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Brand leadership and product innovation as firm strategies in global food markets


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Purpose This paper aims to understand the motivations for product innovation and brand leadership using a series of case studies focusing on firms with leading market positions of different types. Design/methodology/approach A qualitative study is presented of three leading food sector firms of different types (large/public, medium/private, and international/cooperative). An analysis of brand leadership is undertaken in the context of a conceptual framework linking process innovation, product innovation, and the firm's resource base and market orientation. Findings The cases suggest that process innovation supports product innovation as firms implement strategies to differentiate their products. Response to changing demand is a disciplined reaction where firms exploit their specialized resources using superior product knowledge and branding power. Leadership positions are maintained not only by responding to changing demand but by steering the market using innovative products and consumer education. Research limitations/implications This study suggests that firms use their unique resource base and form strategies to capitalize on their capabilities. A single, dominant orientation is not necessary to maintain leadership. Rather process innovation can facilitate product innovation leading to successful product differentiation and enhancing a leadership position. The question of whether the growing power of retailers means the demise for branded food manufacturers is one that deserves attention. Innovation and its motivation is a national public policy concern that is influenced by a myriad of regulations and laws administered by various agencies. Originality/value This study is the first one to pull together the experiences of food‐firm brand leaders with their branding and innovation strategies as they look to the global arena for growth.
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International Food and Agribusiness Management Association
Annual World Food and Agribusiness Forum:
“Re-inventing the Food Chain: New Products, Consumers, and Markets”
June 25-28, 2005
Brand Leadership and Product Innovation as
Firm Strategies in Global Food Markets
Mark J. Gehlhar
Anita Regmi
Spiro Stefanou
Barry Zoumas
Mark Gehlhar and Anita Regmi are senior economists with USDA’s Economic Research
Service. Spiro Stefanou is professor of Agricultural Economics and Barry Zoumas is the Alan
Warehime Professor of Agribusiness at The Pennsylvania State University.
A series of case studies focussing on firms with leading market positions of different types (large
public, medium private, and international cooperative) is used to understand motivations for
product innovation and brand leadership. The cases suggest that process innovation
(organizational efficiency) support product innovation as firms implement strategies to
differentiate their products. Response to changing demand is a disciplined response where firms
exploit their specialized resources using superior product knowledge and branding power.
Leadership positions are maintained not only by responding to changing demand but steering the
market using innovative products and consumer education.
The global food industry is changing in ways that require even the most seasoned and skilled
food manufacturers to rethink their long-term strategy. Global retailers are capable of upsetting
the fortunes of even the largest manufacturers with iconic brands. The power of the retailers is
now placing greater pressure on manufacturer’s margins. Moreover when manufacturers are
unable to meet specific quality demands of large retailers, they may be unable to achieve
adequate distribution levels for their products.
Branding and the corporate image of brands has been the lifeblood of the largest food
manufacturers. In the 1980’s, leading U.S. food manufacturing firms could easily differentiate
products using branding strategies supported by significant advertising expenditures. In the
United States, breakfast cereal manufacturers were highly successful in using marketing
campaigns with aggressive brand promotions and intensive media advertising. The lack of new
entrants and private label manufacturers in the cereal market created a tight oligopoly market
structure raising further questions about sources of profits and nature of firms pricing behavior
(Reimer 2004). Marketing and promotion expenses constituted 30 percent of cereal
manufacturers price while gross margins exceeded 40 percent (Cotterill 1999). Although this
strategy constituted successful marketing, it hardly counts as innovation. Even as prices of
cereal rose twice as fast as of all food products little can be said of added benefit for consumers
(Gejdenson and Schumer 1999).
Branded food manufacturers are now facing a different environment from previous decades. The
supplier’s ability to respond to changing demands is a key factor for attaining success in global
food markets (Regmi and Gehlhar 2005). As private labels grow globally, the space available
for manufacturer brands dwindles. The survival of a manufacturer brand depends increasingly
on being a leader. Suppliers have the option of becoming low-cost flexible manufacturers for
private labels or becoming a manufacturer of their own branded products taking on responsibility
for and risk of product innovation. Careful long-term strategic planning is critical for branded
manufacturers in an environment where sustaining superior returns and maintaining leadership
becomes more challenging.
There has been a sharp increase in new food product introductions globally since the late 1990’s
for major branded food categories (figure 1). However, little is known about the motivation
behind product innovation or new product introductions. Traill and Meulenberg (2002)
conducted a study of European firms with respect to the way in which they innovate, their
motivations, and their orientation towards product and process innovation. They conclude that
the “demand-pull” versus “technology push” debate is too simplistic. Russo, Cardillo, and Perito
(2003) find that shifts in consumer preferences alone cannot explain higher rates of product
innovation in the Italian fruit drink industry. Although the ability of offering consumers new
products with special attributes is considered one of the most important competitive advantages
in global food markets, innovation-based strategies are risky with a high number of unsuccessful
new products. Russo et al. suggests that new practices adopted by retailers for managing risks
facilitate innovation logistics with manufacturers, which in turn lowers costs of product failures.
In such cases, profits from innovation more than offset risks of unsuccessful new products.
Branded food manufacturers face the dilemma of responding to changing consumer demands
while bearing the risk and responsibility of their image and reputation. New products serve as a
means to differentiate products from competitors, aiding a firm to attain product category
leadership. While category leadership is important for achieving higher margins, a company’s
brand image alone is no longer sufficient for food manufacturers to remain competitive in an
environment of fast-moving retail giants.
Branded food manufacturers face a constant threat of low cost imitators. The reason product
imitation is an imminent threat is that most resources, including physical inputs used in food
manufacturing, can be acquired by competitors. However, a truly differentiated product is one
that is not easily imitated and sold at the same price in the same market. Firms capable of
differentiating their products are more likely to possess specialized capabilities or special
resources that give them a sustained advantage. In addition, such firms are likely to be cautious
in shifting their product mix and may prefer to continue to exploit their unique capability that is
not easily replicated by competitors.
Figure 1. New Food Products Introduced Globally
Source: Productscan,
Snacks, sauces,
and soups
Dairy products
replacements and
Number of
Growing consumer sophistication for convenient, healthy, environmentally friendly foods are
creating greater segmentation in global food markets. Mass production is being replaced with
mass customization. This is taking place as suppliers along the food chain position themselves
according to what, how, and for whom they produce. From this viewpoint, the changing
environment presents opportunities for branded food manufactures implementing successful
product differentiation strategies.
In this paper, we use three case studies to illustrate the importance of how a firm’s unique
capabilities as an innovator shape its product differentiation strategy. To be a successful
innovator, a firm must have competencies in consumer marketing, product innovation, and
process innovation. Product differentiation may give firms a competitive advantage as
differentiated products possess unique attributes and require the firm to develop unique
capabilities, both of which are not easily duplicated by competitors. A review of the basic
concepts regarding firm orientation is provided in the next section. This is followed by
description of the case studies conducted and a summary.
