323 Q

2: .36 :36 so. .. 8c .. 30 8° Examséegé E

2: :86 .. ad ad 8o 2.? gaging g

8., .. 02 . 8° .. N3 . 3.? 2930235858 a
2: N3 2.? .. 8? 822823 332825 E

 

 

o3 .. 8° so =89 Swag a

2: 23 Eggs Q

2: 55955322... E

2 :2 8. 8° So So so 93 E 3 ”2 F 8° 03 83535

 

a. 83 a 5 80 80 mg as 3.0 so a... 8m 3 E as:
i a: a: E a: g a E g g E a g

 

  

 

83282 338?. 8. 552 8:29.30 “an 2...;

87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rod wowd 53.0- mm L .o- mm fl .o Smd 9237.on «was:
:3. gas WES- $3- 93 two @855: has:
v93 35.: on L .o- ow fl .o 3 mo momd $562 @000
E fl .o- mead mv _ .o Sod- mmod Bod- mtoqm «wan:
End End 306. wood S; 02 .o 8323 macaw 28; 3.53.5
Sad 3a.: Sod- Sod wmod mid 038 9 SE
Sfio mnod w—wd Rio mmod D: .o 2:? wooO z
. . . . . E283.—
3: 0. So o 8a.: 08 o- mmo o- o2 o- ammo—E mam Eozooxm .8288.—
Gmd- 98.0. 523 mood owed- $3. 8828 8 3288on .
mm L .o- owed cmmd Sad Sod m2 .o- :88 wEmmto>c< Beach-“34..
95o Rod coed m3... Rod 83 355:5
Nmod mm ~ .9 oood- m mod v36 _ m _ .o EoEUEovcoHE .3534
36:8:—
mwfio- 83. E S 48.? Ed- m8..- 2: cassava was 5:25
.533qu
own—E oMaE— 2:5» muonouu3< 5.934 .3130 85.9.32 85.5280
his: can—Sn 6933.8.— woe-.8:—

 

 

 

 

 

 

 

 

 

3955390 1255...— .Su $51.34 .835— ”m.N 035.

88

Dependent Variable

New car residual values, based on a national average percentage of value retained,
of vehicles sold in the U.S. market are used to calculate the rate of value preservation.
The data is from the ALG residual guidebooks, which were originally published in 1964,
and are updated every other month. The ALG residual guidebook is the industry standard
for the residual value forecasting of vehicles used by dealerships and finance firms to
calculate lease costs (Automotive Lease Guide 2002). These values are also relied on by
automotive executives to gauge their relative performance over time. For example, in a
set of exploratory interviews with industry managers, one executive lamented that his
brand had improved on many traditional metrics such as actual quality and market share,
but had not been able to break their range of depreciation over time. The table he used to
illustrate his point was based on ALG valuesz.

Consumer brand equity variables are not specifically incorporated by ALG in’the
residual values and ALG was not a customer of GfK Automotive, LLC during the study
period. However, the expectation is that these dimensions can explain a significant

amount of the variance in the overall depreciation rates over time. Further, ALG’s

 

2 The national percentage residual values are based on macro factors based on an analysis
to include economic factors and correlating the factors to consumer price index; segment
adjustments used supply forecasts at the segment level, consumer trends and shifts at the
segment level, days supply which leads to incentives at the segment level, and residual
performance tracking at the segment level; brand adjustments which anticipate negative
changes in performance within a brand such as management issues, financial health,
product pipeline etc., model adjustments which anticipate negative changes in
performance within a model such as firestone tire, rollover/quality ranking, increased
competition etc. and lifecycle considerations such as anticipated declines based on model
changes and historical patterns; and a new model residual process that includes
significant focus on' future competitiveness, pricing trends and incorporate historical
brand/model based residual performance. The correlation analysis and Hausman Test
provide no indication of endogeneity.

89

incorporation of a wide array of macro environmental and firm level variables acts as ad-
hoc control for these factors in the model developed to test the brand equity dimensions.
The data are available on a model and trim level basis and un-weighted averages are
calculated for each brand in order to complete the analysis at brand level.

The depreciation of the residual values from the point of purchase to five years
out follows a reverse exponential curve. The residual values of the vehicles sold at the
time of the survey are utilized to find the depreciation rate of each brand at that point in
time. These values for each brand/year combination for 24, 36, 48 and 60 months are
then transformed logarithmically utilizing the curve estimation function in SPSS. The
lambda’s are then estimated for each brand/year combination using a linear function,
multiplied by 100 to enhance evaluation, and then used as the dependent variable in the

model estimation.

. 'T
RVzi = (1 ° 62'" + ua-
Which after logistic transformation becomes:

Ln(RV)¢i = a’ + xi”- - 2' + L4,-

Assessing the Impact of Brand Equity Dimensions
Having developed nine indices for six independent variables, the two moderator
variables and the dependent variable, the basic econometric model to test the hypotheses

becomes:

(1n)= flo + 511% + 32% + ,3le:: + fl4PVn' + flsun' + fl6A1n' + .37CEi + [3804i

90

+ fl9AtiCEi + filo/inCEi + fll llQn'CEi + fllzPVziCEi + fl13Un'CEi + fl14AlriCEi
+ fllsAtiCAi + fll6lLIiCAi + fl17lQn'CAi + .318PVn'CAi + [1’19UtiCAi

+ flzoAltiCAi + 8n'

Where i and t denote the brand and survey time period respectively, 1’ denotes the

time from point of purchase, and RVT, and xi“ represent the residual value of brand i at

time I and the depreciation rate of brand 1' at time t, respectively. Where i and t denote

the brand and survey year respectively, and:

 

 

 

 

 

 

 

 

 

 

 

 

 

Ai, Awareness of brand i at time t

IL.-, Intended Loyalty of brand 1' at time t

IQ,-, Qualityof brand i at time t

PV,-, Perceived Value of brand i at time t

LI,-, Luxury Image of brand i at time 1

Ali, Dynamic Image of brand 1' at time t

CE,- Is one if region of origin of brand i is in Europe, zero otherwise
CA,~ Is one if region of origin of brand i is in Asia, zero otherwise
RViz Residual value of brand i at time“:

21,-, Depreciation rate of brand i at time t

 

While time series panel data offers many advantages, care must be taken when
estimating the models as it is generally agreed that cross-sectional heterogeneity exists
for the observations of each individual, implying a different intercept for each brand in
the data set (Kennedy 2003). Since there are so many extraneous factors which could
impact the residual value over time, there is significant potential for omitted variable bias

in the estimation. Thus, the composite error term may incorporate aspects that are

idiosyncratic to each particular brand and can be defined as e,- = 0t,- + Tlm where 01.,- is an

91

unobserved brand specific factor, also known as the unobserved or individual
heterogeneity, and 11,-, is a white noise error term, also called idiosyncratic error (Aaker
and Jacobson 1994; Wooldridge 2000, p. 420). The accepted means of improving
estimation include application of a “first difference” model, “fixed effects” model or a
“random effects” model.

A first difference model subtracts the values for one period from values in the
next earlier period in order to identify change, effectively “differencing away” on ;.
However, this method has the drawback of potentially reducing variation; this can be
mitigated by using a large cross-section of data (Wooldridge 2000, p. 423), but the
number of brands available in the automotive industry does not allow for the collection of
a sufficiently broad cross-section of observations. The fixed effects estimation also
eliminates 0t,- (Wooldridge 2000, p. 449), but transforms the data by subtracting from
each observation the average of all observations for that brand, essentially allowing each
brand to have a different intercept and implicitly including a dummy variable for each
brand (Kennedy 2003, p. 304). This method is limited by the loss of degrees of freedom
through the addition of the dummy variables. Further, the transformation processes of
both the first difference and fixed effects methods of estimation create a situation where
time invariant variables, such as the country of origin effects considered in this study,
cannot be included the estimation (Kennedy 2003; Wooldridge 2000). Thus, from a
theoretical perspective, neither of these methods of estimating time series panel data is
adequate for testing the hypotheses.

The random effects model utilizes an alternative method of estimation; rather than

eliminating 0t 1, the assumption is made that on,- and x ,-, are uncorrelated (Kennedy 2003,

92

p. 305; Wooldridge 2000, p. 449). The transformation of the data is conducted in such a
way that the variance-covariance matrix of the composite error has a block diagonal
pattern which requires use of generalized least squares (GLS) estimation (Aaker and
Jacobson 1994). This allows for an assessment of the variation both within each group
of observations and between the groups. The random effects estimated is more efficient
than the alternatives because it uses a weighted average of both types of estimators when
the assumption of zero correlation between the explanatory variables and the composite
error (Kennedy 2003, p. 307).

The proposed model was estimated using Stata 8.0. Since the random effects
estimation method assumes 0t,- and x g, are uncorrelated, it is necessary to assess whether
or not this assumption is true. This is accomplished through comparison of the estimates
obtained from the fixed effects model and the random effects model (Hausman 1978).
The Hausman test tests the null hypothesis that the coefficients estimated by the efficient
random effects estimator are the equivalent as the ones estimated by the consistent fixed
effects estimator. Running the Hausman test with the model and data set described
previously yields a x2 statistic of 11.4 with 21 degrees of freedom and a p-value = 0.953.
The null hypothesis cannot be rejected, and the assumption that a ,- and x i, are
uncorrelated can be made indicating that the random effects model will not produce
biased coefficients. Thus, both theoretically and methodologically, random effects
estimation is the best specification among those considered for this data set.

The Breusch and Pagan Lagrangian multiplier test for random effects considers
the null hypothesis that there is no serial correlation in the error terms (Wooldridge

2002a, p. 264). The results indicate a 38(1) = 196.21 with a p-value < 0.001. The null

93

hypothesis is strongly rejected, indicating that the there is serial correlation in the
composite error, implying that pooled OLS estimation will be inefficient and GLS will be
a better estimation technique. Further, the results obtained through the random effects
estimation indicate a first order serial correlation (p) of 0.924. Therefore, the model was
run again allowing for first-order autoregressive correlation among the disturbance terms.
The modified Bhargava et al. Durbin—Watson test statistic = 1.076 and the Baltagi-Wu
LBI = 1.681. For testing p = 0 versus p > 0 (or p < 0), it is necessary to compare the LBI
result to the critical value from the lower (upper) tail of an N(0,1) distribution. The upper
tail critical value for the standardized normal distribution at the .05 confidence level is
2,05 = 1.645 . Since 1.68 is greater than the critical value, the null hypothesis of zero
autocorrelation is rejected in the favor of AR(1) in the error terms. Results of the
random effects model and the random effects with autoregressive error correlation are
presented in Tables 6 and 7, respectively. A comparison indicates the coefficients of the
AR(1) model are more consistent across alternate specifications and, therefore, appears to

be the appropriate estimation method for this data set.

94

Table 2.6: Estimation Results — Random Effects

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covariates Alternate Specifications
Constant B -22.811 "‘ -25.330 ‘“ -25.580 "'
s.e. 0.420 0.553 0.645
Intended Loyalty B 0.189 “ 0.215 “" -0.062
s.e. 0.087 0.079 0.134
Awareness B -0.075 0.727 ‘“ 0.467
s.e. 0.273 0.284 0.351
Perceived Quality B 0.159 0.275 -0.760
s.e. 0.200 0.180 0.249
Perceived Economy B -0.039 0280 -0.577
s.e. 0.266 0.249 0.392
Dynamic Image B 1 .505 “‘ 1 .231 *“ 0.565
s.e. 0.259 0.240 0.393
Luxury Image, B 0.407 0.525 “ 0.168
s.e. 0.254 0.229 0.354
European Country B 5.515 “* 5.579 '“
s.e. 1 .039 1.268
Asian Country B 4.394 m 5.376 "'
s.e. 0.870 0.962
European Country X B 0.092
Intended Loyalty s.e. 0.211
European Country X B -0.801
Awareness s.e. 0.663
European Country X B 1.035 ”
Quality s.e. 0.447
European Country X B 1.418 “
Perceived Economy s.e. 0.626
European Country X B 0.232
Dynamic Image s.e. 0.630
European Country X B -0.336
Luxury Image s.e. 0.655
Asian Country X B 0.346 "
Intended LoyaIty s.e. 0.175
Asian Country X B 1.026 ‘
Awareness s.e. 0.543
Asian Country X B 1.606 '“
Quality s.e. 0.289
Asian Country X B 0402
Perceived Economy s.e. 0.560
Asian Country X B 0.572
Dynamic lmagg s.e. 0.495
Asian Country X B 0.748
Luxury Image s.e. 0.512
Year 2002 B -0.449 “" -0.443 '“ -0.405 "‘
s.e. 0.163 0.154 0.127
Year 2003 B -1.133 m -1.345 “‘ -1.143 ""
s.e. 0.253 0.239 0.202
December B 0.802 ‘“ 0.658 ‘“ 0.694 '"
s.e. 0.128 0.123 0.103
R-Sqr - Within 0.566 0.593 0.750
Between 0.626 0.739 0.759
Overall 0.589 0.732 0.775
Wald Chi-Sq (d.1) 196.55 (9) 272.1 (11) 444.67 (23)
significance <0.001 <0.001 <0.001
N (Groups) 171(30) 171(30) 171(3Q

 

 

 

significance levels: * < 0.10, **<0.05, "*< 0.01

95

 

Estimation Results - Random Effects with Autoregressive Error Terms

Table 2.7: -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covariates Alternate Specifications

Constant B -22.652 *** -25.132 *** -25.362 ***

s.e. 0.355 0.500 .480
Intended Loyalty B 0.157 ** 0.140 ** -0.079

s.e. 0.075 0.066 0.1 13
Awareness B -0.443 * 0.503 ** 0.210

s.e. 0.238 0.253 0.3 15
Perceived Quality B 0.411 * 0.429 ** -0.742 **

s.e. 0.211 0.187 0.259
Perceived Economy B 0.011 -0.257 -0.481

s.e. 0.220 0.215 0.293
Dynamic Image B 1.306 *** 0.936 *** 0.192

s.e. 0.213 0.197 0.352
Luxury Image B 0.278 0.360 ** -0.095

s.e. 0.213 0.199 0.266
European Country B 5.578 *** 5.553 ***

s.e. 0.898 4.762
Asian Country B 4.145 *** 0.897 ***

s.e. 0.763 0.696
European Country X B 0.050
Intended Loyalty s.e. 0.181
European Country X B 0313 ..
Awareness s.e. 0.541
European Country X B 0.938 **
Quality s.e. 0.477
European Country X B 0.933 *
Perceived Economy s.e. 0.490
European Country X B 0.530
Dynamic Image s.e. 0.520
European Country X B 0.045
Luxury Image s.e. 0.491

 

 

 

 

 

96

 

Table 7: Continued

 

 

 

 

 

 

 

 

 

Asian Country X B 0.359 **
Intended Loyalty s.e. 0.147
Asian Country X B 0.959 **
Awareness s.e. 0.477
Asian Country X B 1.826 ***
Quality s.e. 0.292
Asian Country X B -0. 182
Perceived Economy s.e. 0.437
Asian Country X B 1.014 **
Dynamic Image s.e. 0.425
Asian Country X B 0.808 **
Luxury Image s.e. 0.392
Year 2002 B -0.599 *** -0.532 ** -0.479 **
s.e. 0.177 0.156 0.143
Year 2003 B -1.496 *** -1.594 *** -1.347 ***
s.e. 0.303 0.268 0.245
December B 0.792 *** 0.630 *** 0.681 ***
s.e. 0.100 0.091 . 0.087
R-Sqr - Within 0.540 0.580 0.727
Between 0.689 0.730 0.792
Overall 0.637 0.728 0.804
227.31 337.2 493.74
Wald Chi-Sq (d.f‘) (10) (12) (24)
significance <.001 <.001 <.001
N (Groups) 171(30) 171(30) 171(30)

 

 

 

 

 

 

significance levels: * < 0.10, **<0.05, ***< 0.01

The model was estimated using alternative specifications based on the conceptual

development.

constructs and time. The fit is good with an overall R2 = 0.589, and a Wald x2 =l96.5 (9
d.f.), p-value < .001. The second specification adds direct region of origin effects; this
model has a better fit with the data, with and overall R2 = 0.728, and a Wald x2 = 337.2

(12 d.f.), p-value <0.001. The final specification includes the interaction effects of region

RESULTS

97

The first specification is with the direct effects of the brand equity

 

of origin with the brand equity indices in order to test for moderation effects of the region
of origin. This specification of the model provides a strong fit to the data with an overall
R2 = 0.804 and a Wald x2 =493.74 (24 d.f.), p-value <0.001; additionally, this
specification explains a strong and consistent amount of variation with both the within
and between groups estimators.

Upon initial evaluation, the results for Hypothesis 1 appear to be mixed. The
coefficient of awareness has a significant negative effect on the slope of the residual
curve (-0.443, p < 0.10) when the direct effects of brand equity are considered
independently. However, when the direct effects of the region of origin are added, the
coefficient becomes positive (0.503, p < 0.05) with a greater level of significance. The
implication of this size and valence of change is that there is most likely an omitted
variable bias in the estimation with the specification that does not include region of origin
(Wooldridge 2000, p. 90). Thus, it can be considered that brand awareness has a positive
effect on the rate of value preservation of automobiles.

Hypothesis 2 is supported in both of the direct effects specifications of the model
with positive and significant coefficients, 0.157 (p <0.05) and 0.140 (p< 0.05). It can be
considered then that the intended loyalty to a brand has a positive effect on the rate of
value preservation of automobiles, ceteris paribus. When the moderation effect of region
of origin is considered, the findings indicate there is a positive impact of intended loyalty
for Asian brands, with a coefficient of 0.359 (p<0.05).

As expected, the direct effects of a positive change in the perceived quality of a
brand will have a positive effect on the change in the rate of value preservation of durable

consumer goods. The estimated coefficients are .411 (p < 0.10) in the direct effects of

98

brand equity specification and 0.429 (p < 0.05) when the region of origin effects are
added. This result provides support for Hypothesis 3.

However, the results for Hypothesis 4 are contrary to the expectations that a
positive change in the perceived value of a brand will have a positive effect on the rate of
value preservation of durable consumer goods. The coefficient in the specification that
includes the direct effects of the brand equity indices is 0.011 (p > .10) and when region
of origin effects is included becomes -0.257 (p > .10). Both coefficients are insignificant
so the hypothesis cannot be supported in either case.

The results are mixed for Hypothesis 5, providing support that a positive change
in strength of a brand’s image will have a positive effect onthe slope of the residual
values. The coefficient of dynamic image on the curve is relatively high, positive and
significant at 1.306 (p < 0.01) and 0.936 (p< 0.01) with the alternative direct effect
specifications. The coefficient of a luxury image on the curve of the residual values is
positive but not significant when only the direct effects of the dimensions of brand equity
are considered, but are significant and positive at 0.360 (p <0.05) when direct region of
origin effects are added to the model specification. The moderation effects of region of
brand origin are mixed. The European effect for both image constructs is insignificant.
However, the Asian effect is positive and significant for both luxury image and dynamic
image, 1.014 (p<0.05) and 0.808 (p<0.05), respectively.

The hypothesized expectation was that the effects of the dimensions of brand
equity on the depreciation rate of vehicles will be greater for European and Asian brands
than for U.S. brands. Overall, there is support for this hypothesis as the interaction

effects between the region of origin of the brand and the dimensions of brand equity on

99

the residual value slope are generally positive and significant. The final specification of
the model with interaction effects evaluates this hypothesis, with the results supporting a
moderation effect by region of origin. First, the direct effects of a European country are
5.578 (p < 0.01) and of an Asian country are 4.145 (p <0.01). When the interaction
effects are added, the effects of a European country remain stable at 5.553 (p <0.01), but
the effects of an Asian country are drawn down to 0.897 (p <0.01) which implies a strong
degree of interaction for the Asian brands with the brand equity dimensions.

Since the base case is U.S. brands, the coefficients on the direct effects variables
in this specification of the model reveal the effect on these brands. The coefficients on
intended loyalty -0.079 (p > .10), initial quality -0.742 (p < .05), perceived value -0.481
(p > .10), and luxury image -0.095(p > .10) all become negative, although only initial
quality is significant. Awareness and dynamic image remain positive at 0.210 and 0.192,
but are insignificant. The intended loyalty effects, 0.05 (p > .10), and the luxury image
effects, 0.045 (p > .10) are very small and insignificant for European brands.
Interestingly, awareness for European brands has a negative effect at -0.313 (p > .10),
while perceived quality and perceived value are statistically significant and equal to
0.938 (p < 0.05) and 0.933 (p < 0.10). Yet, all the dimensions of brand equity have a
positive and significant effect on the residual values for Asian brands, with the one
exception being perceived value which although negative at -0.182 (p > .10) does not
have a statistically significant effect.

In order to account for time specific fixed effects in estimating the model, a set of
two year dummy variables have been included. Further, to control for seasonal effects, a

dummy variable representing the period of data collection was also included. The year

100

control variable is negative and significant across all three model specifications.

In

particular, 2003 has a large coefficient at -1.347 (p < 0.01). On the other hand, the month

variable to capture the semi-annual nature of the survey, is positive and significant at

0.681 (p < 0.01).

Table 2.8: Main Effects

 

 

 

 

 

 

 

 

 

 

Hypothesis Results
H1 Brand awareness has a positive effect on after sale
value retention of automobiles. Supported
H2 Intended loyalty to a brand has a positive effect on
after sale value retention of automobiles. Supported
H3 Perceived quality of a brand has a positive effect after
sale value retention of automobiles. Supported
H4 Perceived economy of a brand has a positive effect Not
after sale value preservation.
Supported
H5 A brand’s image has a positive effect on after sale
value retention of automobiles. Supported
H6 The effects of the dimensions of brand equity on the
value retention of automobiles will differ by the Supported
region of brand origin.

 

 

101

Table 2.9: Estimates of Interaction Effects

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interaction Estimated Significance
Effect

European Country x Intended Loyalty + Not Significant
European Country x Awareness - Not Significant
European Country x Initial Quality + Significant
European Country x Perceived Economy + Significant
European Country x Dynamic Image + Not Significant
European Country x Luxury Image + Not Significant
Asian Country x Intended Loyalty + Significant
Asian Country x Awareness + Significant
Asian Country x Initial Quality + Significant
Asian Countg x Perceived Economy - Not Significant
Asian Country x Dynamic Image + Significant
Asian Country x Luxury Image + Significant

 

DISCUSSION AND MANAGERIAL IMPLICATIONS

As elucidated in this essay, the dimensions of brand equity, residual values, and
region of origin are important factors affecting the decision making process of both
customers and the managers who seek to serve them. Through the identification of the
collective contribution of the discrete components of brand equity through the evaluation
of its residual value over time in conjunction with the origin effects, the findings of this
study contribute to the literature in a variety of ways. First by empirically exploring the
conceptual dimensions of brand equity and their effects on the preservation of value,
meaningful insights can be derived. The conceptual dimensions proposed in the literature
have been validated through the development of distinct factors. This is a relevant

finding since research has incorporated various dimensions of consumer-based brand

102

equity, but this conceptualization offers a comprehensive view in the context of the
automotive industry.

