Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview

CHAPTER 16
Advertising and Branding

Advertising and branding are important tools of competitive strategy. In this chapter I explain why they have been essential to some successful firms, while others have been equally successful while using advertising and branding little if at all. The main function of advertising and branding is to support competitive advantages which are based on the distinctive capability of supplier reputation. The information directly conveyed by advertising with this purpose is generally low. The value of such advertising rests principally on its demonstration of the supplier's continued commitment to the market. Producers of long-term experience goods--those commodities whose quality emerges only after repeated trial--use advertising as a signal of commitment. There are other kinds of advertising, and advertising can help in exploiting other types of competitive advantage, but this support of reputation is the most important way in which advertising contributes to corporate success.

While advertising creates brands, there are some differences between the functions of advertising and of branding. Brands are more often discussed than defined. A brand is established when an item sells for more than a functionally equivalent product. It is that characteristic which distinguishes a brand from the name of a product. The most usual reason for a price premium--and the most profitable reason--is that the customer is uncertain about the attributes of the product and is reassured by the supplier's reputation. But brands have other purposes. Some brands are little more than labels, although labels have their uses. Brands may be used by consumers to signal information about themselves to others--these are what is usually meant by brand images. Yet other brands may be attached to distinctive recipes or incumbent positions. The greatest corporate successes built around advertising and branding are those based on brands which have established several of these characteristics.

Advertising may seek to inform, or to persuade. The classified columns of a newspaper are full of what is intended to be informative advertising:

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Foundations of Corporate Success: How Business Strategies Add Value
Table of contents

Table of contents

  • Title Page i
  • Foreword iii
  • Preface vi
  • Contents xi
  • List of Figures xiii
  • List of Tables xiv
  • List of Tables xv
  • I - Corporate Success 1
  • Chapter 1 - The Structure of Strategy 3
  • Chapter 2 - Adding Value 19
  • II - Business Relationships 31
  • Chapter 3 - Co-Operation and Co-Ordination 33
  • Chapter 4 - Relationships and Contracts 50
  • III - Distinctive Capabilities 63
  • Chapter 5 - Architecture 66
  • Chapter 6 - Reputation 87
  • Chapter 7 - Innovation 101
  • Chapter 8 - Strategic Assets 113
  • IV - From Distinctive Capabilities to Competitive Advantage 125
  • Chapter 9 - Markets 127
  • Chapter 10 - Mergers 144
  • Chapter 11 - Sustainability 160
  • Chapter 12 - Appropriability 181
  • Chapter 13 - The Value of Competitive Advantage 192
  • Added Value Statements 211
  • V - Competitive Strategies 219
  • Chapter 14 - Pricing and Positioning, 1 221
  • Chapter 15 - Pricing and Positioning, 2 235
  • Chapter 16 - Advertising and Branding 251
  • Chapter 17 - Vertical Relationships 267
  • VI - The Strategic Audit 283
  • Chapter 18 - The Industry 285
  • Chapter 19 - The Firm 302
  • Chapter 20 - The Nation 320
  • VII - The Future of Strategy 335
  • Chapter 21 - A Brief History of Business Strategy 337
  • Chapter 22 - Conclusion 364
  • Value of the Ecu 369
  • Glossary 371
  • Bibliography 377
  • Index of Companies 395
  • General Index 399
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