Firm Orientation Concepts
Traill and Meulenberg (2003) suggest that every successful firm has a dominant “orientation”
that guides the company culture and its behavior. Based on case studies they group firm
orientations into three basic types: product, process, and market orientations. Market orientation
is where a firm’s preeminent goal is producing products according to what the current market
wants. A firm with a dominant orientation toward the market emphasizes the importance of
gathering market information and analyzing current trends (table 1). Firms with a dominant
process orientation stress the importance of efficiency and flexibility within the organization and
its links with partners. These firms readily adopt technologies to improve the flow of information
to improve efficiencies throughout the organization. Firms having a product orientation
specialize in product quality making product innovation their primary goal. Their success is
driven by the uniqueness of their products. Using this framework, Traill and Meulenberg
examine various hypotheses using case studies of food manufacturers.
Table 1. Firm orientations and description
Orientation Primary emphasis of firm Examples of firm activities
Market Gain high level of expertise in gathering and Conduct market surveys
analyzing current market trends Consumer testing of new products
Process Readily adopts processes for reducing organizational boundaries Implement cutting-edge information services
increase efficiencies in physical and information flows for Upgrade to state of the art equipment
reducing costs in production, distribution, and financial transactions Establish efficient networks with partners
Product Extensive product knowledge to enhance quality Conducts and monitors international R&D
Stress creativity in products Develops innovative speciality products
Strive for superior quality or functional foods using sophisticated ingredients
Terminology adopted from Traill and Meulenberg, 2002
A dominant orientation is determined by the type of firm (ownership or size) and the markets
they supply. For example, manufacturers without their own brand names are more likely to be
process oriented where their success depends upon efficiency, speed, and flexibility in
production and distribution. They closely coordinate their activities with the market and have
the capability of responding rapidly to market changes. Branded manufacturers with strong
product orientation use their creativity and foresight to develop innovative products. The
traditional cooperative with a focus on using its member’s raw material is less product or market
oriented than other forms of ownership. Rather, cooperatives place a greater emphasis on
process innovation. A graphic representation of orientations and competitive pressures acting on
food suppliers are shown in figure 1. All firms face competitive pressures that can shape their
strategies. When competitors in the same industry adopt new technologies for improving
efficiency, a firm experiences pressure either to adopt the same technology (leftward direction)
to remain viable or to differentiate its products from competitors (rightward direction). There are
also competitive forces pressuring firms to produce for the current market (upward direction).
There are shortcomings associated with each of the dominant orientation that dictate strategic
behavior of firms. If a company is driven only by what the current market wants, then its
products may lack innovation and novelty since a product that a consumer already wants is not
new and innovative. Firms spending resources pursuing consumer fads risk the problem that
such products may not be profitable as the firm strays away from core competencies, ultimately
abandoning an inherent advantage for producing its traditional products. A recent example is the
low carbohydrate diet where bakeries abandoned their specialty in bread making only to find that
the fad is short lived. Food manufacturers focused on being highly efficient may also lack
creativity to produce differentiated and innovative products. Such firms become imitators rather
than innovators, running the risk of entering a “race to the bottom” with their competitors using
Market orientation
(produce what current market wants)
(adopt efficient
production and
Product orientation
(innovate products with
quality focus)
Branded food
Figure 2. Hypothesized firm orientations and competitive pressures acting
on firms
cutthroat pricing strategies. At the other end of the spectrum are firms that are highly innovative
using their unique talent and expertise, but ignore market signals. These firms run the risk of
“running ahead of the market,” thereby innovating themselves into oblivion.
Firm Resources and Sustainable Competitive Advantage
There are other considerations beyond the nature of firm ownership and the types of markets
supplied that will direct a firm’s strategy. Every firm can be viewed as a collection of resources
whose form of productive use depends on it managers’ visions and perceptions (Wilk and
Fensterseifer 2003). A firm’s unique resource base influences its strategies. Heterogeneity and
imperfect mobility of resources are what makes strategic resources “a cornerstone of competitive
advantage” (Peteraf 1993.)
Firm’s that recognize their specialized resources are less likely to shift from one product to
another as the market changes. They are reluctant to chase the market because it is in their
interest to specialize in products that make use of their specific expertise and competencies,
which they regard as strategic resources. A firm must make strategic decisions based on its
inventory of specific skills, technologies, and natural resources. Firms recognizing strategic
resources are better positioned for innovating and sustaining economic rents (Mahoney and
Pandian 2001). They are able to take on risks of new products which if successful face lesser
threat of imitation when products are supported by strategic resources.
Firms that do not recognize possession of a strategic resource are more likely to make decisions
based solely on what the market wants. Such manufacturers may shift from one product line to
another using the same resource base. Although such firms are highly responsive to the market,
they may never achieve sustained economic profits.
Small and medium sized enterprises (SME) may not have sufficient resources to conduct formal
research and development activities. For this reason, companies may by-pass the product
development route and opt for private label manufacturing where retailers dictate their
specifications of products. Growth in food service activity, an alternative marketing channel, is
persuading some food manufacturers to make it a core business rather than promote their brands
to retailers. However, there are small- and medium-sized firms that are part of branded niche
markets where firms seek more profitable opportunities. These firms perceive themselves as
having a unique ability or owning a specific resource that is strategic to producing differentiated
products. This might include craftsmanship in baking, a geographic brand name, or a natural
resource. Similarly, large corporations with a historic reputation may view their brand image as a
strategic resource. Such factors provide options for food manufacturers in the direction they
Method for Case Study Series
Case studies are an effective tool and a practical means of understanding firm behavior and
strategies. The approach has been used for testing hypothesis as demonstrated by Traill and
Grunnert (1997). They examine 12 European food companies ranging from small, to large,
public, private, and cooperative type firms. A problem with the case study series is that the
selected firms may not representative of the industry. Another problem is that the case study
findings are subjective in nature. Direct interviews or surveys may provide a different
perspective of how firms view themselves from what their actions might suggest. For example,
firms are often inclined to make statements that quality is of utmost importance to their company
when the meaning of quality may vary for each type of firm and industry.
In this paper we focus only on companies that have shown clear leadership positions in one or
more product category in global food markets with a goal to better understand motives for
innovation and brand leadership. A brief description of each company is provided in the
Appendix. Information for each company is drawn from two sources: direct interviews with
company representatives and data from Euromonitor International, a provider of global business
intelligence and market analysis. Interviews were conducted in a semi-structured format. In the
case of the H.J. Heinz Company there was a panel of interviewees consisting of the Chief
Quality officer, the Vice President of Global Innovation and Quality, a National Accounts
Manager for special markets, and Senior Manager for Government and Regulatory Affairs. The
CEO was interviewed in the case of Snyder’s of Hanover. For the case study of the Fonterra
Cooperative Group an interview was conducted with the Director of Business Development. In
all cases company officials were given time to say what they thought was important from their
Case 1: Large global company with iconic brand image
Due to potential loss in manufacturer’s brand equity, large public food manufacturers face the
greatest threat from the expansion of private retailer brands and the increased power of the retail
sector. The H.J. Heinz Company has a long tradition in the U.S. market of being a number one
brand. It retains a dominant position in the U.S. and the world market. However, as with many
large food manufacturers, the growing share of private labels is presenting a challenge (table 2).
