How the number of brands in the company’s brand portfolio affects the performance of the firms operating in the Asian market?

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How the number of brands in the company’s brand portfolio affects the performance of the firms operating in the Asian market?

Teodora Oresharova Student ID: 11375639

Date of Submission: 22 June 2017

MSc Business Administration: International Management Master Thesis

University of Amsterdam

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Statement of originality

This document is written by Student Teodora Oresharova who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

The effective development of a brand strategy has become more important because of the integration of the markets and the opportunities of doing business internationally. This thesis investigates how the number of brands in the brand portfolio affects the market share owned by a company. The literature doesn’t provide a consensus on this topic. On the one hand, some authors assume that the more brands the company possesses, the bigger market share it has because it could satisfy more diverse consumer needs. On the other hand, previous studies suppose that the wider brand portfolio could be inefficient and could lower the brand loyalty. The research is focused on the Asian market and includes both foreign and local firms operating in it. This study states that there is a positive relationship between the number of brands and the market share of the company. Moreover, the analysis examines the moderating effect of the cultural distance and the level of economic development of the host country on this positive relationship. The results show that there is a positive moderating effect of the cultural distance, while the level of economic development moderates negatively the relationship between the number of brands and the market share. The study provides some different aspects related to the scope of the brand portfolio and extends the current literature about brand strategy.

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Introduction

The globalization of the markets has accelerated and the consumers have a big amount of brands to choose of (Hsieh, 2002). Furthermore, the role of the brand becomes more important for the performance of the firm (Wise & Pierce, 2005). The brand could be defined as “all the expectations and associations evoked from experience with a company or its offerings” (Petromilli, Morrison & Million, 2002, p. 23). The brand represents the vision and the feelings of the consumers about the products or services offered by the particular company (Petromilli, Morrison & Million, 2002).

The effective management of the brand portfolio is becoming more and more significant because of the globalization of the markets and the desire of the firms to operate on the international market. The reason for this is that the global markets proffer greater opportunity for companies to choose from more diversified and larger markets around the world (Di Giovanni, Gottselig, Jaumotte, Ricci & Tokarick, 2008). The firms could leverage the access to more capital, technologies, innovations, cheaper and different goods and services, and larger export markets (Di Giovanni, Gottselig, Jaumotte, Ricci & Tokarick, 2008).

The firm would like to use the possibility to serve wider consumer base. The rapidity of the globalization is one of the main reasons for the evolvement of the companies. In order to answer to the changing economic environment, companies upgrade their portfolio management strategies to more complex (Talay, Townsend, & Yeniyurt, 2015). Brand portfolio is associated with all brands which the company possesses and manages (Aaker, 2009).

Therefore, one of the consequences of the globalization is the appearance of global brands (Townsend, Yeniyurt & Talay, 2009). The emergence of the global market is a reason for the marketers to understand and find the right way to change the brand strategy of the companies (Shocker, Srivastava & Ruekert, 1994).

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Previous research examined how the different dimensions of the brand portfolio influence the value of the firm (Bahadir & al., 2008; Bharadwaj & al., 2011; Morgan & Rego, 2009; Rego & al. 2009; Wiles & al., 2012). These characteristics include the scope of the portfolio, the segments, the level of competition between the brands, and the positioning of the brands (Bahadir & al., 2008; Bharadwaj & al., 2011; Morgan & Rego, 2009; Rego & al., 2009; Wiles & al., 2012). The scope of the brand portfolio could be defined as “the number of brands the firm owns” (Morgan & Rego, 2009, p.60).

The relationship between the number of brands in the brand portfolio and the size of the market share is interesting to investigate because there are different points in the literature and there is no consensus. On the one hand, some authors consider that the more brands the company possesses, the bigger will be the market share of the company (Kekre & Srinivasan, 1990; Lancaster, 1990).On the other hand, the wider brand portfolio is inefficient (Finskud & al., 1997; Hill, Ettenson & Tyson, 2005; Laforet & Saunders, 1999) and also could reduce the brand loyalty (Bawa, Landwehr & Krishna, 1989; Quelch & Kenny, 1994).

It is valuable to examine how the foreign companies operating in the Asian market develop their brand strategy in comparison to the local companies. According to McKinsey’s Report (2015),” for the past 50 years, most countries in Asia have grown faster than their North American and Western European counterparts”. Also, there are a lot of emerging countries in Asia, which means that the companies face a substantial number of impediments in terms of regulations and institutions (Khanna & Palepu, 1997). It is interesting to understand how the companies form and employ their strategies in these conditions. Likewise, is it better to enter a country with many brands in the brand portfolio in order to serve more clients and to answer to more needs? Or is it more appropriate to have a small brand portfolio but to focus on the development of these brands to become more competitive? On the one hand, the more brands

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the company has, the more consumers can serve. On the other hand, the fewer brands the firm possesses, the more competitive they will be.

I would like to investigate how the number of brands in the brand portfolio influences the market share of the company – as one of the reliable measures of company’s performance (Talay, Townsend & Yeniyurt, 2015). In other words, is it more relevant to have a wide brand portfolio or it is better to focus on smaller number of brands in order to achieve better performance? There are studies which provide empirical proofs that there is a positive relationship between the branding and the performance (Doyle, 2001; Krake, 2005; Rao, 2005; Berthon & al, 2008; Keller, 2008; Gromark & Melin, 2011; Ambler, 2012).

The research will be focused on the beer industry and will contain the brands of the foreign and local companies, which operate in the Asian market. Literature has paid little attention to the brand strategies of the firms operating in the Asian market. It is appropriate to investigate this market because of the presence of a lot of heterogeneities in terms of cultures, religions, and beliefs, level of economic development, consumers’ tastes and preferences. Also, there are a lot of countries in Asia which are appropriate examples for transition economies - these nations which are moving from planned economy to a market-based economy (Hoskisson & al., 2000).

The economic development of a country could affect the perceptions of the consumers for a brand or in other words the economic development impacts the propensity of the consumers to purchase (Hsieh, 2002). The level of economic development could be examined as a moderator of the relationship between the number of brands in the brand portfolio and the market share of a company. Also, I will examine the moderating role of the cultural differences between the home countries of the foreign companies and the host countries. The way the consumers answer to the branding strategies of the companies is crucial. Their perceptions are really influenced by their values, understandings, and beliefs (De Mooij,

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2010). Generally, all the cognitive and motivational characteristics are formed and developed under the impact of the culture (Aguirre‐Rodriguez, 2014). I will measure the cultural distance by using the framework of Hofstede as one of the dominant methods for analysis of the cultural differences in the literature (Talay, Townsend & Yeniyurt, 2015).

