NIE-based SME brand building in foreign markets: an exploratory study
| Pages | 63-79 |
| Date | 11 February 2019 |
| Published date | 11 February 2019 |
| DOI | https://doi.org/10.1108/JPBM-10-2016-1331 |
| Author | Jae-Eun Chung,Byoungho Jin,So Won Jeong,Heesoon Yang |
| Subject Matter | Marketing,Product management,Brand management/equity |
NIE-based SME brand building in foreign
markets: an exploratory study
Jae-Eun Chung
Department of Consumer and Family Sciences, Sungkyunkwan University, Seoul, Republic of Korea
Byoungho Jin
Department of Textiles and Apparel, Technology and Management, North Carolina State University, Raleigh, North Carolina, USA and
Department of Clothing and Textiles, Kyung Hee University, Seoul, Republic of Korea
So Won Jeong
Department of Clothing and Textiles, Pusan National University, Busan, Republic of Korea, and
Heesoon Yang
Research Institute for Human Life Sciences, Sungkyunkwan University, Seoul, Republic of Korea
Abstract
Purpose –The purpose of this study is to examine the branding strategies of SMEs from NIEs, juxtaposing the different strate gies used to
specifically target developed and developing countries with regard to brand-building approach, type and number of brands and degree of
standardization.
Design/methodology/approach –A case-study approach is used. In-depth interviews are conducted with 10 Korean consumer-goods SMEs
exporting their own in-house brands.
Findings –Clear differencesemerge between the strategies of SMEsentering developed countries and thoseentering developing countries,particularly
regarding brand identity development, use of foreign sales subsidiaries and number and types of brands used. The authors find an interaction effect
between productcharacteristics and host marketlevels of economic development,both of which influenced the degree ofproduct standardization.
Originality/value –This study is the first attempt to uncover the branding strategies of NIE consumer-goods SMEs. The findings contribute to the
field by extending our understanding of branding strategies used by consumer-goods SMEs from NIEs, thereby providing useful insight for other NIE
enterprises when establishing branding strategies aimed at foreign markets.
Keywords SME, Case study, Branding strategy, Foreign markets, NIE
Paper type Research paper
Introduction
Small- and medium-sized enterprises (SMEs) face heightened
competition due to increasing trends in globalization (Spence
and Essoussi, 2010). Branding adds value by helping
consumers identify and differentiate a firm’s products from
those of its competitors, often by developing favorable brand
images and cultivating brandloyalty (Lee et al., 2015;Pratihari
and Uzma, 2018). Particularly for consumer-goods SMEs,
strong branding has increasingly become an essential means to
secure new growth opportunities in foreign marketsbecause of
the larger buyer pools and more complicated distribution
infrastructure compared to that of industrial-goods firms
(Gabrielsson, 2005;Spence and Essoussi, 2010). However,
SMEs that lack human and financial resources often have
limited understanding of foreign markets and marketing
investments, which can make brand development in foreign
markets challenging (Gabrielsson, 2005;Spence and Essoussi,
2010).
Despite these difficulties, SMEs have recently developed a
substantial number of successful brands abroad. At present,
however, the majority of studies on SME international
branding strategies focus on western firms from developed
countries (Couto and Ferreira,2017;Gabrielsson, 2005;Huck
and Rennhak, 2013;Luostarinen and Gabrielsson, 2006;
Spence and Essoussi, 2010). Consequently, successful cases
from newly industrialized economies (NIEs[1]) are often
neglected in the literature. For example, Dr Jart1, a Korean
cosmetics brand, sells its products in Sephora stores in New
York and Boots stores in London. Moreover, in 2011, the
Evolution Mid GTX trail shoes (made by the Korean brand
TrekSta) were included in American Backpacker Magazine’s
footwear hall of fame.
The current issue and full text archive of this journal is available on
Emerald Insight at: www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
28/1 (2019) 63–79
© Emerald Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-10-2016-1331]
This work was supported by the Ministry of Education of the Republic
of Korea and the National Research Foundation of Korea (NRF-
2015S1A3A2046811).
Received 5 October 2016
Revised 31 October 2017
11 June 2018
11 September 2018
Accepted 13 September 2018
63
Existing studies on the international branding strategies of
western SMEs may not always be applied to firms from non-
developed markets becauseof their inherent differences. SMEs
from developed economies (DE SMEs) are generally
positioned more favorably than those from NIEs (NIE SMEs)
because the former can offer positive country-image
associations (Ahmed and d’Astous, 2008;Magnusson et al.,
2011). Developed markets also tend to have more rigorous
product quality standards, allowing DE SMEs to access
stronger technologyand achieve higher levels of quality. Kumar
and Steenkamp (2013, p. 7) asserted that building brand
names in developed markets can be costly for less-developed
market firms because this requires“a sophisticated distribution
system, a trusted network of retailers to stock a relatively
unknown brand, and an aggressive marketing campaign to sell
consumer products from an unknown company based in a
country not knownfor quality”. Thus, NIE SMEs typically face
greater obstaclesto brand development in foreign markets.