In response, rather than relying solely on its long held brand image, Heinz is making a strategic
decision to invest more heavily in differentiating itself further from private label offerings by
improving the quality of its products to attract more quality-conscious consumers.
H.J. Heinz
might easily be viewed as a company with a dominate product-orientation based on its
Chairman’s statement “I am convinced that quality and innovation are the way forward for
Private label offerings are an increasing challenge in the ketchup market, growing 6 percent between 2001 and
2004, accounting for 9.5 percent of the world market (or second largest share world wide).
Heinz: Product Innovation Activity
Much of the innovation has been focused on what is considered core products where it has strong
existing competencies and expertise. New product development constitutes an important part of
Heinz’s growth strategy. Product introductions are focused on meeting consumer’s demand for
convenience, health, improved taste, and lifestyle changes. The company has created attractive
consumer products by offering packaging innovations and the promotion of the health benefits of
its existing products. The health dimension is critical factor in its product differentiation strategy
for Heinz.
There are numerous examples of recent product innovations. The company introduced a new
range of soups, offering more nutritious contents with alternative ingredients and reduced salt,
sugar, and fat content. In 2004, nine contemporary “special” soups were introduced in the
United Kingdom, such as “Spicy Butternut Squash” and “Mediterranean Tomato and Bacon.”
There are many creative products such Ore-Ida Easy fries, the first microwaveable French fries
tasting like restaurant fries. This product is a strong complement to its ketchup. The most
successful package innovation in the United States was the Heinz Easy Squeeze ketchup
designed in an upside down ketchup bottle for faster and less messy dispensing. This packaging
was successfully launched in 19 European countries as well as in the U.S. and the Canadian food
service. In recent years, the company has also made substantial packaging innovations in other
food products with a conversion from traditional cans to more convenient solutions in single-
serve microwavable packaging.
Heinz: Process Innovation Activity
Heinz established four imperatives to achieve better performance: drive profitable growth,
remove the clutter, squeeze out costs, and measure and recognize performance. By “removing
the clutter,” Heinz seeks to eliminate inefficiencies and reduce complexities of product portfolio
and supply chain. The company implemented a major restructuring initiative named
“Streamline” aimed at reducing overhead costs. Heinz has also made a series of divestitures in
an effort to refocus its business more closely on its core products. The company is focusing on its
Table 2. Heinz's Position in U.S. and World Ketchup in 2003
U.S. market World
Company Share
Company Share
Heinz Ketchup Heinz Co, HJ 58.9 Heinz Heinz Co, HJ 27.6
Hunt's Ketchup ConAgra Foods Inc 16.3 Kagome Kagome Co Ltd 5.7
Del Monte Ketchup Del Monte Foods Co 5.1 Baltimor Baltimor Holding ZAO 4
Private Label Private label 14.5 Hunt's ConAgra Foods Inc 3.4
Others Others 5.2 Del Monte Kikkoman Corp 2.1
Total Total 100 Del Monte Del Monte Foods Co 2
Calvé Unilever Group 1.4
Hellmann's Unilever Group 1.4
Felix Orkla Group 1.3
Hela Gewürzwerke Hermann Laue 1.2
Others 49.9
Total 100
Source: Euromonitor International, 2005
top 15 “power brands,” which account for 60 percent of total sales. The “squeeze out the cost”
initiative has mainly focused on promotional expenditure as new systems have been
implemented to better track promotional spending. Through a new global procurement initiative
led from World headquarters in Pittsburgh, Heinz is aiming to cut costs in both direct and
indirect sourcing activities.
Heinz: Marketing Activities
The company launched its first national foodservice advertising campaign, using the slogan
“Insist on Heinz.” The objective of this campaign is to encourage consumers to insist on Heinz
Ketchup, when it is not available in fast food restaurants or other food service establishments.
Furthermore, to take full advantage of its strong position in the foodservice market, the company
has created “Group 57”, a culinary expert team that supplies customers with new ideas and
support. Heinz invests in consumer education by promoting the health benefits of lycopene in
tomatoes. Heinz’s advertising expenditures have also increased in recent years, mainly due to
the launching of a new product, Ore-Ida extra crispy fries in the United States. In response to
growing competition, especially from private labels, Heinz introduced an Every Day Low
Pricing initiative across many product groups. The aim of this initiative is to fight off
competition by creating a positive value impression among consumers.
Case 2: Small and medium private enterprise (SME) with branded products
Small- and medium-sized enterprises are often involved in niche marketing. Niche marketing
typically involves a supplier selling a differentiated product catering to a focused, target group of
customers. The consumer target market may have a certain romantic loyalty to the product or to
the brand name. Niche marketers can often capitalize on positive feelings that a group of
consumers may have about a certain region to which they trace their heritage. This is one reason
why Snyder’s of Hanover can compete with the Frito-Lay brand (owned by PepsiCo) in the
snack food market while attaining a respectable market share in both the U.S. and the global
market (table 3). Innovation, in general, is a rather elusive concept for an SME. This is because
innovation can involve major, expensive changes or subtle changes such as extensions to existing
product lines. In response to changing market conditions, SMEs need to adapt, develop new
ideas, and improve existing products.
Snyder’s of Hanover considers itself a medium-sized niche company where product quality and
innovation are key to remaining a leader. Although the company has a long tradition of pretzel
making, there are many types of pretzel-like products sold under company’s name (see
Appendix). Snyder’s of Hanover has found ways to adapt to market changes and pursue markets
outside the United States for future growth.
Snyder’s of Hanover: Product Innovation Activity
According to the CEO, the company’s strategic direction is in producing differentiated products,
whereby market niches are filled with innovative products. Snyder’s is currently producing a
wide array of distinctive products for national distribution in the United States. The company is
reluctant to enter product markets in snack foods where other competitors can easily replicate
products. The CEO used cheese curls as one example where the snack food industry is fiercely
competitive with the growth of private label manufacturers.
Product quality, a very important consideration for Snyder’s, is described in terms of product
freshness, texture, and flavor. These attributes of the pretzel are all quality components that the
company is constantly improving. The CEO attributes part of the company’s success to improved
pretzel quality through its oven baking technology. Conventional ovens yield a high variance in
moisture content, making pretzels unstable in storage. The company acquired specialized baking
ovens which provide consistent moisture content in the baking process. Simply finding the right
ovens is considered research and development for Snyder’s of Hanover.
Snyder’s of Hanover: Process Innovation Activity
Like many small- and medium-sized firms, the company has limited scope for achieving major
cost reductions in production and distribution. The speed and flexibility of taking an idea to a
commercially viable venture is key to the company’s success. At Snyder’s of Hanover, the
development process for products is in many ways ad hoc, but very effective for a medium-sized
food company. The CEO says there are three rules to ensure product success, but then states
“unfortunately nobody knows what they are.” Flexibility is important to bringing a good product
to fruition. Ideas or concepts are “tossed around.” The process of generating new products is
done through informal means where a research and development process committee meets once
a month consisting of four of five people, but always includes someone from the top
management. The company employs, in the CEO’s description, a “Marco Polo” approach of
traveling, carrying ideas home and keeping and improving on the good ideas. If a new concept
does not fit with existing competencies it is discarded.