The thesis will be structured as follows. Firstly, a literature review about the brand strategy, cultural distance, economic development, the relationship between the brand portfolio and the firm’s performance will be discussed. Secondly, the theoretical framework will be discussed. After that, the research design will be explained. The next section will be for the results from the analysis. Lastly, the discussion of the results, the academic contributions, the managerial implications, the limitations of the research and the suggestions for future research will be discussed.

Literature review

Brand strategy

Thus, the companies need to formulate appropriate brand architecture in order to be competitive. It is well-known in the literature that the development of strategic branding is a necessary factor for the creation of sustainable competitive advantage and profitable financial results (Aaker, 1996; Abimbola, 2001; Berthon & al, 2008; Keller, 2008; Wong & Merrilees, 2008; Ambler, 2012; Reijonen & al, 2012; Urde & al, 2013). There is a general consideration that a brand delivers to a product more value (Heinberg, Ozkaya & Taube, 2016). Likewise, a branded product creates more consumer loyalty than an unbranded one (Dodds & Monroe, 1985; Dodds & al., 1991; Grewal & al., 1998).

The brand architecture is defined as the way the firm organizes, directs and sells their brands (Petromilli, Morrison & Million, 2002). The brand architecture is the “face” of the company’s

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strategy (Petromilli, Morrison & Million, 2002). The brand architecture of the firm should align with the strategy of the firm (Petromilli, Morrison & Million, 2002).

Brand architecture is the way all diverse parts of the brand portfolio are managed, organized and developed by the company (Petromilli, Morrison & Million, 2002). The fit between them is influenced by the shifting condition in the markets and the evolvement of new business strategies (Petromilli, Morrison & Million, 2002).

Brand architecture is related to the creation of strategic motivation which key role is to coordinate the decisions about the management of the international brand portfolio (Douglas & al., 2001). The architecture of the brand portfolio is a determinant factor in the marketing strategy of the company because it creates the path how to leverage the strengths of the brands in the portfolio across markets and regions (Douglas & al., 2001).

Likewise, the brand portfolio of the companies is an intangible asset which has a significant impact on the performance of the firm (Ailawadi, Lehmann & Neslin, 2003; Capron & Hulland, 1999; Sullivan, 1998). The companies should structure their brand portfolio in a leveraged way in order to convert these brands in competitive advantages for the firm. Many prior studies assume that there is a positive relationship between the brand portfolio and company’s performance (Doyle, 2001; Krake, 2005; Rao, 2005; Berthon & al, 2008; Keller, 2008; Gromark & Melin, 2011; Ambler, 2012). Thus, the efficient management of the brand portfolio is essential for the long-term performance of the companies (Doyle, 2001; Keller, 2008).

A resource-based view is an approach which supposes that the company needs to manage its heterogeneous resources and capabilities in order to create a sustainable competitive advantage (Barney, 1991, 2014; Wernerfelt, 1984). The VRIO framework assumes that company’s resources could be valuable, rare, inimitable, and if the firm is organized and ready to exploit them, they would create a competitive advantage for the firm (Barney &

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Hesterly, 2012). According to Barney (1991), the reason for the different performances of the companies is because all companies possess diverse kinds of resources even if they are in the same industry.

Most market-based resources have one main characteristic – they are intangible, for instance, brand and market sensing (Haapanen, Juntunen & Juntunen, 2016). This means that they are hard to be imitated and replicated by the competitors. These resources give a great possibility for sustainable competitive advantage (Kozlenkova, Samaha, & Palmatier, 2014).

Marketing capabilities provide an opportunity to the companies to reach market information and knowledge and in this way, firms are capable of aligning their strategies with the characteristics of the market (Barrales-Molina, Martínez-López & Gázquez-Abad, 2014). There exists a clear relationship between the strategy of the company and the branding (Urde, 1999; Wong & Merrilees, 2005; Urde & al, 2013). According to Keller (2008), there are 4 main phases in the strategic brand management. The first one is the actions of the management to find and determine where the position of the brand should be (Neuvonen, 2016). Afterwards, the company should create a marketing plan and apply it. As a third step is determining and analyzing the brand performance (Neuvonen, 2016). The last step of the process is defined by making the brand equity sustainable (Neuvonen, 2016).

In the literature, there are two different brand portfolio strategies for strengthening the connection between disparate brands - “pooling” and “trading” (Petromilli, Morrison & Million, 2002).

The function of the first one is to organize multiple separate brands to work coherently in order to answer to the needs of the target customers. The main idea is that each brand is varied and has its own superiorities (Petromilli, Morrison & Million, 2002). Therefore, every brand could provide additional value to the consumers (Petromilli, Morrison & Million, 2002). The main aims are reaching more relevance in wider market and building brand loyalty in the

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portfolio. In this way, this brand strategy establishes “top-line growth” (Petromilli, Morrison & Million, 2002).

On the other hand, the brand strategy “trading” is based on creating a relationship between two or more brands in order to use their complementary values (Petromilli, Morrison & Million, 2002). The main advantage of this strategy is filling (Petromilli, Morrison & Million, 2002). Likewise, in this way, the company could create a balanced mix with a value which is not possible for a single brand (Petromilli, Morrison & Million, 2002).

For instance, the branding strategy “trading” is used by Disney and in this way, it supports the whole brand identity to its sub-brands as Disney World, Disneyland, or the Disney Stores. In other words, each of these sub-brands creates its own value but they also leverage the whole power of Disney perceptions (Petromilli, Morrison & Million, 2002). However, the both strategies provide a lot of opportunities for improving the brand portfolio. Likewise, they lead to cost-efficiency (Petromilli, Morrison & Million, 2002).

Global Brand Strategy

The global integration of markets inspires firms to find new ways of serving and satisfying the international consumer base (Wang, Wei & Yu, 2008). Globalization could be defined as “the distribution and creation of products and services of a homogeneous type and quality worldwide” (Rugman & Moore, 2001, p. 65). The presence of more markets leads to the need of stronger competitive advantages (Matanda & Ewing, 2012). Furthermore, companies try to adapt their strategy to the new global opportunities and to raise their worldwide competitiveness (Wang, Wei & Yu, 2008).

