OVERVIEW
In this part, we will make further analysis of the complicated mechanism major Ingredient Brands play a key role in retaining a long-term competitive advantage over those competing market players.
2.2.4 How Ingredient Brands Matter with Sustainable Competitive Advantage
We can draw a conclusion form RBV theories that, those firms with a weak resource position can carry out brand marketing as well by virtue of scarce resources obtained from either Merger & Aquisition of or strategic cooperation with other firms of superior manufacturing techniques. This is true at least with what is going on in China. By doing so, those market resources acquired from outside a given firm are expected to provide a shortcut for business development after being transformed into its own internal resources. According to the findings from Desai and Keller in 2002, although a co-shared brand is constructive in the early phase of a given firm’s business expansion, an independent ingredient brand is more important in terms of evaluating its business prospect in a long run. Currently, Merger & Acquisition is getting increasing popularity among those leading manufacturers of industrial equipment across all sectors. It is seen as an effective and trendy way of enhancing business competitiveness by differentiated resources acquired from outside. From a perspective of co-branding, however, firm-leveled resource integration with quality advantages under brand marketing is still a basic question yet to answer as any forms of business activities is motivated by a goal to enhance a firm’s current resource position by creating and securing a long-term competitive advantage over its competitors or equivalently an unique capability other market players do not have, through acquired resources which is translatable into such an expected advantage or capability. When in the very context of what China is experiencing economically, to better support a more favored branding strategy to be implemented, there is a valuable proposal which is designed to direct further study into how we can identify a sensible pathway to business development by virtue of precise identification of quality-based advantage of manufacturing resources.
In the same way, the success of ingredient branded products will be leading to fierce competitions among those outsourced ingredient products, a cause for a string of negative outcomes for those host brand owners featuring reduced profit margins, declining market share, weakened market dominance and also diminishing competitive advantages (Donald G. Norris, 2007). A proof of this is the so-called Fiesco Effect describing that price war will happen when ingredient brands are found to be widely available anywhere as they can’t be considered as an unique or differentiated resources any more. Moreover, it is for sure risky for host brand owners to adopt this strategy if a given product which is ingredient branded functions as a core part to the host machine. It means host brand owners without exclusive licensing of a certain ingredient brand will be disadvantaged as they are unable to make a long-term competitive advantage from a non-differentiated ingredient brand (Lance, Chiranjeev & Rajneesh, 2003). Regrettably, very limited amount of work has ever gone into the research with host brands on what influence it brings to develop self-own ingredient brands based on what resources they already have.
2.2.5 Research on How Ingredient Brand Affects Resource-Based View of The Firm
Possibly, a market position gained from promotional campaigns has quite a low chance of making a sustainable competitive advantage over time. With regards to ingredient branded products, both first mover advantage and competitive convergence can be applied to explain why this is hard to achieve. Given much limited research work put into this aspect, it is thought to be due to either ingredient product itself under intellectual property protection or lack of marketing input by other competitors (Norris, 2007). Ingredient brands which are seen as a strong and credible signal of product quality or other key inherent attributes will be more convincing to target customers than promised quicker delivery of service when things go wrong. In this sense, marketing strategy can be described as a process for a given firm to employ unique tangible or intangible assets, which requires either its internal resources to be correctly identified or external resources to be acquired. Some typical examples are knowledge (Glazer, 1991) and those market-based assets (Srivastava, Shervani & Fahey, 1998). In this case, those host machine manufacturers with a better resource position from doing so can be immune from fierce competition.
When considering of developing a most suitable Co-Branding Strategy, corporate executives are always expected to take into account a series of different factors for evaluation before decision is made. In 2008, Helmig along with other scholars proposed a branding strategy decision-making matrix as shown below,
In terms of the subjects of this study, medium-and-large-sized industrial manufacturers are those being able to make heavy investment in ingredient branded products. For that reason, we are here making our study extended by putting self-owned ingredient brand as a form of Co-Branding to top right of the original matrix, in which self-owned ingredient brand can be singled out for being more sustainable and resource consuming.
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For contact with the author, please email to shanshan@towermind.com;
For contact with the editor, please email to yangls@skiplifting.com
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