Table 3. Snyders of Hanover position in U.S. and World Pretzels in 2003
U.S. World
share Company
Frito-Lay Co Rold Gold 31.5 PepsiCo Inc Rold Gold 21.4
Snyder's of Hanover Snyder's of Hanover 27.0 Snyder's of Hanover Snyder's of Hanover 17.9
Utz Quality Foods Inc Utz 5.0 Lorenz Bahlsen Snack GmbH & Co Salzletten 6.3
Mars Inc Combos 3.6 Utz Quality Foods Inc Utz 3.3
Bachman Co Bachman 2.7 Mars Inc Combos 2.4
Herr Foods Inc Herr's 2.3 Intersnack Knabber-Gebäck GmbH Stickletti 2
Old Dutch Foods Inc Old Dutch 1.6 Bachman Co Bachman 1.8
Jay's Food LLC Jay's 1.5 Herr Foods Inc Herr's 1.5
General Mills Inc Gardetto's 0.5 Ancel SA Bretzels 1.4
Private label Private Label 6.3 PepsiCo Inc Parkers 1.2
Other brands 18.0 Other brands 40.8
Total Total 100.0 Total 59.2
Source: Euromonitor International, 2005
Snyders of Hanover: Marketing Activities
The company is open to consumer suggestions and has its own online club called “Pretzel Eaters
Club.” In addition, it conducts polls to get consumer reactions to various products. As an
example, a recent poll asked consumers how they prefer to eat Snyder’s pretzels. This is
important since the company is looking for better complements, such as dips, for its pretzels.
Moreover, it also helps Snyder’s design the most appropriate type of pretzel to accompany a
particular dip. However, the company carefully screens suggestions by evaluating how potential
concepts and products fit with existing capabilities.
Snyder’s of Hanover is cautious to not expand into new products that do not fit with its existing
production capabilities. The company finds focus groups helpful for determining whether a new
product concept is viable prior to making major capital outlays. The company offers an extensive
line of new product extensions that fits with its existing pretzel category. A point emphasized by
the CEO is that the company’s philosophy is to be open to suggestions but not let consumers take
the company in directions it does not want to go.
Case 3: Large cooperative using R&D and international ventures
A handicap of traditional cooperatives is their orientation toward producers and lack of consumer
awareness. However, this is changing as cooperatives discover more suitable market-oriented
strategies and increasingly operate in global markets. Although capital constraints have been a
primary barrier to internationalization, risk aversion is one of the most important factors
discouraging the extent of internationalization (Buccola, Duraham, Gopinath, and Henderson
2001). The Fonterra Cooperative Group has successfully internationalized, breaking away from
most models of traditional cooperatives. Its two distinct businesses structure, specialty
ingredients and consumer milk products provides a hedge against fluctuating international dairy
prices. Since Fonterra is a supplier to both consumer product and dairy ingredient markets, it
generates higher earnings in consumer products when commodity-type dairy prices fall. In
addition, Fonterra supplements New Zealand milk with milk supplies from foreign affiliates to
assure a stable supply of products for its customers
Fonterra uses its expertise in dairy technology for creating value from milk as both ingredients
and consumer dairy products. It is a leader in several country markets for branded consumer
products such as milk, cheese, powder milk, butter and yogurt (table 4). Although, Fonterra is
ranked 14
in sales of consumer dairy products, Fonterra is ranked as the 6
largest dairy
company in the world with more than two thirds of its sales in dairy ingredients.
Fonterra: Product Innovation Activity
Fonterra views milk with sophistication, seeking to lead the race to develop its nutritional
potential by meeting the needs of an increasingly health-conscious world. Science and biology
underpins the dairy industry both in on-farm production and in dairy product manufacturing.
Biotechnology is the tool that allows Fonterra to modify biological systems, either using natural
means or more advanced tools.
To develop specialized products, Fonterra uses a health and nutrition team that focus on the
unique health benefits of milk-derived bioactives. This team targets specific areas in response to
global consumer health concerns namely: immune health, gastrointestinal health, infant nutrition,
dermatology, sports health, therapeutics, bone health and animal health. Fonterra’s
concentration on the development of new products to drive growth is evident in both the
consumer products and the ingredient business. It established new research and development
facilities in 2004 to expand its potential of new products. Fonterra also established a number of
joint research projects with pioneering German vitamin producer BASF. This agreement includes
developing dairy-based products for the health ingredients market, and a collaboration to develop
customized, instantly-vended convenience foods for a variety of dietary needs, which will be
marketed as or “point-of-sale individualized foods”.
Table 4. Fonterra's position in selected country and product categories
Chile, Yoghurt
Venezuala, Long-life UHT milk
Fonterra Co-operative Group 43.7 Fonterra Co-operative Group 50
Nestlé SA 37.2 Parmalat Finanziaria SpA 44.5
Parmalat Finanziaria SpA 5.8 Alpina Productos Alimenticios SA 4.1
Sodiaal SA 3.6 Lácteos Los Andes CA 1.3
Calan SA 2.8 Others 0.1
Private label 0.4 Total 100
Others 6.5
Total 100.0
Hong Kong, Powder Milk Taiwan, Cheese
Fonterra Co-operative Group 36 Fonterra Co-operative Group 47.6
Friesland Coberco Dairy Foods 34.5 Kraft Foods Inc 17.8
Nestlé SA 20.5 Lactalis, Groupe 3.6
Private label 5 Friesland Coberco Dairy Foods Holding NV 3.6
Others 4 Land O' Lakes Inc 3.0
Total 100 Bega Co-operative Society Ltd, The 2.8
Unibel S
Others 19.5
Total 100.0
Source: Euromonitor International, 2005
Fonterra: Process Innovation Activity
Fonterra’s management states that “operational excellence has to be embedded in our culture”.
An important part of Fonterra’s global business operations is procurement of raw milk and
gaining access to product markets. Fresh milk products, by their perishable and bulky nature,
cannot be economically transported across long distances. Furthermore, high trade barriers on
dairy products restrain global product movements. Fonterra established several strategic
alliances and partners to increase efficiency and flexibility in its global supply chain. Fonterra
and Dairy Farmers of America (DFA), the largest milk-collecting cooperative in the United
States, formed a joint venture company called DairiConcepts which combines DFA 's
manufacturing sites with Fonterra 's technological innovations. DairiConcepts both strengthened
Fonterra’s position in the U.S. market and offered the cooperative the ability to better exploit its
new opportunities.
In addition to improving efficiencies in its South American operations, Fonterra established a
joint venture with Nestlé to form Dairy Partners Americas. Consisting of 3,400-strong
workforce throughout the Americas, with more than two thirds of them ex-Nestlé staff, Dairy
Partners Americas has been successfully implemented in Argentina, Brazil and Venezuela. A
further extension to the Dairy Partners Americas includes Trinidad and Tobago, Ecuador and
Colombia. These and other partnerships provide alternative sources of raw milk for its
ingredients business, enable optimization of Fonterra's production plan and inventory levels, and
ultimately facilitate meeting customer demand in all regional markets.