Globalization is a term which shows the process of international integration of the markets in terms of breaking down the national barriers for trade and exchange (Douglas & Craig, 1989; Levitt, 1983; Ohmae, 1989). This process is influenced by a big number of factors as the development of the communication and information channels, decrease in transportation

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costs, changes in the market economies, and the emergence of terms as a global consumer, media, and products (Zou & Cavusgil, 2002). The globalization of the markets provides a lot of possibilities for the companies. They could leverage the development of technological innovation, transport, the interconnection of global value chains, reduction of trade tariffs and barriers between countries (Garrett, 2000; Di Giovanni, Gottselig, Jaumotte, Ricci & Tokarick, 2008). Furthermore, the companies could broaden their operations and have the opportunities of doing business internationally.

The globalization of the company is defined as “the transformation of leading business organizations from domestic, to multinational enterprises, to those with broad global scale and scope” (Ghoshal, 1987; Perlmutter, 1969 as cited in Townsend, Yeniyurt & Talay, 2009, p. 540). The literature proposes that some of the company’s brands will follow the global brand strategy trough the gradual process of internationalization (Johanson & Vahlne, 1977). In order to answer to the integration of the markets, the companies develop their multi-domestic marketing approach into global marketing approach (Schuiling & Kapferer, 2004). Companies developed their brand strategies in order to meet the diverse consumers’ preferences. According to Hsieh (2002), the number of brands, both domestic and foreign, has considerably increased. In confectionery, for example, the number of brands increased by more than 40 percent in the recent years (McKinsey, 2015).

Global brand means that the brand identity of the services or the products remains the same though the implementation is aligned with the local marketing approaches (de Chernatony, Halliburton & Bernath, 1995). Hence, this doesn’t mean that the product is not adapted to appropriate markets or nations but the global brand view is distinguishable and the associations and the main identifiers of the brand such as logo are unchanged (Townsend, Yeniyurt & Talay, 2009). Therefore, the relationship between the brand portfolio and the

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performance of the firms, and the globalization of the markets lead to the necessity of formulating an effective global brand strategy.

Therefore, companies develop and promote global brands (Townsend & al., 2009; Wang, Wei & Yu, 2008). Brands may be used as a tool to maintain and enhance the competitive advantage of the firms (Abimbola, 2010). Global brands could be defined as “tools that enable organizations to portray and manage consistent corporate and brand images across a diverse customer base” (Matanda & Ewing, 2012, p. 6).

In the marketing literature, there exist a diverse amount of brand strategies. Some of the major strategies of the brand architecture are the following - global, multi-regional, regional, and domestic (Townsend, Yeniyurt & Talay, 2009). The first type of brand performs in all main markets of the world. Another important characteristic of this type is that it is to some extent standardized for all these markets.

Typical for multiregional brands is that they are popular in several markets on several continents. The main difference between them and the global brands is that they are not standardized across the major markets and they are not in all triad markets (Asia, Europe, and North America).

As regards to the regional brands, they take part in several countries but in only one region (Rugman & Collinson, 2004). According to Morrison, Ricks, and Roth (1991), the company could achieve greater balance if it applies the multiregional strategy. For instance, examination of a case of global automotive manufacturers indicates that the bigger part of them was applying a regional strategy with only a few global moving (Schlie & Yip, 2000). As regards to better performance, companies need to develop semi-global marketing strategies (Douglas & Craig, 2011).

Domestic brand is performed only in the national market of the brand. On the one hand, there is evidence that the brands which are sold on narrower geographic scope could create

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attractive opportunities for the consumers. However, on the other hand, the global brands are associated with greater quality (Townsend, Yeniyurt & Talay, 2009).

The relationship between brand portfolio and firm performance

The literature has examined to some extent the relationship between the brand portfolio strategy and the firm performance. Some authors assume that the brands which the firm possesses could be a competitive advantage for the firm if they are effectively organized (Morgan & Rego, 2009). The importance of this relationship leads to different research related to the characteristics of the brand portfolio in order to find interdependence between the brand strategy of the firm and the financial results of the firm. The performance of the firm could be measured in a different way – sales volumes, profit margin, market share (Roth, 1992).

The effective brand strategy is important for achieving better international performance. The global brand strategy could enhance economies of scale and scope (Ozsomer & Altaras, 2008; Strizhakova, Coulter & Price, 2008). Economies of scale provide the opportunity to gain competitive advantages in worldwide markets. The standardization of the global brand reduces the cost related to research and development, communication (Ozsomer & Altaras, 2008; Strizhakova, Coulter & Price, 2008).

Another advantage is the development of a unique brand image across countries. All these consequences lead to higher financial performance and develop the unique brand image. For instance, the contribution of an effective brand strategy is mainly related to attracting new consumers, creating barriers to new entrants, extension in the same or in new product categories, access to new markets, brand loyalty, premium prices, lower price elasticity, promotional efficiency, better negotiating position in marketing channels (Veljkovic & Kalicanin, 2016).

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According to some authors, the most common brand strategies are “branded house” and “house of brands” (Petromilli, Morrison & Million, 2002). The first one is the strategy which includes only one master brand and its sub-brands names (Petromilli, Morrison & Million, 2002). In this way, the companies emphasize on the development of a narrower portfolio in order to be competitive.

The strategy “house of brands” supposes the presence of a large number of brands because of the expectation for greater gains instead of possessing few brands (Petromilli, Morrison & Million, 2002). Furthermore, one of the most important decisions which the company’s management should undertake is the scope of the brand portfolio. The literature doesn’t reach a consensus about the more profitable and appropriate brand portfolio strategy in terms of the number of brands.

It is hard to define which of these two strategies is better or more profitable because for example a lot of competing firms use different approach – General Mills applies “house of brands”, while Kellogg’s employs “branded house” (Petromilli, Morrison & Million, 2002). Some organizations try to develop a balance between the both strategies. However, if the firm would like to have successful brand architecture, it should consider a lot of factors as the strategies of the competitors, information of the changes on the market, a clear understanding of the goals (Petromilli, Morrison & Million, 2002). The alignment between the strategy and the perception of the customers is the foundation for creating successful brand architecture (Petromilli, Morrison & Million, 2002). The brand management of the company should understand the viewpoints of the customers in terms of “Which brands do customers perceive as being in our portfolio? What relationships do customers see between brands in the portfolio?” (Petromilli, Morrison & Million, 2002, p. 23).

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Companies should put them “in the shoes” of the customers for better understanding the perspectives of them. On this base, they could develop in the more strategic way their brand architecture.

The globalization of the markets and the desire to achieve better financial results and market share have led to the implementation of different brand strategies. Literature provides opposite opinions in terms of the breadth of the brand portfolio. However, it is missing a unanimity.

