Publication: Brand value in horizontal alliances : the case of twin-cars
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Publication date
2011-08
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Palgrave Macmillan
Impact
Export
Abstract
Rival firms often cooperate horizontally in order to share risks and achieve scale advantages in
production or in their research and development projects. The output of these strategic alliances is
usually sold by the individual ally company under its own brand and using its own marketing mix
strategies. Marketing strategies create a cumulative effect that is reflected in brand value. Although
horizontal alliances often have a significant overall impact on firm profitability, undesired brand value
dilution is a worrisome possibility for the partners and therefore a relevant subject of study. In this
paper, we consider brand value to be the economic added value of a brand, and propose two marketbased
measures of brand value: (1) price premia (which are relevant for a unit sale) and (2) revenue
premia (which also account for the premia in sales volume). We apply this analysis to the Spanish market
for new automobiles, in which successful and long-lasting horizontal alliances have formed. Our findings
suggest that, during the introduction stage of the product life cycle, horizontal allies did not charge
different price premia, but that horizontal allies profit from differences in brand reputation obtained
from demand side effects such as revenue premia (specifically, the impact on sales volume).
Consequently, horizontal cooperation among brands does not dilute their value at the introduction
stage. Furthermore, our results suggest that horizontal allies do charge different price premia during the
growth stage of the product life cycle. Consequently, horizontal allies have recognized strategies that do
not dilute brand value in intense competition mitigating the brand value diluting risk
Description
Keywords
Brand value, Revenue premia, Automobile market, Price premia, Marketing
Bibliographic citation
The Journal of the Operational Research Society, (Aug 2011), v. 62, n. 8, pp. 1533-1542