Fonterra: Marketing Activities
Fonterra focuses on conveying the message that it has high quality products stemming from
research and development activity, which use healthy, natural and ecologically responsible
products that are consistent with Fonterra's rural roots. The company takes a science-based
approach to developing and promoting these products by employing scientific results found in
research studies and commissioning research papers and clinical studies to support its claims. In
2004, a report was published illustrating the positive benefit of feeding fortified milk powders to
children. Fonterra aims to establish the image of its products in the minds of young consumers,
viewing them as potential life-long consumers. For example, its website for children,
(, offers interactive games, fun information, contests and links to other
milk-related sites.
Case comparison summary
Although each firm in this case series differs by type and the products they supply in different
markets, they have much in common as branded manufacturers seeking to differentiate their
products. All firms view themselves as having a unique identity within their industry. This is
key for implementing a successful product differentiation strategy.
Statement made by Fonterra’s CEO, Andrew Ferrier, to shareholders October 2004.
Each firm has strategic resources, either real or perceived, that are key for successful product
differentiation strategies (table 5). Both Heinz and Snyder’s of Hanover believe their brand
conveys a quality image with their respective company’s historic reputation. The image of
enduring quality gives consumers trust and loyalty to the brand name. To retain this image,
Heinz and Snyder’s of Hanover must constantly innovate products to compete with younger
companies seeking to imitate products. Brand power alone erodes easily if it is not maintained
with tangible product quality enhancements.
Fonterra, a new company name, does not use its company name as a brand. Rather, the
cooperative owns many consumer brands in foreign countries (such as Anchor, Anlene, Meadow
Fresh, Soprole). The company’s distinct resources, which render it a technologically advanced
innovator and a supplier of New Zealand milk products, gives it a distinct competitive advantage
that is not easily replicated by competitors. As a New Zealand-based company it projects an
image of high quality milk products. Through its superior product knowledge of milk and
extensive networks in research and development, the company conveys experience and expertise
to its industrial ingredient customers. Like Heinz, its reputation as a consumer branded company
must be maintained with new product innovation.
Another common characteristic among the three firms is their tendency to focus on products
where each firm has strong core competencies. In the case of Heinz, the company divested of
certain products that were not deemed as core products. In other cases, firms have innovated
existing products rather than expand into more product categories. For example, in response to
the growing demand for health foods, Snyder’s of Hanover could produce new and healthier
snack foods. However, the company has instead chosen to focus on creating better tasting
Snyder’s pretzels using healthier inputs. This decision is consistent with the company’s desire to
sustain its quality and family tradition of pretzel baking. In addition, there is a careful screening
Table 5. Summary and comparison of cases
Heinz Snyder's of Hanover Fonterra Cooperative Group
Type of company
Large, public, global Medium sized, private, domestic Large cooperative, global
Strategic resources
-A quality brand image established in 1876 -Fine art of pretzel baking since 1909 -Image of clean environment-green pastures
(real or perceived)
-Expertise in condiments and sauces -A family tradition and geographic brand -Deep knowledge of milk and components
-Superior knowledge of international cuisine
Product orientation
-Packaging and quality innovation -Niche marketing of quality products by -Put more focus and resources behind
for making products healthier improving existing products innovation projects to capture market leadership
and more convenient with emphasis on health components using R&D
Process orientation
-Streamline operations and focus -Flexibility and speed of adopting Outsource global information technology
on improving core products to improve new products
to achieve operational excellence
of mergers and partnerships
Market orientation
-Educate consumers, provide information -Listen to ideas, implement -Educate consumers about benefits of
on healthy choices for their products only when fits with company of dairy products and ecological sound practices
Comments from management
"Quality and innovation are the way "Do not let consumers take you "We want to be indispensable
forward" where you don't want to go" to our customers"
"a genuine ability to use our R&D capabilities"
process for which ideas are implemented to fit with the company’s production capability. All of
these actions are viewed as responding to the changing market in a “disciplined” manner. In
doing so, each firm reduces the risk of facing direct price competition with firms that can imitate
the company’s products.
Firms with the leadership position also take on the responsibility of educating consumers to
promote their products. Steering the market in their favor is more advantageous than allowing
the market to steer the firm. Influencing the market is important to capture new markets using
their specific capabilities. Thus, leadership firms coordinate consumer education at the same
time they offer more choices of products to their customers.
It is difficult to say that any one firm has a single dominant orientation. Both Heinz and Fonterra
emphasize product innovation and process innovation (operational efficiency). Because of this, a
“dominant” orientation is not depicted graphically (figure 3). Rather, process innovation
supports product innovation. For example, by focusing on the company’s power brands, Heinz
aims to improve organizational efficiencies with the goal of improving product innovation in
specific product categories. Likewise, Fonterra is developing strategies to put more focus and
resources around its consumer “power brands” which earn higher returns. When strategic
resources are recognized, there is less pressure to follow a particular orientation (as suggested in
figure 1). Rather firms direct their activities around market, process, and product activities
which, in turn, direct the firm towards higher growth and profitability.
Market orientation
Influence what market wants
adopt processes using
strategic resources
more effectively
Product orientation
Innovate to differentiate
products using strategic
H.J. Heinz
Make existing product under Heinz
brand healthier with convenient
Snyder’s of Hanover
Specialize in baking
tradition using product
extensions of pretzels
Figure 3. Leaders recognize strategic resources and use innovation to
influence market for sustaining profits and growth
Use R&D extensively and promote
wholesome “green pasture” image to
promote milk products and ingredients
Direction for
superior profits
Resource base
Leaders recognize strategic resources
The question of whether the growing power of retailers means the demise for branded food
manufacturers is one that deserves attention. Branded manufacturers can be a major source of
innovation in the food industry as they have the potential for earning superior returns. Leadership
is maintained when firms are able to differentiate their product offerings from competitors.
However, maintaining leadership position requires not only branding power but also innovative
products. The case studies covered in this paper suggest that firms use their unique resource base
and form strategies to capitalize on their capabilities. A single dominant orientation is not
necessary to maintain leadership. Rather process innovation can facilitate product innovation
leading to successful product differentiation and enhancing leadership position.
Health, vitality, and convenience foods are becoming more important in global food markets.
Responding to this demand will require investments in food science and technologies to produce
truly innovative products that involve new processes, ingredients, or both. Innovation and its
motivation is a national public policy concern that is influenced by a myriad of regulations and
laws administered by various agencies. An area of future investigation is how policy might open
doors to other forms of food businesses beyond the traditional role of food manufacturers,
including specialists in ingredient technologies, product innovation firms, and specialty food
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H.J. Heinz Company is a leading manufacturer and marketer of branded foods in the global food
industry. The company is most recognized for its ketchup with a comprehensive presence in
condiments, sauces, ready meals, soup, tuna, and baby food. Heinz is the most global U.S.-based
food company, with a world-class portfolio of powerful brands holding number-one and number-
two market positions in more than 50 countries. The Heinz brand has an estimated value of $2.5
billion with Heinz's top-15 power brands accounting for two-thirds of annual sales.