Brand portfolio strategy is an important part of the strategy of the business practice because companies could obtain competitive advantages through the use of strong brands (Aaker, 1998; Keller, 1993,2000). According to Aaker (1992) awareness, associations, perceived quality, and brand loyalty are the four main dimensions of a strong brand. Therefore, the strong brand could generate higher returns and also reduce the risk (Madden & al., 2006). The consumers perceive a strong brand as a symbol of higher quality (Chu, 2013). Likewise, branding strategy is a powerful tool for sustainability (Lin & Kao, 2004).

Therefore, the development of brand strategy is becoming more and more important in the global marketing (Wang, Wei & Yu, 2008). According to Aaker (1991), brand equity comprises brand loyalty, brand awareness, perceived quality, brand association and other brand assets. Furthermore, brand equity is the value which makes a branded product profitable and successful in comparison to non-branded products (Moore & al, 2002). Thus, brand equity comes from how much consumers trust in brand rather than in competitors’ brand (Keller, 1993). It could be evaluated by the perceived value, uniqueness of the brand and willingness to pay a premium price (Netemeyer & al., 2004).

In order to develop a profitable and successful brand portfolio, company’s management needs to analyze more in depth the portfolio (Petromilli, Morrison & Million, 2002). Therefore, it is important to examine the relevance of the brand and its probability to satisfy the preferences

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of the consumers. Likewise, the analysis should also contain an understanding of the main impediments which could influence brand performance (Petromilli, Morrison & Million, 2002).

Another crucial factor is the cannibalization of the brands or in other words, the brand management should examine if there is some overlapping between the brands in the portfolio and to consolidate them if there is a need (Petromilli, Morrison & Million, 2002). Also, this analysis should find if there are gaps which need to be filled and the potential opportunities for the company (Petromilli, Morrison & Million, 2002).

In the marketing literature, there exists a common consideration that the diversification of the product scope of a company in the emerging markets is an efficient way to improve the performance (Chang & Hong, 2002; Khanna & Palepu 2000 a, b).

Some authors suppose that a wider brand portfolio could assure greater advantage to the firm (Bordley, 2003; Shocker, Srivastava & Ruekert, 1994). If the scope of the portfolio is bigger and diversified, it will cover a bigger part of the market niches. In this way, the company is more likely to answer to the heterogeneous preferences of the consumers (Kekre & Srinivasan, 1990; Lancaster, 1990). When the firm decides to expand its brand portfolio, it is important how it will do it.

Brand creation means the launching of a new brand to the market (Damoiseau, Black & Raggio, 2011). This is one of the strategies which the firm could apply when it considers widening the brand portfolio (Damoiseau, Black & Raggio, 2011). In the process of the creation a new brand, the company should take into account which is the most appropriate position for the brand in the portfolio in order to both avoid cannibalization and answer to customers’ needs and preferences (Damoiseau, Black & Raggio, 2011).

Likewise, companies can manage the speed of brand portfolio widening (Kahn & Isen, 1993). Nonetheless, this strategy has its risks. Brand creation is “a risky venture with a greater

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chance of failure than success” (Jones, 2004 as cited in Sarkar and Singh, 2005, p. 86). According to Aaker (1994), another disadvantage of the brand creation is that it leads to greater promotion and distribution expenditure. Also, the competition increases because of the brand proliferation (Aaker, 1994).

However, another advantage of the wider brand portfolio is the ability to deter new market entrants (Bordley, 2003; Lancaster, 1990). In this way, the companies assure themselves bigger chance to be “first” on the market. Consequently, this could assure them consumer loyalty. According to some authors, if the company possesses a bigger number of brands in its portfolio, the firm could easily overcome some impediments related to the heterogeneity of consumers’ needs. The broad brand portfolio assures the possibility to adjust brands to local preferences in different countries. These brands benefit from an elevated level of awareness across countries (Schuiling & Kapferer, 2004).

One of the main impediments which the company focuses when undertakes international approach is the cultural differences across countries. Cultural factors represent the main determinants of the consumer’s behavior, preferences, understandings, and values (Jain, 1989). Furthermore, it is important to be considered the role of the culture when formulating an effective brand strategy. The broad brand portfolio is also related to the attracting of the best brand managers (Morgan & Rego, 2009).

The diversity of the wider product line could lead to bigger market share (Kekre & Srinivasan, 1990). According to some authors, the broad product could increase the market share of the company because it could cover the heterogeneous consumers’ needs (Bagozzi, 1986). Another advantage of the broader product line is that it could reduce sales uncertainty (Talayasum, Hassan & Goldhar, 1987).

On the other hand, some authors suppose that the company could decrease the diversity of the product line in order to increase the quality of few products (Bordley, 2003). This narrow

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product line could lead to better performance because of the decrease in design costs, inventory holding costs (Lancaster, 1990; Moorthy, 1984).

According to some authors, the firm needs to reduce the number of brands in the portfolio if it would like to achieve better financial performance (Kumar, 2003). The profits of the firms which have broad brand portfolios come from around 20% of their brands (Kumar, 2003). Furthermore, if the brands are managed effectively and the brand strategy is strong, there is no need of a big number of brands. For instance, in 1999 Unilever had 1600 brands but it gained its profits only from 400 of them (Kumar, 2003). This example provides a relevant explanation of the argument that many brands don’t mean better performance.

The strategic consolidation and eliminating of inefficient brands provides considerable benefits to the companies in terms of cost reductions in different areas as producing, distribution and marketing (Petromilli, Morrison & Million, 2002). For instance, the company will save resources because of the reduction of support costs or materials.

According to some authors, the creation of a new brand is inefficient and the company should avoid it because it is expensive (Petromilli, Morrison & Million, 2002). They assume that this should be the last approach which the company could employ and only if there is no chance to create value from the existing brands (Petromilli, Morrison & Million, 2002). On the other hand, in some cases, the creation of a new brand is the only strategic and valuable decision which could meet the market objectives (Petromilli, Morrison & Million, 2002). According to some authors, this method should contain both traditional and strategic branding principles in order to bring value to the whole brand portfolio (Petromilli, Morrison & Million, 2002). However, the more extensive brand portfolio leads to greater costs. For instance, they realized that only 27 out of 80 brands made 95% of the gross margin and sales (Wise & Pierce, 2005). Therefore, the company should reduce the scope of the brand portfolio because it is not rational to maintain so many unnecessary brands (Wise & Pierce, 2005).

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Likewise, the vast number of brands is a cause of decreased brand loyalty and increased price competition across many markets (Bawa, Landwehr & Krishna, 1989; Quelch & Kenny, 1994). Thus, the broad brand portfolio could create an inter-brand competition which could lead to lower financial results. “The brands compete with one another as much as they do with rival brands and often end up cannibalizing each other” (Kumar, 2003, p. 92). It is difficult to specify the optimal number of brands. It depends on several conditions and every firm defines its product lines in a different way. “One firm might view two physically distinct, but highly similar, items as variants of the same basic product entry; another firm might view these items as distinct entries” (Bordley, 2003).

