A brand portfolio means a collection of brands from one and the same organization. There are some benefits to develop several brands in a company. The utilization of several brands increases the chances that consumers will buy a brand from the portfolio of your company. This strategy is applicable to a larger level of risk, and also provides stable foundation for extension to the brand. It also provides “Synergy effects” which among other things may benefit the profitability of the company. So, a brand portfolio is good for a company, and the key is to utilize other brands to protect the most valuable brand of a company from competition.
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In a brand portfolio, four types of brand are distinguished. A bastion brand has the major strategic and financial advantages for the company, as it is the most profitable brand in a brand portfolio. A flanker brand has the maximum strategic advantages because it is used to thwart potential competitors. “A bastion brand can be protected from competitive discount brands by introducing one or more fighter brands” (Riezebos et al., 2003: 198). The fourth type of brand is a prestige brand, the financial value of which is huge. Except for the bastion brand, the other three types of brand are not fit for extensions (management advantages).
In the process of building a brand portfolio, initially the company should choose which brand is the most valuable for it and how it intends to defend this brand. How is a brand portfolio set up?
Three strategies can be used:
Brand development (corporations exploit the individual brand itself)
Brand acquisition (by purchasing related brands)
Brand alliance (by making arrangements with other corporations).
The first strategy takes a long time to exploit brands and has average control over the market position of the brand. It also needs high investment. In brand acquisition, the speed of building a brand portfolio is quite fast, and the level of control is maximized, while the financial investment is very high. There needs low control and low investment in brand alliance, and the time of building a brand portfolio is neither too quick nor too slow (Ourusoff et al., 1992).
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A great brand portfolio provides a steady foundation to a corporation not only to help gain entry into other product groups, but also to help gain entry into other countries. The development of a successful brand into other countries is termed international branding. This branding can promote the financial condition of a corporation, and enhance the strategic position of this corporation in other countries (Marston, 1992).
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Corporations have a tendency to develop several brands in more than one market, and how to control this situation is something which must be considered as part of the brand’s management. Brand portfolio, brand extension and endorsement are main forms for a corporation. Zara belongs to a brand portfolio, Inditex Group. There are many advantages to building up a brand portfolio. For instance, this strategy is relative to a greater degree of risk spread, and offers a more steady foundation for extension to the brand. In a brand portfolio, four types of brand are differentiated. A bastion brand has the greatest strategic and financial merits for the corporation, as it is the most valuable brand in a brand portfolio. A flanker brand is used to prevent potential competitors. Fighter brands defend the bastion brand from competitive discount brands. And finally the prestige brand is one with the greatest financial value (Riezebos, 1995b). According to Table 1, Zara is a bastion brand, which is the most profitable brand and has a high strategic advantage. Other brands in the Inditex Group can assist Zara to stem possible rivals from entry into its market, and to spread risks in the competition. Moreover, three strategies can be used to set up a brand portfolio: brand development, brand acquisition and brand alliance (Riezebos et al., 2003). The Inditex Group adopts a brand development strategy. It is obviously
shown that, as a bastion brand in a brand portfolio, Zara is being more uccessful. In other words, if a brand portfolio is well controlled, it can develop more successfully than other corporations with a single strategy. Zara is an international branding because 68 countries all over the world have its stores. It also demonstrates that Zara is an effective brand. This type of branding can advance the financial condition of a corporation, and promote the strategic position of this corporation in other countries (Marston, 1992). A successful brand has a manifest value and a latent value. In the international brand strategy, a powerful brand has a distinctly manifest value, but the latent value of a brand can be exploited by brand extension and endorsement strategy.
In developing a brand’s latent values, the endorsement strategy can be used. In an endorsement strategy, a new product has a new and unique brand name. Inditex has seven endorsed brands: Zara, Massimo Dutti, Bershka, Oysho, Pull and Bear and Uterqüe (Inditex, 2007) Inditex selects the endorsement strategy rather than the extension strategy, because it is eager to appeal to more consumers than those in its contemporary consumer franchise (i.e. the different target group) (Riezebos et al., 2003). A brand extension means the name of an existing brand is employed for a product in a dissimilar product group, such as Zara and Zara Home. Zara is a successful and strong brand, so it is extended to another product class, Zara Home. Awareness of brand name Zara Home is higher as Zara, its parent brand, is already known to consumers. In addition, Zara evokes feelings of familiarity (positive association) within consumers, which perhaps results in a greater probability of purchasing Zara Home. It is well-known that the fashionable design with the medium price is one main characteristic of Zara, and then consumers think Zara Home also has the same feature. From the corporation’s view, Zara Home is successful. From the view of consumers, they are not so sure whether Zara’s extension strategy is rewarding. Perhaps Zara Home is still a new brand for consumers, and there are not so many stores in the street about this brand. Hence, no matter which strategy is chosen, it must be useful to develop a brand to become powerful. In summary, Zara chooses premium strategy and impressive approach positioning, and the brand value of Zara is related to need-driven and inner-directed aspiration levels. It has positive and strong images and high brand-added value. Although brand name, design and advertising as an instrument have an important effect in the brand management, not all of them should be employed. It is better to use the most appropriate one, so they chose to employ design and brand name. Zara set up a brand portfolio, Inditex Group, which utilizes an endorsement strategy to exploit more brands. Zara also developed a new extended brand, Zara Home. Based on these factors, Zara has become one of the largest global fashion companies.
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