The company has number-one or number-two brands in 200 countries around the world,
showcased by Heinz Ketchup. Other brands in the company’s portfolio include Heinz, Weight
Watchers, Ore-Ida frozen potato products, Classico pasta sauces, Plasmon baby food and John
West tuna. Heinz also uses the famous names Weight Watchers, Boston Market, T.G.I. Friday's,
Jack Daniel's and Linda McCartney under license.
Table A1. Examples of Heinz new product introductions (2003-2004) in U.S. and U.K markets
Brand & Product Name Countr
Heinz Tomato Ketchup with Talking Labels - Worthy of Gold;
Fixes Burgers at Warp Speed; Served at the Immaculate
Heinz One Carb Ketchup USA
Wyler's Soup Starter Homestyle Soup Mix - Beef Vegetable;
Chicken Noodle; Potato, Garlic & Chives; Hearty Three Bean Chili;
Hearty Chicken Vegetable; Chicken with White and Wild Rice;
Wyler Sodium Free Instant Bouillon Cubes - Chicken; Beef;
Sodium Free Instant Bouillon Packets - Chicken; Beef
Heinz Chilled Soup - Carrot & Coriander; Roast Chicken & Herbs;
Tomato & Red Pepper
United Kingdom
Heinz Weight Watchers Soup Cup - Country Vegetable; Thai
Chicken; Tomato
United Kingdom
Heinz Top Down Tomato Ketchup United Kingdom
Heinz Special Soup - Broccoli & Watercress United Kingdom
Heinz Special Soup - Mediterranean Tomato & Bacon; Spicy
Butternut Squash
United Kingdom
Heinz Top Down Tomato Ketchup - Chilli; Curry United Kingdom
Heinz Salad Shaker Pre-Packed Salad Kit - Classic Chicken
Caesar; Classic Greek
United Kingdom
Heinz Exotic Table Sauce & Dip - Garlic & Chive; Sweet & Sour;
Tomato & Chilli
United Kingdom
Heinz Eazy Squirt Sauce - Choppin' Sweet `n' Sour; Cowboy Joe
BBQ; Slurpin' Sweet Curry; Supersonic Pizza
United Kingdom
Source: Productscan
Snyder’s of Hanover
Snyder’s of Hanover, known as “America’s Pretzel Bakery,” started in 1909, in Pennsylvania,
with sales totaling about $300 million in 2004. The company is considered a niche player in the
snack food industry. It specializes in pretzels and similar snack foods, with 90 percent of its
sales in the United States. The company has national distribution with two production plants, one
in Hanover, Pennsylvania and the other in Phoenix, Arizona. The company has a long tradition t
began in 1909 with Snyder's founder Harry V. Warehime, affectionately known as "Gramp
Harry". He started the Hanover Pretzel Company with a single recipe, Hanover Olde Tyme
Pretzels. The company’s product line is an extensive array of pretzel products including
Sourdough Hard Pretzels, Nibblers (Garlic Bread, Honey Mustard, and Sourdough), Flavored
Pieces (Buttermilk Ranch, Cheddar Cheese, Honey BBQ, Jalapeno, Seasoned Snack), Organic
Selections(Oat Bran Sticks, Classic Mini, Honey Wheat Sticks, Pumpernickel and Onion Sticks),
and EatSmart (Veggie Crisps, Sundried Tomato and Pesto, CheddAirs, Soy Crisps, and All-
Natural Dips).
Table A2. Examples of Snyders of Hanover new product introductions
Brand & Product Name
Snyder's of Hanover Pieces - New York Deli Style; Hot Buffalo Wing
Snyder's of Hanover Pretzel Sticks - Pumpernickel & Onion; 12 Multi Grain
Snyder's of Hanover Pretzel Sandwiches - Cheddar Cheese; Peanut Butter
EatSmart All-Natural Soy Crisps - Parmesan, Garlic & Olive Oil; Tomato, Romano
& Olive Oil
Snyder's of Hanover Carb-Fix Pretzel Nibblers
Snyder's of Hanover Pretzel Dips - Made with Hershey's White Chocolate; Made
with Hershey's Milk Chocolate
Snyder's of Hanover Pretzel Sandwiches - Cheddar Cheese; Peanut Butter
Snyder's of Hanover EatSmart Veggie Crisps - Sundried Tomato & Pesto;
Cheddar & Jalapeno; Lunch Packs - Regular
Snyder's of Hanover EatSmart CheddAirs Corn & Rice Puffs with Aged White
Cheddar Cheese - Lunch Pack
Snyder's of Hanover Organic Honey Wheat Sticks - Lunch Pack
Snyder's of Hanover Milk Chocolate Covered Specials Pretzels
Snyder's of Hanover Rounds - Creamy Caramel Sourdough Pretzel Slices; Apple
Cinnamon Pretzel Slices
Snyder's of Hanover EatSmart Kettle Pops Organic Sweet Popcorn - with a Light
Caramel Glaze; with a Sweet and Salty Glaze
Fonterra Cooperative Goup
The Fonterra Co-operative Group was formed by the merger of New Zealand Dairy Group, Kiwi
Co-operative Dairies and the New Zealand Dairy Board in late 2001. It is owned by its 13,000
dairy farming shareholders. Fonterra is organized in three divisions; New Zealand Milk Products
(NZMP), New Zealand Milk, and Fonterra Enterprises. NZMP is the world’s largest dairy
ingredients company which focuses on separating milk to its various components and then
marketing these components. New Zealand Milk is the business unit manufacturing dairy based
consumer and branded food products, while Fonterra Enterprises comprises an innovative
venture and growth businesses supporting Fonterra’s core business activities. Since the merger
there have been a number of acquisitions. Fonterra has a 50% stake in Australian dairy producer,
Bonlac Foods Ltd, and has undertaken the formal merger of both companies' consumer products
operations in Australia and New Zealand. Other acquisitions and strategic alliances include joint
ventures with Nestlé through Dairy Partners Americas in South and Central America, Dairy
Farmers of America with DairiConcepts in the United States, Britannia Industries Ltd in India,
and Arla Foods in the United Kingdom.
Table A2. Examples of Fonterra's new product introductions
Brand & Product Name Countr
Brownes Traditional Friendly aB+ Yoghurt
- Vanilla Pear
Connoisseur Exquisite Yoghurt -
Caramelised Pear; Classic Vanilla
Chill Ice Cream Bar - Super Sour New Zealand
Tip Top Chill Ice Cream Cone - Mega
New Zealand
Polar Pops Milky Pops - Banana &
Caramel; Strawberry & Caramel
New Zealand
Polar Pops Moo-Sli Pops Ice Cream Bar -
New Zealand
Meadow Fresh Calci Trim Liquid
Breakfast Drink - Banana; Chocolate;
New Zealand
Meadow Fresh Pouring Custard - Vanilla
New Zealand
Mainland Spreadable Cream Cheese &
Sweet Chilli Sauce
Brownes SupaShake Milkshake - Choc
Britannia Milkman Low Fat Cheese -
Sliced; Spread
Britannia Milkman Malai Chaska Cream
Cheese Spread
... Therefore, it is important to highlight the relevance of this study, as it addresses innovative brands from the perspective of managers, seeking to deepen the knowledge about these brands, how they are developed, and managed. Gehlhar, Regmi, Stefanou and Zoumas (2009) conducted a study with leading brands in the market that indicates that, for a brand to remain in the lead, it is not enough that the brand responds to changes in demand, it is necessary for the company to direct the market through its product innovations and consumer education. This study is in line with the understanding of Schumpeter (1939), who postulated that changes in consumer tastes, at the initiative of consumers themselves, are very small and that they are generated by the action of manufacturers. ...
