A brand built on sand: Is acquiring a local brand in an emerging market an ill-advised strategy for foreign companies?

Martin Heinberg (), H. Erkan Ozkaya () and Markus Taube ()
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Martin Heinberg: University of Duisburg-Essen
H. Erkan Ozkaya: California State Polytechnic University, Pomona
Markus Taube: University of Duisburg-Essen

Journal of the Academy of Marketing Science, 2016, vol. 44, issue 5, No 5, 586-607

Abstract: Abstract The literature that focuses on acquisitions from the consumer perspective has generally neglected the brand strategy of cross-border acquisitions in an emerging market by a developed country brand. However, research in this field appears necessary, considering the high failure rate of M&As, the common practice of Western/global companies of augmenting their brand portfolio through local acquisitions, and the sensitivity of emerging market consumers to foreign brands. The present study is an initial attempt to understand the loyalty of consumers toward the acquired brands. Moreover, we investigate how such an acquisition affects the relationship between quality and loyalty, as well as between price and loyalty. For fast-moving consumer goods brands in China, the findings indicate that from a customer’s perspective acquiring a local brand is not an advisable strategy for foreign brand conglomerates, because such an international takeover may decrease consumer loyalty. Additionally, consumers tend to expect higher quality after the takeover but may not want to pay more for the quality increase.

Keywords: Mergers and acquisitions; Quality; Price; Loyalty; Local brands; Foreign brands; IBPA brands (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (11)

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DOI: 10.1007/s11747-015-0452-7

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