Also, the impact of the brand equity factors on the value retention rates of new
vehicles sold in the U.S. market is significant because it considers consumers’ retained
brand knowledge, and the utilization of this knowledge as measured by value retention
rates, in an attempt to mitigate the effects of information asymmetries in the purchasing
process. Therefore, brand equity can provide explanation of expected performance of the
brand’s products after the transfer of ownership. As such, it contributes to the emerging
literature stream integrating the theoretical frameworks of cognitive psychology and
information economics. Also, leasing represents an important means of generating new 1
sales for automotive manufacturers. The lower the rate of depreciation, the greater the
residual value of the vehicle at the end of the contract period, allowing for a lowering of
the monthly payments offered to the customer. Improving the brand equity dimensions
which have positive impact on residual values thus offers managers an opportunity to
provide more attractive pricing options for potential customers. Further, by exploring the
region of origin boundary condition with respect to the equity dimensions, implications
for managerial decision making on this basis can be explored. The results, however,
vary across dimensions and the moderation of region of brand origin, deserving further

consideration of the specific findings and implications.
Awareness

Awareness has a generally positive impact on long term value preservation.

Nevertheless, the region of origin significantly moderates its effect on value preservation.

103

According to the estimates, Asian brands enjoy a greater positive return from awareness
than U.S. brands. The moderation effect is not significant for the European brands,
implying that those brands have a similar return on awareness as the American brands.
This implies spending greater amounts of resources on increasing awareness will actually
be less beneficial for American and European brands as compared to Asian brands, with
respect to value preservation. These results have important implications for the
American firms, since generating a greater amount of awareness has a lesser impact on
value preservation than their Asian competitors. On the other hand, generating a greater
level of awareness increases the long term value preservation of Asian brands, thus
decreasing the overall cost of ownership for the buyers. These findings are possibly a
reflection of the existence of a higher level of awareness for U.S. and European based
brands, but this was not a specific focus of this study and provides a basis for future

research.

Intended Loyalty

It was expected that the loyal purchase intentions of consumers would have a
positive impact on the forecast depreciation rate of automobiles. This hypothesis is
generally supported by the findings. However, the Asian brands benefit from a greater
effect of intended loyalty on value retention when compared to the American or
European brands. The implication is there is limited benefit for European or U.S. brands
employing loyalty programs in comparison with their Asian counterparts. A positive
change in the intended loyalty to a brand will have a greater positive effect on the rate of

value retention of automobiles only for Asian brands. Thus, loyalty programs established

104

by these brands will improve the overall residual values more than the American and

European brands.

Perceived Quality

Perceived quality has an overall positive effect on value retention of automobiles.
Yet, the moderation tests reveal a positive change in the perceived quality of a brand will
have a positive effect on the rate of value preservation of durable consumer goods for
both European and Asian brands in comparison to U.S. brands. This provides further
delineation of the results found by Sullivan (1998) where quality was indicated to have an
overall positive effect on re-sale values of twin-branded vehicles. While it is commonly
perceived that these brands have a high level of quality associated with them, there has
recently been a spate of bad reports about European brands such as Volkswagen and
Mercedes-Benz, in particular. One would expect these reports to have a negative impact
on value retention rates; however, as indicated by this study, the effects would have to be
substantial in order to have a negative impact on depreciation rates.

While the direct effects of perceived quality is positive and significant, when
moderated by region of origin the effect becomes negative and significant for American
brands. The results also explain why recent advances in quality by U.S. based brands
have not been met with corresponding increases in residual values. The practical
implication is that the firm level drivers of increased quality values are not effective in
leading to measures of perceived quality which translate to increased residual values over
time. One possible explanation for this finding may be that increases in perceived

quality are associated with perceived cost and related price increases. This could result in

105

an increase of the point of intercept, and accelerate the depreciation rate in the value

retention curve.

Perceived Economy

The results indicate that perceived economy has a limited effect on the value
retention of automobiles. Yet, when the moderation effect of region of origin is
considered, the results reveal that European automobiles benefit from a significant
positive return on perceived economy in terms of value retention when compared to
American and Asian brands. That is interesting because Asian brands were originally
brought into the U.S. market as value products, with high gas mileage and low cost of
ownership. Managerial actions over the last twenty years have allowed for a change
where perceived value no longer matters to buyers. This is particularly interesting when
considering the value proposition of hybrid vehicles recently taking the market by storm.
The implication is that buyers are not as concerned with the value of these vehicles, but
with other factors. On the other hand, a positive change in the perceived value of a brand
will have a positive effect on the rate of value preservation of European vehicles. This is
also an interesting finding as European brands tend to position themselves at a higher
price point in the market. The recent moves to launch vehicles which compete in lower

price ranges could have a favorable impact on residual values.

Image

Overall, a positive change in strength of a brand’s image will have a positive

effect on the rate of value preservation of automobiles. Yet, according to the results,

106

Asian brands benefit from significantly higher returns on image strength than their
European and American competitors. This is a particularly interesting finding. This
could be because the Europeans traditionally position themselves as luxury brands, and
further enhancement of this type of attribute would have a lesser effect than their Asian
counterparts. Essentially, this image area could be saturated for these brands. The effect
of the image strength on value preservation is also limited for the American brands. This
could be because there are so few brands from this region that are positioned in the
luxury segment when compared to European brands. Dynamic image, on the other hand,
could be the result of centrist, mainstream positioning for the American brands with little
emphasis on small vehicles. The results .for the Asian brands could be the result of
significant expansion into the luxury area in recent years, along with emphasis on rugged,

youthful positions for vehicles such as small SUV’s.

Region of Origin

The findings of this study are consistent with previous studies, where negative
country of origin effects can have an impact on purchase decisions (Johansson et al.
1994). Under conditions of information asymmetry value retention is suggested as an
indicator of the equity of a brand. Overall, the American brands fair very poorly in their
ability to impact value retention. The implication bodes poorly for Chevrolet’s recent
campaign relating the brand to an “American Revolution”. Although this has been and
exciting campaign, which may have contributed to sales and market performance, the
emphasis on patriotic themes may not ultimately bode well for re-sale values. It also

implies that Toyota’s efforts to position their brand as a major contributor to the

107

American economy may not be worth the effort, with respect to value retention as

measured by the depreciation rate of new vehicles sold.

LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH

This study is limited in its generalizability due to it being conducted in a single
industry related to a specific and relatively unique durable consumer product. It is also
limited by the use of forecast residual values. While this is the industry standard for
leasing and what is used by consumers in their decision process when considering capital
value at some future point in time, it is strictly a forecast. This study is also limited by
the use of industry specific measures from one source. While GfK Automotive, LLC
benefits from a history as the primary supplier of pre-purchase data in the industry,
recently competitors have entered this market. Therefore, future studies could compare
findings from alternative data suppliers. Additionally, to derive a greater degree of
generalizability, similar measures from other industries could be employed to test the
findings of this study. Further this research is limited by the time horizon of the study, a
longer time horizon may offer further insights to the findings, as potentially could the use
of alternate years.

Also, additional specifications of the model could provide further revelations. For
example, adding interaction effects between time and the dimensions of brand equity
could provide further explanation of the dynamic effects over time. Another
specification could consider the impact of the interaction of awareness with other factors.
Awareness creation activities can focus on specific consumer benefits, which are divided

into three categories: functional, symbolic or sensory (Park et al. 1986). Delineation of

108

interaction effects of awareness with the symbolic image factors considered in this
analysis, along with other forms of image could help to determine how marketing efforts
focused on building awareness could be directed at specific aspects of brand equity.

Future research directions should also attempt to uncover why it is that U.S. based
brands appear to have minimal, and somewhat negative brand equity impact on the
residual value of vehicles. There are several possibly viable approaches to address this
issue, beginning with a differentiation by manufacturer to highlight the effects of
managerial practices. This could be undertaken both between and within groups based on
region of origin; however, sample size within the U.S. market alone could be problematic
so a broader market would need to be considered. The means to evaluate the opportunity
for improvement to the impact of the brand equity variables on the depreciation rates may
be through the consideration of firm level drivers of the dimensions.

Comparison and contrast to actual value retention, as opposed to that which is
forecast, would provide meaningful information for managers and academics attempting
to explain, predict and control the dimensions of brand equity. Industry executives at the
highest levels of the U.S. based brands indicated during the initial phases of this study
that they believe their brands are being unfairly discriminated against in the residual
forecasting process because the values of promotions and incentives are not taken into
account, effectively causing a steeper decline in the forecast retained values in order to
compensate for what should be a lower intercept. A comparison of this nature could

have implications for decision making during the strategic planning process.

109

CHAPTER 4

THE EFFECTS OF BRAND INNOVATIVENESS AND DIFFERENTIATION ON
BRAND EQUITY: A LONGITUDINAL STUDY OF AUTOMOTIVE BRANDS

110

THE EFFECTS OF BRAND INNOVATIVENESS AND DIFFERENTIATION ON
BRAND EQUITY: A LON GITUDINAL STUDY OF AUTOMOTIVE BRANDS

ABSTRACT

Identifying and defining the intermediate effects of marketing related value
creation activities such as innovativeness and advertising are of considerable interest to
academics and practitioners alike. Brand equity has been proposed as one such
intermediate measure. This third essay will provide means to understand the effect of
firm level strategic actions on consumer-based dimensions of brand equity,
conceptualized as awareness, intended loyalty, perceived quality, perceived economy,
and image. A seemingly unrelated regression model is used to test the conceptual model.
The study is conducted within the context of the U.S. automotive market, using the
largest pre-purchase brand related data set in the industry. The results indicate a positive
effect of advertising, as measured by annual expenditures, on all the dimensions of brand
equity, except luxury image. lnnovativeness, as defined by new product introductions,
positively effects all the dimensions except perceived value. The contextual factors of
region of origin and global brand reach have mixed effects on the consumer-based

dimensions of brand equity.

111

THE EFFECTS OF BRAND INNOVATIVENESS AND DIFFERENTIATION ON
BRAND EQUITY: A LONGITUDINAL STUDY OF AUTOMOTIVE BRANDS
INTRODUCTION

Understanding the value of marketing-related value creation activities is of
substantial interest to the field. While firm level outcomes have been well researched in
the literature with some valuable contributions, understanding the intermediate brand
level effects of marketing efforts has been somewhat neglected. It order to help rectify
this situation, Marketing Science Institute has designated the role of branding and brand
equity as sustainable means of differentiation, along with ways to evaluate new product
design and introductions, and the changing role of marketing among their highest
research priorities.

Brand equity provides a basis for comparison between brands, and thus a means
for evaluating and interpreting marketing strategies (Keller 2003). Academic research
related to consumer based brand equity has focused on the factors that contribute to brand
equity (Aaker 1991), how to measure them, (Aaker 1996; Keller 1993), how to manage
them (Aaker 1992a; Farquhar 1989), and consumer evaluations of the trend toward the
extension of core brands in order to leverage the value of built up equity (Aaker and
Keller 1990; Bottomley and Holden 2001). While there has been research conducted in
an attempt to understand the firm-level drivers of brand equity derived from firm-level
financial measures (Farquhar 1990; Simonin and Sullivan 1992), there has been limited
empirical work which attempts to explain marketing related activities which contribute to

consumer based measures of brand equity.

112

The context of this study is the U.S. based automotive market, which is one of the
most competitive in the world with a majority of the world’s largest players participating.
The automotive industry is one of the most important industries in the U.S., According to
the Original Equipment Suppliers Association (OESA), the U.S. automotive industry
represents approximately 10% of the U.S. economy, with new vehicle sales generating
over $240 billion in annual revenue and contributing 6.6 million jobs (Thuermer 2004).
Increasing competition from foreign manufacturers and global consolidations has
continuingly eroded the domestic companies’ market share, with new entrants poised to
make further inroads. Even with the reality of continuous quality improvements, the
domestic makers still have trouble improving brand image and related brand value.

There has been considerable consolidation at a macro level of both automotive
OEM’s and Tier 1 suppliers, as well as an acceleration of product development cycle
time and platform approaches to product development. This has allowed for the
announcement of a myriad of new product initiatives requiring an ever greater focus on
the marketing of the brand (Stein 2004). In the automotive industry, strong brands are
highly valued and represent a significant competitive advantage, but are also extremely
fragile and need to be managed carefully (Foumier et al. 2002). The business press has
highlighted numerous examples of how global automotive firms are attempting to focus
their value creation activities on the building and maintenance of strong brands.
Volkswagen currently enjoys a price premium of 6-8% over its competitors and has spent
billions to develop new models which it hopes will further boost its brand image
(Mackintosh 2004). GM has turned around Cadillac with a variety of exciting new

models that coalesce the brand’s image; executives are concerned with the need to

113

safeguard brand identity and differentiation in an increasingly competitive market
(Economist 2004). In a recent survey sponsored by Agilent Technologies, business
executives ranked product innovation and brand building among the top five priorities for
their organizations (The Economist Intelligence Unit 2004).

Recent research suggests that focusing on the constructs that create brand equity
is more important than trying to measure it as an aggregate financial performance
outcome (Faircloth et al., 2001). However, exploration of firm level drivers and
intermediate brand level outcomes has been relatively limited. Simon and Sullivan (1993)
consider such factors as advertising expenditures, sales force and marketing research
expenditures, age of the brand, advertising share, order of entry, and product portfolio as
sources of financial based brand equity. Further, a financial perspective, based on firm
level drivers was taken by Sullivan (1998) as she considered the effects of quality and
advertising on the value of automobiles in the secondary market. Recent research
exploring the relationship between marketing mix elements and brand equity, suggests *
that marketing mix elements are positively related to specific components of consumer
based dimensions of brand equity in student based surveys (Yoo and Donthu 2001). Yet,
understanding the nature of the effects of marketing related activities and firm specific
resources with respect to strategic orientation on brand equity has not been considered in
the literature.

In view of the potential for brand equity to serve as an intermediate outcome measure
of a firm’s marketing activities, the lack of empirical research in this area is a significant
oversight. Thus, explaining and predicting the role of marketing-related value creation

activities such as brand innovativeness, and brand differentiation through advertising

114

(Mizik and Jacobson 2003), along with the relative contribution of firm level contextual
factors which effect brand equity is an important consideration.

This research will address the nature of the effects of marketing related value
creation activities and firm specific attributes on intermediate outcomes, as measured by
the impact on consumer based dimensions of brand equity (i.e., awareness, intended
loyalty, perceived quality, perceived economy, and image). The remainder of this essay
is organized as follows. First the concept of brand equity and its underlying dimensions
as an intermediate outcome of a firm’s activities is considered. Next the theoretical
foundations of the activities which lead to the creation of brand equity are explored. A
conceptual framework and hypothesis development is followed by the development of
the empirical research method employed. Results are presented and a discussion of the

findings offered.

THE DIMENSIONS OF BRAND EQUITY

In the early 1980’s advertising practitioners coined the term “brand equity” as a
broad expression to denote the financial value of long term customer relationships
(Barwise 1993). In the existing literature, brand equity has most frequently been
addressed from two distinct perspectives: financial based metrics and consumer based
measures. The first of these methods is most closely related to traditional financial
valuations of assets (Farquhar 1990; Schultz 2000; Simonin and Sullivan 1992), while the
other is grounded in cognitive consumer psychology (Keller, 1993). The financial based
methods use estimation techniques to determine the incremental cash flows which accrue-

to the firm through their branded products (Simonin and Sullivan 1992). Consumer-

115

based metrics related to the value customers place on a brand generally rely on attitudinal
measures which attempt to determine either future consumer choice decisions (Argarwal
and Rao 1996), consumer utility (Kamakura and Russell 1993; Swain et al. 1993) or the
premium price willing to be paid for a product bearing the brand name, as opposed to one
that does not have a brand associated with it (Aaker, 1996; Keller, 1993).

In broad terms, customer based brand equity has been defined as the differential
effect of brand knowledge on consumer response to the marketing of a brand (Kamakura
and Russell 1991; Keller 1993). Keller (1993) stated “in terms of the marketing effects
uniquely attributable to the brand — for example, when certain outcomes result from the
marketing of a product or service because of its brand name that would not occur if the
same product or service did not have that name”. Thus, brand equity can be summarized
as the difference in consumer choice between the focal branded product and an
unbranded product given the same level of product features (Yoo et al. 2000a).

One of the most accepted characterizations of the consumer based dimensions of
brand equity (Aaker 1991; Keller 2003; Kotler 1997), proposes that a strong brand has
four key dimensions: loyalty, perceived quality, associations, and awareness (Aaker
1991). Empirical research has conceptually incorporated many of the same underlying
characteristics of these dimensions (see table 3.1). For example, Lassar et al.(1995)
propose five elements of brand equity: performance which incorporates the concepts of
quality, value, social image, trustworthiness and commitment. Yoo et al. (2000a)
operationalize the dimensions of brand equity as perceived quality, brand loyalty, and
brand associations incorporated with brand awareness. While Y00 and Donthu (2001)

identify a scale of brand equity dimensions based on brand loyalty, brand awareness as

116

measured by recall, perceived brand quality and brand associations. Krishnan (1996)
considers the effect of various associations on brand equity as measured externally by
market share and Landor’s rankings of overall equity and measures of share of mind,
esteem, familiarity and awareness. Overall, brand equity has been regarded as the
combination of brand strength, based on brand associations held by customers, and brand
value based on the financial leverage derived from brand strength (Srivastava and
Shocker 1991). The inherent nature of brand equity as a valuation tool implies it can
have either a positive or negative valence, although it is most commonly referred to in a
positive context.

Keller (1993) suggests brand knowledge is a component of brand equity and is a
function of brand image and brand awareness. Brand image is able to capture the effects
of brand attitude and other associations (Faircloth et al. 2001). A unique, strong, and
favorable brand image permits the brand and its meaning to be strategically differentiated
and positioned in the consumer’s mind, contributing to enhanced brand equity (Faircloth
et al. 2001; Pitta and Katsanis 1995). From a cognitive psychology perspective, the
majority of associations are pre-conscious and non-verbal (Supphellen 2000), the bulk of
which are visual, as opposed to verbal (Zaltman 1997). Thus, brand strength is the set of
associations held by stakeholders that allows the brand to be differentiated from its
competitors and enjoy a sustainable competitive advantage (Srivastava and Schocker
1991). Brand awareness has two components: brand recall and brand recognition (Keller
1993). Brand recall, or the ability to identify a brand from memory cues is significant to
brand equity because it is an important determinant of consumer’s choices (Nedungadi

1990). Brand recognition, on the other hand, has a lower threshold of processing, and

117

only requires a consumer to correctly discriminate a brand from other products in a given
category (Keller 1993).

Brand loyalty is considered to be the commitment to re-purchase a preferred product
or service consistently in the future, regardless of situational Context or competitor’s
marketing efforts (Oliver 1997). Loyalty is considered to be a component of brand equity
because loyal consumers tend to exhibit more favorable responses to a branded product
than consumers without loyal intentions or switching consumers (Grover and Srinivasan
1992). The perceived quality of a brand is considered to be the subjective judgment of
consumers with respect to a brand’s overall excellence and superiority, which would lead
a consumer to purchase a brand over a competitor brand (Ziethaml 1988). The concept of
the perceived value attributable to a brand is a function of aligning the price of purchase
and costs associated with ownership of a brand’s product with the expectations of
consumers (Keller 2000).

In this study the concept of brand equity is captured through a combination of the
most salient consumer-based dimensions, as presented in the marketing literature. Thus,
the individual dimensions of brand equity conceptualized include brand awareness,
intended brand loyalty, perceived brand quality, perceived economy (value), and brand
image. Delineation of these dimensions allows for assessment of the impact of value
creation and differentiation activities undertaken by the firm and relate them to an

intermediate marketing outcome.

118

Table 3.1:
Dimensions of Brand Equity

 

 

 

Dimension Definition Key Citations Terminology used
. . . . Aaker 1991; Awareness
2.2222. K.-. ...
Awareness and to correctly discriminate Keller 1993’ Keller Awareness (recall
and Lehman 2005 and recognition)

a brand from other products

 

 

 

 

 

 

 

 

in a given category. Yoo et al. 2000; Yoo Awareness
and Donthu 2001 (measured by recall)
The commitment to re- Aaker 1991; Oliver, Loyalty
purchase a preferred product 1997; Yoo et al.
Intended or service consistently in the 2000; Yoo and
Loyalty future, regardless of Donthu 2001
situational context or
competitor’s marketing
efforts ‘
Aaker 1991; Erdem Perceived quality
and Swaite 1999;
The subjective judgment of Yoo et al. 2000; Yoo
Perceived consumers with respect to a and Donthu 2001;
Quality brand’s overall excellence Ziethaml 1988
and superiority. Lassar et al. 1995; Brand performance
Keller and Lehman
2005
The alignment of customer Erdem and Swaite Expected Utility
expectations with respect to 1999
Perceived the price of purchase and Lassar et al. 1995 Value
Economy costs associated with
ownership of a brand’s
product.
Aaker 1991; Keller Associations
Associations that enable the and Lehman 2005;
brand and its meaning to be Yoo et al. 2000; Yoo
Image strategically differentiated and Donthu 2001

 

and positioned in the
consumer’s mind.

 

 

Keller 1993

 

Image (associations
and relationships
between them)

 

119

 

CONCEPTUAL FRAMEWORK

Two major strategies exist to differentiate a brand’s position in the marketplace
from its competitors (Miller 1986; Porter 1980). The innovating differentiators focus on
new product development and introduction. Organizations that follow this strategy type
have also been labeled as prospectors (Miles and Snow 1978) or adaptive firms (Miller
and Friesen 1884). In these organizations there is a strong emphasis on Research and
Development. Innovating differentiators tend to be pioneers in new products and
technologies (Miller 1986). On the other hand, marketing differentiators “offer an
attractive package, good service, convenient locations and good product! service
reliability” (Miller 1986). These firms have very strong marketing capabilities, focusing
on advertising, promotion and distribution to achieve the competitive advantage in the
marketplace and tend to be laggards in new product introductions (Miller and Friesen
1884). As such, the strategic typology offered by Miller (1986) provides an adequate
framework for this study. Brands have two generic strategies two choose from in
developing their equity: innovation and marketing differentiation.

A recent contribution by Mizik and Jacobson (2003) suggests the relative
deployment of resources, or capabilities, is based on the strategic orientation of the firm
and the trade off between emphasizing value creation (innovativeness) and value
appropriation through differentiation (advertising). The results of their study indicate
that a sustainable competitive advantage, as measured through firm level financial
outcomes, is achieved through a focus on differentiation rather than value creation. Yet,
the current study is concerned with the relative contribution of each of these capabilities

to brand equity. Consistent with consideration of the balance of strategic orientation, the

120

interaction of brand capabilities can be assessed with regard to achieving a market
advantage (i.e., brand equity).

Firms achieve above normal returns because of distinctive competencies in
deploying resources optimally (Penrose 1959). In order to achieve a sustainable
competitive advantage, resources and capabilities must enable the firm to conceive of or
implement strategies that improve performance, exploit market opportunities, or
neutralize impending threats (Barney 1991). Although broadly elucidated in the
literature with respect to the relationship between firm capabilities and overall
performance, there has been limited understanding gained as to the effect of capabilities
on intermediate marketing related outcomes.

