National Brand Identity & Its Effect On Corporate Brands: The Nation Brand Effect (NBE)

Multinational Business Review, Fall 2003 by Jaworski, Stefan Paul, Fosher, Don

Currently, we see the very same scenario being played out by Korean automakers like KlA and Hyundai. Hyundai has spent two decades and considerable efforts (especially over the last 10 years) trying to overcome the "Nation Brand Effect" whereby its Brand (and products) was disregarded as the "low quality Asian maker." Regardless of the fact that Hyundai for decades has been a major player in building cargo ships, oil tankers, and numerous products that require considerable technology and engineering prowess, the negative Korean connection was just too powerful. Even television ads were commissioned to show that the car came from a super-ship building company: "Hey, if we can be trusted to build one of those, we can easily be trusted to make a car!" It took most of the 1990's; a hell bent dedication to quality, engineering, design and image change; and the longest warranty in the world at 10 years, but Hyundai is emerging from the results of its past negative Nation Brand Effect. In 2002, a JD Powers Initial Quality Study ranked Hyundai, along with fellow Korean KIA, as the most improved automaker (with Hyundai up 21 percent and KIA bettering its 2001 rating by 19 percent). Especially impressive for 2003 is that Consumer Reports magazine ties Hyundai with much respected Honda in its "problems per 100 vehicle" rating. This is only slightly behind Toyota-which holds the top rating. But, still, people's minds and hearts are not fully convinced: Japanese, sure!...but Korean? This is the power of the Nation Brand Effect.

The Chinese are also an excellent example of how Brands are affected negatively (often unjustly) by the power of their Nation's Brand identity. "Made in China" is a synonym for poor quality, plasticky, low value, bargain basement, copycat products. Of course, for decades, China has produced some very poor quality, low price point goods but, at the same time, hidden behind many of the West's largest Brand names (like Nike, Adidas, Reebok, and New Balance that are China-made products). But, with the Western Brand name comes the perception of quality and the transferring of positive Core Values that instantly negate the China Nation Brand Effect. In essence, Nike shoes being made in China does not cause them to be considered Chinese shoes. They are still seen as American, with all of the benefits of both the Nike Brand's Core Values in combination with the USA's very positive Nation Brand Effect. The USA's Nation Brand Effect (and the cognitive shields formed regarding it) is so strong that consumers are easily quite willing to overlook such hypocrisy Brand wise.

THE BRAND CHALLENGE & OPORTUNITY FOR CHINA

One Chinese Brand that has learned the lesson of the Nation Brand Effect is Haier, a respected maker of high quality fridges and electronics. Once a state-owned company that made very low-quality goods for the Chinese market (which would rather have much higher quality and better styled U.S. goods like GE and Whirlpool), Haier radically changed its ways after privatization. They adopted a philosophy and culture of world class quality, innovation, and Brand-first attitude. Haier also realized the power of the Nation Brand Effect. The company knew that, to be successful in the U.S., it must circumvent the negative connotations of a "Made in China" Brand. The strategy Haier used was very simple: "Haier, Made in America." In other words, leverage the U.S. Nation Brand so as to overcome whatever China objections arise. Haier achieved this by first establishing its headquarters in a visible landmark building in New York. Next, they built a large plant in the Southern part of the United States (Camden, South Carolina) to manufacture its products for the North American market, allowing for a "Made in the USA" stamp on each product box.