One of the biggest disadvantages of the broader brand portfolio is the lack of economies of scale because of the “hidden costs” (Kumar, 2003). According to Kumar, these costs could exceed the revenues if the company creates a lot of brands. Likewise, the broad portfolio could lead to inefficiency because it is more expensive to maintain a lot of brands on a small scale instead of the narrow brand portfolio (Kumar, 2003).

The presence of a great number of brands in the portfolio could be risky unless these brands are not related to a certain segment (Damoiseau, Black & Raggio, 2011). Therefore, the wider is the brand portfolio, the bigger is the chance of overlapping between the brands and the possibility to cannibalize each other (Damoiseau, Black & Raggio, 2011). Kumar (2004) assumes that this trade-off could reduce the efficiency and management facility.

Cultural distance

According to previous research, some firms did not perform efficiently in foreign countries because they did not consider the characteristics of the host country or more accurately the differences between the home and the host country in terms of culture and economic development (Hill & Still, 1984; Ricks, 1983). According to Johanson and Vahlne (1977), a

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lot of pitfalls emerge during the process of international expansion because of the lack of information about the host countries.

The culture is related to the consumers’ behavior (Roth, 1992). In the literature, culture is defined as an aggregate of values and beliefs (Talay, Townsend & Yeniyurt, 2015). Likewise, it is a predecessor to the approval of brands in a country because of the appearance of global customer cultures (Alden, Steenkamp & Batra 2006). Also, most of the customers tend to select brands which are more aligned with their cultural values and beliefs (Talay, Townsend & Yeniyurt, 2015).

It is significant for their needs, norms, and values. Therefore, cultural distance has an important influence on the performance of the firm. It is a factor which doesn’t have to be underestimated. Cultural distance and its main role in the selection of markets take part in a lot of studies. (Eriksson, Majkgard & Sharma, 2000; Kogut & Singh, 1988; Nordstrom & Vahlne, 1994, Erramilli, 1991;Erramilli & Rao, 1993).

Cultural distance is a part of the psychic distance. It is one of the most key factors which the company should consider when deciding to do business in a foreign country (Barkema, Bell & Pennings, 1996). The importance of the cultural distance could be explained as independently of the globalization of the markets, some cultural beliefs and norms remain unchanged and they have considerable influence on the perceptions and actions of the consumers (Markus & Kitayama, 1991; Triandis, 1989).

Cultural distance in terms of beliefs, social norms, understanding, and language could be an obstacle for the trade (Ghemawat, 2011). The four-dimensional model of Hofstede is appropriate for measuring differences across countries (Roth, 1995). Likewise, Hofstede model is suitable because of the emphasis on underlying values which are crucial for the consumers’ brand loyalty (Eisingerich & Rubera, 2010). According to Hofstede, the culture is “the collective programming of the mutual which distinguishes the members of one human

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group for another” (Hofstede, 1984, p. 82). This model is based on four dimensions of cultural structure - Individualism versus Collectivism, Large versus Small Power Distance, Strong versus Weak Uncertainty Avoidance, and Masculinity versus Femininity (Hofstede, 1984). Each country has different scores in every dimension and in this way, it could be compared to other countries.

In previous studies, cultural distance plays the role of moderator of the relationship between product signals and performance (Akdeniz & Talay, 2013). Previous research supposes that these psychological mechanisms are a reason for differences in the perceptions toward some brands between developing and developed countries (Alden & al., 2013; Guo, 2013; Swoboda, Pennemann & Taube, 2012).

Economic Development

Another factor which could affect the relationship between the number of brands in the brand portfolio and the market share of the company is the economic development of the country in which the company operates. The perceptions of the brands could be different across countries with different level of economic development (Hsieh, 2002). Also, it could “moderate the process of the formation of attitudes toward the brand” (Reardon, Miller, Vida & Kim, 2005, p.728). Likewise, the propensity of the consumers to purchase is influenced by the economic status of the country (Hsieh, 2002).

According to Roth (1995), the differences between the socioeconomic conditions and market structures in the countries are a great reason for the diversity of brand strategies among the companies. This means that the economic conditions in a country have a big influence on the companies’ branding decisions. Furthermore, the level of economic development of a country influences the market structure. Likewise, the choices of the company’s brand management are influenced by the market conditions of a country (Roth, 1995). Another fact is that national socioeconomic development affects “the consumer spending and buying power”

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(Roth, 1995, p.58). According to Wallendorf and Arnould (1988), there is a relationship between the economy, consumers’ needs and preferences and the brand strategy of a company. These economic conditions in a country affect the consumer behavior in several areas as for example, the level to which the people are mobile and have access to mass media, also if they live in the urban or rural area. All these conditions form their preferences and their propensity to purchase (Belk, 1988; Jain, 1989; Keegan, Still & Hill 1987; Keyfitz, 1982; O'Guinn, Lee & Faber, 1986). Therefore, countries with different economic development have different customer propensity, willingness to pay, needs for the products. In Asian countries, there are both developed and developing economies which mean that these differences in terms of economic development by countries are even greater.

A lot of countries in Asia are developing countries which on the one hand could create difficulties for foreign companies from developed countries. One of the biggest impediments for the companies operating in emerging markets is the lack of institutions. This fact leads to a lot of other factors such as immature capital, product and labor market. Likewise, emerging countries miss well-established property rights (Khanna & Palepu, 1997). All these factors impede to some extent the companies when they attempt to reach certain financial results. In the literature, there is a general consideration that there is a big amount of differences between the developed and the developing countries (Aiello & al., 2015; Ghemawat, 2001; Hofstede, 2001; Marchi, Martinelli & Balboni, 2014). For instance, brand consciousness in emerging markets is low (Sheth, 2011) which means that consumers are not aware how to differ the brands (McKinsey, 2012).

According to Sheth (2011), there are 5 main characteristics of the emerging markets which could affect some areas of the marketing strategy. They are the heterogeneity of the market, socio-political governance, unbranded competition chronic shortage of resources and inadequate infrastructure (Sheth, 2011). Furthermore, in terms of these five characteristics,

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the developing markets are extremely different from the developed markets. Thus, the level of economic development of a country could be a crucial factor for the performance of the companies. So, these arguments are even stronger when we consider Asian countries because the heterogeneity of these markets is more related to factors as income and net worth than consumers’ preferences and needs (Sheth, 2011). Likewise, emerging markets differ from the developed ones because of the enormous impact of the socio-political governance which includes “religion, government, business groups, nongovernmental organizations (NGOs), and local community” (Sheth, 2011, p. 168).