Since it is accepted that brand equity represents the biased behavior a consumer
has for a branded product versus an unbranded equivalent (Faircloth et al. 2001), it is
clear that this aspect of consumer behavior has particular relevance to both practitioners
and academics alike. A firm possessing a brand with a Substantial amount of built up
equity has higher resilience against competitors, along with organic barriers of entry, can
withstand negative events and the opportunity for successful extensions to the brand
(Farquhar 1989). Further, a brand with a strong amount of equity can avoid price
competition and command a sustainable price premium in its product category (Aaker
1992a; Morgan 2000a). From this perspective, the achievement of brand equity
represents a sustained competitive advantage (Barney 1991) through the application of
core capabilities to the strategic development of brands. There are a tremendous
amount of resources employed in the automotive industry towards both value creation,

through innovativeness, and differentiation, through advertising. A goal of these factor

121

deployments would be to enhancing brand equity as a means to creating a sustainable
competitive advantage. The question becomes one of relative contribution, as well as the
boundary conditions which exist. The intention is to evaluate firm specific capabilities
and how they effect measurable consumer based perceptions of the brand.

Additionally, this study considers contextual variables which are highly pertinent
to the automotive industry. First, region of origin is captured since this is often a means
of categorization of consumer perceptions (e.g., European brand, Asian brand) and it is
expected to set a boundary condition with respect to brand capabilities. Yet another
important contextual factor in the automotive industry is the globalization of brands.
Brand ubiquity is posited to be a means of creating positive associations (Steenkamp et
al. 2003) and a global positioning supersedes domestic or foreign positioning (Alden et
al. 1999).

The framework which emerges from the integration of these firm specific
resource deployments in conjunction with the contextual variables is hierarchical in
nature, as each direct relationship is theoretically contingent upon the previous factor.
This allows for explication of the effects of endogenous firm capabilities indicated by
strategic efforts, as bounded by the contextual factors that essentially moderate the
strategic emphasis of the brand. The conceptual model which results is illustrated in
figure 3.1.

The following sections elaborate on the literature related to each of the strategic
orientations, as well as the contextual factors considered in this framework, in order to
develop hypothesis. The literature and hypothesis are summarized in Table 3.2 and

Figure 3.2.

122

 

 

'5
as
o
04
:8
.9.
U

 

 

 

 

 

 

123

 

 

 

 

A m 5mg we cewom M
385m 985 . ..... J ............ .
1r 3555353
A 4 couesceota
A < 6 e $053335:

 

 

25:85 33>

 

 

 

bus—cm 6:55 we $52.5 "zuchEauh 7333.80
"3” 252

HYPOTHESIS DEVELOPMENT

Brand Innovativeness

The new product development literature has focused on a extensive range of
factors related to new product success that can be included in categories such as strategy,
the development process, the market environment including characteristics such
competitiveness and market potential, along with organizational factors like internal and
external relations (Henard and Szymanski 2001; Montoya-Weiss and Calantone 1994)
and developing methods of forecasting new product sales (Urban et al. 1996). Essentially
two types of innovations are conceptualized: technical innovation and administrative
innovation (Han et al. 1998). Technical innovations are product intensive; related to
products, services, and production process techniques. On the other hand, administrative
innovation is related to organizational structure and administrative processes. Product
related innovations are often referred to with respect to their degree “innovativeness”, or
the “degree of discontinuity in marketing and/or technological factors” (Garcia and
Calantone 2002). In this study, the focus is on product innovativeness as measured by
incremental automotive model changes and new introductions aggregated by brand and

year.

It has been suggested that firms use their capabilities to create products to meet
the needs of consumers, engendering a competitive advantage in the market (Gatignon
and Xuereb 1997). Recent findings presented in the literature suggest that new product
introductions in the automotive industry increases both the short and long term financial
performance and stock value of the firm (Pauwels et al. 2004). Chaney et al. (1991)

found that the emphasis on new products positively effects firm value. Further, Ali

124

(2000) found that the market performance of new products is moderated by the cycle time
of the product development process, implying that the rate of new product introductions
will have a positive impact on intermediate marketing outcomes. Nowlis and Simonson
(1996) found that new product features can mitigate the effects of price and quality
perceptions on consumer brand choice. It is expected the total number of products
introduced by a brand is a measure of the new product development capability (Lukas
and Ferrell 2000; Miller 1986) and is expected to provide a competitive advantage to the
brand. Therefore, it is expected that the rate of a firm’s innovativeness as measured by
total new product introductions will have a positive impact on the dimensions of brand

equity.

H1: A brand’s innovativeness has a positive impact on brand equity in the U.S.
automotive market.

Advertising as Means of Brand Differentiation

Recent literature related to the value activities of firms posits that marketing
efforts result in value extraction from the marketplace through the creation of barriers to
entry through differentiation (Mizik and Jacobson 2003). As measured by advertising
expenditures, the “appropriation” of value, the achievement of differentiation was found
to be of benefit to the organization’s financial performance. Advertising has been
identified as on of the principal means through which brands are able to maintain a
competitive advantage in the marketplace over time for durable consumer goods such as

air conditioners (Golder 2000).

125

Is it possible that these financial returns and competitive advantages are derived
as a result of brand equity built for the brands held in the firms portfolio? It has been
shown that repetitive advertising schedules increase the probability that a brand will be
included in the consideration set, which simplifies the consumer's brand choice, making it
a habit to choose the brand (Hauser and Wemerfeldt 1990). By reinforcing the
consumer's brand-related beliefs and attitudes, advertising contributes to strong brand
loyalty (Shimp 1997). Additionally, Aaker and Jacobson (1994) find a positive '
relationship between advertising and perceived quality. Tellis and Fomell (1988) find
that increased advertising signals high quality, especially when the costs of producing
quality are low even when consumers tend to be less responsive to advertising. Yoo et al.
(Yoo et al. 2000a) find advertising positively impacts the brand equity dimensions of
perceived quality, loyalty and associations, and advertising spending is positively
associated with overall brand equity.

Thus, advertising expenditures are conceptualized as a deployment of resources,
also known as a capability (Day 1994; Miller 1986). If advertising leads to
differentiation and a sustainable competitive advantage in the marketplace (Barney 1991;
Miller and Friesen 1984), then it can be expected that advertising expenditures will
contribute to positive responses in the dimensions of brand equity. Further, this study
investigates whether there is an impact from the interaction of advertising and new

product introductions on the dimensions of brand equity.
H2: A brand’s advertising expenditure has a positive impact on brand equity.

H2a: The greater the brand’s advertising expenditure, the greater the positive impact of
the firm’s innovativeness on brand equity in the U.S. automotive market.

126

Region of Origin

The literature streams related to Country of Origin Effects generally evaluate the
effect of consumer search cues, or search qualities, on consumer choice and ultimately,
product sales performance. Consumer product evaluation cues are conceptualized as
being either extrinsic, where the cue is not physically part of the product, or intrinsic,
where the one is a core product attribute (Richardson et al. 1994). Although from new
product perspective, this has been grounded in the theory related to information
asymmetry (Hennig-Thurau et al. 2001), it can also be viewed from the categorization
literature related to consumer behavior and cognitive psychology related to the process of
evaluative judgments (Pavelchak 1989). Essentially, this literature suggests that
consumers either use a piecemeal or categorization process to evaluate products (Meyers-
Levy and Tybout 1989; Pavelchak 1989), and because consumers will typically take the
easiest approach to evaluation, they will categorize based on known information (Fiske
and Taylor 1984; Ulgado and Lee 1998). Furthermore, it has been found that U.S.
consumers generally rely on intrinsic attributes as a basis for evaluating products (Ulgado

and Lee 1998).

The country of origin effects literature has considered the impact of specific
country associations on the evaluation of product quality (Bilkey and Nes 1982;
Parameswaran and Pisharodi 1994). Hong and Wyer (1989) found that country of origin
has a direct effect on product evaluations. In general, it has been found that the

evaluation of a country from which a product originates has an impact on consumer

127

assessments of product quality, and is used to choose the best available option (Klein
2002). Consumer ethnocentrism literature takes this concept to a more granular level,
and has been defined as the belief by consumers that it is inappropriate and immoral to
purchase foreign products because it damages the economy, costs jobs and is generally
unpatriotic (Shimp and Sharma 1995). Findings are that consumer ethnocentrism affects
purchasing behavior, but will be lower when there is a higher quality to the imported
good, and if there is a higher degree of cultural openness (Shimp and Sharma 1995).
Moreover, the variable has been determined to be a factor when consumers make choices

between domestic and foreign goods (Klein 2002).

Automotive brands are frequently referred to as “European” or “Asian”,
illustrating the categorization effects. U.S. brands have been losing market share to
brands from these regions for over twenty years now, implying there is direct effect on
the dimensions of brand equity. Therefore, it is expected the region of origin, as an
intrinsic product cue, will have an impact on the dimensions of brand equity, and
moderate the effects of marketing value creation and differentiation efforts on the

dimensions of brand equity in the U.S. domestic market.
Thus, it is expected:

H3: European and Asian brands will have a greater positive impact on brand equity
than will North American brands.

H3a: The effects of a firm’s innovativeness on brand equity will be greater for the
European and Asian brands than North American brands.

H3b: The effects of a firm’s advertising expenditure on brand equity will be greater for
the European and Asian brands than North American brands.

128

Inferences of Global Reach of the Brand

It appears global branding is becoming more predominant as firms focus on core
brands, and are increasingly implementing unambiguous international brand architectures
as a strategic means of facilitating brand consistency across international markets
(Douglas et al. 2001). This has implications from the brand level with respect to the
acquisition and utilization of knowledge across markets, where experiential learning
allows for the application of knowledge gained from successive markets to other markets.

A global brand offers a number of compelling benefits for the firm: (1)
efficiencies of scale, (2) responsiveness to global customers, (3) leveraged agency
relationships, and (4) efficiencies in scope (Board 2001). A company utilizing global
branding strategies can achieve scale economies in manufacturing, sourcing, and sales
and distribution networks. Additionally, an established market presence for a brand that
incorporates multiple regions and country markets suggests that the company will derive
inherent benefits from its innovation and achieve a sustainable competitive advantage
through the scale economies of operating on a broad scope. Global brand positioning
strategies have developed in parallel with the growth of the global marketplace (Alden et
al. 1999). It has been posited that the integration of marketing and centralization of
product selection and positioning allows for the transfer of knowledge across markets
(Kim et al. 2003), and speeds up a brand’s new product introductions by minimizing the
number of modifications necessary for individual markets (Neff 1999; Steenkamp et al.

2003'). This has implications from the brand level with respect to the acquisition and

129

utilization of knowledge across markets, where experiential learning allows for the
application of knowledge gained from successive markets to other markets.

The implications for the impact on consumer perceptions of the brand are
significant, as it has been found that the higher the perceived brand globalness (i.e., a
consumer perception the brand is marketed in multiple countries and recognized as
global in these countries), the higher its perceived quality and the stronger its perceived
level of prestige (Steenkamp et al. 2003). This association with globalness is an
important consideration when delineating the relationship between firm level activity and
the dimensions of brand equity. It has been found that manipulations of brand
associations through the marketing mix can influence brand image and brand attitude
(Faircloth et al. 2001). Other research has found that the relative influence of brand
specific associations and general brand impressions on brand ratings depend on both
brand experience and positioning (Dillon et al. 2001).

As noted by Steenkamp et al. (2003), perceived brand globalness can be derived
from either actual availability in multiple markets, or marketing efforts directed at
establishing a global positioning. Therefore, it is expected the actual global reach of a
brand will have an impact on changes to the dimensions of brand equity. In this study,
global reach is operationalized by the number of countries in which a brand is sold in a
given year. As a contextual factor establishing a boundary condition, it is also expected
to moderate the effects of the deployment of endogenous resource factors which
influence brand equity. Additionally, the effects of country of origin should be of lesser
importance when the brand is perceived as more global. This is posited because there is

potential the attribution to a specific country or region will be at least partially mitigated.

130

H4: The global reach of a brand has a positive impact on brand equity in the U.S.
automotive market. .

H4a: The effects of a brand’s innovativeness on brand equity in the U.S. automotive
market will vary by the degree of global reach of a brand.

H4b: The effects of brand’s advertising expenditure on brand equity will vary by the
degree of global reach of a brand in the U.S. automotive market.

H4c: The region of origin effects on brand equity in the U.S. automotive will vary by
the degree of global reach of a brand.

131

 

 

own—5

 

 

kudos—00mm
@0300qu

 

 

 

 

5:850 @0300qu

 

 

 

5:23 8895

 

 

 

 

 

395.8340.

 

 

 

 

 

 

 

 

 

 

536m 955

 

 

 

11%“ nosed 3920 m
u .......... j ....... ..
3.: u. .................. m
e M 53.5 co sewed “
mm H u
. tttttt J ttttttttttt L
av: 9mm 85555:}:
NE nomumucouofimfl
«#3 «mm 6 ~5th chcc>m§>o=5v
3w ( :05880 035/

 

 

.333— unaum we Seine—=5 2: ac 5353:2255 can mme=o>5a>e=5 we "accum— 2: he ammo—=69»:

"an 255

132

Table 3.2: Exogenous Variables

 

 

 

 

 

 

 

 

 

 

 

Construct Definition Measures Citations
Innovativeness The level of The aggregate new (e.g., Bayus et al.
potential product 2003; e.g., Garcia
discontinuity a introductions at all and Calantone 2002;
product generates levels of Pauwels et al. 2004)
innovativeness for
the focal brand per
year. (see Table 3.4)
Differentiation Value extraction Advertising (e.g., J ohansson
from the expenditures 1973; e.g., Mizik
marketplace through measured in billions and Jacobson 2003;
the creation of of dollars Simon and Arndt
barriers to entry 1980; Telser 1962)
through
differentiation
Region of Origin The impact of Country of a brand’s (e.g., Balabanis and
specific country origin Diamantopoulos
associations on 2004; e.g., Bilkey
brand evaluations and Nes 1982;
Parameswaran and
Pisharodi 1994; van
Ittersum et al. 2003)
Global Reach Perceived brand Number of (e. g., Alden et al.
globalness can be Countries a Brand is 1999a; e.g., Shocker
derived from actual sold in officially et al. 1994a;
availability in Steenkamp et al.
multiple markets. 2003)
METHOD

Data

The hypotheses presented above are tested within the context of the U.S.
automotive market. Survey results are used to measure the brand equity dimension
scores of each brand. The time span of the dataset covers seven years (inclusive), from
1997 to 2003. The dataset has been provided by GfK Automotive, LLC, member of the

GfK Group, a leading supplier of syndicated market research to the automotive industry.

133

GfK Automotive, LLC maintains the largest database of pre-purchase automotive
information available in the U.S. market and is the industry stande for deriving
purchase intention and image data. An automotive consumer panel is developed from a
monthly survey of on average 200,000+ households that demographically represents the
U.S. population. This initial survey measures the timing of the next purchase of an
automobile, and the make/model intended. A follow up study is conducted semi-armually
(June & December) among the new vehicle intenders. Each intender rates all
brands/models in the segment with surveys collected until a minimum ending sample size
of n=300 per wave is achieved. Utilizing this dataset, the dynamic values of the brand
average dimension scores of 33 brands sold in the U.S. light vehicle market are computed
on an annual basis using the December observations. An automotive brand is defined by
the “make” level unit of analysis (e.g., Chevrolet, Toyota, Nissan, Dodge, etc.), as
opposed to product or “model” level observations (e.g., Corvette, Camry, Altima,
Caravan, etc.).

The advertising and new product introduction data was captured from secondary
data sources including Automotive News, and Wards Automotive. The region of origin
was recorded as North America, Europe and Asia, and coded using a set of two dummy
variables, with the base case being North America. The new market entries were
collected from annual company reports and media announcements. The global brand
reach data was provided by Polk Automotive Intelligence, GmbH. who maintains a
proprietary data base of global automotive registrations; 57 countries are recorded for the

years investigated in this study.

134

The Dimensions of Brand Equity

The dependent variables representing the dimensions of brand equity are derived
from the panel data and include 7 annual time points from 1997-2003. The measures
collected for each make/model are aggregated to form the dimensions of brand equity.
These variables include the awareness, intended loyalty, perceived quality, perceived
economy, and image strength. Awareness is measured via two questionnaire items; the
first is based on a 3 point Likert scale asking the familiarity of the brand, and the second
is based on a 4 point Likert scale asking the amount of advertising seen/heard for the
brand. Both of these measures were converted to a 10 point scale. Loyalty is measured
through purchase intentions compared to current brand ownership. Perceived economy,
perceived quality and image are each measured via multiple questionnaire items on a 5
point likert scale. Image is broken into two distinct image variables which tend to be
focal positioning strategies in the automotive industry: sporty image and luxury image. ~
Table 3.3 presents the items included in the factors, along with the reliabilities and factor

loadings.

135

Table 3.3:
Factor Analysis of Brand Equity Dimensions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Factor Variance
Dimension Measures Loading Explained Alpha
familiarity 0.962 92.5 0.92
Awareness
advertising 0.962
, o erational costs 0.974 85.0 0.90
Perceived ,1 0 957
Economy as m1 cage .
value 0.827
dependable 0.951 97.5 1 0.96
acceleration 0.907
Perceived Quality ride 0,894
workmanship 0.974
lasting 0.949
fun drive 0.979 83.7 0.93
Sporty Image trend settrng 0.903
sporty 0.957
good looking 0.81 1
luxurious 0.980 96.0 0.96
Luxury Image . .
prestrgrous 0.980

 

Exogenous Variables

The advertising effort of the brand is measured in terms of the total ad spending

reported for the given year. The innovativeness of the brand was captured in terms of the

aggregate new product introductions at all levels of innovativeness for the focal brand per

year. The annual new product introductions were coded from the company reports and

media announcements by industry experts with extensive experience in automotive

styling and design based on the JD Powers and Associates rating scale as reported by

Pauwels et al. (2004) and illustrated in table 3.4. Fach introduction is coded based on the

degree of change. The introductions were then added up, and the cumulative innovative

136

 

effort of the brand during the year used as the measure of brand innovativeness. The
region of origin was recorded as North America, Europe and Asia, and coded using a set
of two dummy variables, with the base case being North America. The global reach of
the brand is captured in terms of the number of markets in which the brand is sold via
authorized distributors at each time point. The countries where an independent importer
is responsible for registrations are not included in the data set.

Table 3.4:
Rating scale of innovation level for car model changes“

 

Innovation Scale Description

 

 

 

0 No visible change
1 Only styling change, affecting grille, headlight and taillight areas
2 Minor changes affecting sheet metal in front and rear quarter areas

and minor changes to interior, but not to the instrument panel

 

3 Major changes affecting exterior sheet metal and considerable
change to interior, including instrument panel

 

4 All new sheetmetal including the roof panel, e.g. new platform or
change from rear-wheel to front-wheel drive

 

 

5 New entry into the market

 

 

* As presented in Pauwels et a1. (2004)

Model

In this model, the dependent variables consist of the brand equity dimensions as derived
by the available survey data. The regressors include the innovation, advertising
expenditures, global reach of the brand, the dummy variables for the region of origin of

the brand and their interactions. Since the regressors are the same across equations and

137

 

the five dimensions theoretically reflect an underlying common construct, the error terms

across the six equations could potentially be correlated. In order to allow for this

potential correlation, a seemingly unrelated regressions (SUR) model is employed

(Wooldridge 2002b). In this method, each equation in the system has its own coefficient

vector and therefore it appears as if the equations are unrelated, but the errors of these

equations are allowed to freely correlate. The resulting equation becomes:

total __ npiJ
advbillm
globalnem
coeur,‘
‘ coasiai p£a,t .
total _ up“ X advbilli’ t 81,;
total _ npm X advbillm €q,t
Ee,t
€s,t

£1,t

Fawarenessi’ t
int _ loyai, t
pqualityi,t
peconom i, t
sportimg i, t

total __ npiJ X coeuri
total _ up” X coasiai
advbilli’t x globalnem

 

 

 

 

luximagei’ t
‘ advbilli, t x coeur;
advbillm x coasiai
globalnei, t x coeuri

globalnei, t X coasiai

h d

 

 

Where i and t denote the brand and survey year respectively 1" is the coefficient matrix,

and:

awareness“
int_loyai,t
pqualitya.:
peconomm
sportimgm
luximagem
total_np,,
advbilly
globalnem
COCIll'i
coasiai

Awareness of brand i at time t

Intended loyalty of brand i at time t

Perceived quality of brand i at time t

Perceived economy of brand i at time t

Sport image of brand i at time t

Luxury image of brand i at time t

Innovativeness of brand i at time t

Advertising expenditure in billion dollars of brand i at time t
Global reach of brand i at time t ,

Is one if country of origin of brand i is in Europe, zero otherwise.
Is one if country of origin of brand i is in Asia, zero otherwise.

138

However, if all the interaction terms are introduced simultaneously in the equation,
multicollinearity problems may occur, leading to potentially unreliable estimations. In
order to mitigate this possibility, a hierarchical approach has been employed by including
only one interaction term at a time (e.g., Elvira and Cohen 2001; Luo 2002; McGrath

2001).

RESULTS

The complete results of the analysis are found in Tables 3.6-3.12. Overall, the
results indicate a complex set of main and interaction effects providing mixed evidence
with respect to the hypotheses. A summary of the hypotheses and the relative support
fore each provided from this study can be seen in Table 3.13.

The results of the main effects model indicate advertising (B = 3.524, 2 = 16.67, p
< .001) and a brand’s global reach (B = .008, z = 2.75, p = .006) have significant positive
effects on brand awareness. The country of origin variables are significantly and
negatively related to brand awareness, where European (B = -.962, z = -8.96, p < .001)
and Asian (B = -.932, z = -13.44, p < .001) brands are compared to U.S. based brands.
On the other hand, total new product introductions (B = .003, z = .51, p =. .610) have an
insignificant positive effect on awareness. The independent variables explain 84% of the
variance in the measure of awareness.

Advertising (B = 22.297, 2 = 3.38, p < .001) and a European country of origin (B
= 13.907, z = 4.15, p < .001) have a positive and significant effect on intended loyalty.

On the other hand, the effects of innovativeness (B = 0.092, 2 = .55, p = .583) are positive

139

but insignificant on intended brand loyalty. While Asian brands (B = -3.351, 2 = -l.55, p
= .122) and global reach (B = -0.140, 2 = -l.62, p = .104) are just outside the significant
range at a 10% level of confidence, but have a negative valence. 19 % of the variance in
intended brand loyalty is explained by the independent variables.

The effects of advertising (B = 1.331, 2 = 2.98, p = .003) and European brands (B
= 1.772, 2 = 7.8, p < .001) are positive and significantly related to perceived quality.
Innovativeness (B = 0.019, 2 = 1.64, p = .101) and Asian brands (B = 0.233, 2 = 1.59, p =
.113) are positively related to perceived quality, but just outside the range of significance
at a 10% level of confidence. Global reach (B = -0.026, 2 = -4.54, p < .001), however, is
significant and negatively related to perceived quality. The independent variables
explain 28% of the variance in perceived quality.

