Question

1. Your company has a strong brand name in the United States, and you’re ready to enter Africa, especially West Africa. You decide to acquire a local company in Liberia. Considering your understanding of branding, would you use the existing US brand in Liberia? Would you use it in all of West Africa? Or would you use your strong US brand globally? Would you use both brands in the same markets? Discuss the advantages and disadvantages of the various strategies, taking into account the trust factor of brands, the influence of local differences, and the country-of-origin effect.

Answer 1

North American brands have increasingly gained prominence in the African subcontinent. These brands have a tremendous goodwil, which is one of the cruicial assets for a company. West Africa comprises of 16 countries, with an average GDP per capita od 2,500 US$ and nearly all the West African countries fall in the category of developing countries. There is a general trend in such developing countries to value highly the American and other foreign brands due to various factors such as the demonstration effect; bandwagon effect applies highly in these countries.

Case 1: The local company acquired in Liberia is not well-known/lacks recognition

In this case, as the goodwill and name of my American brand is far highers and people will pay just for the name of my brand, the would be advantageous to use my American brand name instead of the local Liberian name due to pre-existing goodwill and recognition of my American brand.

Case 2: The Liberian company acquired is well known and has a strong base in Liberia

In this case, retaining the local brand name, which already has a significant goodwill would be advantageous. In this scenario, using the local brandname as well as the American brand name would yield maxiumum benefit. As goodwill of both the brands will be exploited in this scenario.

Case 3: The Liberian company acquired is well known in Liberia, but not in other West African Countries

In this situation, it is feasible to use both the Liberan and American brand name in Liberia. But, in the other West African countries, using the American brand name would be more beneficial.

Case 4: The Liberian company acquired is well known in entire West Africa

In this, expanding upon the base of the Liberian company would lead to the maximum gains. In the long run, the American brand name could be introduced. However, both the brand names will have to continue to be used.

Case 5: The Liberian company is not well known in Liberia or other West African countries

Using only the American brand name is most suited in this case.

LOCAL DIFFERENCES AND COUNTRY OF ORIGIN EFFECT:

My American brand has to certainly adapt to the local differences. For instance, Mc.Donalds introduced a large number of vegetarian options in the Indian market to cater to a large number of vegetarian population. Thus, making such changes/ alterations would be a must when entering into the African market.

Country of Origin effect: As the world is becoming more and more connected, transcending borders, the non-willingness to purchase a foreign brand just because of its place of origin has diminished. Apart from this, there is a strong tendency for people in developing countries to value foreign brands highly. Thus, the country of origin effect will lead to positive outcome in this particular case.