To overcome these shortcomings,it is critical for NIE SMEs
to learn how to establish effective branding strategies when
targeting foreign markets with their limited resources.
Moreover, without developing their own brands, NIE SMEs
may face severe price competition from developing-country
firms. When NIE SMEs export using original equipment
manufacturing (OEM[2]) or original development/design
manufacturing (ODM[3]), they become threatened by
developing-country firms that offer lower prices because of
lower wages and costs (Lee etal., 2015). Despite the urgency of
the topic, few studies have examined NIE SME brand
developmentin foreignmarkets.
The purposes of thisstudy, therefore, are:
to examine how NIE consumer-goods SMEs develop their
brands in foreign markets; and
to provide a foundation for future theoretical development
and quantitative analyses by postulating testable propositions
on this issue.
Whereas DE SMEs tend to enter countries in a “downward”
manner (i.e. entering other developed countries, NIEs or
developing countries),NIE SMEs can adopt both “downward”
(entering developing countries) and “upward”approaches
(entering developed countries)and may use differing strategies
accordingly. This study compared the branding strategies of
DE SMEs with those of NIE SMEs while juxtaposing the
branding strategies of NIE SMEs targetingdownward markets
with those targetingupward markets. Given the lack of research
on this subject, this paper advances theoretical understanding
within the SME branding literatureby postulating propositions
on NIE SME international branding practices and the
underlying factors influencing these strategies. The findings of
this study may alsooffer insight for NIE enterprises that require
strategies to enterdeveloped and developing markets.
South Korea was selected as the target NIE country in this
study because its consumer-goodsSMEs (i.e. in-house brands)
have rapidly increased exports of own brands over the last
decade. Such exports increasedby an average of 21.98 per cent
during the last three years (Korea Federation of SMEs, 2014),
comprising 15.9 per cent of the country’s totalSME exports in
2012. According to the Korean Small and Medium Enterprises
Act, SMEs are defined as independent businesses with fewer
than 300 employees and less-than-average annual sales of
approximatelyUS$145m.
This study sought to investigate the following research
questions:
RQ1. Which branding strategies do Koreanconsumer-goods
SMEs (Korean SMEs) adopt when enteringdeveloped
versus developingmarkets?
RQ2. What are the factors that influence the selection of
branding strategies when these SMEs enter developed
versus developingmarkets?
Literature review
SME branding strategies
Branding is the process by which firms createfavorable, unique
and personal associations for their products in the minds of
consumers (Keller,2008), adding product value by heightening
their perceived importance (Chandler and Owen, 2002)and
eventually, increasing their financial performance (Fischer and
Himme, 2017;Muhonen et al.,2017). Branding among SMEs
had received very little attention from researchers until
Abimbola (2001) called for studies on the relevance, process
and consequences of SME branding over a decade ago
(Odoom et al.,2017). Although a significant amount of
research has since been conducted, the lack of studies on SME
branding in the marketing literature is still evident based on
Odoom et al.’s (2017) review of the current studies on the
subject.
One topic that currently lacks researcher attention is the
international branding strategies of SMEs (Spence and
Essoussi, 2010). Although several researchers have suggested
models and theoretical frameworks targeting SMEs –such as
Krake’s (2005) ‘funnel’model for SME brand management”,
Wong and Merrilees (2005) “branding-archetype ladder
model”and more recently, M’zungu et al.’s (2017) “typology
of SME brand management”(Odoom et al.,2017for a more
comprehensive review) –the majority of them have focused
primarily on domestic markets in western developed countries.
They are inapplicable to international branding strategies, as
they often overlook important dimensions in international
markets, such as the degree of standardization. Onlya handful
of studies have examined the international branding strategies
of SMEs (Couto and Ferreira, 2017;Gabrielsson, 2005;Huck
and Rennhak, 2013;Luostarinen and Gabrielsson, 2006;
Spence and Essoussi,2010).
In this section, Gabrielsson (2005)’s theoretical framework of
branding strategies was adopted to review the literature because it
comprehensively embraces dimensions in international branding
strategies based on the marketing and international business
literature. He outlines the three dimensions of branding strategies
in the context of SME international operations:
1 the brand-building approach;
2 the type and number of brands used; and
3 the degree of standardization.
The brand-building approach is associated with two issues: brand
identity development and marketing communication strategies
(an example of the latter being push versus pull strategies). The
type and number of brands used pertains to the dichotomy of
SME brand building
Jae-Eun Chung, Byoungho Jin, So Won Jeong and Heesoon Yang
Journal of Product & Brand Management
Volume 28 · Number 1 · 2019 · 63–79
64
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