Advertising (B = 3.286, 2 = 8.09, p < .001) and both non U.S. based brands,
European (B = 0.464, 2 = 2.25, p=0.025) and Asian (B = 0.943, 2 = 7.08, p < .001), have a
positive and significant effect on perceived economy. While innovation (B = -0.020, 2 = -
1.98, p = 0.048) has a slightly negative and significant effect. Global reach’s (B = -0.003,
2 = -0.58, p = 0.563) effect is also slightly negative, but insignificant. The variance of
perceived economy explained by the independent variable is 41%.

Interestingly, all the independent variables are significant with respect to the
sporty image dimension of brand equity. Advertising (B = 1.796, 2 = 4.08, p < .001),
innovativeness (B = 0.023, 2 = 1.98, p =0.047), European brands (B = 1.595, 2 = 6.99, p <
.001), and Asian brands (B = 0.411, 2 = 2.79, p = .005) all have positive effects.
However, global reach (B = -0.020, 2 = -3.4, p < .001) has a mildly negative effect. The

variance in sporty image explained by the equation is 25%.

140

The impact of advertising (B = -0.701, 2 =-1.56, p = .119) and Asian brands (B = ~
0.049, 2 = -0.33, p = .738) are negative but insignificant. Innovativeness (B = 0.021, 2 =
1.87, p =0 .061) and European brands have a positive and significant impact on luxury
image. Global reach (B = -0.020, 2 =-3.48, p < .001), on the other hand, has a negative
significant effect on luxury image. The independent variables explain 27% of the
variance in the luxury image dimension.

The addition of the interaction of innovativeness and advertising explains a
greater degree of variance in all the equations except the one related to the dimension of
luxury image. The interaction variable has a negative impact across all the dimensions
of brand equity, but is significant only for awareness, intended loyalty, and sporty image.

The interaction of the Asian region of origin with brand innovativeness is
generally insignificant, except the interaction with perceived economy. The interaction
of innovativeness with European brands is significant for perceived quality, sporty image
and luxury image. The variance explained the brand equity dimensions are improved
slightly with the addition of the interaction term.

The interaction term of the European region of origin and the advertising variable
has a positive effect on awareness and perceived economy. However, it has a negative
effect on perceived quality and luxury image. The interaction of Asian brands with
advertising is positive and significant with respect to all the dimensions of brand equity.
Region of brand origin interacted with advertising provides an increase in the variance
explained across all the dimensions of brand equity.

The interaction effect of global reach with innovation is generally not significant,

except for a very slight impact on perceived quality and perceived economy. The

141

variance explained by the addition of this variable to the equations improves by only 1%
for each of these outcome variables, and has no effect on the variance explained in the
other dimensions of brand equity. The interaction of advertising with global reach
provides a significant and positive effect for only the dimension of perceived quality.
The variance explained by the equations is generally not improved by the addition of this
interaction term.

The interaction of global reach with European brands has a positive and
significant effect on awareness, perceived quality, perceived economy and sporty image.
The Asian region of origin interacted with global reach has a positive and significant
effect on perceived economy, but has a negative and significant effect on both sporty
image and luxury image. The variance explained in the equations is improved for all the
out come variables, with the variance explained by perceived economy increasing by
15%.

Further, to test for the robustness of the findings, a separate analysis was
performed including time and brand as covariates in the SUR model. The inclusion of
these variables had no effect on the explained variance and an insignificant effect on the

coefficient estimates.

142

Table 3.5: Descriptive Statistics

50.1 14 1.

0. 1. 0 1.
001
-0.071 0 1
0.309 <.001
0.763 0.1 -0.1 1.
001 0. 0.
0.576 0.1 -0. 0.815 1
.001 0. 0.525 <.001
0.604 -0.191 -0 0.832 0 1.
001 0. <.001 <.001 <.001
0.189 0.801 0. 0.01 0.1 -0.271 1
0.005 <.001 <.001 0 0.01 <.001
0.1 0. 0.236 0.060 0 -0.108 0
0.01 <.001 <.001 0.336 0.001 0. <.001
0.263 -0 -0.208 0.41 0.321 0.415 -0
001 <.001 0.001<.001 <.001 <.001 <.001
-0.287 -0 0.355 -0.155 -0. -0.202 -0.
001 <.001 <.001 0.012 0 0.001 0.51
0. 0. 0.221 0.059 0.1 -0. 0
0.219 0 0.001 0.345 0.031 0.296 <.001
0.148 0 0.361 0.020 0.1 -0.21 0
0.027 <.001 <.001 0.748 0. 0.001
intinnovcoeur . 0.263 -0 -0.1 0.379 0 0. -0
.001 <.001 0.005 <.001 <.001 <.001 <.001
-0.212 -0.141 0. -0.085 0. -0.224 0.1
0.001 0 <.001 0.1 0 <.001 0
intadvcoeur . 0.175 -0.1 0.01 0.230 0 0.17 -0.11
0. 0.01 0.776 <.001 0.001 0. 0
-0.055 0.01 0 0.059 0.1 -0.17 0
0.411 0.81 <.001 0.340 0.131 0.005 <.001
0.153 0 0 0.081 0.231 -0.1 0
0.022 <.001 <.001 0.195 <.001 0.096 <.001
8.1 0.167 0.689 0.506 0. 0.17 0259 0.931
0.012 <.001 <.001 0. 0.012 <.001 <.001
9.34 1 0.275 -0.37 -0.196 0.416 0 0.417 -0.331
001 <.001 0. <.001 <.001 <.001 <.001
13. 19 -0.271 -0.1 0. -0.222 -0.1 -0.339
001 0. <.001 <.001 0 <.001 0.1

 

143

Table 3.5 Continued

1

   
   
 
  
 
 
  
 
  
 
 
  
 
  
 
  
 
  
  
  
   

-0.1 1
0.
0.044 -0 1.
0.455 <.001
0.232 0.406 0.091 1.
<.001 <.001 0.121
0.808 -0.241 -0.023 0.224 1.
<.001 <.001 0.697 <.001
0.193 0. -0.274 0. -0.108 1.

0.001<.001 <.001 <.001 0.067

0.343 -0.31 0.798 0.202 0.208 -0.21 1

<.001 <.001 <.001 0.001<.001 <.001

-0. 0.743 -0.291 0 -0.141 0 -0 1.

0.130 <.001 <.001 <.001 0.017 <.001 <.001

0.241 -0.287 0.734 0.303 0.247 -0.205 0.844 -0.21 1

<.001 <.001 <.001 <.001<.001 0.001<.001 <.001

0.905 -0.002 0.082 0.555 0.771 0.31 0.372 0.032 0 1.

<.001 0.978 0.167<.001<.001 <.001 <.001 0. <.001

0.588 -0.218 0.062 0.4 0. -0.137 0.276 -0.01 0.461 0.692 1.

<.001 <.001 0.296<.001<.001 0. <.001 0.860 <.001 <.001

'0.123 0.991 -0.388 0.427 -0.232 0.7 -0.307 0.771 -0.285 0.034 -0.202 1
0.037 <.001 <.001 <.001<.001 <.001 <.001 <.001 <.001 0.001
0.094 -0 0.885 0.404 0.054 -0.248 0.784 -0.257 0.808 0.227 0.244 -0
0.112 <.001 <.001 <.001 0.366 <.001 <.001 <.001 <.001 <.001<.001 <.001

144

Table 3.6: Estimated Main Effects

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dependent Independent Coef. IStd. Err. z P>d R sq. Chi Sq.
awareness advertsing 3.5241 0.211 16.67 <.001 0.84 1101.43
innovativeness 0.003 0.005 0.51 .61
European -0.962 0.107 -8.96 < .001
Asian 0.932 0069' .1344 < .001
global reach 0.0081 0.003 2.75 .0001
intercept -0.671 0.083 -8.11 < .001
intended advertising 22.297 6.598 3.38 .001 0.19I 46.79'

loyalty innovativeness 0.092 0.168 0.55 .583

European 13.907 3.354 4.15 < .001

Asian -3.351 2.164 -1.55 .122

global reach -0.140 0.086 -1.62 .104

‘ intercept 48.088' 2.584 18.61 < .001
perceived advertising 1.331 0.447 2.98 .003: 0.28 78.061
quality innovativeness 0.019 0.011 1.64 .101

European 1.772 0.227 7.80 < .001

Asian 0.233 0.147 1.59 .113

global reach -0.026 0006‘ -4.54 < .001

flintercept 0.095 0.175 0.55 586'
perceived advertising 3.286 0406' 8.09 <.001 0.41 138.89
Feconomy innovativeness -0.020 0.010 -1.98 .048

European 0.464 0.207 2.25 .025

Asian 0.943 0.133 7.08 < .001

global reach -0.003 0.005 -0.58 .563

intercept -0.930 0.159 -5.84 < .001

 

 

 

145

 

Table 3.6: Continued

 

 

 

 

 

 

 

 

sporty image advertising 1.790 0.449 4.00 < .001 0.25 67.52
innovativeness 0.023 0.011 1.98 .047
European 1.595 0.228 6.99 < .001
Asian 0.411 0.147 2.79 .005
global reach -0.020 0.006 -3.40 < .001
lintercept -0.353 0.176 -2.01 .045
luxury image advertising -0.701 0.450 -1.561 .119l 0.27 74.701
innovativenm 0.021 0.011 1.87 .061
European 1.245 0.229 5.45 < .001
Asian -0.049 0.148 -0.33 .738
global reach -0.020 0.006 -3.48 < .001
‘ intercept 0.546 0.176 3.10 .1112

 

 

 

All Chi sq. statistics are significant at .001 level
Breusch-Pagan test of independence: ChiZ (15) = 795.368; P value < 0.001
Bold items indcate a 10% or better level of significance

Table 3.7 : Estimated Interaction Effects: Innovation and Advertising

 

 

 

 

 

Dependent Independent Coef. I Std. Err. I 2 J P>|z| R sq. Chi Sq.
awarenes advertising 4.069 0.321 12.68 < .001 0.85 1133.5

innovativeness 0.017 0.008 2.04 .042

European -0.965 0.106 -9.09 < .001

Asian -0.942 0.069 -l3.72 < .001

global reach 0.007 0.003 2.68 .007

intinnovadv -0.042 0.019 -2.24 .025

intercept -0.797 0.099 -8.03 < .001 .

advertising 35.813 10.061 3.56 < .001 0.20r 50.64
intended innovativeness 0.437 0.256 1.71 .088
loyalty European 13.841 3.328 4.1 < .001

Asian -3.614 2.153 -1.68 .093

global reach -0.147 0.085 -1.72 .086

intinnovadv -1.041 0.588 -l.77 .077

intercept 44.969 3.112 14.45 < .001

advertising 2.193 0.682 3.21 .001 0.29r 81.89r
perceived innovativeness 0.041 0.017 2.34 .019
quality European 1.767 0.226 7.83 < .001

Asian 0.216 0.146 1.48 .139

global reach -0.027 0.006 4.65 < .001

intinnovadv -0.066 0.040 -1.66 .096

intercept -0.103 (L211 -0.49 .624,

 

 

 

 

 

 

 

146

Table 3.7: Continued

 

 

 

 

 

 

advertsing 3.526 0.624 5.65 < .001 0.41 139.
perceived innovativeness -0.014 0.016 -0.90 .366
economy European 0.463 0.206 2.24 .025

Asian 0.939 0.1 7.03 < .001

global reach -0.003 0.005 -0.60 .547

intinnovadv -0.018 0.037 -0.51 .614

intercept -0.985 0.193 -5.11 < .001

advertising 3.671 0.668 5.50 < .001 0.30I 85.72
sporty image innovativeness 0.070 0.017 4.14 < .001

European 1.586 0.221 7.18 < .001

Asian 0.375 0.143 2.62 .009}

global reach -0.021 0.006 -3.68 < .001

intinnovadv -0.144 0.039 -3.70 < .001

intercept -0.785 0.207 -3.80 < .001

advertising -0.090| 0.689 0.13 .896 0.27 76.57
luxury image innovativeness 0.037 0.018 2.11 035'

European 1.242 0.228 5.45 < .001

Asian -0.061 0.147 -0.42 .678

global reach 002] 0.006 -3.54 < .001

intinnovadv -0.047 0.040 -1.17 .242

intercept 0.405 0.213 1.90 .057

 

 

 

 

 

 

All Chi sq. statistics are significant at .001 level
Breusch-Pagan test of independence: ChiZ (15) = 787.358; P value < 0.001

Bold items indcate a 10% or better level of significance

 

Table 3.8: Estimated Interaction Effects: Innovation and COO

 

 

 

 

 

 

 

 

Dependent Independent Coef. IStd. Err. z I P>|z| I qu. Chi Sq.
awareness advertiz‘hg 0.365 0.223 16.37 <.001 0.85 1,121.21
innovativeness -0002 0.007 0.25 .800
European -1.109 0.142 -7.78 < .001
Asian -0.893 0.117 -7 .66 < .001
global reach 0.007 0.003 2.73 .006
intinnovcoeur 0.020 0.013 1.58 .1 l4
intinnovcoasia -0.003 0.010 -0.31 .759
intercept -0.665 0.087 -7.67 < .001

advertising 25.028 6.947 3.60! < .001 0.20l 51.38
intended innovativeness 0.092 0.223 0.41 .681
loyalty European 11.142 4.441 2.51 .012

Asian 0.751 3.634 0.21 .836

global reach -0.144 0.085 -1.68 .092

intinnovcoeur 0.394 0.395 mm .318

intinnovcoasia -0.418 0.319 -1.31 .190

intercept 47.371 2.704 17.52 < .001

advertising 1.692 0.468 3.61 < .001 0.30I 85.964
perceived innovativeness -0.004 0.015 -0.27 .789
quath European 1.303 0.299 4.35 < .001

Asian 0.040 0.245 0.16 .870

global reach -0.027 0.006 -4.65 < .001

intinnovcoeur 0.062 0.027 2.34 .019

intinnovcoasia 0.024 0.022 1.1 1 .267

*‘mtercept 0.195 0.182 1.07 .286

 

 

 

 

 

 

 

148

Table 3.8: Continued

 

 

 

 

 

 

 

 

advertising <.00 0.4 146723!
perceived innovativeness .013
economy European .1
Asian .011
global reach .573
intirmovcoeur .607
intinnovcoasia .036
intercept < .001
advertising < .001 0.30, 86.3
sporty image irmovativeness .714
European .003
Asian .117
global reach < .001
intinnovcoeur < .001
intinnovcoasia .684
intercept .1391
luxury image advertising
irmovativcness
European
Asian 0.248 0.21
global reach 0.006 -3.55
intinnovcoeur 0.027 1.70
intinnovcoasia 0.022 -0.39
intercept 0.184 3.02

 

 

 

 

 

 

 

A11 Chi sq. statistics are significant at .001 hvel
Breusch—Pagan test of independence: cm (15) = 794.435; P value < 0.001
Bold items indcate a 10% or better level of significance

149

Table 3.9: Estimated Interaction Effects: Advertising and COO

 

 

 

 

 

 

 

 

 

 

Dependent Independent Coef. I Std. Err. I z I P>M R sq. I Chi Sq. ]
awarenesss advertising 2.959I 0.238 12.46 < .001 0.861 1,243.80

innovativeness 0.008 0.005 1.50 .134

European -1.401 0.144 -9.76 < .001

Asian -l.217 0.110 -11.09 < .001

global reach 0.008 0.003 2.86 .004

intadvcoeur 2. 0.694 4.08 < .001

intadvcoasia 1.000 0.333 3.01 .003

intercept -0.542 0.087 -6.22. < .001

advertising 19.729 7.671 2.57 .01 0.21 55.84
intended innovativeness 0.054 0.169 0.32. .749
loyalty European 18.192 4.635 3.92 < .001

Asian -8.343 3.544 -2.35 .019

global reach -0.168 0.085 -1.97 .048

intadvcoeur -35.918 22.407 -l.60 .109

intadvcoasia 20.372 1.075 1.90 .058

intercept 50.060 2.813 17.80 < .001

advertising 0.632 0.487 1.30 .195 0.39} 128.14
perceived * innovativeness 0.016 0.011 1.52 .129
quality European 2.113 0.295 7.17 < .001

Asian -0.640 0.225 -2.84 .004

global reach -0.031 0.005 -5.64 < .001

intadvcoeur -3.365 1.424 -2.36 .018

intadvcoasia 3.464 0.683 5.07 < .001

“intercept 0.450 0.179 2.52 .012

 

 

 

 

 

150

Table 3.9: Continued

 

 

 

 

 

 

advertising 2.108 0.455 4.63 < .001 0.471 178.61
perceived . innovativeness 0011 0.010 -1.15 .254
economy European -0.285 0.275 -1.04 .300

Asian 0.252 0.21 1.20 .231

global reach -0.004 0.005 -0.77 .438

intadvcoeur 4.616 1.330 3.47 .001

intadvcoasia 2504' 0.638 3.93 < .001

intercept -0.624 0.167 -3.74 < .001

advertising 1.574 0.526 2.99 . 0.261 73.291
tsporty image innovativeness 0.021 0.012 1.85! .064

European 1.755 0.318 5.52. < .001

Asian 0.104 0.243 0.43 .669

global reach -0.021 0.006 -3.67 < .001

intadvcoeur 1536 -0.95 .340

intadvcoasia 0.737 1.67 .095

intercept 0.193 -l.l9 .236
luxury image advertising 0.515 -1.25 .212 0.32 94.22

innovativeness 0.011 1.37 .170

European 0.311 5.90 < .001

As'mn 0.238 -1.43 .152

global reach 0.006 -3.99 < .001

intadvcoeur 1.503 -3.01 .003

intadvcoasia 0.721 1.76 .079

intercept 0.189 3.46 .001

 

 

 

 

 

 

 

 

A11 Chi sq. statistics are significant at .001 level
Breusch-Pagan test of independence: Chi2 (15) = 821.047; P value < 0.001
Bold items indcate a 10% or better level of significance

151

Table 3.10: Estimated Interaction Effects: Innovation and Globalness

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dependent Independent Coef. IStd. Err. z P> a R sq. Chi Sq.
awareness advertising 3.5401 0.211 16.75 <.001 0.84 1108.7
innovativeness -0.015 0.017 —0.85 .393
European -0.945 0.108 -8.73 < .001
Asian -0.922 0.070 -13.23 < .001
global reach 0.004 0.005 0.83 .404
. intinnovglob 0.000 0.000 1.07 .286
intercept -0.537 0.151 -3.56I < .001

advertising 22.100 6.612 334 .001| 0.19I 47.01
intended innovativeness 0.305 0.537 0.57 .570
loyalty European 13.697 3.3891 4.04 < .001

Asian 3.466 2.181 -1.59 .112

global reach -0.093 0.141 -0.66 .511

intinnovglob -0.005 0.013 -0.42 .676

* intercept 46.439 4.715 9.85 < .001

advertising 1.385 0.445 3.11 .002 0.29I 82.07
perceived innovativeness -0.040 0.036 -l.10 .270
quality European 1.829 0.228 8.02 < .001

Asian 0.264 0.147 1.80 .072

global reach -0.039 0.010 -4.14 < .001

tntinnovglob 0.001 0.001 1.70 .088

intercept 0.548 0.317 1.73 .084

 

152

 

Table 3.10: Continued

 

 

 

 

 

 

 

 

 

 

 

I advertising 3.34 0.404 8.27 < .001 0.42 144.79I
perceived innovativeness -0.079 0.033 -2.40 .016
economy European 0.521 0.207 2.52 .012

Asian 0.975 0.133 7.32 < .001

global reach -0.016 0.009 -1.84 .065

intinnovglob 0.001 0.001 1.87 .061

intercept -0.478 0.288 -1.66I .097

advertising 1.823 0.449 4.06] < .001 0.25 68.45
sporty image innovativeness -0.006 0.036 -0.17 .862

European 1.624 0.230 7.05 < .001

Asian 0.427 0.148 2.88 .004

global reach -0.026 0.01 -2.74 .006

intinnovglob 0.001 0.001 0.84 .403

intercept -0.129 0.320 -0.40| .688

advertising 0679 0.450 -1.51 .132 0.27 75.34
luxury image innovativeness —0.002 0.037 -0.07 .948

European 1.268 0.231 5.49 < .001

Asian -0.036 0.149 -0.25 .806

global reach -0.026 0.01 -2.66 .008

intinnovglob 0.001 0.001 0.68 .494

intercept 0.73 0.321 2.27 .023

 

 

 

A11 Chi sq. statistics are significant at .001 level
Breusch-Pagan test of independence: Ch12 (15) = 802.476; P value < 0.001
Bold items indcate a 10% or better level of significance

153

Table 3.11: Estimated Interaction Effects: Advertising and Globalness

 

 

 

 

 

 

 

 

 

 

 

 

 

Dependent Independent Coef. IStd. Err. z I 15sz R sq. Chi Sq. I
awareness advertising 1.916 0.662 2.89 .000 0.85 1143271

innovativeness 0.002 0.005 0.34 .733

European -0.924 0.107 -8. < .001

Asian -0.962 0.069 -13.89 < .001

global reach -0.001 0.004 -0.21 .831

intadvglob 0.040 0.016 2.56 .011

intercept 0.333 0.155 -2.1 .032 .

advertising 18.091 20.994 0.86 .3891 0.19I 46.85
inteMed innovativeness 0.090 0.168 0.53 .594
loyalty European 14.005 3.386 4.14 < .001

Asian -3.431 2.197 -156 .118

global reach 0162 0.136 -1.19 .234

intadvglob 0.105 0.497 0.21 .833

intercept 48.973 4.926 9.94 < .001

advertising -1.744 1.404 -l.24 .214 0.301 85.41
tperceived innovativeness 0.017 0.011 150 .134
quality European 1.844 0.226 8.14 < .001

Asian 0.174 0.147 1.19 .2361

global reach -0.043 0.009 4.7 < .001

intadvglob 0.077 0.0 2.31 .021

intercept 0.742 0.329 2.25 .024

 

 

154

 

 

 

”‘31

S13

 

:2!

Bo

 

Table 3.11: Continued

 

 

 

 

 

advertising 1.936 1.289 0.41 140.93
perceived innovativeness -0.021 0.010
economy European 0.496 0.208

Asian 0.918 0.135

global reach -0.010 0.008

intadvglob 0.034 0.031

intercept -0.646 0.303

advertising 1.268 1.428 0.25 67.72
sporty innge innovativeness 0.022 0.011

European 1.608 0.

