The fact that the ranks of upscale American consumers are comfortably spreading their wealth around these days is another attraction to foreign companies looking for reliable expansion opportunities.
But to succeed in the U.S. today the way non-U.S. brands such as Hyundai, Samsung and Corona already have, a new analysis by a top-tier branding consultancy says CEOs of these companies must learn to “harness the power of the brand” rather than take the previous path of expansion in the U.S. through largely “brandless” investment growth that depended mainly on good timing for companies’ invasion of the American market or on a commodity strategy based on low prices.
Unless CEOs “recognize and act upon the importance of building strong ‘brands,’ they will most likely fail to achieve their U.S. objectives,” write John Grace and Russ Ackerman. Grace is president and founder of Brand Taxi and a former Interbrand consultant, and Ackerman is a consultant with Brand Taxi. “Brands have become the primary differentiator and a way for companies to garner the attention of customers, consumers and the trade.”
Grace and Ackerman argue that the major shift toward U.S.-based expansion by high-growth market-based companies in China, India, Brazil and other previously high-flying emerging markets makes sense. The logic includes their drive for greater revenues and profits, the large American middle class with strong per capita income, recognition of the stability of U.S. government, economic incentives for locating in a particular state or locality, access to important factors such as skilled labor forces and strong distribution channels, and a high number of “diaspora” consumers from the companies’ home countries living in America and often becoming the first wave of “acceptors.”
But the key to taking advantage of these opportunities, they argue, has become an emphasis on the visibility-gaining and differentiating power of the brand. This can lead to higher revenues, market share and profits and is the key to creating a “unique and ownable” position in the U.S. market.
The writers cite three brands as examples of foreign-based companies that already have successfully followed this path:
- South Korea-based Hyundai, which “entered the U.S. as a cheap vehicle, and overcame country-of-origin issues by offering the first [extended] powertrain warranty. The company focused on the design and performance of its cars, differentiated its offering and then spent heavily on its brand. They now have a market cap of $9 [billion], and even offer premium luxury vehicles. A successful model, corporate sibling Kia has followed Hyundai down basically the same U.S. path.
- Samsung, the Korean electronics giant, which now rivals Apple as a leader in smart phones by using a “focus on innovation” and aspirational tag lines targeted to young Americans and “superb connectivity” across devices and platforms.
- Corona, which rose from a popular brew among American college students visiting Mexico on spring break and leveraged clarity in positioning their brand, extensive advertising campaigns and significant levels of spending to capture the spirit of Mexican beaches and, still popular among the Gen X set, has become the No. 1-selling imported premium beer in the U.S.
To copy the success of such brands, Grace and Ackerman said that foreign companies must address key challenges, including adapting their business model to the realities of the U.S. market, taking a long-term perspective, and addressing “country of origin” issues that may attach themselves to a company whose domicile doesn’t have a good reputation for quality among American consumers.