... This study is in line with the understanding of Schumpeter (1939), who postulated that changes in consumer tastes, at the initiative of consumers themselves, are very small and that they are generated by the action of manufacturers. For Gehlhar et al. (2009), the leadership of a brand depends on the differentiation capacity of its products that can be obtained through product innovation. ...
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... Customer engagement through education is also an enabler that is particularly relevant for products that are perceived as innovative in the market (Gehlhar et al., 2009). ...
Purpose The Chinese market represents an increasingly popular destination for wine firms and recent opportunities derive from the growth of e-commerce. The aim of this paper is to understand the impact of digital platforms on wine firms' internationalisation in China by adopting the service ecosystems approach. Design/methodology/approach The authors carried out a case study of Italian premium wine firms from the Valpolicella area by collecting 27 semi-structured interviews with key informants that operate at the micro-, meso- and macro-levels of the internationalisation ecosystem. Italian wine firms were selected as the focus of the analysis, given the recent sales growth of their products in the Chinese market. Findings Results show that digital platforms hold a key role in the wine firms' internationalisation in China, intervening with resource integration mechanisms, alignment to the cultural context and mediating firms' digital presence in the market. The platformisation dynamics also reveal the existence of enablers and constraints in the firm internationalisation through digital platforms. Research limitations/implications The authors aim to contribute to the marketing literature by analysing how digital platforms influence the wine firms' internationalisation in China through an original perspective, i.e. the service ecosystems lens. Originality/value The study adopts the service ecosystems approach to understand the internationalisation of wine firms in the Chinese market through digital platforms.
... On the other hand, the cost of advertising for Heinz has grown significantly in recent years. The company's strategy to counter the entry of private labels is to introduce everyday low pricing programs (Gehlhar Mark et al., 2009). Also, Innocent drinks is a UK company that manufactures healthy drinks and smoothies. ...
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... Piroth et al., 2020;Segovia and Palma, 2016). In doing so, researchers allow practitioners to find segments of consumers with similar demographic and psychographic characteristics and thus to pursue product or process differentiation, a common firm strategy in the segmented food consumer marketplace (Cucagna and Goldsmith, 2018;Gehlhar et al., 2009). Knowledge of the relationship between individuals' characteristics and their grocery shopping preferences is useful to provide practitioners and policy makers with potential recommendations in terms of store policies, price strategies and health directives, respectively. ...
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... For some scholars the answer lies in functional food development (FFPD) as the future for new product development (NPD) [48,51]. Instead of being market-oriented, FFPD tends to be more product-oriented and exploit technical opportunities to develop new markets, hence consumers also have specific information [103]. Moreover, NPD generate knowledge using trial and error method with prevailing knowledge whereas the successor tends to explore and analyze new knowledge in order to outperform others [48,104]. ...
... Igualmente, o con-sumidor valora a diferenciación superior do produto, que se reflicte na disposición a pagar un prezo relativamente superior. Este enfoque de marca innovadora, que permite non só conseguir unha diferenciación exitosa de produtos senón mellorar unha posición de liderado, foi contrastado empiricamente por Gehlhar, Regmi, Stefanou e Zoumas (2009). Doutra banda, un estudo centrado en investigar os factores explicativos da intención de compra do azucre de coco, que se efectuou nos Emiratos Árabes Unidos (Nurhayati, 2018), tamén concluíu a importancia do envase fronte a outros atributos como a calidade ou o prezo. ...
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Branding is critical in strategic marketing decisions since it identifies the various components a company chooses to apply across the multiple products it sells. There are multiple reasons why companies adopt branding in marketing strategy, including increasing brand awareness, building a positive image and reputation, establishing consumer loyalty, adding valuable equity, brand extensions, segmenting the market, and ensuring legal protection. Despite these promising benefits, there lacks adequate research explaining the attributes marketers can use to create a strong brand identity, awareness, and loyalty amidst these challenges. In this regard, this chapter addresses this issue by exploring how building brand identity, awareness, and loyalty in business-to-business and business-to-consumer markets can improve organizational performance and competitiveness. This research chapter uses a systematic review of the bibliometric literature to explore branding as a marketing strategy critical to improving a company's performance in local and international markets.
Food diversity in India is an implicit characteristic of India’s diversified culture consisting of different regions and states within. Traditionally, Indians like to have home-cooked meals – a concept supported religiously as well as individually. However, with times due to increasing awareness and influence of western culture, there is a slight shift in food consumption pattern among urban Indian families. The economic reforms brought in innumerable MNC brands in the fast food sector to the Indian market. Today, fast food industry is getting adapted to Indian food requirements and is growing in India. It is gaining acceptance primarily from Indian youth and younger generations and is becoming part of life. This paper reports an empirical test of the claim that sales promotion strategies like high advertisement, combo offers, low priced meals and Indianised menu adopted by these MNC’s has changed drastically every aspect of FMCG segment particularly in the food products in special reference to Nagpur.
Conference Paper
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Brand innovation (BI) is one of the most important issues to brand management. However, it has not been adequately explored, resulting in a significant gap in the literature since a clear framework on BI has not been developed. The main purpose of this paper is to investigate: i) the impact of brand innovation on brand equity, ii) the relationship between market orientation (MO) and brand innovation, and iii) the relationship between internationalization and brand innovation. The research model integrates four key variables in Greek export food and beverage companies: market orientation, internationalization, brand innovation and brand equity. Findings show that when companies are more brand innovative, their brand equity increases. More specifically, results show that: a) brand innovation directly and positively affects brand equity, b) there is a positive link between market orientation and brand innovation, and c) there is a positive link between internationalization and brand innovation. Furthermore, the lack of brand innovation reduces brand equity even when internationalization and market orientation are present.
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Purpose – The purpose of this paper is to sketch a comparative account of NPD approaches between registered New Zealand food companies that are doing some sort of functional foods (FF) development (Group 1) and those that are not (Group 2); to generate a better understanding of differences and commonalities in their NPD approaches from resource-based view of competitive advantage. Design/methodology/approach – This paper opted an exploratory approach using a quantitative survey across food manufacturing companies in New Zealand. The primary foci of this empirical investigation were: orientation towards the NPD, innovation processes, collaborative NPD links and routes to commercialisation. Findings – The results (based on a 22 per cent response rate) show a significant difference ( p <0.05) in the aims and mode of NPD between Groups 1 and 2. Further it was observed that food companies in Group 1 have significantly ( p <0.05) more diverse external collaborations with broader aims to collaborate, in comparison with food companies in Group 2. Research limitations/implications – This study was conducted in New Zealand and thus generalisability of the findings may have to be interpreted carefully. Practical implications – The traditional NPD approach (independent and closed NPD), with loose intellectual property protection practices, dominates the food manufacturing industry in New Zealand. Research-oriented collaborations need to be strengthened in their scope and content to develop the innovative capabilities and capacities of small and medium enterprises (SME's) within future value-added food productions. Originality/value – This research provides the comparative narration of innovation process of food manufacturing companies with reference to FFs development.