To sum up, the literature paid little attention to the relationship between the number of brands and firm performance, especially in the Asian market. This market is relevant for investigation because of the presence of developing countries as well as developed countries. According to some authors, the company should reduce the number of brands in its brand portfolio in order to be more competitive and to have better performance (Wise & Pierce, 2005; Bawa, Landwehr & Krishna, 1989; Quelch & Kenny, 1994, Kumar, 2003). In this way, the firm could develop its brands and to be sure that all of them work effectively and have a positive effect on the final performance. Conversely, other authors suppose that the aim to be global and to serve as many consumers as possible leads to the decision to have a bigger number of brands (Bordley, 2003; Shocker, Srivastava & Ruekert, 1994). Thus, the firm tries to provide more alternatives to the consumers.

Therefore, there is no agreement on this relationship in the literature. The research question which I would like to examine is “How the number of brands in the company’s brand portfolio affects the performance of the firms operating in the Asian market?”.

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Theoretical Framework

H1

Fig. 1 Theoretical Framework.

In the literature, there is a consideration that the relationship between the number of the brand in the brand portfolio and the performance is positive (Doyle, 2001; Krake, 2005; Rao, 2005; Berthon & al., 2008; Keller, 2008; Gromark & Melin, 2011; Ambler, 2012). For example, according to Rugman, the assumption in the literature that companies could develop only one global product in order to answer to the rapidity of the globalization and to serve with this product all the markets across the world is misleading. The firms should adapt their products for the different markets (Rugman & Moore, 2001). This shows that company should build its brand portfolio in the more strategic way. Or in other words, if the company possesses more brands, it will find it easier to serve more markets.

Every market has some specific characteristics influenced by the culture. Furthermore, the diversified brand portfolio provides bigger chance to serve more different markets. For example, medicines are representatives of this type of products which are perceived as universal (Rugman & Moore, 2001). Nevertheless, pharmaceutical companies should answer to the national regulations which mean that they could not have global production and distribution (Rugman & Moore, 2001).

Number of brands in

the brand portfolio Market Share

Cultural Distance (H2) Economic development of the host

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A lot of companies prefer to launch new brands and to widen their brand portfolio instead of developing only their existing brands (Wise & Pierce, 2005). They consider that this approach is more appropriate for long-term growth than developing the existing ones. The reason for this is that in this way the company could easily meet new consumer needs which the existing brands could not satisfy (Ambler & Styles, 1997).

The firms apply different strategies in order to widen their brand portfolio – as creating new brands, or acquiring existing competitors’ brands – for instance, as Procter & Gamble which acquire Clairolline of hair-care product in 2001 (Wise & Pierce, 2005). The literature indicates that if the company has a big amount of brands in the brand portfolio, it has a greater chance for deterring the competition to enter the market (Bordley 2003; Shocker, Srivastava & Ruekert, 1994; Lancaster, 1990, Schmalensee, 1978). Another significant advantage of the wider brand portfolio is the opportunity for the company to attract and keep the best professional in the marketing area because in this way the company and the managers “enjoy synergies in the development and sharing of specialized brand management capabilities” (Morgan & Rego, 2009, p. 60). In this way, the company could leverage their specialized brand management skills and abilities – for instance, marketing and media research, examining and tracking brand equity (Aaker & Joachimsthaler, 2000;Kapferer,1994).

The larger brand portfolio provides the opportunity to serve more heterogeneous markets as the Asian market (Kekre & Srinivasan, 1990; Lancaster, 1990). This ability also gives the opportunity to enter more marketing segments (Morgan & Rego, 2009). Previous research provides the consideration that common brands in different marketing segments assure economies of scope advantages (Grant & Jammine, 1988; Palich, Cardinal & Miller, 2000). Nevertheless, some authors assume that the wider brand portfolio is a premise of competition between the brands in the portfolio (Aaker & Joachimsthaler, 2000; Kapferer, 1994; Park,

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Jaworski & Maclnnis, 1986). However, this competition could lead to more efficient allocation of the resources in the company (Low & Fullerton, 1994; Shocker, Srivastava & Ruekert, 1994) because “it would improve efforts on behalf of each brand” (Shocker, Srivastava & Ruekert, 1994, p.157). According to the marketing literature (Talay, Townsend & Yeniyurt, 2015), market share and its derivatives are one of the most reliable and significant sources to measure the market performance. Therefore, Steenkamp (2014) assumes that market share is “a valued outcome for global brands” (Steenkamp, 2014, p. 25). Likewise, Chabowski, Samiee and Hult (2013) propose market share to be used for further research because it is a significant foundation.

All these factors related to culture, institutions, and regulations are a reason to change or adapt the brand strategy. In other words, the company needs to manage the existing brands, and also to create or acquire new brands in order to satisfy larger part of the heterogeneous consumers’ needs and to serve more different markets. Therefore, there is a need for a bigger brand portfolio.

H1: There is a positive relationship between the number of brands in the brand portfolio and the company’s market share.

Differences in norms, understandings, beliefs create distance between countries (Ghemawat, 2001) and a lot of companies prefer to enter to more similar to their home markets (Johanson & Vahlne, 1977; Johanson & Weidersheim-Paul, 1975) if they are unable to meet all these different tastes and preferences. Likewise, according to some authors, the firms find it easier to invest more in culturally similar markets than in culturally different markets (Erramilli & Rao, 1993; Kogut & Singh, 1988) because these cultural characteristics influence the consumers’ decisions (Ghemawat, 2001).

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The main factors which influence the brand strategy of the company are the market attractiveness, organizational learning, and the psychic distance. Therefore, firms explore these factors which are important for launching their brands. Hence, companies attempt to adapt and change their brand strategy in order to leverage from their brands.

Cultural distance is a part of the psychic distance. Therefore, it is one of the most significant factors which the company should not underestimate when entering a foreign country (Barkema, Bell & Pennings, 1996). The importance of the culture is based on the cultural beliefs and norms which remain unchanged independently of the globalization of the markets (Markus & Kitayama, 1991; Triandis, 1989). Hence, they have considerable influence on the perceptions and actions of the people (Markus & Kitayama, 1991; Triandis, 1989). For instance, the associations which the consumers make for a particular product are greatly related to their “identity as a member of a particular community” (Ghemawat, 2001, p.142). In every region in the world, diverse mechanisms exist and they influence the formulating of the brand’s perception and image. For example, in previous research of the Chinese market, as one of the main markets in Asia, examiners find out that some retail brands use different psychological and functional approaches in order to influence customer’s choice. (Swoboda, Pennemann & Taube, 2012).

