Brand Positioning and Anti-Counterfeiting Effectiveness: A Study of Managers' Perceptions of Foreign Brands in China

Article excerpt

Abstract:

* We pursue the previously-noted association between brands and counterfeiting one step further to examine the relationship between brand positioning and anti-counterfeiting, based on a study of 130 well-known foreign brands in China.

* We test hypotheses about managerial perceptions as to the effects of different brand positioning strategies on the effectiveness of their actions to counter counterfeiting, in other words, whether branding positioning can help to stop counterfeiting, limit damage to firms and maintain brand reputation.

* Our findings confirm that brand positioning affects anti-counterfeiting effectiveness. Specifically, product reliability and customer services are compatible with efforts to stop counterfeit production, but innovative technologies and product features and functions appear to exacerbate the problem.

Keywords: Anti-counterfeiting strategy. Brand. Brand positioning - China. Counterfeiting * Effectiveness

Introduction

Counterfeiting--the unauthorised imitative production of products and/or services that are protected by owners' intellectual property rights (IPR) in the pursuit of profit (Cordell et al. 1996, Shultz/Saporito 1996, Yang/Sonmez/Bosworth 2004)--has grown into a global business. Estimates claim that counterfeits represent seven percent of global merchandise trade (Balfour 2005). International trade in pirated physical products exceeded US $200 billion in 2005, and this estimate excludes the value of counterfeit goods that were domestically produced and consumed (OECD 2007). To place this in perspective, this amount exceeds the collective domestic products of 150 of the world's economies (OECD 2007). With the increase in its scope and geographical reach, counterfeiting is now a global enterprise working through international networks.

China is regarded as a leading source of counterfeits, and accounted for 70% of the total value of seized goods by the US Customs in 2005 (IACC 2006). The problem of counterfeiting is not limited to the sphere of international trade, as fakes made in China for sale in Chinese markets undermine the prospects for foreign--and, increasingly, local--brands alike. For instance, Michi, once one of Beijing's most popular brands, cited 'widespread counterfeiting' as the principal reason for its demise (O'Neil 2001).

Given the magnitude of this problem, actions against counterfeiting have preoccupied both practitioners and policy makers. From the corporate perspective, any action that might mitigate the frequency of, or fallout from, the faking of products should be welcome. This should be especially so in the Chinese context, given the fact that China plays host not only to many foreign brands, but also to many counterfeit operations.

However, this pressing global problem has excited little academic interest. Of the existing anti-counterfeiting studies (though rich in examining strategies themselves), only two have explored the effectiveness of anti-counterfeiting strategies in any depth (Lybecker 2007, Yang/Fryxell/Sie 2006), both demonstrating that combined government/corporate actions can potentially improve anti-counterfeiting effectiveness. While the latter also finds that government measures tend to be overtaken by faster-acting corporate action, both studies stress that their findings are inconclusive, and that further work is needed.

Our study differs from prior research in three respects. First, it links brand positioning with anti-counterfeiting effectiveness. Ample prior research has confirmed a positive association between the popularity of brands and consumers' purchase of counterfeits (Albers-Miller 1999, Bearden/Etzel 1982, Bian/Veloutsou 2007, Bloch/Bush/Campbell 1993, Gentry/Putrevu/Shultz 2006, Matos/Ituassu/Rossi 2007, Pine/Peppers/Rogers 1995, Shultz/Saporito 1996); however, these studies appear not to have examined how a company positions its brand(s) can affect the effectiveness of its anti-counterfeiting strategy. …