Asian 0.401 0.149 .

global reach -0. 0.009 .014

intadvglob 0.013 0.034 .697

intercept -0.242 0.335 .471

advertising -2.451 1.426 .086 0.27 76.99!
luxury image innovativeness 0.020 0.011 .074

European 1.286 0.230 < .001

As'am -0.083 0.149 1 -055 .580

global reach -0.030 0.009 -3.21 .001

intadvglob 0.044 0.034 1.29 .196

intercept 0.914 0.334 2.73 .006

 

 

 

 

 

 

All Chi sq. statistics are significant at .001 level
Breusch-Pagan test of independence: ChiZ (15) = 799.902; P value < 0.001
Bold items indcate a 10% or better level of significance

155

Table 3.12: Estimated Interaction Effects: C00 and Globalness

 

 

 

 

 

 

 

 

 

 

 

 

 

Dependent Independent Coef. Std. Err. I z I We R sq. Chi Sq.
awareness advertising 3.606 0.211 17.13 < .001 0.85 1,152.92

* innovativeness 0.002 0.005 0.36 .721

European 3.1261 0.834 -3.75 < .001

Asian -1.132 0.177 -6.41 < .001

global reach 0.002 0.004 051 .607

intcoeurglob 0.047 0.017 2.7 .007

intcoasiaglob 0.007 0.005 1.29 .197

intercept -0533 0.119I 4.47 < .001

advertising 23.014 6.6851 3.44I .001 0.19 47.77
intended innovativeness 0.079 0.171 .642
loyalty European -8.811 26.484 .739

Asian 4.697 5.608 .402

global reach -0.179 0.141 .205

intcoeurglob 0.488 0.555 .379

intcoasiaglob 0.161 .779

intercept 3.786] < .001

advertising 0.450I .002I 0.29 82.97
perceived irurovativeness 0.011 .186
quality European 1.782 .405

Asian 0.377 .367

global reach 0.010I .007

intcoeurglob 0.037 .072

intcoasiaglob 0.011 .792

intercept 0.255 .726.

 

 

 

 

 

 

 

 

156

 

Table 3.12: Continued

 

 

 

 

 

advertising 3.789 0354 10.69 < .001 0561 260.961
perceived innovativeness -0.011 0.009 -1.2 .229
economy European -2.557 1.403 -1.82 .068

Asian -1.344 0.297 4.52 < .001

global reach -0.053 0.007 -7.15 < .001

intcoeurglob 0.084 0.029 2.86 .004

intcoasiaglob 0.071 0.009 8.38 < .001

intercept 0.31 0.201 1.59 .111

advertising 1.711 0.436 3.92 < .001 0.31 92.
sporty image innovativeness 0.013 0.011 1.15 .249

European -3.608 1.729 -2.09 .037

Asian 1.395 0.366 3.81 < .001

global reach -0.001 0.009 -0.14 .889

intcoeurglob 0.100 0.036 2.76 .006

intcoasiaglob -0.030 0.010 -2.83 .005

intercept 0.789 0.247 -3.19 .001
luxury image advertising 0.893 0.442 .202 .0431 0.31 93.49

irmovativeness 0.013 0.011 1.18 .237

European -0.649 1.751 —0.37 .711

Asian 1.143 0.371 3.08 .002

global reach 0.004 0.009 0.46 .647

intcoeurglob 0.029 0.037 0.79 .432

intcoasiaglob -0.037 0.011 -3.4 .001

I0 c -0.052 0.250 -0.21 .837

 

 

 

 

 

 

 

All Chi sq. statistics are significant at .1111 level
Breusch-Pagan test of independence: ChiZ (15) = 801.840; P value < 0.001

Bold items indcate a 10% or better level of significance

157

Table 3.13: Summary of Findings

 

 

 

 

 

 

 

 

 

 

 

 

Hypothesis Findings

H1: A brand’s innovativeness has a positive impact on the dimensions Partially
of brand equity. supported

H2: A brand’s advertising expenditure has a positive impact on the Supported
dimensions of brand equity.

H2a: The greater the brand’s advertising expenditure, the greater the Not
positive impact of the firm’s innovativeness on the dimensions of supported
brand equity.

113: European and Asian brands will have a greater positive impact on Partially
the brand equity dimensions than will American brands. Supported

H3a: The effects of a brand’s innovativeness on the dimensions of brand Partially
equity will be greater for the European and Asian brands than Supported
American brands.

H3b: The effects of a brand’s advertising expenditure on the dimensions Supported
of brand equity will be greater for the European and Asian brands
than American brands.

H4: The global reach of a brand has a positive impact on the Not
dimensions of brand equity in the U.S. automotive market. Supported

H4a: The effects of a brand’s innovativeness on the dimensions of brand Partially
equity in the U.S. automotive market will vary by the degree of Supported
global reach of a brand.

H4b: The effects of a brand’s advertising expenditure on the dimensions Partially
of brand equity will vary by the degree of global reach of a brand. Supported

H4c: The region of origin effects on the dimensions of brand equity will Partially
vary by the degree of global reach of a brand. Supported

 

 

158

 

DISCUSSION

This study contributes to the literature by ascertaining the impact of marketing

related value creation and differentiation activities undertaken by the firm on an

intermediate marketing outcome as comprised by the underlying dimensions of brand

equity.

Since brand equity is posited to contribute to a sustainable competitive

advantage, delineation of the strategic efforts and contextual factors which impact the

underlying dimensions of brand equity has inherent appeal for both academics and brand

managers. These effects are evaluates further by considering observable contextual

factors as boundary conditions. Several potentially important implications emerged:

There is a positive return in terms of brand equity on both the innovativeness and
differentiation orientations.

The most consistent effects on brand equity are from differentiation through
advertising.

As suggested by the existing literature (Miller and Friesen 1984; Mizik and
Jacobson 2003), there is a negative return for focusing on both value creation and
differentiation through advertising at the same time. In this case, the new insight
drawn is the potential mediating effect of brand equity between the deployment
of resources and firm level financial returns.

Country of origin is a significant driver of brand equity and also a significant
moderator of the intermediate marketing return on strategic orientation.
Globalness emerged not as a driver, but a significant moderator of the returns on

the strategic orientations and country of origin.

159

Overall, the conceptual framework is generally supported. However, there is
variation in the results by specific drivers across the dimensions of brand equity, which
provides a contribution to the literature. While there are significant effects of both direct
and interaction terms, the most consistent results are found from the effects of
differentiation through advertising. In all specifications, advertising has a positive and
significant impact on all the dimensions, except luxury image. However, innovativeness
only has a positive effect consistently across the image dimensions. When the first
hierarchical interaction is added, new product introductions become positive and
significant across all dimensions except perceived economy. Yet, as both innovativeness
and advertising increase, there is a negative return on awareness, intended loyalty and
perceived quality. This implies there is a diminishing return to focusing too heavily on
either value creation or differentiation capabilities concurrently, and only one course
should be emphasized at a time. However, the results do not negate the importance of
innovativeness, but suggests advertising provides a moderating effect. Strategically, it is
important to determine the optimal point of emphasis for innovativeness and
differentiation; thus, in addition to contributing to the knowledge base related to value
creation and differentiation, this finding provides a direction for future research.

There is strong support for the moderating effects of region of origin and global
brand reach proposed in the conceptual framework, supporting the hierarchical nature of
the hypotheses and providing significant boundary conditions for the strategic orientation
framework presented. There are significant main effects for region of origin, as well as a
number of the interaction effects, supporting this step in the framework. However, both

the direct and indirect effects of global reach vary across dimensions and specifications.

160

Although there is general support for this boundary condition, sustaining the overall
framework, it is not consistent across the dimensions of brand equity. The specific

effects of each driver on each dimension of brand equity are discussed below.

Determination of Intermediate Outcomes

Awareness is explained to a large degree by advertising expenditures, global reach
and region of origin. The findings with respect to differentiation through advertising is
consistent with previous studies that indicate advertising is an important component of
maintaining a consumer durable good’s brand position over time (Golder 2000) and a
means of achieving competitive advantage (Mizik and Jacobson 2003). Further, as
expected, the broader a brand’s global reach, the greater the awareness of the brand. This
finding supports the notion that as the inter—connectedness of the markets of the world
increases, consumers have a greater awareness of products and services offered in other
countries. There is a negative effect, however, of brands with non-U.S. region of origin
on the awareness variable. This implies that overall, U.S. brands are the most well
known in the U.S. market. However, greater degrees of advertising by brands from the
European and Asian regions receive a higher return than brands from the U.S., indicating
a level of saturation for U.S. brands. European brands which have a broader global
reach also benefit further from their advertising efforts with respect to generating
awareness. This may be because European brands tend to be consistent in their
positioning in global markets, and thus gain greater advantage from their international

efforts.

161

Intended loyalty is influenced by advertising, which reinforces a brand’s message
to the consumer. While this is consistent with previous findings that indicate through the
reinforcement of the consumer's brand-related beliefs and attitudes, advertising
contributes to strong brand loyalty (Shimp 1997). What is interesting is that European
brands enjoy a substantial advantage with respect to intended loyalty, but it is diminished
in a practical sense by increased advertising. This is interesting and implies that loyal
European brand owners prefer a more subtle marketing strategy, perhaps due to the
nature of the positioning and target demographics of most European brands.

Perceived quality is also enhanced by advertising, as was found previously by
Aaker and Jacobson (1994). However, while this study supports this finding, it goes
further to delineate the effects of the region of origin on perceived brand quality. The
findings support that European brands have a higher perceived quality than U.S. based
brands, but what is interesting is that Asian brands do not. This result could be ”because
Asian brands have a broader range of quality perceptions. While Toyota and Honda may
enjoy a high level of perceived quality, other Asian brands may not have that same level
of perception. European brands, however, may tend to cluster more closely on this
variable. European brands benefit further through their innovativeness, but those returns
diminish through increased advertising. Further, the greater the global reach of the brand,
the lower is the perceived quality of the brand. This is contrary to expectations because
of recent findings that indicated the higher the level of a brand’s perceived globalness,
the greater its’ perceived quality (Steenkamp et al. 2003). Yet, the measure used in this
study is objective rather than subjective. Just because a brand is sold in many markets

does not mean that it’s positioning is consistent, or that it is even positioned globally.

162

Perceived economy, as with the other dimensions of brand equity, is positively
impacted overall by increased advertising, with this effect being even more pronounced
for European and Asian brands. These brands also enjoy a benefit on this dimension
from their advertising efforts and global reach in comparison to U.S. based brands.
However, innovativeness had negative direct effects on the dimensions of brand equity.
This may be because consumers believe that firms who are more innovative have higher
prices and a greater cost of overall ownership to maintain those innovations. Yet, Asian
brands are rewarded for their innovativeness; this could be because consumers perceive
their innovations to be either affordable with respect to cost, or perhaps because they
believe the innovations (like hybrid technology, which actually increases overall costs!)
to effect a lower cost of ownership.

While advertising has a positive direct effect on sporty image, it has an
insignificant but practically negative direct effect on luxury image. However, when the
interaction of region of origin and globalness is added to the equation, the effects become
significant, and increasingly negative. This implies a point of advertising saturation for
brands with a luxury image that operate more globally, and a diminishing return on these
strategic efforts for this component of brand equity. Innovative efforts have a positive
effect though for both types of image, which is an important finding; however, more so
for European brands. Asian brands have a positive return from advertising for both types
of image. It suggests Asian firms positioned in these segments should emphasize their
value creation activities, while European luxury brands should balance their advertising
efforts carefully. European brands enjoy a higher effect for luxury, while both regions

enjoy an advantage over U.S. brands for a sporty image. Asian brands are impacted

163

negatively by their globalness, so U.S. brands may want to emphasize their

innovativeness and position globally with respect to image versus Asian brands.

LIMITATIONS AND DIRECTIONS FOR FUTURE RESEARCH

This study is limited in its generalizability due to it being conducted in a single
industry related to a specific and relatively unique durable consumer product. It would
be interesting to consider different industries and product classifications to see if the
results are consistent. Also, additional specifications of the model could provide further
revelations. For example, adding interaction effects between time and the drivers of
brand equity could provide further explanation of the dynamic effects over time.
Additionally, the effects of specific types of advertising and product introductions may
add greater insights.

Further, several limitations arise from the method employed. Given that the data
is collected from secondary sources and single measures were employed for each of the
independent variables, measurement errors may be an alternative explanation for the
insignificance in some of the coefficients. Future studies should consider multiple
measures for each independent construct and use of structural equation modeling to
alleviate the potential effects of measurement errors. Also, the data availability restricted
the time range of this study to only seven years; the inclusion of a broader time span
would allow for the investigation of alternate research questions such as whether there is
change over time in the region of origin effects, and is there a cumulative or saturation
effect of advertising and new product introductions on the brand equity dimensions.

Finally, quadratic and delayed effects of value creation through innovativeness and

164

differentiation through advertising have not been a focus of this study. Future research
may address the diminishing returns, as well as the persistence of the effects of these

variables on the brand equity dimensions.

165

CHAPTER 5

CONCLUSION

166

CONCLUSION

Through the process of incorporating both broad theoretical perspectives and
focused empirical analysis, this dissertation investigates the sources and consequences of
brand equity in the automotive industry. The three essays take distinctly different means
to uncover various aspects of the brand equity phenomenon utilizing alternative
methodological approaches. The first essay begins the progression of understanding &
explaining how the new product development process responds to globalization in order
to create global brands using qualitative research methods. The second essay uses a
random effects model with auto-regressive error terms tested with time series panel data
to explain and predict the effects of the multi-dimensional values of consumer-based
brand equity on the rate value preservation, as moderated by the region of brand origin.
The theoretical foundations for this essay are based on the premises of information
asymmetry. The third and final essay identifies the longitudinal effects of marketing
related antecedents on the dimensions of brand equity using seemingly unrelated
regression estimation.

The first essay contributes by the development of knowledge with respect to the
association between globalization, marketing and other functions in the new product
development process, and the organization’s global brand portfolio architecture. The
focal company of this study is General Motors, which remains the largest automotive
manufacturer in the world. The company is challenged to unifying the styling and looks
of their individual brands while also managing a new product development process that

harnesses efficiencies from the scale of the corporation. Simultaneously, it is globalizing

167

its new product and brand architectures, converging previously disparate functional and
geographic groups in order to build a cohesive whole.

The study results provide support for the concept that the environmental global
drivers influencing the organization are perceived differently by the various groups
involved in the new product development process. A summary of the findings indicates:

' Functions are unwaveringly driven by cost reductions and efficiencies which can
be gained through global integration.

0 Flaming and VSSM groups are concerned primarily with competitor and cost
considerations,

0 AVD and VLE groups appear to find consumer preferences and regulatory issues
an impediment to globalization.

' IPC is motivated by the drivers of globalization in a much broader sense than
other organizational groups.

It is interesting to note that within the new product development process, the
group, known as the VLE’s, which integrates the functional areas to develop a vehicle,
while aware of the drivers of globalization, appear to be more sensitive to the differences
across markets, rather than the similarities. This may be because this area is responsible
for implementing the systems and processes required to satisfy consumers, requiring an
awareness of the constraints in meeting a variety of needs.

Previous research indicates the interface between marketing and research and
development (R&D) is one of most important relationships in the organization (Song and
Parry 1992). Yet, this qualitative study indicates that marketing’s role in GM is

somewhat marginalized. Other groups in the new product development process take

168

responsibility for activities which academics consider marketing activities, especially
with respect to implementing the marketing concept. In particular:

0 Marketing’s role is relative to the point of process completion, with emphasis and
control being taken by the “brands” near to the point of product launch.

' The new product development infra-structure has a strong emphasis on
engineering and design which is considered to be a function of the complexity of
the development process in the industry.

0 There is evidence from the interviews that some things may be changing in

response to reorganizations being implemented.

GM is implementing a new brand hierarchy, both domestically and globally; in
this approach, there is an increasing acceptance of the importance on marketing in new
product development which represents the evolutionary nature of the changes which are
occurring within the organization. The challenge for GM, beyond recognizing the need
to facilitate the changes in place, is reducing the time lag between environmental change
and cultural response - marketing concept is infused throughout the processes on a global
basis.

' The pre-existing infrastructure has an inhibiting effect, by limiting the marketing
function to a perception of “sales”.
' GM executives recognize the need for more influential marketing thought, but this

is most notably being implemented through the brand management groups.

169

' Under the pressures of globalization, the organization is beginning to recognize
the important role marketing plays in the development and management of global

brands.

It is noted often by people in the automotive industry that “there is no such thing
as a global car”. Yet, global brands do exist in the industry and harnessing the power and
efficiencies which can be gained from brand equity enjoyed by brands with a global
scope can be realized through the structure, processes and culture of the organization.

As elucidated in the second essay, the dimensions of brand equity, residual
values, and region of origin are important factors affecting the decision making process
of both customers and the managers who seek to serve them. The U.S. market is
considered by industry executives to be the most globally competitive market in the
world. It is with this in mind that consideration of multi-dimensional consumer-based
brand equity, sources by which it is derived and the relationship with value retention rates
is considered in the context of this market. Through the identification of the collective
contribution of the discrete components of brand equity through the evaluation of its
residual value over time in conjunction with the origin effects, the findings of this study
contribute to the literature in a variety of ways.

The impact of the brand equity factors on the value retention rates of new vehicles
sold in the U.S. market is significant because it considers consumers’ retained brand
knowledge, and the utilization of this knowledge as measured by value retention rates, in
an attempt to mitigate the effects of information asymmetries in the purchasing process.

Therefore, brand equity provides explanation of expected performance of the brand’s

170

products after the transfer of ownership. As such, this essay contributes to the emerging
literature stream integrating the theoretical frameworks of cognitive psychology and
information economies. In addition to being a factor considered by consumers when
purchasing a new car, residual values also have a direct impact on the leasing options
available for the firm to offer. The lower the rate of capital decline, the lower the
monthly payments available to the customer.

Essay 2 also contributes to knowledge by exploring the boundary condition
established by the region of origin of the brand with respect to the equity dimensions.
Asian brands enjoy a greater positive return from awareness than U.S. brands. The
moderation effect is not significant for the European brands, implying that those brands
have a similar return on awareness as the American brands. This suggests that spending
greater amounts of resources on increasing awareness will actually be less beneficial for
American and European brands as compared to Asian brands, with respect to value
preservation. The Asian brands also benefit from a greater effect of intended loyalty on
value retention when compared to the American or European brands. The implication is
there is limited benefit for European or U.S. brands employing loyalty programs in
comparison with their Asian counterparts. However, this could also be because the
European and American brands already enjoy a high level of brand loyalty, with
emphasis on maintenance of current levels being an important concern.

0 Awareness has a generally positive impact on long term value preservation.
- Region of origin significantly moderates its effect on value preservation.
' Intended loyalty has a positive impact on the depreciation rate of automobiles.

— Asian brands have a greater effect.

171

° Perceived quality has a higher positive effect on value preservation for European
and Asian brands.

' European automobiles have a significant positive return on perceived economy in
terms of value retention when compared to American and Asian brands.

° The conceptual dimensions proposed in the literature have been validated through

the development of distinct factors.

Overall, the findings support the concept that brand equity can provide explanation of
expected performance of a brand’s products after the transfer of ownership, essentially
mitigates the effects of information asymmetries.

The research study conducted in Essay 3 addresses the nature of the effects of
marketing related value creation activities and firm specific attributes on intermediate
outcomes, as measured by the impact on the consumer based dimensions of brand equity.
The value creation activities considered are new product introductions and advertising.
Understanding the relative importance and degree of contribution of each of these
activities provides insights for managers when allocating resources and organizational
emphasis. While recent literature indicates perceived brand globalness is an important
indicator of quality and purchase intentions of consumers (Steenkamp et al. 2003), the
question of a brand’s actual global reach has not been considered previously. This has
potentially important implications for managers as they consider whether they nwd to
achieve greater reach in order to achieve a higher degree of perceived globalness. The

findings of this study do not suggest

172

Since brand equity is posited to contribute to a sustainable competitive advantage,
delineation of the strategic efforts and contextual factors which impact the underlying
dimensions of brand equity has inherent appeal for both academics and brand managers.
These effects are evaluates further by considering observable contextual factors as
boundary conditions. Several potentially important implications emerged:

' There is a positive return in terms of brand equity from both the innovativeness

and differentiation orientations.

I The most consistent effects on brand equity are from differentiation through
advertising.

I As suggested by the existing literature (Miller and Friesen 1984; Mizik and
Jacobson 2003), there is a negative return for focusing on both value creation and
differentiation through advertising at the same time. In this case, the new insight
drawn is the potential mediating effect of brand equity between the deployment
of resources and firm level financial returns.

' Country of origin is a significant driver of brand equity and also a significant
moderator of the intermediate marketing return on strategic orientation.

- Globalness emerged not as a driver, but a significant moderator of the returns on

the strategic orientations and country of origin.

While there are significant effects of both direct and interaction terms, the most
consistent results are found from the effects of differentiation through advertising. This
implies there is a diminishing return to focusing too heavily on either value creation or

differentiation capabilities concurrently, and only one course should be emphasized at a

173

time. However, the results do not negate the importance of innovativeness, but suggests
advertising provides a moderating effect. There is strong support for the moderating
effects of region of origin and global brand reach proposed in the conceptual framework,
supporting the hierarchical nature of the hypotheses and providing significant boundary
conditions for the strategic orientation framework presented.

In summary, this dissertation provides interesting findings related to the drivers
and outcomes of consumer-based brand equity from a broad organizational level, as well
as from the more granular construct level. Organizations struggle with deriving value
and creating meaning for their brands through complex processes which result from
environmental pressures. Consumer-based brand equity provides means for measuring
the effects of marketing related efforts on one hand, and provides explanation of the
expected future performance of a brand’s products on the other. The findings from each
essay have limitations, but never-the-less, contribute independently and holistically to the

body of knowledge related to brand equity.

174

APPENDICES

175

APPENDIX 1:
CULTURAL MATERIALISM

The cultural materialism framework posits three parallel layers where an
infrastructure composed of technology, economy and population factors forms as a direct
response to the environment; a structure supported by the infrastructure consists of the
organized patterns of social order; and finally a mental superstructure which captures the
ideological and behavioral actions of members (Harris 2001).

This framework has been invoked primarily for application to broad societal
issues (Leavitt 1986). Yet, its extension to organizational level phenomenon has inherent
attraction in an increasingly global environment where businesses, both large and small
must respond to change. When considering societal level phenomena, the traditional
tenets of cultural materialism are based on an open-natural system model (Scott 2003, p.
115), where emphasis is placed on the influences of the environment and evolutionary
adaptation does not necessarily result in an increase in productivity or environmental
advantage (Scott 2003, p.115; Weick 1979). Yet, when applied to a firm level inquiry
based on a formalized organization with specific goals, cultural materialism takes a much
different perspective. In this case, it is more reflective of an open-rational system
approach (Scott 2003, p. 111).

Additionally, Harris’ framework requires the integration of more detailed theories
because alone it does not provide explanation (Jackson 1996); there are synergies with
well established organizational and marketing theories which make this framework
inherently attractive for firm level research (see Figure 5). This materialist orientation

framework is thus extended to the organization level as a means to explain:

176

Infrastructure: The modes of production and re-production and their interaction
with the environment. This is investigated with respect to the increasing
globalization of the environment elucidated by the global drivers of the industry
and related firm level infrastructure dynamics.

Structure: The societal interactions as regulated by the political economy and
the domestic economy, at least partially based on responses to the infra-structure.
In an organizational sense, this is delineated through the formal and informal
structures of the new product development process with respect to the interaction
between marketing and the other functional groups within the firm.

Super-structure: The institutional values and beliefs, in conjunction with
observable practices. The culture of the firm as denoted by the strategic
orientation and global mindset.