Thus, it could be concluded that the culture of one country has a significant place in the forming of customers’ decisions (Petersen, Kushwaha & Kumar, 2015). Likewise, in the literature, cultural distance is used as a moderator of the impact of marketing mechanism (Petersen, Kushwaha & Kumar, 2015).

Therefore, in order to meet the various consumers’ needs, the companies should possess more brands because in this way it could satisfy more diverse preferences influenced by the different cultural environments. Hence, most of the people are inclined to choose and buy brands which are more aligned with their cultural values and beliefs (Talay, Townsend &

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Yeniyurt, 2015). According to Ghemawat (2001), differences in the cultural principles could affect “entire categories of products” (Ghemawat, 2001, p.142). Therefore, if the company has a greater number of brands in the portfolio, it could serve more culturally distant markets. The positive relationship between the number of brands and the market share of the company is even more important when the company is operating in the culturally distant market because the company faces more heterogeneous preferences compared to these at home. The more the markets are distant, the more the needs of these consumers could be different from the ones of the home country. So, in this case, the company has to diversify its brand portfolio and the way to diversify is the number of brands.

All these facts lead to the second hypothesis:

H2: Cultural distance has a positive moderating effect on the relationship between the number of brands and the market share of the company.

The perceptions of the consumers impact the loyalty and the vision for the quality of the brand. Therefore, some studies show that there exists a significant difference in the consumer’s loyalty between brands in one product category but from different countries with different level of economic development (Pappu & al., 2006).

According to Hsieh (2002), the level of economic development of a country has a major influence on the consumers’ perceptions of the brand. The level of economic development influences significantly the intellectual level in receiving and understanding communication messages of the consumers, their propensity to purchase goods (Hsieh, 2002). Likewise, the economic development of the country affects “the infrastructure development in exchanging marketing information” (Hsieh, 2002, p. 49). Consequently, the consumers in countries with the greater level of economic development are more able to purchase products than consumers from countries with a low level of economic development.

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Considering the differences between developing and developed economies, Asia is a good example of both types of level of economic development. On the one hand, one of the biggest impediments for the companies in emerging markets is the lack of institutions. This fact leads to a lot of other factors such as immature capital, product, and labor markets. Likewise, emerging countries miss well-established property rights (Khanna & Palepu, 1997). All these factors impede to some extent companies when they attempt to promote their brands and reach certain financial results.

On the other hand, the greater is the level of economic development, the bigger is the consumers’ propensity to purchase goods. Previous studies have shown that most managers in the companies agreed that the socioeconomic conditions of the countries are a significant factor in the process of developing the brand strategy (Roth, 1995). Therefore, the extent of economic conditions in a country impacts directly the positive relationship between the number of brands in the portfolio and the company’s performance. These conditions impact „the consumer spending and buying power” (Roth, 1995, p. 58) which is the main factor for companies to reach better performance. The greater is the consumers’ propensity to buy goods, the stronger is the positive relationship between the number of brands in company’s portfolio and the market share of the firm.

Previous research indicates that consumer behaviour includes different factors as to which extent consumers are mobile, where they live – in the rural or urban area, do they have access to mass media (Belk, 1997; Jain, 1989; Keegan, Still & Hill, 1988; Keyfitz, 1982; O'Guinn, Lee & Faber, 1986). All these factors are influenced by the economic development of a country and shape the perceptions of the consumer toward a brand.

Roth (1992) classifies the level of economic development as one of the most significant perspectives of the international markets. It shapes the demand and affordability of the consumers to purchase the products offered by the companies (Crawford & Lamb, 1989).

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Therefore, companies should take into account the economic development when developing their brand portfolio strategy. However, the greater number of brands provides a bigger chance to the company to meet the consumers’ preferences and financial opportunities. According to Rostow (1971), consumers from countries which are in advanced stages of economic development can spend more money for goods in services in comparison to consumers from countries at lower levels of economic development. Therefore, when the company possesses more brands in the brand portfolio, it could better satisfy the consumers’ needs if the consumers are capable of purchasing these goods. Hence, this results in the following hypothesis:

H3: The economic development of the host country has a positive moderating effect on the relationship between the number of brands and the market share of the company.

Method Section

Sample and Data Collection

We tested our hypotheses on the beer industry in the Asian market. We employ a dataset of all brands of the companies which operate in this market. We chose to examine the Asian market because according to McKinsey’s Report (2015),” for the past 50 years, most countries in Asia have grown faster than their North American and Western European counterparts”. Likewise in Asia, there are a lot of heterogeneities in terms of cultures, religions, and beliefs, level of economic development, consumers’ tastes and preferences.

Also, we consider that Asian market is an appropriate sample because there are both developing and developed countries. Therefore, in the literature, there is a general consideration that there are a big amount of differences between the developed and the developing countries (Aiello & al., 2015; Ghemawat, 2001; Hofstede, 2001; Marchi, Martinelli & Balboni, 2014).

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The data set includes both local and foreign companies. The sample for the research is obtained from the dataset Passport, created by Euromonitor International. Passport is a global market research database which is already employed in previous marketing research (Chandrasekaran & Tellis, 2008; Tellis, Stremersch & Yin, 2003). It provides information, analysis, reports, and statistics on different industries and countries. The examined period is between 2006 and 2015. The total number of the companies in the dataset is 105. The information available from dataset Passport which we gathered is brands of the companies, the market share of the companies and market size of the host countries.

The firm-level and industry-level information are taken from Bureau van Dijk’s Orbis Database because it contains a suitable database for public and private companies all over the world (Morgan & Rego, 2009).

The study used a panel data research design to investigate the relationship between the number of brands in the company’s brand portfolio and the market share of the firm.

Dependent Variable

The dependent variable in our research is the performance of the company. The performance of the firm could be measured in a different way – sales volumes, profit margin, market share (Roth, 1992).

The performance of the companies was measured by using the market share of the company. We used market share as a measure because it is one of the most reliable measures of company’s performance (Talay, Townsend & Yeniyurt, 2015). We collect the information from the dataset Passport, dataset Passport, created by Euromonitor International.

