Local Brands, Foreign Investment And Strategic Brand Competition

With the increase entry of foreign enterprises into the host-country market and rapid expansion of the foreign investment, the issue causing by the entry of foreign capital is increasingly conspicuous. In the area of joint ventures and M&A, the brand competition of foreign enterprises by "weakening" the local brands' market influence has recently developed into one of the most concerned problems.This thesis firstly admits the positive spillover effects of foreign investment to the development of the local brands. Then beginning with the description and analysis of the fact that the market share of the local brands gradually decline or even disappear when foreign enterprises control the local brands, the thesis investigates the problem of the disappearance of local brands causing by the entry of foreign capital, using the theories of microeconomics, industrial organization, information economics, and brand. The thesis uses the methods of theoretical analysis combining with case studies, centering on the foreign enterprises' brand competition strategies, analyzes the local enterprises' brand decision-making and constraints.The thesis is arranged as follows:The first chapter describes the fact that the market share of the local brands gradually decline or even disappear when the foreign enterprises control the local brands and the significance of selecting this topic, shows status of the relevant researches with the features, methods and the ideas of analysis in this thesis.The second chapter analyzes the basic role of brand on improving the enterprises' position in the market competition. For enterprises, the brand, like other advantaged resources, can be conducive to raising the market share and enhancing the market forces. Using brand, enterprises can reduce the degree of information asymmetry, form product differentiation and build barriers to entry to enhance market forces.The third chapter researches the channels that foreign enterprises affect the local brands. This is prepared for further analysis of the foreign enterprises' brand competition strategies. At the same time, the part describes the status of introducing foreign capital to China and the major areas that foreign enterprises affect the host-country's brands. The channels that foreign enterprises affect the local brands contains: (1) Set up joint ventures with local enterprises (2) Merges and acquires local enterprises (3) Acquires local brands directly.The forth chapter is the main part of this thesis. It discusses the brand competition strategies of foreign enterprises when they enter into the host-country market. (1) using the theory of industrial organization, the thesis analyzes the foreign brands' market position at the initial stage of entering the host-country market. Then it discusses the barriers to entry which faced by foreign brands and formed by consumer preference differentiation, asymmetric information, advertisements and distribution channels; (2) showing two distinct brand competition strategies adopted by foreign enterprises when they have taken control of the local brands: eradicable brand competition strategies and incorporated brand competition strategies; (3) analyzing reasons influencing the selection of the foreign enterprises' brand competition strategies: the foreign enterprises' preferences on brands and non-brands resources, the strength of the local brands' market influence, the products' positioning differentiation between the local brands and foreign brands and the degree that the foreign enterprises control local brands; (4) discussing the foreign enterprises' benefit gained by using of the local brands and the specific measures of eradicable brand competition strategies, which means how foreign enterprises "weaken" the local brand's market influence step by step.The fifth chapter analyzes the local enterprises' brand decision-making and constraints. The entry of foreign capital affects the development of local brands is an inevitable result of joint venture or M&A between local and foreign enterprises, the local enterprises' brand decision-making can also influence the development of local brands. Although the local brands may be "concealed" when they are controlled by foreign enterprises, the fact that local enterprises transfer the right to use brand or brand ownership to foreign enterprises occurs frequently and never stop. The constraints that affect the local enterprises' brand decision-making can be explained as follows: (1) enterprises' competitiveness is not so strong; (2) there is urgency in the enterprise's fund chain; (3) "rent-seeking" behavior of the local government.The sixth chapter is the summary of this thesis. It puts forward some conclusions, policy implications and the inadequacy of the study.