Means and Limitations of Building Brand Equity

Means and Limitations of Building Brand Equity

Introduction

Modern conditions of managing a brand as a tool of the market environment, which allows winning a place in the market, where worthy qualities are realized, demand for purposeful and regular management. The value of a brand in an organization is shown only in the course of the use of tools. Kotler and Pfoertsch (2010), and other western experts at brand management notice that the most typical qualities of professional brand-managers are the ability to create, support, protect, strengthen and expand trademarks, in other words to operate. Therefore, Paul Temporal (2010) in his book Advanced brand management: managing brands in a changing world  marks that brand management (a branded principle of management) is well-thought in theory; there is a developed system of ideas, principles and methods, which generalizes practical experience and reflects the basic laws of the realized processes. Any type of management is based on the corresponding concept. The latter is a system of ideas, principles, representations, which predetermines the purpose of functioning of an organization, mechanisms of the interaction of the subject and object of management, the character of relations between separate links of its internal structure, and a necessary degree of the account of the influence of an environment on organization development. The latter has changed the mission of trademarks in the market. In the course of work with trademarks, the understanding of managers’ functional purpose has extended from an image in the consciousness of consumers to the mechanism of differentiation and individualization of goods and services, and the legal tool of the protection of intellectual property as part of the philosophy of business developing in time. As a consequence, the brand management paradigm has essentially changed and demands for considerably new conceptual approaches to the brand management system that causes publication urgency. The analysis of the given problem shows that a significant amount of scientific works is devoted to it.

Theoretical and practical aspects of a brand are in the center of attention of many scientists. Problems connected with the creation of successful trademarks are discussed in various treatises, trademarks and advertising mechanisms. Other aspects of the theory of a brand management are developed in works of such experts as Jacob Jacobi and Robert Chestnut (1978). However, in the published scientific works, questions of the modern conceptual approach, which are insufficiently investigated by the brand management system, are formed on this basis. The overall objective of such publications is the research of the modern conceptual approach to the brand management system. The concept was elaborated in 1931 by firms Procter & Gamble and General Food, and consisted in trademark advancement in the market for the purpose of the formation of long-term preference of a certain trademark among competing ones. 1931 is considered to be the beginning of regular research and practical introduction of a brand management into the activity of organizations. Since then, this direction in the theory and brand management practice continues to develop, and researches in this area are conducted all over the world. The majority of succeeding organizations have reached results thanks to brand management introduction into organizational activity. Doyle (2009) states a number of reasons for the activation of brand management as a kind of activity:

• A considerable quantity of commercial references: by some estimations, for an average citizen daily, there should be 1000 references;
• A variety of goods and trademarks;
• The identity of goods and services;
• A scale effect.

In the past, the scale effect was observed in industrial activity. However, in the present, it is in advantage communications, trade and distribution possess. If “know-how” becomes more flexible, and, in many cases, does not demand for big capital expenses on the marketing of the distribution of goods, than there is a greater requirement for the use of effects of an increase in volumes in the given sphere. Unprecedented changes in an environment and society have changed a paradigm of brand management. Preconditions of such changes are connected with cycles of economic development, processes occurring in the economy, namely business globalization, the expansion of the borders of markets, activity diversification, the intensity of competition, and scientific and technical progress. According to the new conceptual approach, the brand management overall objective is the development of the cost of the basic non-material active of an organization, namely brand capital, which is determined by brand cost. In this case, the image of a trademark, the quality of its relation with consumers, an increase in the quantity of loyal consumers and the degree of their loyalty to a brand are means of increasing brand capital. Based on a new paradigm of brand management, it is possible to assert that the modern concept consists of the following constituents:

1. Strategic orientation of brand management. The brand is considered to be an important non-material active of an organization, brand capital gets a strategic character, by means of which it is possible to reach long-term profits. A brand strategy under the influence of an organization business strategy reflects plans for the future and the corporate culture of the firm.
2. Brand management globalization. A problem of a successful competition in conditions of the global market has changed, the modern concept of brand management is marked by the global prospect. Accordingly, the overall objective of brand management consists in capturing various markets in different countries by a brand.
3. A wide focus on the use of a brand. In the classical concept of brand management, the responsibility of a brand-manager was limited only to one brand, one product and one market. In the modern concept, one brand can include a considerable quantity of products and markets. The product limit defines the possibility of the expansion of the brand and license programs. The market border concerns the coverage of the market by the brand. The main problems connected with the border of the market are to keep sufficient flexibility to develop polytypic products, and reach synergies between various markets and products. The brand use has horizontal coverage (brand presence in consumer and industrial markets), or vertical one (the brand is presented in a high price segment, and in a low price one).
4. Development of the identity of a brand. A brand strategy is aimed not only at achieving short-term indicators of productivity (sales volumes and profitableness), but also identity, which accurately defines brand directions. The development of the identity of a brand is based on a deep understanding of clients of an organization, its competitors and business strategy, and finally, on the value of brand consumers. Therefore, the brand strategy should be based on the arranged strategy of segmentation and profound knowledge of the motivation of a consumer. The identity of the brand should reflect the business strategy.
5. Brand activity and its manager. In the modern concept of brand management, a manager of a brand is a strategist, who actively reacts to environmental factors. He or she carries out the strategic control over the brand, forms its image in the eyes of consumers, and creates regular and effective information support of its identity. The brand-manager takes active part in business strategy creation and realization.

At the present stage, brand management is the basis of the activity of an organization. Experts at trademarks receive big powers in the sphere of the design management of goods, the process of their creation and advancement in the market. The transition of brand management from short-term programs to long-term strategic actions has a great influence on all participants in the market. The first impact is that the brand-manager becomes one of the key figures in the organization. Agencies specializing in trademark creation are reoriented on strategic consultation; and companies-manufacturers realize an increasing role of brand management as a key factor in business. From the management perspective, the modern conceptual approach considers brand management as a functional object, and a brand as an object of management. Similar to the social system, in an organization, there are four kinds of objects of management: industrial (shops, brigades), structural (departments, bureau, groups), subject (finances, personnel, marketing, manufacturing), and functional (strategic management, management of the personnel).

The brand covers the whole complex of the objects of management, and is independent on them and the personnel, finances, and manufacturing. The importance of a brand as an object of management is characterized by the fact that it is the general carrier of the strategy of an enterprise, identifying its production among competitors, facilitating the exit of the manufacturer with new production to adjacent markets. Besides, it allows to get additional profits by selling the right to use the brand (franchising), develops a business and reduces the marketing budget.

The importance of brand management as a functional object is characterized by its ability to create a uniform target space, focus other functions of management on the realization of the brand strategy, allow an enterprise to count on long-term profits, and simplify the performance of the functions of strategic management at the expense of interaction and the formation of priorities of their performance. It is the pledge of professionalism of the top management of an organization. Thus, brand management as a functional object acts as a component of the control system of an organization, which includes:

• Management methodology;
• Management mechanism (technology, technics).

The methodological base for the functional object of management consists of the following:

1. The  consideration of processes of brand management as systems, in other words a combination of elements necessary for the achievement of a definite purpose.
2. Complex as a unity of organizational, economic, social, legal, psychological aspects of management.

Situational (applied) actions of the head and brand managers should be independent from the current internal condition and an organization environment. As a brand management mechanism, the development of difficult communicative communications provides not only the orientation on a commodity market and profit receptions, but also the reception of return information for the acceptance of effective administrative decisions on acts: financial production, marketing actions, legal protection of a brand, and strategic reference points of an organization. Therefore, the modern conceptual approach to brand management defines stages of the  formation of the system of brand management. Based on the above, the additional study on the foreign experience of brand management suggests the following stages of its system:

1. Comprehension and accurate understanding of the mission of an organization.
2. The formation of purposes of a brand.
3. The analysis of an environment and internal possibilities of the organization.
4. Strategic and tactical decisions in the field of trademarks.
5. The realization of the accepted decisions and performance control.

The offered stages of brand management are directed to the achievement of the put strategic targets and provide working out of the whole complex of the interconnected purposes and problems of the organization, which are reduced to the following:

• The achievement of competitiveness of the organization in the market environment;
• Profitableness achievement;
• An increase in the cost of actives of the organization;
• An increase in the cost of the share capital;
• The satisfaction of consumers with goods and organization services.