Figure 4.5 : An Organizational View of Cultural Materialism

 

 

 

Graphical depiction of concepts presented by Harris (2001).

 

177

 

While it has traditionally been considered that humanistic and positivist
approaches are mutually exclusive (Hirschman 1986), the cultural materialist approach
takes a post-positivist view and argues for a melding of these methods. Qualitative
approaches typically commence with an open or eclectic approach to conducting research
of a phenomenon and building grounded theory (Hirschman 1986; Strauss and Corbin
1998). Cultural materialism proposes a research strategy that encompasses the
specification of a hypothesized set' of relationships and an investigation targeted at
conceptual discovery related to these propositions (Harris 2001). While positivist in
3 nature, it provides opportunity for theoretical exploration through qualitative data
collection. The development of propositions related to the infrastructure, structure and
super-structure, along with the theoretical underpinnings for each of these structures and
relationships thus follows the materialist framework.

The infra-structure posited by Cultural Materialism encompasses the technology,
economy and population factors of a society (Harris 2001). It is the organization and
deployment of these factors in the pursuit of productive performance which responds to
the external environment. Cultural materialism is concerned with the inter-relationships
between the environment and the infrastructure which ensues to cope with natural
change. The criteria postulated for etic measures of success are related to the amount of
energy expended per unit of time times the technological means of expenditure is equal to
the magnitude of the product per unit of time (White 1943). This tenet is not inconsistent
with the theory of industrial organization economics, which provides that a firm’s
environment influences its strategy and structure, which directly impacts firm

performance (Porter 1980). Conceptually, the parallel which can be drawn is that the

178

energy expended and means through which a strategy is implemented through the
materialist structural foundation results in the relative magnitude of performance
achieved. Essentially, those firms which make strategic decisions in response to
environmental influences, and adeptly manage the implementation of these decisions will
be able to achieve an advantage in the marketplace.

The cultural materialist approach includes a level of structure related to the social
interaction within the society and includes a political economy, which can be related to
the formal group structures; and a domestic economy, which can be related to the
informal group structures. One foundation upon which to study these relationships is the
framework provided by cultural ecology (Baba 1995; Burgelman 1991). This theory is
derived from that of organizational ecology theory (Harman and Freeman 1977), which is
concerned with competition for resources and how constraints in the environment affect
relative sizes of different populations, but adapted to the intra-organizational setting. A
population is defined by a collection of entities with a similar degree of environmental
dependence, common reliance on certain resources, and limits to the range of activities
and structures. The organization itself can be conceptualized as a niche, or collection of
resources that sustains a population. One focus of ecological theory is in the processes
that lead to equilibria in the environment. It is believed that as product populations
compete for resources, they will begin to specialize or differentiate. When two
populations try to inhabit the same niche, they cannot coexist in equilibrium; one will
always try to outmaneuver and thwart the other in order to utilize the available niche

resources, with the goal of competitive exclusion (Geroski 2001).

179

From an intra-organizational perspective, this can be conceived as one group exerting
a greater level of influence and control to the disadvantage of another functional area. It
has been posited that the marketing concept should be infused throughout functional
areas of the organization based on the strategic objectives of the firm; this is not to say
that marketing should not reside simultaneously as a distinct functional group (Ruekert &
Walker, 1987). Yet, this leads to a need for a deeper understanding of marketing’s role
if it is not considered exclusively as a distinct functional area, and has limited influence
in the development process. This implies the interaction of the functional subgroups of
the firm will have an effect on the cultural orientation of the organization.

Cultural materialism divides the concept of superstructure into two components:
the behavioral and the mental (Harris 2001). The behavioral superstructure is composed
of symbolic processes which assume the repetition of productive activities that leads to
etic products and services. The mental superstructure is concerned with “the conscious
and unconscious cognitive goals, categories, rules, plans, values, philosophies, and
beliefs about behavior elicited from the participants or inferred by the observer” (Harris
2001, p. 54). Aggregated to the super-structure level, the combination of these
components encompass many of the concepts of organizational culture elucidated in the
marketing literature. This view is analogous to the conceptualizations of market

orientation which have been widely embraced by the marketing literature.

Fundamentally, the construct of market orientation is an operationalization of the
marketing concept (Kohli and Jaworski 1990a; Narver and Slater 1990b), which is the
underlying business philosophy of understanding and satisfying customer needs and

wants (Kotler 1997). Consistent with the idea that market orientation is an internal firm

180

resource, is Narver and Slater’s (1990) conceptualization and construct development
based on a culture driven perspective. The underlying constructs which they measure and
employ to form the higher order variable are customer orientation, competitor orientation
and inter-functional coordination. The behavioral perspective of market orientation
incorporates activities of members of the organization and includes information
generation, dissemination, and firm responsiveness concept (Kohli and Jaworski 1990a).
The contention from the cultural driven perspective is that if a market orientation was
simply a function of behaviors, then these practices could be implemented in any
organization regardless of the culture (Homburg and Pflesser 2000; Narver and Slater
1998). However, in order to measure culture, behavioral measures have been used as
indicators of the manifestation of the cultural orientation (Homburg and Pflesser 2000).
Thus, the cultural materialist’s super-structural definition of culture is consistent with the
accepted definition of market orientation in the marketing literature, as it represents an

integration of the alternative perspectives.

The ability of the firm to develop and incorporate knowledge is an essential part
of the a firm’s implementation, management and maintenance of a market orientation
(Sinkula 1994a). Cultural materialism holds that each stratum of the organization will
change as a reaction to progression of other levels; the implications of a globalizing
infrastructure and structure are that the firm would develop a global market orientation in
response. Conceptually, this can be explained through the tenets of organizational
learning, or the development of insights, knowledge and associations between past
actions, the effectiveness of those actions and future actions (F101 and Lyles 1985). From

this perspective, experience is a pattern of recognition; a repetition of activity that has

181

been undertaken previously, while future actions become a function of the accumulated
memory of the firm (Sinkula 1994b; Slater and Narver 1995). Organizational memory is
the collective beliefs, behavioral routines, or physical artifacts that vary in their content,
level of dispersion and accessibility (Moorrnan and Miner 1997). Organizational
routines, procedures, and structures are vital components for controlling the behavior of
the organization and are accumulated over time, establishing conditions for subsequent
firm actions and activities (Cyert and March 1963; March and Simon 1958).
Consequently, organizational learning is a function of age and experience (Sinkula
1994b). How a firm applies experiential knowledge to its activities is a major source of
capability.

An influential framework of organizational culture drawn from an emic
psychology foundation is based on the work of Schein (1984; Schein 1992), who
suggests culture is a function of the assumptions, values, and artifacts of a group. This
foundation was extended by Hatch (1993) to integrate the symbolic-interpretive view
which places greater focus on the symbolism of organizations and various means of
interpretation of these symbols. The dynamic nature of Hatch’s model posits a recursive
causal relationship between the assumptions, values, artifacts and symbols. The
suggestion is that artifacts are the most tangible aspect of the organizational culture,
derived from the process of realization of organizational values (Hatch 1993). Thus, an
integration of two seemingly different schools of thought, cultural materialism with an
evolutionary view, and the cultural dynamics model with a psychological perspective,
provides a means to garner a more meaningful and in-depth understanding of the

workings within the super-structure.

182

APPENDIX 2:
A BRIEF HISTORY OF GENERAL MOTORS

In order to understand the evolutionary nature of the culture within a multi-
national corporation such as GM, it is first necessary to consider the history of the
organization and the orientation of its culture, and how the products and brands have
related over time. Organizational history is important consideration in a materialist
framework because structures tend to persist over time, even as their utility diminishes in
value (Stinchcombe 1965). Briody and Baba (1994) suggest philosophies and behaviors
of an organizational also persist in a corresponding fashion.

GM was initially incorporated in 1908 as a holding company for the various
automotive operations acquired by William (Billy) Crapo Durant. Each of the car
producing groups were operated as individual strategic business units (Binder and Ferris
2000). While somewhat of a visionary, Billy Durant was not able to manage finances
well, and he eventually was forced out of the company. His de-centralized approach,
however, was continued and expanded during the era of Alfred Sloan, Jr., who is widely
credited with creating the management structure which was in place for more than half a
century. Under the configuration established, each of the car divisions operated
autonomously and had control of all aspects of the business, with only high level
financial control held at the corporate level. The general structure of the overall
portfolio was aimed at covering the full spectrum of car buyers, as illustrated by Sloan’s
now famous phrase, “A car for every purse and purpose” (Weiss 2003). Yet, over time,
each of the car divisions became very powerful in their own right; competition between

the individual divisions became intense as the corporation as a whole developed near

183

monopolistic powers with a dominant market share in the U.S. market, and gained the
position of the largest automotive manufacturer in the world.

Corporate level design and development of new products was undertaken initially
under the direction of Harley Earl. The design studio was centralized in a geographic
location, along with higher level reporting, but each division’s design group worked
independently -— although housed in the same area, they were not supposed to look a the
other divisions work. Interestingly, design in the early 1940’s was based on a family of
basic bodies but styled so each brand reflected the distinctive grilles and front ensembles
that would allow each product group to be instantly recognizable as unique (Binder and
Ferris 2000). This structure has alot of similarity with that which has emerged in recent
years.

The companies which eventually came to form GM began international operations
in the late 1800’s. The first automobile exports began in 1893 by Oldsmobile with
shipments to Bombay, India through sales to a company based in England. As a
corporation, GM has had international operations since 1911 when the General Motors
Export Company was formed to sell CKD kits for assembly in overseas markets. A key .
decision was to maintain the overseas Operations as a separate division based in New
York rather than in Detroit with the domestic operations. Over the next 80 years or so,
GM largely followed the expected internationalization process (J chanson and Vahlne
1977), leading to ventures of various natures from export to manufacturing, sales and
service, in all parts of the world. The individual country markets were operated as
autonomous organizations reporting through the international division, which was

eventually called International Automotive Operations (GMIO). During the same time

184

frame that the domestic divisions were being more integrated, international operations
were organized into four regional groups: North America, Europe, Asia-Pacific
Operations, and Latin America, Middle East & Africa (Binder and Ferris 2000). As
explained by one executive, each of the regional operations operated independently,
reporting through the Automotive Strategy Board (see figure X). The integrating
organization is called the International Product Center (IPC), with each region having an
IPC. The organizational structure allowed the company to develop a global footprint, but
international operations were always decoupled from the domestic and considered to be
distinct from the North American operations, (Briody and Baba 1991; Briody and Baba
1994), and distinct from each other. This has added inherent complexity to responding

to changes engendered by a globally competitive marketplace.

185

Figure 4.6: Automotive Strategy Board

 

The company currently sells products in more than 190 countries and has
manufacturing operations in more than 32 countries. While tremendous gains have been
made in plant productivity and vehicle quality, GM is struggling with sales and market
share, particularly in Europe and its home U.S. market. However, it still maintains the #1
position in global sales and revenue, selling approximately 8.5 million vehicles annually
or nearly 15% of the total global market. Currently the company has approximately
325,000 employees around the world, and some estimates figure as many as 900,000 jobs
in the U.S. alone are directly or indirectly dependent on the company (Welch and Beucke

2005).

186

'15—“

a

APPENDIX 3: INTERVIEW OUTLINE

The Organizational Dynamics of Branding
in a Globally Competitive Market:

The Nexus of Marketing and Design in the New Product Development

Process

 

Research ijectives:

Identify and define the interaction between marketing and other functional areas involved in
the new product development process, particularly the design/ styling group. Gain an
understanding of the nature of the interface between General Motors and the environment.
Relate these findings to the means by which brand objectives are achieved.

Importance to GM:

Key Respondggtsz

landmine:

This research will address how marketing acts as an interface between
the environment and other groups involved in the new product
development process, particularly design/ styling in such a way as to
support brand objectives; the goal is to provide diagnostics for
improved performance.

Semi-structured interviews; Observation of group meetings; Analysis
of archival data such as organization charts, product development
procedures and protocols, and product/ brand performance data.

Define the structures and nature of the relationship between the
marketing/ brand management and the design/ styling groups.
Understand the nature of the interface between General Motors and the
external environment.

Characterize how these relationships maintain focus on dynamic brand
objectives.

Determine how a rapidly globalizing environment impacts these internal
and external interactions.

Establish how different levels of leadership have affected the
relationship between marketing and other functional areas involved in
the new product development process.

Executive leadership, Marketing/ Brand Management, Design/ Styling
Management, Functional Members in the New Product Design 8:

Development Process, Corporate Communications

May — August 2004

187

Contact: Janell Townsend, Ph.D. Candidate
The Eli Broad Graduate School of Management
N370 Business College Complex
Michigan State University
East Lansing, MI 48824
(517) 353-6381

email: townsend bus.msu.edu

 

 

 

 

Conducted by: Sponsored by:

The Eli Broad 93 Michigan State University
Graduate School of Center for International
Management Business Education
Michigan State University and Research (CIBER)

General Interview Questions;
The Individual:

' Please tell me about your position at GM and its responsibilities?
The Process 8: the Group:

' Could you briefly describe the product development process and its key functional
players?

What is your role in this process?

What roles are played by the marketing personnel?

What roles are played by the design staff?

How have these roles changed over time?

Interactions:

' How does the design/styling group and marketing group interact?
What is the nature of a typical interaction?
' How often do personnel from these groups meet in formal groups?
' Do individuals from marketing and design interact on a one to one basis
as well?
' How does this change during the course of a new product development

program?
' What considerations regarding competitor’s actions are made prior to starting a new

product development?
' How is information regarding competitors actions collected?

188

' How is this information used during the new product development
process?

' To what extent are competitor moves integrated into the planning of and
strategy for new products?

What considerations of customer input are made prior to starting a new product
development?
' How is information regarding customer requirements and expectations
collected? ‘
" How is this information used?
' Can you give me some examples?

Brand Management Considerations:

What considerations regarding the brand positioning are made prior to starting a new
product development?
' What happens if there are changes to brand positioning strategies during
the new product development process?
' What specific considerations of branding are made during the new
product development process?
Recent media reports indicate GM is moving from individual branding to a greater
degree of family branding under the GM name, what is the expected return from this
move?
Rick Wagoner, Jim Queen and others have recently been quoted in Automotive News
and other trade journals related to the need to safeguard brand identity and
differentiation — how does this play into the new product development process?
What does the company consider to be the most important components (or attributes)
of brand equity (value)?
' What specific activities take place to enhance these attributes that lead to
brand value?

What means are used to convey the functional, experiential or symbolic benefits which
can be accrued to customers by purchasing their brand?
Are there specific efforts to position specific brands as either local products, foreign
products or global products?

" Has this changed over time and with corporate moves toward

globalization?

What aspects of the shared values, beliefs and organizational norms facilitate the new
product development process in such a way as to effectively support the brand?
Which people currently in the organization have had the greatest impact on shaping the
brand?

' Who in the past has had the greatest impact on shaping the brand?

Globalization:

189

' Considering GM’s move to globalize the corporation, how has this impacted the new
product development process?
' The marketing functions?
' The design functions?
' Has an increasingly globalization impacted the interaction between marketing other
groups in the new product development process?
' Can you give me some examples?

Leadership:

' What is leadership’s role in the new product development process?
' Does this change at various junctures of the process?
' How does leadership affect the relationship between:
0 Marketing and brand management function’s interaction with the design/ styling
group?
0 How the competitive environment impacts brand management decision making?
0 Customer input and decision making at points throughout the new product
development process?
' How does the leadership affect the culture of the organization?
' What means are used by the executive leadership to communicate core values to the
organization?
0 Are informal as well as formal means utilized?
" How does individual leadership or management affect the culture of the functional
groups within the company?

General Organizational Culture (If time permits):

' What do you consider to be the core values of the company?

' Is there a key story about the organization, or your functional area which you believe
illustrates the nature of the organization best?

' Are there any key rituals, rites of passage, or myths within the corporate experience you
believe are particularly relevant?

' How have these cultural aspects of the company changed over time?

190

APPENDIX 4:

SELECTED QUOTATIONS - ESSAY 1, GLOBAL DRIVERS

 

Quote
No

Quote

Source

 

“Well, the customer-from a customer perspective, basic
sides of the vehicle are pretty common. If you’ve got a
small car you’ve got a small car. Even if in Europe, you
like smaller cars than our small car, it’s a different car.
They still have that size small car. . . The customer
expectations of how they use those cars have vast
differences. They have common things too, but they have
vast differences. So, even if I do get all this common
stuff the question is do the benefits of common outweigh
the differentiation you have to have for customer
differences?

In Europe, they don’t have the fast food world. They
don’t care if they ever had a cup holder in their car. In the
U.S., you wouldn’t buy my car if I didn’t have cup
holders, because where would we put our coffee?

So, you’d think that’s not a big deal. That’s a real little
one, okay, but when you start packaging an interior in a
car and now this very prime real estate where I would
have storage or a console and now I’m saying I’ve got to
have cup holders, and by the way I can’t just have one,
I’ve got to have two and if I’ve got a back seat you better
have two more back there. Things as little as a cup
holder, the customers expectations are very, very different
because of how you use the car.”

Janet Jones

 

“And I think that the world is such that people don’t have
to leave their little town to recognize the globalness of
brands, because the intemet, obviously; because of sports
or whatever, but, I mean, television-things that transcend
the country. It wouldn’t surprise me, I haven’t seen the
measurements but it wouldn’t surprise me, and I think that
in our business, we’re the bigger, durable good where a
lot of our consumers are globalized more, the more we
can do to show consistency around the globe with a right
kind of brand positioning the better off we’re gonna be.”

Joe Creek

 

 

 

“The bigger difference I see is more the regulatory
differences. If you have a right hand drive car and I have
a left hand car drive, that’s pretty big. If you’re worried
about-if you’re in Japan or you’re in Europe and you’re
worried about pedestrian protection and you’re going to

 

Roscoe Fielder

 

191

 

 

mandate laws that say if you run into a person on the
street and you can‘t hurt them anymore. Therefore, I have
to redesign the whole front end of the car so that air bags
blow out of the bumpers or hoods do these things. That’s
a big deal in Japan and Europe, and by the way Japan and
Europe aren’t migrating to common regulatory
requirements on how they do that, but it affects the
fundamental appearance of the car and styling, because
maybe I need four inches of dead space under a hood,
which means all my hoods are going to get taller so that I
don’t hit their knees. Now, the front ends have to be flat
instead of styled and sculpted. Those are pretty
fundamental differences.

So, I see those getting more and more diverse. Even the
air bag safety, all that kind of stuff, the requirement on
how you meet those needs in the U.S. are different than in
Europe, they’re different in Japan, and some of the third
world countries aren’t even to the point that they care
about some of that stuff yet.”

 

“I think cost is a huge driver, but also, a little bit deeper
than that is you say leveraging GM’s capability and foot.
80, if on a particular architecture, let's say, that you could
get 10 products off around the world, if that expertise is
an Opel in Germany and they're the best engineers to do
that, let's let them do that. Now, that comes back to a
basket weave though. The basket weave is that the
Germans may not know the North American market, but
they know the basic infrastructure and how to engineer
that vehicle so that when we eval that product here in
North America and we put what we think are the winning
regional elements in that vehicle, that not only is it going
to sell here great, but we don’t need to reengineer all the
infrastructure and all the costs that goes into all of that.”

Giovanni Seagate

 

 

 

“And so when I say I competitive pressures that’s one of
the key ingredients right there. That’s really forcing the
organization to look at how we do business and how can
we improve, etc., etc. Obviously, the other things all play
into it too. But let’s face it, it’s the competitive pressures
that really make the organization, you know, achieve, you
know, what it is that they want to try and accomplish.”

 

Chan Vanderman

 

192

 

APPENDIX 5:

SELECTED QUOTATIONS — ESSAY 1, GLOBAL BRAND PORTFOLIO

 

Quote
No

Quote

Source

 

1

“And the brand pyramid, you know, over time the joke is
the font got smaller and smaller, you know. More and
more and more text is jammed into the brand pyramid
over time because you want to, you know, if there’s
something that you’re perceived as not being, having an
equity in, you’ll want to build that into your brand
pyramid. But before you know it you’ve build every
single thing into your brand pyramid and then when you
take that from marketing to design, engineering or
whatever, they’ll say, you know, how is this one different
from the next pyramid. Out come the impassioned pleas
but you know, the fact is that you’ve got almost
everything baked into everyone’s brand position. 80
that’s problematic.”

Ricky Wright

 

“And we tried saying, well, what if take essentially the
same players and we take, and we roll that process up
front. And it really, it fell apart. What if we do the
positioning like we’ve always done it but we do it earlier
on in the vehicle development process. A great idea, it
falls apart because you cannot get it done for people
reasons. It’s like, all right, we’re going to get a cross-
functional team together and we’re going to hammer out
some positioning alternatives and we’re going to, you
know, go out and do some research and you guys can
come and sit in the meeting as well - for a vehicle that’s
going to launch six years from now, or four years from
now. No way. There are far more pressing issues on
everyone’s plate. Well, but it’s important to get the
positioning done up front and everyone can agree on that
in principle. But by the time you get the four or the six
years down the road, all the people have changed jobs.
And this is the pesitioning work we did four years ago.
Oh, well guess what? It’s not really that good anymore
because there have been a bunch of new competitive
entries since then. The market shifted. This has
happened. That’s happened. And you know, so that’s,
you know, it’s just impractical.”

Ricky Wright

 

 

 

“And I, you know, I think you look at China for example,
you realize we're all in there battling with our global
brand. You know -if we're going to compete in the global
market, shouldn't we, in this region of China, shouldn't we

 

Dominic
Kawamoto

 

193

 

 

have our brand? I think that if we are to be the (leader) in
China, we have to go with our global brand and that
association of that global brand needs to be so strong that
it never provides an opportunity for those local brands
ever to succeed.”

 

“And I must admit, about two years ago, we tried to look
for a definition of what is a global brand and couldn't find
a definition. We (now) have a definition of what is a
global brand. And (we) defined that a global brand had
to meet a certain criteria. It was almost like Marketing
101 quite honestly. But I can't remember all the points on
the axis now. But one was the depth of the product range,
availability in all regions of the world, for example. And
there about five or seven different givgpoints.”

Dominic
Kawamoto

 

“I think with Middlebrook in place, if he can learn to
better globally manage Chevy, Hummer, Saab, Cadillac,
Opel there are five global brands -- that should help.”

Adam Bernard

 

“Our Global Brands are Chevrolet, Saab, Hummer and
Cadillac. They are or will be sold in all four of our Global
Regions and have a common positioning and identity
globally. We do have Multi-Regional Brands that are sold
in more than one region but are not intended to be Global.
They are Buick (NA and China), GMC (NA , Europe and
Middle East ) and Opel (in three Regions but not planned
as a Global Brand). The balance of our brands are limited
to a Region or Country.”

Joe Creek

 

“And the consequence, we had to recognize that although
many people spoke about Chevrolet as being a global
brand, it was in fact a mutli-regional brand and not a
global brand.”

