Wednesday, December 26, 2007

Jaguar at Wal-Mart price?

Will you buy Jaguar at Wal-Mart?

From The Statesman
26 December 2007

ND Batra

What will happen to the Jaguar brand image if it is acquired by Tata Motors, a company that is associated with tractor-trailers, full-size SUVs, and now getting ready to manufacture the world’s cheapest automobile?

India may tolerate contradictions, slums and high towers in the same neighbourhood, but the global marketplace does not.

Writing in The New York Times, Heather Timmons commented: “Jaguar dealers in the United States have expressed concern about an Indian buyer, which they believe would devalue the luxury brand name.” But the Tata business empire also includes Tata Consultancy Services, one of the world’s largest providers of information technology, consulting services and business-process outsourcing with presence in 47 countries.

Last year, the Tata Group bought the Anglo-Dutch company Corus, making it the world’s sixth largest steelmaker. The Time magazine called it one of the top ten business deals of 2007.

Protecting brands is important, especially when the global market is becoming crowded with cheaper goods and it is difficult to distinguish between one product and another, though of course, you won’t confuse a Land Rover with a “One-Lakh Car”.

In the struggle for shelf space in the buyer’s imagination, branding has become indispensable. Brands create loyalty by offering identity, prestige and security, though the quality of a brand name product may not be much higher than its non-brand twin. And as non-brands and copycats themselves become recognizable names, the need to strengthen brand loyalty through its intensification becomes imperative.

Ulrich Steger says in his book Corporate Diplomacy: “Today brands indicate a life style, aspirations, a set of ideas or a social cachet.” Most people feel satisfied with pizza but some do want to have caviar. But will they go to Pizza Hut for caviar if it were available there? Some of the attributes of a good brand include originality, quality, reliability and personality. Quoting Naomi Klein, Steger says: “As companies become weightless, focusing on marketing and design only (but reaping with this bulk of the profit), they are shifting production into sweat shops elsewhere.”

So even if Jaguar and Land Rover will continue to be manufactured in Britain, thanks to the vote of confidence by its powerful union, Tata Motors cannot ignore the problem of image management and product reputation by association. India may not be a “land of tigers, jungles and cobras,” but you cannot hide the slums.

The survival of a strong brand in a competitive environment of meaning and identity creation is a serious question. A scandal could raise social protests and destroy a brand, unless brand values are deeply shared and lived by the whole company. “Always Low, Always” Wal-Mart’s slogan, for example, was being interpreted as putting the employees low.

The gap between promises and reality of a company’s behaviour gives critics opportunities to strike at the company.

Reputation of a company is as important as its other assets, including the country in which it is embedded.

The question is: Will European and American buyers continue buying the luxury brands Rover and Jaguar if they were sold, in a manner of speaking, through K-Mart or Wal-Mart?

Will the cool soon become a passing fad as it changes hands? Marguerite Rigoglioso, reporting the research done by Stanford business professor Chip Heath and Jona Berger of Wharton School at the University of Pennsylvania, wrote in Stanford GSB online that “as soon as chic goes mainstream, or geeks start sporting the clothes of jocks, items are dropped like passé hot potatoes by the kings and queens of cool.”

Rupert Murdoch, the Australian global media tycoon, faced a serious problem when he tried to buy the Wall Street Journal, whose brand value exceeds its intellectual value. Murdoch had to bend his knees and promise not to mess up with the editorial independence and integrity of the Journal. He had to accept a most humiliating condition: the establishment of a self-perpetuating independent editorial board to oversee the integrity of the newspaper.

Of course Jaguar will not be sold at bargain basement prices, and the Tata Group has a better reputation than Murdoch; nonetheless, the company has to understand that selling a Corus steel structure is not the same thing as selling a Jaguar convertible, which sits on your driveway. The Jaguar brand has a social meaning beyond its value.

As Wharton’s Professor Berger says: “Companies need to manage meaning. Brands need to attend to who is adopting their products, because these adopters can change what purchasing or using the product signals, and can lead other consumers to abandon it. If you want your brand to retain caché, you might want to think about protecting or segmenting meaning. Brands can constrain the type of consumers who can easily find it, or can use sub-brands or limited edition options that allow the company to sell to the mainstream while also maintaining the desired signal for the taste leaders.”

Let me rephrase the question: Will Europeans and Americans buy Champagne from the slums of Mumbai? The Tatas, the Mittals, the Ambanis and their billionaire kinds, as they go on mergers and acquisitions (M&A) sprees abroad, should also help clean up the slums of India.

Unlike Indians, Europeans and Americans have little tolerance for cognitive dissonance.

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