Independent variable

The independent variable in our research is the number of brands in the brand portfolio of the company. We collected this information from the dataset Passport. In the recent years, the

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number of domestic and foreign brands increased and the consumers have a lot of possibilities to satisfy their needs (Hsieh, 2002). Previous research examined how the different dimensions as scope of the portfolio, the segments, the level of competition between the brands, and the positioning of the brands of the brand portfolio influence the value of the firm (Bahadir & al. 2008; Bharadwaj & al. 2011; Morgan and Rego, 2009; Rego & al., 2009; Wiles & al., 2012).

Moderating variables

We included in our research two moderating variables - cultural distance and level of economic development of the host country.

We measured the cultural distance by using Hofstede framework as one of the dominant methods for analysis of the cultural differences in the literature (Talay, Townsend & Yeniyurt, 2015). The four-dimensional model of Hofstede is appropriate for measuring differences across countries (Roth, 1995). Likewise, Hofstede model is suitable because of the emphasis on underlying values which are crucial for the consumers’ brand loyalty (Eisingerich & Rubera, 2010). Previous research views Hofstede’s framework as one of the most influential cultural studies (Kirkman, Lowe & Gibson, 2006). According to Social Science Citations Index, “Hofstede’s work is more widely cited than others” (Kirkman, Lowe & Gibson, 2006, p.285). For gathering the information about the scores of the countries we used the Hofstede website. Because of the lack of information about the scores of some countries, we used the scores of similar countries in order to receive achieve as accurate results as possible. For Kazakhstan, Uzbekistan, and Belarus we took the scores of Russia because in the past they were part of the Russian Empire. For Bermuda and Cayman Islands we choose the scores of the United Kingdom because they both are British Overseas Territories. For Moldova, we took the scores of Romania because of their similar linguistic, historical and cultural characteristics. To operationalize the Hofstede’s cultural dimensions we used The Kogut and Singh index (1988). According to their formula, “cultural distance is calculated by the sum of

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squared Euclidean distance for two countries on each cultural dimension while controlling for the variance of each dimension” (Dragoni, Oh, Tesluk, Moore, VanKatwyk & Hazucha, 2014, p.873). This model has been used in a lot of previous studies (Chen, Kirkman, Kim, Farh & Tangirala, 2010; Kirkman, Lowe & Gibson, 2006).

The economic development of the host country could affect the perceptions of the consumers for a brand or in other words the economic development impacts the propensity of the consumers to purchase (Hsieh, 2002). We measured the economic development of the country by GDP per capita because it is a reliable source to measure the consumers’ purchasing capita (Hsieh, 2002). Likewise, GDP per capita is a proven measurement of the economic growth in previous studies (Granados, 2012; Henderson, Storeygard & Weil, 2011). According to James, Gubbins, Murray and Gakidou (2012), GDP per capita is one of the most used indicators of country-level income. Furthermore, GDP per capita is a widely used variable in previous studies related to “growth, distribution, trade, human development, life satisfaction, social capital and well-being” (Ram & Ural, 2014, p. 640). We obtained this data from the site of The World Bank as a reliable source of country-level information.

Control Variables

We include several control variables in our research which could also influence the performance of the company. We identified as control variable the size of the market because it is the main characteristic of the market on which the company sells their brands (Talay, Townsend & Yeniyurt, 2015). We selected this variable in order to eliminate “the effects of skewness in distribution” (Talay, Townsend & Yeniyurt, 2015, p.62). We expect that this control variable is positively correlated with our dependent variable. We measured the market size in the total value of the sales in USD and obtained the data from the dataset Passport. Likewise, we selected the size of the company as a control variable (Morgan & Rego, 2009) because it is a significant factor for the firm performance. We selected this variable in order to

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exclude the effect of economies of scale on company’s performance (Morgan & Rego, 2009; Atinc, Simmering & Kroll, 2012) because we expect that this variable is positively correlated with the market share of the company. We measured the size of the company with the Total assets of the company by year in USD as a reliable measure of firm size in previous studies (Morgan & Rego, 2009). We gathered this firm-level information from Bureau van Dijk’s Orbis Database.

Other control variables are whether some of the brands in the portfolio are global or local. One of the main consequences of the globalization is the evolution of the local brand strategy which is characterized by the development of more adapted to the local culture products in global or regional brand strategy which is related to the development of globalized products with limited adaption to particular markets (Kotabe & Helsen, 2010). The variables will be operationalized as a percentage – Global brands/Total brands. We collected the information about the brands from the dataset Passport. We expected that the global brands are positively correlated with the market share because the global view of a brand creates positive perceptions of the quality and prestige of these brands and also an esteem image (Steenkamp & al., 2003; Holt & al., 2004; Johansson & Ronkainen, 2005). Likewise, global brands could reduce risk and assure greater credibility (Winit, Gregory, Cleveland & Verlegh, 2014). On the other hand, previous studies provide mixed results about the effect of local brands (Winit, Gregory, Cleveland & Verlegh, 2014).

We identified as key control variable the nationality of the company because according to previous research it could affect the perception of the brand (Chryssochoidis, Krystallis, & Perreas 2007). However, Zhou and al. (2010) consider that foreign brands could be a more reliable measure than the local brands in these markets. Likewise, the foreign brands own greater brand equity than the local ones. According to Jones (2006), the nationality of the firm is more important in the recent years because the influence of the nationality on the corporate

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strategy is strong. Likewise, “nationality is an important driver of brand identity management strategies” (Talay, Townsend & Yeniyurt, 2015, p.62).We operationalized the variable nationality of the company as a dummy variable which takes the value of 1 if the home country of the company is this one of the dummy variable or 0 otherwise in order to exclude the influence of the home country on our dependent variable.

Another control variable which we used is the age of the company because previous research has shown that the age of the company could also affect the long-term and short-term performance of the company (Galbreath & Galvin, 2008). We expected that the age of the company is positively correlated with the firm market share. We computed this continuous variable by using the year of incorporation and the year of analysis. We gathered the data for the years of incorporation from Bureau van Dijk’s Orbis Database.

The period of observation is from 2006 to 2015. We expected that factors as the 2008 financial crisis could have an effect on the performance of the companies because of the changes in the stock market, the exchange rate and country credit ratings (Rose & Spiegel, 2012). Likewise, a big part of the industrialized countries has been influenced by the crisis as well as a lot of emerging countries (Rose & Spiegel, 2012). We operationalized this control variable as a dummy variable which takes the value of 1 if the year of observation is this one of the dummy variable or 0 otherwise in order to exclude the influence of the time on our dependent variable.

Results

Preliminary analysis

The finalized data set was analyzed in SPSS. First, the frequency test was done in order to check if there are some errors in the data set and no errors were found. The next step was to check for missing or incorrectly entered data and to analyze for multicollinearity. The