Dominic
Kawamoto

 

“So about 200,000 units in Europe being switched over to
Chevrolet. And it — what we've been worried about in the
past is that every time Daewoo closed an electronic
factory in France or whatever, Daewoo closing down
plant in France and we got all the bad publicity, even
though our product in fact - because it's coming from the
federal mandation. So moving it to Chevrolet is seen as a
positive move. Some risk, some unknowns, but rather
than drag it out and doing that. So that's happening on
January 1‘”, we've made the announcements.”

Dominic
Kawamoto

 

 

 

“Every vehicle will be identified, front and rear, with a
gold bowtie. Wherever you go around the world today,
you'll find silver ones, red ones - - blue ones, and gold
ones. First of all, looking at the product identification,
and starting queues; but let's say mostly at the badge, what
is Chevrolet? If what theflooked at is the positioning,

 

Joe Creek

 

194

 

 

that's some too. Third was actually looked at our identity.
In other words, when you look at a - the place where the
vehicle is purchased — the plate, how was it identified?
And it might sound very easy. But to make it very easily
communicatively possible, we actually just wracked every
country in a red/green/yellow state. In other words, we
have a standard. This is the standard for identification.
Where are we? And —If you look at the sales outlet, there
you see this gold bowtie. Does it actually meet what is
the standard that's laid down? Recognizing that they get
four autonomous regions of General Motors; they'll carry
those four regions, and that's the way that the business is
being driven. We define what the brand looks like and
then here’s a product, the style of the product, the engine,
the whole thing — it's centrally managed.”

 

10

“The Saab products are conceived as being — with a
couple of exceptions, were conceived as being global
from day one.”

Dominic »
Kawamoto

 

11

“If you’re gonna play as a real global player—now you
could be a niche global player, niche luxury guy and play
in the whole market if you wanted—but yeah, we want to
be global.”

Roscoe Fielder

 

12

“We’ve been kind of going down this road that says,
‘Alright, you’ve got to have the same architecture, the
same materials, the same, the same, the same.’ But I
think maybe it needs to be a little bit more carefully
thought through then that although it’s really hard to do
that.

Prakesh Smith

 

13

“Its easy—it’s relatively easier to say it has to be exactly
the same. Then you’ve got your formula. Follow the
cookbook and you’re done. It requires a higher degree of
judgment if you’re going to go beyond that and say, “OK.
How do we create an architecture, for instance, that’s
Cadillac like and you can see maybe it’s part of the family
but is more appropriate for, you know, 3 Shanghai or
wherever then, you know, or a Frankfurt or wherever then
simply the cookie-cutter approach.”

Prakesh Smith

 

 

14

 

“On that whole issue of standardization versus adaptation-
I would, in fact, argue-at least as a hypothesis-that they
would be different. That the adaptation might allow you
to do better brand building but that the standardization
might be-at least in the short term—more financially
(viable).”

 

Prakesh Smith

 

195

 

APPENDIX 6:

SELECTED QUOTATIONS - ESSAY l, NPD PROCESS

 

Quote
No

Quote

Source

 

“Research, in our planning aspects, within our planning
functions, comes in and they’re looking at the whole
portfolio and they’re developing these needs segments
across the whole portfolio and they’re looking at where
the volumes are, what the opportunities are, what the
demographics are, how it’s shifted, who’s bringing in
what entry. So, they’re kind of framing it all for all of
us. . .. So, they assimilate all the data. This would be the
needs segmentation. I told you we had a bunch of
numbers. These are the ones price is right, affordable
safety sedan, sporty and affordable, practical with a touch
of luxury. These would all be low car, different
definitions of who that customer is, what they want, but I
want to appeal to all those. And then they would tell me
what’s the volume opportunity, what’s the demographics,
who else has cars in there.”

Janet Jones

 

“The planning part of it is really, you know, the folks who
are, you know, running the process, who are bringing in,
you know, or making sure everybody is delivering on
their requirements when they’re supposed to, etc. They’re
not tracking it. They’re running it. They’re running the
process, you know—“

Chan Vanderman

 

 

 

“In reality, they’re there from day one, because our teams
are cross-functional teams that work together from the
conception of a program till following up with the
customer after we’re in production. Where I get the data
that we all use may come from different places and there
may be people at different points in time of a program that
their focus is provide this to the team. But, the whole
team’s integrating the data.

80, Marketing starts at the very, very beginning and says
‘we have a market segment spec that says this is what I
think I need.’ Now, the research and some of the details
that are behind that may be coming from the Planning
guys. But, they’re involved right from day one. ‘How
many options do I need? What features do I need? Who
is it really going to go up against? What else do I have in
that show room?’ If I’m designing a new Chevy Cobalt
and I’ve got an Aveo and a Malibu on either side of it,
I’ve got to make sure, independent of what the market

 

Janet Jones

 

196

 

 

says, I’ve got Aveos and Impalas and Malibus and
everything else in that show room, so it’s got to make
sense within the Chevy show room, too. 80, Marketing
would make sure that I knew that as we’re planning what
we’re gonna do.”

 

“We typically have interactions with marketing, but it is
not like it used to be where we would see—the marketing
people would come into the studios and critique design
directions... marketing has some influence, but they don’t
steer anymore. But, still, you know, they still have some
influence where they would like to see the brand go.

They talk about an image of the buyer, it’s their
responsibility to try to establish who the buyer is.”

Kevin Nailer

 

“Well, I need to say marketing plays a very, very
important role, I think, in understanding the customer
while you’re developing the product. But the way it was
before, they were coming in. They were actually
participating in making the aesthetic calls.”

Rich C udgels

 

“They certainly don’t have the level of influence that they
had before where, you know-before they were dictating to
design, no we want to get a new this with the interior of
the vehicle and blah, blah, blah.”

Chan Vanderman

 

“We don’t expect the customer to establish the identity of
the product. We’ll get reaction to that, but we don’t see
the customer setting the design direction.”

Kevin Nailer

 

“Clinics, going to clinics can be some of the most painful
experiences a designer can go through. You have to —
you’re sitting there in a room and there’s a TV screen and
there’s people just in the room next door. And they’re
just slamming something that you just spent months and
months slaving over and in your own mind is like, man,
this is the best it can be. This is awesome. And then you
hear these comments and you’re just like - and oftentimes
that’s the difference between a designer designing for
themselves rather than understanding what the customers
are looking for.

And that’s a designer’s job, is to understand the customer
well enough that they can help develop a product that that
customer is going to want. But at the same time throw
new, exciting ideas into it that that customer never even
knew they wanted.”

Rich Cudgels

 

 

 

“And as the brands have evolved and essentially become
marketing organizations within a large - the
manufacturing and design and all are now done - they’ve
retained marketing and they’ve retained a small PR

 

Brooklyn Mays

 

197

 

 

function as part of marketing primarily to help with
market launches of vehicles.”

 

10

“They do all the advertising; they do all the sales
initiatives. So, when you think of Marketing, they’re the
ones developing promotions and ads and they’re the ones
moving it from a customer standpoint. Now, they have to
be thinking about what else do I need and they’re working
with the dealers, but they’re working on the brands and
like advertising.”

Brooklyn Mays

 

11

“I don't call them marketing by the way, they're all sales
jobs.”

Kevin Nailer

 

12

“It’s really easy for Proctor & Gamble to be a marketing
driven company because it’s so easy to manufacture most
of their products and there’s so little capital investment in
doing it. So, these people would come from Proctor &
Gamble and, you know, we’re just marketing the ruling
the roost and couldn’t understand why all of these other
people had so much say at GM.”

Brooklyn Mays .

 

13

“And so I think it’s just one of those culture things that
inevitably when push comes to shove, and because it’s so
hard to change the manufacturing footprint or so hard to
change the product portfolio, there really is a tendency
when push comes to shove, marketing probably gets
shoved harder than some of the other people

would. . ...because marketing, I think, in a company like
GM is seen as being kind of a little amogihous.”

Brooklyn Mays

 

14

“And when you have that product, when you have that
vision that gets everyone excited so they can rally around
it, then marketing really is able to create a clear focus.”

Rich Cudgels

 

 

15

 

“And there is good tension and bad tension. Good tension
is that the functions and the regions are driving each other
to produce better products for that global market. Bad
tension is there's internal competition, there's politics,
there's those kinds of things.”

 

Giovanni Seagate

 

198

 

APPENDIX 7:
SELECTED QUOTATIONS — ESSAY 1, DISCUSSION SECTION

 

 

Quote Quote Source
No
1 “There is a VSE and those are kind of like the lieutenants Nate Mountaban

of the army and then those lieutenants kind of report to
the. . .I don’t know the general. The general is a person
that works for me for that program, they are called a
program engineering manager and they manage that
individual, those five programs I reeled out. There is a
person called a program manager that manages the
engineering for that program. And then those program
managers report to me and so for those car lines, that is
how we kind of run the business.”

 

 

2 “It’s just the company culture. If you look at the people Brooklyn Mays
running the company, almost all of them come out of
either finance, manufacturing or engineering.”

 

 

 

199

 

REFERENCES
Aaker, David A. (1991), Managing Brand Equity. New York, N.Y.: The Free Press.

---- (1992a), "Managing the Most Important Asset: Brand Equity," Planning Review
Special Issue, 20(5), 56-58.

---- (1996), "Mearsuring Brand Equity Across Products and Markets," California
Management Review, 38 (3), 102-20.

---- (1992b), "The Value of Brand Equity," The Journal of Business Strategy, 13 (4), 27-
33.

Aaker, David A. and Robert Jacobson (1994), "The Financial Information Content of
Perceived Quality," Journal of Marketing Research, 31 (May), 191-201.

---- (2001), "The Value Relevance of Brand Attitude in High-Technology Markets,"
J oumal of Marketing Research, 38 (November), 485-93.

Aaker, David A. and Kevin Lane Keller (1990), "Consumer Evaluations of Brand
Extensions," J oumal of Marketing, 54, 27-41.

Aaker, Jennifer L. (1997), "Dimensions of Brand Personality," Journal of Marketing
Research, 34 (August), 347-56.

Akerlof, George A. (1970), "The Market for "Lemons": Quality, Uncertainty, and the
Market Mechanism," Quarterly Journal of Economics, 84, 488-500.

Alden, Dana L., Jan-Benedict E. M. Steenkamp, and Rajeev Batra (1999a), "Brand
Positioning Through Advertising in Asia, North America, and Europe: The Role of
Global Consumer Culture," Journal of Marketing Research, 63 (1), 75-87.

Alden, Dana, Jan-Benedict Steenkamp, and Rajeev Batra (1999b), "Brand Positioning
Through Advertising in Asia, North America, and Europe: The Role of the Global
Consumer Culture," J oumal of Marketing.

Ali, Abdul (2000), "The Impact of Innovativeness and Development Time on New
Product Performance for Small Firms," Marketing Letters, 11 (2), 151.

Anonymous (2004), "Harnessing Innovation: R&D in a Global Growth Economy."
London: The Economist Intelligence Unit.

---- (2002), "Summary of ALG Methodology," Automotive Lease Guide.

Argarwal, Manoj K. and Vithala R. Rao (1996), "An Empirical Comparison of Consumer
Based Measures of Brand Equity," Marketing Letters, 7 (3), 237-47.

200

Atuahene-Gima, Kwaku and Felicitas Evangelista (2000), "Cross-Functional Influence in
New Product Development: An Exploratory Study of Marketing and R&D
Perspectives," Management Science, 46 (10), 1269-84.

Baba, Marietta L. (1995), "The Cultural Ecology of the Corporation: Explaining
Diversity in Work Group Responses to Organizational Transformation," Journal of
Applied Behavioral Science, 31 (2), 202-33.

Bagozzi, Richard P. (1975), "Marketing as Exchange," Journal of Marketing, 39
(October), 32-39.

Balabanis, George and Adamantios Diamantopoulos (2004), "Domestic Country Bias,
Country- of-Ori gin Effects, and Consumer Ethnocentrism: A Multidimensional
Unfolding Approach," J oumal of the Academy of Marketing Science, 32 (1), 80-95.

Barczak, Gloria and Edward F. McDonough 111(2003), "Leading Global Product
Development Teams," Research Technology Management, 46 (6), 14-18.

Barney, Jay (1991), "Firm Resources and Sustained Competitive Advantage," Journal of
Management, 17, 99-120.

Barwise, Patrick (1993), "Brand Equity: Snark or Boojum?" International Journal of
Research in Marketing, 10 (1), 93-104.

Bayus, Barry L., Gary Erickson, and Robert Jacobson (2003), "The Financial Rewards of
New Product Introductions in the Personal Computer Industry, " Management Science, 49
(2), 197-210.

Belzowski, Bruce and Brett Smith (2001), "Delphi X Forecast and Analysis of the North
American Automotive Industry." Ann Arbor, MI: Office for the Study of Automotive
Transportation, University of Michigan.

Biel, Alexander L. (1992), "How Brand Image Drives Brand Equity," J oumal of
Advertising Research, 12 (November), RC6-RC12.

Bilkey, Warren J. and Erik Nes (1982), "Country of Origin Effects on Product
Evaluations," Journal of International Business Studies, 13, 89-99.

Binder, Alan K. and Deebe Ferris Eds. (2000), General Motors in the 20th Century.
Southfield, Michigan: Ward's Communications.

Birkinshaw, J ., A. Morrison, and J. Hulland (1995), "Structural and Competitive
Determinants of a Global Integration Strategy," Strategic Management Journal, 16 (8),
637-55. ' *

Birkinshaw, Julian (2002), "Managing Internal R&D Networks in Global Firms - What
Sort of Knowledge is Involved?" Long Range Planning, 35 (3), 245.

Board, Corporate Executive (2001), "Overcoming executional challenges in global brand
management," Marketing Leadership Council.

Bonoma, Thomas V. (1984), "Making Your Marketing Strategy Work," Harvard
Business Review, 62 (2), 69-76.

Bordley, Robert (2003), "Determining the Appropriate Depth and Breadth of a Firm's
Product Portfolio," J MR, Journal of Marketing Research, 40 (1), 39.

Bottomley, Paul A. and Stephen J. S. Holden (2001), "Do We Really Know How
Consumers Evaluate Brand Extensions? Empirical Generalizations Based on Secondary
Analysis of Eight Studies," J oumal of Marketing Research, 494-500.

Boudreau, Marie-Claude, Karen D. Loch, Daniel Robey, and Detmar Straud (1998),
"Going Global: Using Information Technology to Advance the Competitiveness of the
Virtual Transnational Organization," Academy of Management Executive, 12 (4), 120-
28.

Briody, Elizabeth K. and Marietta L. Baba (1991), "Explaining Differences in
Repatriation Experiences: The Discovery of Coupled and Decoupled Systems,"
American Anthropologist, 93 (2), 322-44.

---- (1994), "Reconstructing Culture Clash at General Motors: An Historical View from
the Overseas Assignment," in Anthropological Perspectives on Organizational Culture,
Tomoko Hamada and Willis E. Sibley, Eds. Lanharn, Maryland: University Press of
America, Inc.

Briody, Elizabeth K., S. Tamer Cavusgil, and Stewart R. Miller (2004), "Turning Three
Sides into a Delta at General Motors: Enhancing Partnership Integration on Corporate
Ventures," Long Range Planning, 37 (5), 421-34.

Burgelman, Robert A. (1991), "Intraorganizational Ecology of Strategy Making and
Organizational Adaptation: Theory and Field Research," Organization Science, 2 (3),
239-62.

Buzzell, R. (1968), "Can You Standardize Multinational Marketing"," Harvard Business
Review (July-August), 78-89.

Calantone, Roger J. and C. Anthony di Benedetto (1988), Journal of Product Innovation
Management, 5, 201-15.

Cavusgil, S. Tamer (2002), "Knowledge Development in International Marketing: A
Critical Assessment and a Look Forward," in IU-IB Conference. Indiana University.

202

Cavusgil, S. Tamer and Shaoming Zou (1994), "Marketing strategy-performance
relationship: An investigation of the empirical link in export market ventures," Journal of
Marketing, 58 (1), 1-21.

Cavusgil, S. Tamer, Shaoming Zou, and G.M.Naidu (1993), "Product and Promotion
Adaptation in Export Ventures: An Empirical Investigation," J oumal of International
Business Studies, 24(3), 479-506.

Chaney, Paul K., Timothy M. Devinney, and Russell S. Winer (1991), "The Impact of
New Product Introductions on the Market Value," The Journal of Business, 64(4), 573.

Chatterjee, A., M. E.Jauchius, K.W. Kaas, and A. Satpathy (2002), "Revving up the Auto
Branding," The McKinsey Quarterly (1), 134-43.

Chaudhuri, Arjun (2002), "How Brand Reputation Affects the Advertising-Brand Equity
Link," Journal of Advertising Research (May-June), 33-43.

Cooper, R. G. and E. J. Kleinschmidt (1987), "New Products: What Separates Winners
from Losers?" J oumal of Product Innovation Management, 4 (3), 169-84.

Cummings, Jonathon N. (2004), "Work Groups, Structural Diversity, and Knowledge
Sharing in a Global Organization," Management Science, 50 (3), 352-65.

Cyert, Richard M. and James G. March (1963), A Behavioral Theory of the Firm. New
York: Prentice-Hall.

Dawar, Niraj and Philip Parker (1994), "Marketing universals: Consumers' use of brand
name, price, physical appearance, and retailer reputation as signals of product quality,"
Journal of Marketing, 58 (2), 81-95.

Day, George S. (1994), "The Capabilities of Market Driven Organizations," J oumal of
Marketing, 58 (October), 37-52.

Day, George S. and Robin Wensley (1988), "Assessing Advantage: A Framework For
Diagnosing Competitive Superiority," Journal of Marketing, 52(2), 1-20.

deChematony, Leslie, Chris Halliburton, and Ratna Bemath (1995), "International
Branding: demand or supply driven opportunity," International Marketing Review, 12
(2), 9-22.

DeSimone, Glenn (1998), "Overcoming Obstacles to Global Branding," MM&M, 89-95.

Dillon, William R., Thomas J. Madden, Amna Kirmani, and Soumen Mukherjee (2001),
"Understanding What's in a Brand Rating: A Model of Assessing Brand and Attribute

203

Effects and Their Relationship to Brand Equity," Journal of Marketing Research
(November), 415-29.

Douglas, S. P. and C. S. Craig (1989), "Evolution of Global Marketing Strategy: Scale,
Scope, and Synergy," Columbia Journal of World Business (Fall), 47-59.

Douglas, Susan R, C. Samuel Craig, and Edwin J. Nijssen (2001), "Integrating Branding
Strategy Across Markets: Building International Brand Architecture," J oumal of
International Marketing, 9 (2), 97-114.

Economist (2004), "Cadillac Comeback," in The Economist.

Eisenhardt, Kathleen M. (1989), "Building Theories from Case Study Research," The
Academy of Management Review, 14 (4), 532-50.

Elvira, M.M. and LE. Cohen (2001), "Location matters: a cross-level analysis of the
effects of organizational sex composition on turnover," Academy of Management
Journal, 44, 591-605.

Elwell, Frank (2001), "Marvin Harris's Cultural Materialism."

Erdem, Tulin and J offre Swait (1998), "Brand Equity as a Signaling Phenomenon, "
Journal of Consumer Psychology, 7 (2), 131-58.

Erdem, Tulin, J offre Swait, Susan Broniarczyk, Dipankar Chakravarti, J can-Noel
Kapferer, Michael Keane, John Roberts, J an-Benedict E. M. Steenkamp, and Florian
Zettelmeyer (1999), "Brand Equity, Consumer Learning and Choice," Marketing Letters,
10(3), 301.

Faircloth, James 8., Louis M. Capella, and Bruce L. Alford (2001), "The Effect of Brand
Attitude and Brand Image on Brand Equity," Journal of Marketing (Summer), 61-75.

Farquhar, Peter (1989), "Managing Brand Equity," Marketing Research, 1, 24-33.

Farquhar, Peter H. (1990), "Managing Brand Equity," Journal of Advertising Research,
30(4), 7-12.

Fiol, C. Marlene and Marjorie A. Lyles (1985), "Organizational Learning," Academy of
Management Review, 10 (October), 803-13.

Fiske, S. T. and S. E. Taylor (1984), Social Cognition. Reading, MA: Addison-Wesley.
Foumier, Richard, Thomas Shovelton, and Larry Stolfe (2002), "Walking the Automotive

Industry Tightrope: Keeping Customers - and Your Brand - Safe." Somers, N.Y.: IBM
Global Services.

204

Foumier, Susan (1998), "Consumers and Their Brands: Developing Relationship Theory
in Consumer Research," Journal of Consumer Research, 24 (March), 343-73.

Garcia, Rosanna and Roger Calantone (2002), "A Critical Look at Technological
Innovation Typology and Innovativeness Terminology: A Literature Review," The
J oumal of Product Innovation Management, 19, 110-32.

Gatignon, Hubert and J can-Marc Xuereb (1997), "Strategic Orientation of the Firm and
New Product Performance," Journal of Marketing Research, 34 (February), 77 -90.

Geroski, P. A. (2001), "Exploring the niche overlaps between organizational ecology and
industrial economics," Industrial and Corporate Change, 10(2), 507.

Golder, Peter N. (2000), "Historical Method in Marketing Research with New Evidence
on Long-Term Market Share Stability," Journal of Marketing Research, 37 (May), 156-
72.

Grover, Rajiv and V Srinivasan (1992), "Evaluating the Multiple Effects of Retail
Promotions on Brand-Loyal and Brand-Switching Segments," Journal of Marketing
Research, 29 (February). 76-89.

Han, J in K, Namwoon Kim, and Rajendra K Srivastava (1998), "Market orientation and

organizational performance: Is innovation a missing link?" Journal of Marketing, 62 (4),
30-45.

Harman, M. T. and J. Freeman (1977), "The population ecology of organizations,"
American Journal of Sociology, 82, 929-64.

Harris, Marvin (2001), Cultural Materialism: The Struggle for a Science of Culture.
Walnut Creek, CA: AltaMira Press.

---- (1968), The Rise of Anthropological Theory: Crowell.

Hatch, Mary J o (1993), "The Dynamics of Organizational Culture," Academy of
Management Review, 18 (4), 657-90.

Hausman, J. A. (1978), "Specification Tests in Econometrics," Econometrica, 46, 1251-
71.

Heath, Robert (1999), "Just popping down to the shops for a packet of image statements':
a new theory of how consumers perceive brands," Journal of the Marketing Research
Society, 41 (2), 153-69.

Hellofs, Linda L. and Robert Jacobson (1999), "Market Share and Customers'

Perceptions of Quality: When Can Firms Grow Their Way to Higher Versus Lower
Quality,” Journal of Marketing, 63 (January), 16-25.

205

Henard, David H. and David M. Szymanski (2001), "Why Some New Products Are More
Successful Than Others," Journal of Marketing Research, 38 (3), 362-75.

Hennig-Thurau, Thorsten, Gianfranco Walsh, and Oliver Wruck (2001), "An
Investigation into the Factors Determining the Success of Service Innovations: The Case
of Motion Pictures," Academy of Marketing Science Review, Online 01 (6).

Hirschman, Elizabeth C. (1986), "Humanistic Inquiry in Marketing Research:
Philosophy, Method, and Criteria," Journal of Marketing Research, 23, 237—49.

