Brand Extensions with an Asian Twist

Deakin email address: asidh@deakin.edu.au6c3ac0a1bebb25759b4105e9127b32b9An $88 Kit Kat bar, for the chocolate lover who has it all. Picture: Nestle

There is growing trend for melding Asian consumer tastes with long-established Western brands.

Nestlé’s Kit Kat launched a number of limited edition ‘gold flavoured’ Kit-Kat’s in Australia during the 2016 Chinese New Year. The gold flavoured Kit Kat bars included Phoenix Oolong tea leaves from China along with lychee and rose petals. Nestle only made 88 of the bars and sold them for $88 as the number 8 is considered lucky in Chinese culture.

McDonalds_China1

The influence of Asian consumer tastes on Western brands is not unique to Australia as reflected by the successful brand extension strategy of American fast food chains in Asia. For instance in China, KFC and McDonald’s have been catering to Chinese tastes by featuring a variety of rice dishes on their menus as rice is a major staple of the Chinese diet.

Brand extensions are a strategic use of a brand’s equity to leverage the brand’s reputation, reliability and high quality to induce customers to buy a new offering under the same brand (Iacobucci 2013, p. 83).

75% of the McDonald’s menu in India comprises new product creations under the McDonald’s brand to meet the needs of Indian customers that  consume neither beef or pork due to their religious beliefs (Dash 2005, p. 5). 80% of India’s population revere cows as sacred and over 150 million Indian Muslims do not eat pork.

Starbuck’s brand extension strategy in China was to adopt the Chinese tea-drinking culture by introducing green tea lattes and popular local teas like Oolong and Mudan alongside their fresh-brewed coffee. As a result, Chinese consumers quickly developed a taste for coffee and Starbucks’ popularity skyrocketed.

Starbucks

New Product Development

The companies that own the well-known brands above spend their resources on innovating new products to better satisfy current customers, attract new customers and fend of competition (Iacobucci 2013, p. 91). From a macro-environmental context, the changing demographics in Australia due to Asian migration and the rise of the middle-class consumers in China and India has led major Western brands to innovate and compete for substantial worldwide profits.  McDonalds serves 4 million customers in China on a daily basis (CNBC International, 6 August 2014).

Product Life Cycle

New product development is required to replace existing products within the brand’s portfolio that are ageing and experiencing declining sales and profits. The product life cycle describes the evolution and duration of a product in the marketplace (Iacobucci 2013, p. 97). The phases within a product’s life cycle are market introduction, market growth, maturity and finally the product’s decline. The above phases tend to have predictable sales and optimal marketing actions. McDonald’s strategy is discussed below to highlight how large Western brands have continued to grow in revenue by replacing declining products with new innovative products.

During the early expansion phase of McDonald’s life cycle in the United States, there was a strong demand for their products, and sales grew rapidly. When the growth rate of sales for their basic hamburger began to decline, McDonald’s introduced new products, such as the Big Mac and McMuffin to counter the decline in sales for the basic hamburger.  As the life cycle for each new product matured, McDonald’s continued to grow by adding new products and entering new markets (Gup & Agrrawal 1996, p. 3). When the trading environment in the United States  became increasingly competitive and saturated, McDonald’s opened new markets overseas in countries such as China and India. The strategy has been successful due to the development of new products that consider the cultures in which their businesses operate.

By adapting to local tastes and cultures while still maintaining their brand identity these chains have successfully become powerful forces in Asia.”

Student name: Amarjit Sidhu ; Student ID: 93072431

References:

Dash, K 2005, ‘McDonalds in India’, Thunderbird: The Garvin School of International Management, pp. 1-25, retrieved 25 April 2016, <http://www.csumba.org/mba602/McDonald’s%20in%20India.pdf&gt;
Gup, B & Agrrawal, P 1996, ‘The Product Life Cycle: A Paradigm for Understanding Financial Management’, Financial Practice and Education, Fall/Winter 1996, pp. 1-9, retrieved 25 April 2016, <http://ssrn.com/abstract=2621151&gt;
 Iacobucci, D 2013, Marketing Management (MM4), Student Edition, South-Western, Cengage Learning, Mason, Ohio.

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