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The primary purpose of this empirical research was to develop and validate the brand leadership scale (BLS). In this study, brand leadership is defined as consumers’ perception about the relatively distinctive ability of a brand to continually achieve excellence through sufficient combinations of trendsetting and brand positioning within an industry segment. The BLS, comprising perceived quality, value, innovativeness and popularity, provides a unique methodological and conceptual approach for measuring products’ brand leadership in market dynamics. The measurement scale helps develop a clear understanding of competitive relationships among leading and trailing brands from a strategic perspective based on consumers’ perceptions. Theoretical and practical implications are discussed.
This report examines the conduct of the cereal industry since the advent of our public campaign for lower cereal prices one year ago, on March 5, 1995. Announced cereal price increases slowed for the first time in a decade. But the fact that the major cereal companies sold 145 million fewer boxes of cereal in 1995 indicates that consumers still believe prices continue to be too high. It remains to be seen whether or not the leading companies will move prices more in line with the costs of production due to competition from private label and consumer dissatisfaction. [EconLit cites: L100, L410, L660]
Building on Thompson's (1967) typology of long-linked, intensive, and mediating technologies, this paper explores the idea that the value chain, the value shop, and the value network are three distinct generic value configuration models required to understand and analyze firm-level value creation logic across a broad range of industries and firms. While the long-linked technology delivers value by transforming inputs into products, the intensive technology delivers value by resolving unique customer problems, and the mediating technology delivers value by enabling direct and indirect exchanges between customers. With the identification of alternative value creation technologies, value chain analysis is both sharpened and generalized into what we propose as a value configuration analysis approach to the diagnosis of competitive advantage. With the long-linked technology and the corresponding value chain configuration model as benchmark, the paper reviews the distinctive logic and develops models of the value shop and the value network in terms of primary activity categories, drivers of cost and value, and strategic positioning options.
This paper summarizes and comments on Conner (1991) that contributes to the strategic management area by providing an historical comparison of resource-based theory and five schools of thought within industrial organization economics. Conner (1991) argues that the fundamental distinction between resource-based theory and transaction costs theory is that resource-based theory focuses on the deployment and combination of specific inputs while transaction costs theory focuses on the avoidance of opportunism. I offer three responses to this claim. First, Conner's distinction was not central to the resource-based literature at the time the article was published. Second, I raise concerns about building a resource-based theory of the firm that assumes away the problems of opportunistic behavior. Third, I offer an alternative view of the fundamental similarities and differences between resource-based theory and transaction costs theory.
New product launch research has identified four strategic issues that involve activities essential to introduce a new product to its target market. The sum of these decisions is critical to new product success. Substantial research has focused on decisions guiding the proper product, price, and promotion mix to favorably impact market goals. Considerably less research has centered on determining how place capabilities such as logistics and supply chain relationships impact launch performance. Logistics and supply chain collaboration—the processes involved in planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from the point of origin to point of consumption for the purpose of conforming to customer requirements—can greatly reduce risk associated with new product launch. They combine to provide a structure to facilitate rapid response to developing demand by location and intensity. In this article, an effort is made to fill the gap in extant knowledge regarding new product launch strategies by reviewing relevant literature and comparing traditional launch strategies based on anticipatory demand forecasts with alternative lean launch strategies based on the principles of response-based logistics. The result is a lean launch model for continued empirical testing and managerial review. The article contrasts traditional logistics support of new product launch with an emerging logic called lean launch strategy. The traditional launch strategy is forecast driven and is based on anticipatory logistics (push). The lean launch strategy is formulated on principles of postponement and is based on responsebased logistics (pull) and supply chain management. Response-based logistics systems provide flexibility that enables better management of inventory levels. Improved replenishment times and in-stock availability of products from a centralized inventory allows managers to rapidly react to actual demand. Lean launch enhances successful introduction by allowing greater flexibility in product variant selection while minimizing out-of-stock potential. Lean launch also can cut losses in product launch failures by reducing launch inventory exposure. Finally, lean launch can improve chances of new product success by helping
Purpose – The increasing importance of health food sales and the growing number of consumers purchasing health foods necessitates that marketers develop enhanced understanding of health food consumers. The purpose of this paper is to provide a theoretical extension to the health belief model (HBM) that integrates personal stress and environmental cues (visible health problems) with its constructs. Design/methodology/approach – Data were collected through a quantitative face-to-face survey of 384 health food consumers in Taiwan, and structural equation modelling was used to analyse the data. Findings – The results show that the perceived benefits and barriers of health foods are critical antecedents of continued-consumption intention. Personal stress and visible health problems substantially influence consumers’ perceived susceptibility to and severity of health problems, and perceived susceptibility consequently leads to consumer continued consumption. However, the results indicate an irrelevant relationship between perceived severity of health problems and continued-consumption intentions. Originality/value – Based on the HBM, the authors integrated perceived stress and visible health problems into the health food consumer research. The findings can improve the understanding of managers in the health food market regarding the role that stress and visibility play in consumer decisions.
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
The body of literature on brand extensions has extensively focused on consumers' evaluation and perceived fit of brand extensions. Yet little attention has been given to the internal and external strategic factors of foreign firms that affect brand extensions in a foreign host market. Drawing from international business and marketing literature, in this conceptual study we propose an integrative, conceptual framework to study these factors at three different levels: consumer-specific, industry-specific, and firm-specific factors in a host market. Specifically, we examine the impact of uncertainty avoidance, consumer innovativeness, market concentration, firms' heterogeneous resources (i.e., international experience and local market knowledge), and firms' strategic posture of standardization/adaptation. We also discuss implications and directions for future research.
Purpose – This paper presents the results of exploratory research aimed at understanding how firms operating in regional clusters use the clusters' collective identity in their external communication and combine it with the communication of their individual identity. In particular, the paper aims to detect different behaviors among different types of firms. Design/methodology/approach – A quantitative exploratory content analysis is performed on the websites of the wineries of the Franciacorta wine cluster (Italy). A two-step cluster analysis is used to identify differences in identity communications. Findings – The results suggest the existence of two groups manifesting different patterns of identity communication. Larger firms communicate their individual identity through symbols, but they consistently communicate collective values. The other group (on average smaller firms, but including some of the biggest) seems to exploit collective identity symbols, without giving prominence to collective values. Practical implications – This study provides an understanding of how companies communicate collective symbols and values promoted by cooperative institutions; this understanding can be beneficial for future developments of collective branding projects. Originality/value – This research contributes to broadening the debate on cluster identity as a strategic resource by adopting a communication perspective as well as providing empirical data on how different types of clusters' firms actually combine a collective cluster's identity and their firm's identity to shape their external image.