Wednesday, September 3, 2008

Brand Name Power

Sales fell 19% last quarter for the top three local PC brands in South Africa including Sahara and Mustek's Mecer. Strong global brands such as Dell and HP recently decreased their prices to levels that are comparable to local brands. Distributors have found that when local and global brands are priced competitively, consumers chose the well-known globally-branded PCs over local hero PCs.

Global brands have traditionally struggled to compete with local companies, which often sell at lower prices. With savings in labor and distribution, local companies can maintain thin margins and pass on those savings to the consumer. However, with value chain efficiencies and falling PC prices, larger global brands such as Lenovo, Dell, HP and Sony have begun to reach a similar price-point to local brands. While competitive pricing may not assure the premiums that multinational corporations are accustomed to, they do lead to a greater market share. Success in emerging markets has kept the PC industry healthy in spite of a weakening economy in the US and Europe. Companies that have previously invested heavily in building their global brand are beginning to reap the rewards in these growing markets.

Strong growth in emerging markets is quickly becoming essential to a global technology company’s health. With global brands becoming viable competitors to local hero brands, multinational corporations would do well to expand their marketing and build brand awareness among a wider and more diversified customer base in emerging markets. As costs come down for consumer electronics and global brands become more competitive, brand awareness and perceived quality could tip the scales.

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