Holbrook, MB. and EC. Hirschman (1982), "the Experiential Aspects of Consumption:
Consumer Fantasies, Feelings and Fun," J oumal of Consumer Research, 9, 132-40.

Homburg, Christian and Christian Pflesser (2000), "A Multiple-Layer Model of Market-
Oriented Organizaional Culture: Measurement Issues and Performance Outcomes,"
Journal of Marketing Research, 37 (November), 449-62.

Hong, Sung-Tai and Jr Robert S. Wyer (1989), "Effects of Country-of-Origin and
Product-Attribute Information on Product Evaluation: An Information Processing
Perspective," Journal of Consumer Research, 16 (September), 175-87.

Hurley, Robert F and G Tomas M Hult (1998), "Innovation, market orientation, and
organizational learning: An integration and empirical examination," Journal of
Marketing, 62 (3), 42-54.

Jackson, William A. (1996), "Cultural Materialism and Institutional Economics," Review
of Social Economy, 54(2).

Jain, Subhash C. (1989), "Standardization of International Marketing Strategy: Some
Research Hypothesis," Journal of Marketing.

J aworski, Bernard J. and Ajay K. Kohli (1993), "Market orientation: Antecedents and
consequences," Journal of Marketing, 57 (3), 53-70.

Johanson, J. A. N. and J an-Erik Vahlne (1977), "The Internationalization Process of the
Firm - a Model of Knowledge Development and Increasing Foreign Market
Commitments," Journal of International Business Studies, 8(1), 23-32.

J ohansson, Johny K, Ilkka A Ronkainen, and Michael R Czinkota (1994), "Negative
country-of-ori gin effects: The case of the new Russia," Journal of International Business
Studies, 25 (1), 157.

J ohansson, Johny K. (1973), "A Generalized Logistic Function with an Application to the
Effect of Advertising," Journal of the American Statistical Associaton, 68 (343), 824-27.

206

Kamakura, W. A. and G. J. Russell (1991), "Measuring Consumer Perceptions of Brand
Quality with Scanner Data: Implications for Brand Equity." Cambridge, MI: Marketing
Science Institute.

Kamakura, Wagner A. and Gary J. Russell (1993), "Measuring Brand Value with
Scanner Data," International Journal of Research in Marketing, 10, 9-22.

Keller, Kevin Lane (2000), "The Brand Report Card," Harvard Business Review, 147-
157 (J anuary-February).

---- (1993), "Conceptualizing, Measuring, and Managing Customer-Based Brand Equity,"
Journal of Marketing, 57, 1-22. '

---- (2003), Strategic Branding Management: Building, Measuring and Managing Brand
Equity. Upper Saddle River, N .J .: Pearson Education, Inc.

Keller, Kevin Lane and Donald R. Lehmann (2005), "Brands and Branding: Research
Findings and Future Priorities," Marketing Science Institute.

Kennedy, Peter (2003 ), A Guide to Econometrics. Cambridge, MA: The MIT Press.

Kiley, David (2004), "Buy or Lease? Factor Costs In; Give Leasing Rules Good Look
Before Signing Deal," in USA Today. McLean, VA.

Kim, Jane J. (2004), "Tip of the Week: On Next Car, Try Leasing," in Wall Street
Journal. Sunday ed. New York, NY.

Kim, K., J -H Park, and IE. Prescott (2003), "The Global Integration of Business
Functions: A Study of Multinational Business in Integrated Global Industries," Journal
of International Business Studies, 34(4), 327-44.

Klein, Jill Gabrielle (2002), "Us Versus Them, or Us Versus Everyone? Delineating
Consumer Aversion to Foreign Goods."

Kogut, B. (1985), "Designing Global Strategies: Comparative and Competitive Value-
Added Chains," Sloan Management Review (Summer), 15-28.

Kohli, Ajay K. and Bernard J. J aworski (1990a), "Market Orientation: The Construct,
Research Propositions, and Managerial Implications," Journal of Marketing, 54 (April),
1-1 8.

---- (1990b), "Market Orientation: The Construct, Research Propositions, and Managerial
Implications," Journal of Marketing, 54(2), 1-18.

Kotler, Philip (1997), Marketing Management: Analysis, Planning, Implementation, and
Control. Upper Saddle River, NJ .: Prentice Hall.

207

Kotler, Philip and Gary Armstrong (2004), Principles of Marketing. Upper Saddle River,
N .J .: Pearson Prentice Hall.

Kozinets, Robert V. (2001), "Utopian Enterprise: Articulating the Meanings of Star
Trek's Culture of Consumption," J oumal of Consumer Research, 28 (June), 67-88.

Krishnan, HS. (1996), "Characteristics of Memory Associations: A Consumer-Based
Brand Equity Perspective," International J oumal of Research in Marketing, 13, 389-405.

LaForet, Sylvie and John Saunders (1994), "Managing Brand Portfolios: How the
Leaders do it," J oumal of Advertising Research, 34 (5), 64-77.

Lassar, Walfried, Banwari Mittal, and Arun Sharma (1995), "Measuring Customer Based
Brand Equity," Journal of Consumer Marketing, 12 (4), 11-19.

Leavitt, Gregory C. (1986), "Ideology and the Materialist Model of General Evolution:
A Cross-Cultural Test of Subsystem Relationships," Social Forces, 65 (2), 525-53.

Lee, Angela Y. and Brian Stemthal (1999), "The Effects of Positive Mood on Memory,"
The J oumal of Consumer Research, 26 (September), 115-27.

Levitt, Theodore (1983), "The Globalization of Markets," Harvard Business Review, 61
(May-June), 92-102.

Li, Tiger and Roger J. Calantone (1998), "The Impact of Market Knowledge Competence
on New Product Advantage: Conceptualization and Empirical Examination," Journal of
Marketing, 62 (4), 13-30.

Lukas, Bryan A. and QC. Ferrell (2000), "The Effect of Market Orientation on Product
Innovation,” Academy of Marketing Science. Journal, 28 (2), 239.

Luo, Y. (2002), "Product diversification in international joint ventures: performance
implications in an emerging market," Strategic Management Journal, 23, 1-20.

Lutz, R.A. (1998), Guts: The Seven Laws of Business That Made Chrysler the World's
Hottest Car Company. New York, N.Y.: John Wiley & Sons, Inc.

Lutz, Robert A. (2005), "Lutz: GM Outgrew Engineering Structure," in Automotive
News.

Mackintosh, James (2004), "VW's Iconic Golf Seems to be Running Out of Gas," in
Financial Times. U.S. Edition ed.

208

Maltz, Elliot and Ajay Kohli (2000), "Reducing Marketing's Conflict with Other
Functions: The Differential Effects of Integrating Mechanisms," Journal of the Academy
of Marketing Science, 28 (4), 479-92.

March, James G. and Herbert A. Simon (1958), Organizations. New York: Wiley.

McCullough, Wayne R. (1996), "Global Advertising Which Acts Locally: The IBM
Subtitles Campaign," Journal of Advertising Research, 11-15.

McGrath, R.G. (2001), "Exploratory learning, innovative capacity, and managerial
oversight," Academy of Management Journal, 44 (1), 118-31.

Meyers-Levy, J. and A. M. Tybout (1989), "Schema Congruity as a Basis for Product
Evaluation," Journal of Consumer Research, 16, 39-54.

Miles, Raymond E. and Charles C. Snow (1978), Organizational Strategy, Structure and
Processes. New York: McGraw-I-Iill.

Miller, D. and RH. Friesen (1984), Organizations: A Quantum View. Englewood Cliffs,
NJ: Prentice Hall.

---- (1884), Organizations: A Quantum View. Englewood Cliffs, NJ: Prentice Hall.

Miller, Danny (1986), "Configurations of Strategy and Structure: Towards a Synthesis,"
Strategic Management Journal, 7 (3), 233-49.

Mittal, Vikas, Wagner A. Kamakura, and Rahul Govind (2004), "Geographic Patterns in
Customer Service and Satisfaction: An Empirical Investigation," Journal of Marketing,
68 (3), 48.

Mizik, Natalie and Robert Jacobson (2003), "Trading Off Between Value Creation an
Value Appropriation: The Financial Implications of Shifts in Strategic Emphasis,"
Journal of Marketing, 67 (January), 63-76.

Montoya-Weiss, Mitzi M and Roger Calantone (1994), "Determinants of new product
performance: A review and meta-analysis," The Journal of Product Innovation
Management, 11 (5), 397.

Moorman, Christine and Anne 8 Miner (1997), "The impact of organizational memory on
new product performance and creativity," J MR, Journal of Marketing Research, 34 (1),
91-106.

Morgan, Rory P. (2000a), "A Consumer-Oriented Framework of Brand Equity and
Loyalty," International J oumal of Market Research, 42, 65-78.

209

---- (2000b), "A Consumer-Oriented Framework of Brand Equity and Loyalty,"
International Journal of Market Research, 42 (1), 65-78.

Muhr, Thomas (1991), "ATLAS/ti — A prototype for the support of text interpretation,"
Qualitative Sociology, 14(4), 349-71.

Muniz, Albert M. and Thomas C. O'Guinn (2001), "Brand Community," J oumal of
Consumer Research, 27 (March), 412-32.

Narver, John C. and Stanley F. Slater (1998), "Additional Thoughts on the Measurement
of Market Orientation: A Comment on Deshpande and Farley," Journal of Market
Focused Management, 2 (1), 233-36.

---- (1990a), "The Effect of a Market Orientation on Business Profitability," Journal of
Marketing, 54(4), 20-35.

---- (1990b), "The Effect of a Market Orientation on Business Profitability," J oumal of
Marketing, 54 (October), 20-35.

Nedungadi, Prakash (1990), "Recall and Consumer Consideration Sets: Influencing
Choice withouth Altering Brand Evaluations," J oumal of Consumer Research, 17
(December), 263-76.

Neff, J. (1999), "P&G and Unilever's Giant Headaches," in Advertising Age Vol. 70.

Nowlis, Stephen M and Itamar Simonson (1996), "The effect of new product features on
brand choice," J MR, Journal of Marketing Research, 33 (l), 36.

Ohmae, Kenichi (1989), "Managing in a Borderless World," Harvard Business Review,
67 (May-June), 152-61.

Oliver, Richard L. (1997), Satisfaction: A Behavioral Perspective on teh Consumer. New
York: McGraw-Hill.

Parameswaran, Ravi and R Mohan Pisharodi (1994), "Facets of country of origin image:
An empirical assessment," Journal of Advertising, 23 (1), 43.

Park, C. Whan, Bernard J. Jaworski, and Deborah J. Macinnis (1986), "Strategic Brand
Concept-Irnage Management," J oumal of Marketing, 50(4), 135-45.

Pauwels, Koen, Jorge Silva-Russo, Shuba Srinivasan, and Dominique M. Hanssens
(2004), "New Products, Sales Promotions, and Firm Value: The Case of the Automobile
Industry," Journal of Marketing, 68 (October), 142-56.

Pavelchak, M. A. (1989), "Piecemeal and category-based Evaluation: An idiographic
analysis," J oumal of Personality and Social Psychology, 56, 354-63.

210

Penrose, Edith T. (1959), The Theory of the Growth of the Firm. New York: Wiley.

Perlmutter, Howard V. (1969), "The Tortuous Evolution of the Multinational
Corporation," Columbia Journal of World Business (J an.-Feb.), 9-18.

Pitta, Dennis A. and Lea Prevel Katsanis (1995), "Understanding Brand Equity for
Successful Brand Extensions," J oumal of Consumer Marketing, 12 (4), 51-64.

Porter, Michael E. (1980), Competitive Strategy. New York: The Free Press.

---- (1991), "Towards a Dynamic Theory of Strategy," Strategic Management Journal, 12,
95-1 17.

Rao, Akshay R., Lu Qu, and Robet W. Ruekert (1999), "Signaling Unobservable Product
Quality Through a Brand Ally," Journal of Marketing Researh, 36 (2), 258-68.

Ratchford, Brian T. (2001), "The Economics of Consumer Knowledge," Journal of
Consumer Research, 27, 397-411.

Ratchford, Brian T., Myung-Soo Lee, and Debabrata Talukdar (2003), "The Impact of the
Internet on Information Search for Automobiles," J MR, Journal of Marketing Research,
40(2), 193.

Rechtin, Mark (1997), "Study Finds That Loyal Buyers Will Pay More for Vehicles,"
Automotive News (August 4), 8.

Richardson, P.S., A. S. Dick, and A.K. Jain (1994), "Extrinsic and Intrinsic Cue Effects
on Perception of Store Brand Quality," J oumal of Marketing, 58, 28-36.

Roth, K., D. M. Schweiger, and A.J. Morrison (1991), "Global Strategy Implementation
at the Business Unit Level: Operational Capabilities and Administrative Mechanisms,"
Journal of International Business Studies, 22 (3rd Quarter), 369-402.

Ruekert, Robert W. and Orville C. Walker, Jr. (1987), "Marketing's Interaction with
Other Functional Units: A Conceptual Framework and Empirical Evidence," J oumal of
Marketing, 51 (1), 1-19.

Rust, Roland T., Christine Moorman, and Peter R. Dickson (2002), "Getting Return on
Quality: Revenue Expansion, Cost Reduction, or Both?" J oumal of Marketing, 66
(October), 7-24.

Samiee, Saeed and Kendall Roth (1992), "The influence on global marketing
standardization on performance," Journal of Marketing.

211

Sawyers, Arlena (2003), "Big 3 Models' Residual Values Tumble," in Automotive News
Vol. 78.

Schein, Edgar H. (1984), "Coming to a New Awareness of Organizational Culture,"
Sloan Management Review, 23 (1), 55-68.

---- (1992), Organizational Culture and Leadership (2nd ed.). San Francisco, CA: Jossey-
Bass Publishers.

Schultz, Don E. (2000), "Understanding and Measuring Brand Equity," MM (Spring), 8.

Scott, W. Richard (2003), Organizations: Rational, Natural and Open Systems. Upper
Saddle River, N.J.: Prentice Hall.

Shillinglaw, Gordon (1955), "Residual Values in Investment Analysis," Journal of
Business, 28(4), 275-85.

Shimp, Terence A. and Subhash Sharma (1995), "Consumer Ethnocentrism:
Construction and Validation of the CETSCALE," J oumal of Marketing Research, 24,
280-89.

Shocker, A.D., R.K. Srivastava, and R.W. Ruekert (1994a), "Challenges and
Opportunities Facing Brand

Management: An Introduction to the Special Issue," Journal of Marketing Research (31),
149-58. ,

Shocker, Allan D., Rajendra K. Srivastava, and Robert W. Ruekert (1994b), "Challenges
and opportunities facing brand management: An introduction to the special issue,"
Journal of Marketing Research, 31 (2), 149-58.

Simon, Julian L. and Johan Arndt (1980), "The Shape of the Advertising Response
Function," Journal of Advertising Research, 20 (4), 11-28.

Simonin, CJ. and M. W. Sullivan (1992), "A Financial Approach to Estimating Firm-
level Brand Equity and Measuring the Impact of Marketing Events." Cambridge, MA:
Marketing Science Institute.

Sinkula, James (1994a), "Market Information Processing and Organizational Learning,"
Journal of Marketing, 58 (January), 35-45.

Sinkula, James M. (1994b), "Market Information Processing and Organizational
Learning," Journal of Marketing, 58 (January).

Slater, Stanley F. and John C. Narver (1995), "Market Orientation and the Learning
Organization," Journal of Marketing, 59(3), 63-.

212

Slotegraaf, Rebecca J and J Jeffrey Inman (2004), "Longitudinal Shifts in the Drivers of
Satisfaction with Product Quality: The Role of Attribute Resolvability," Journal of
Marketing Research, 41 (3), 269.

Solheim, Mark K. (2004), "Car's That Keep the Most Value," in Kiplinger's Personal
Finance Vol. 58.

Song, X Michael and Mark E Parry (1997), "A cross-national comparative study of new
product development processes: Japan and the United States," Journal of Marketing, 61
(2), 1-18.

Song, X.M. and ME. Parry (1992), "The R&D -Marketing Interface in Japanese Hi-
technology Firms," J oumal of Product Innovation Management, 9 (June), 91-112.

Srivastava, R.K and AD. Shocker (1991), "Brand Equity: A Perspective on its Meaning
and Measurement." Cambridge, MA: Marketing Science Institute.

Srivastava, Rajendra K, Tasadduq A Shervani, and Liam Fahey (1999), "Marketing,
business processes, and shareholder value: An organizationally embedded view of
marketing activities and the discipline of marketing," Journal of Marketing, 63, 168-79.

Srivastava, Rajendra K., Tasadduq A. Shervani, and Liam Fahey (1998), "Market Based
Assets and Shareholder Value: A Framework for Analysis," Journal of Marketing, 62
(January), 2-18.

Srivastava, Rajendra and Allan D. Schocker (1991), "Brand Equity: A Perspective on Its
Meaning and Measurement." Cambridge, MA: Marketing Science Institute.

Steenkamp, J an-Benedict EM, Rajeev Batra, and Dana L. Alden (2003), "How Perceived
Brand Globalness Creates Brand Value," Journal of International Business Studies, 34
(1)9 53'65.

Stein, Jason (2004), "So Many Nameplates.," in Automotive News.

Stinchcombe, A. L. (1965), "Social Structure and Organizations," in Handbook of
Organizations, J. G. March, Ed. Chicago: Rand McNally.

Strauss, Anslem and Juliet Corbin (1998), Basics of Qualitative Research: Techniques
and Procedures for Developing Grounded Theory. Thousand Oaks, CA: Sage
Publications, Inc.

Sullivan, Mary W. (1998), "How Brand Names Affect the Demand for Twin
Automobiles," J oumal of Marketing Research, 35 (2), 154-65.

213

 

Supphellen, Magne (2000), "Understanding Core Brand Equity: Guidelines for In-depth
Elicitation of Brand Associations," International Journal of Market Research, 42 (3), 319-
38.

Swain, Joffre, Tulin Erdem, Jordan Louvriere, and Chris Dubelaar (1993), "The
Equalization Price: A Measure of Consumer-Perceived Brand Equity," International
Journal of Research in Marketing, 10, 23-45.

Tellis, Gerard J. and Claes Fomell (1988), "The Relationship Between Advertising and
Product Quality over the Product Life Cycle: A Contingency Theory," J oumal of
Marketing Research, 25 (February), 64-71.

Tellis, Gerard J. and Birger Wemerfelt (1987), "Competitive Price and Quality Under
Asymmetric Information," Marketing Science, 6(3), 240-54.

Telser, Lester G. (1962), "Advertising and Cigarettes," J oumal of Political Economy, 70
(5), 471-99.

Thuerrner, Karen E (2004), "U.S. in Overdrive," Vol. 2005: Financial Times: FDI
Magazine.

Townsend, J anell D., Sengun Yeniyurt, Seyda Deligonul, and S. Tamer Cavusgil (2004),
"Marketing Related Antecedents of Performance in the Global Company," Journal of
International Marketing, 14(4), 1-24.

Ulgado, Francis M. and Moonkyu Lee (1998), "The Korean versus American
Marketplace," Psychology & Marketing, 15 (6), 595-614.

Urban, Glen L. and John R. Hauser (2004), ""Listening In" to Find and Explore New
Combinations of Customer Needs," J oumal of Marketing, 68 (2), 72.

Urban, Glen L., Bruce D. Weinberg, and John R. Hauser (1996), "Premarket Forecasting
of Really-New Products," Journal of Marketing, 60(1), 47-66.

van Ittersum, K., M.J.J.M. Candel, and M.T.G. Meulenberg (2003), "The influence of the
image of a product's region of origin on product evaluation," Journal of Business
Research, 56 (3), 215-26.

Verona, Gianmario (1999), "A Resource-based View of Product Development," The
Academy of Management Review, 24(1), 132-42.

Webster, Frederick E. (2002), "Marketing Management in Changing Times," Marketing
Management (J anuary/February), 18-23.

Weick, Karl E. (1979), The Social Psychology of Organizing. Reading, MA: Addison-
Wesley.

214

 

Weiss, H. Eugene (2003), Chrysler, Ford, Durant and Sloan. Jefferson, NC: McFarland &
Company, Inc.

Welch, David and Dan Beucke (2005), "Why GM's Plan Won't Work," in BusinessWeek.
Wentz, Laurel (1989), "How Experts Value Brands," Advertising Age.

Wemerfelt, Birger (1988), "Umbrella Branding as a Signal of New Product Quality: An
Example of Signalling by Posting a Bond," Rand Journal of Economics, 19 (3), 458-66.

White, Leslie A. (1943), "Energy and the Evolution of Culture," American
Anthropologist, 45 (3), 335-56.

Wills, James, A. Coskun Samli, and Laurence Jacobs (1991), "Developing Global
Products and Marketing Strategies: A construct and research agenda," J oumal of the
Academy of Marketing Science, 19(1), 1-10.

Wolf, Charles (2000), "Globalization: Meaning and Measurement," Critical Review, 14
(1), 1-10.

Wooldridge, Jeffrey M. (2002a), Econometric Analysis for Cross Section and Panel Data.
Cambridge, MA: The MIT Press.

---- (2002b), Econometric Analysis of Cross Section and Panel Data. Cambridge, MA:
The MIT Press.

---- (2000), Introductory Econometrics: A Modern Approach: South-Westem College
Publishing.

Workman, John P., Jr. (1993), "Marketing's limited role in new product development in
one computer systems firm," Journal of Marketing Research, 30 (4), 405-21.

Yin, Robert K. (2003), Case Study Research Design and Methods. Thousand Oaks, CA:
Sage Publications.

Yip, George S. (1992), Total Global Strategy: Managing for Worldwide Competitive
Advantage. New Jersey: Prentice Hall.

Yip, George S., Johny K. J ohansson, and J. Roos (1997), "Effects of Nationality on
Global Strategy," Management International Review, 37 (4), 365-85.

Yoo, Boonghee and Naveen Donthu (2001), "Developing and Validating a

Multidimensional Consumer-based Brand Equity Scale," Journal of Business Research,
52(1), 1.

215

Yoo, Boonghee, Naveen Donthu, and Sungho Lee (2000a), "An Examination of Selected
Marketing Mix Elements and Brand Equity," Academy of Marketing Science. Journal, 28
(2), 195.

---- (2000b), "An Examination of Selected Marketing Mix Elements and Brand Equity,"
Journal of the Acadamy of Marketing Science, 28 (2), 195-211.

Zaltman, G. (1997), "Rethinking Market Research: Putting People Back In," Journal of
Marketing Research, 34, 424-37.

Zetsche, Dieter (2004), "Detroit Automakers Not at Death's Door," in Automotive News.

Ziethaml, Valerie A. (1988), "Consumer Perceptions of Price, Quality and Value: A
Means-Ended Model and Synthesis of Evidence," Journal of Marketing, 52 (July), 2-22.

Zou, Shaoming and S. Tamer Cavusgil (2002), "The GMS: A Broad Conceptualization of

Global Marketing Strategy and Its Effects on Firm Performance," Journal of Marketing,
66 (4), 40-56.

216

 

   

Illl'lj‘jjjiallljljijflilig'ljljljl