Brand and product integration in horizontal mergers and acquisitions

1/2, 2010 T9 Brand and product integration in horizontal mergers Abstract: This paper ams to understand integration of brands and products after Mergers and Acquisitions M&As.. Through

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Pages Title and authors

3-29 Anoperations process

framework for international

M&A value creation

Jagjit Singh Srai, Andrej

Bertoncelj, Don Fleet, Mike

target firms in advanced

countries?

Peter J Buckley, Stefano Elia,

‘Mario Kafouros

DOI: 10, 1504/EJIM.2010.031272

48-55 Acquisitions versus licensing

agreements as vehicles for

technology transfer

Nicolas Forsans, V.N

Balasubramanyam

DOI: 10.1504/EJIM.2010.031273

56-78 Network integration for

international mergers and

acquisitions

Yufeng Zhang, Don Fleet,

Yongjiang Shi, Jagit Singh Srai,

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184-199 International managers as

translators Susanne Tietze DOI: 10.1504/EJIM.2010.031282 Pages Title and authors

European J International Management, Voi 4, Nos 1/2, 2010 T9

Brand and product integration in horizontal mergers

Abstract: This paper ams to understand integration of brands and products

after Mergers and Acquisitions (M&As) The paper identifies four different

strategies fr integrating brands and produets: ‘Choice’, "Growth Maximisation’

‘Harmonisation’ and “Foundation” These strategies act as strategie directions

for firms to follow and to iniegrate brands and products in postherzontal

M&As in onder to create and deliver value and competitiveness Each main

{integration strategy contains a set of different sub-srategies (18 in total) which sm to achieve the same objective set by its umbrella integration strategy The

builds the linkage between the inegraion sub-strategies and the wo se views ~ positionng and resource-based ~ from the se

‘management perspective Through in-depth case studies and analyses, a broader

view towards "brand” 1s developed and discussed in which the successful

‘management of brands requites paying close attention to both the external

customer franchise andthe intemal organisational system and culture

Keywords: brand; product integration: M&As; value creation; competitiveness

Reference to this paper should be made as fllows: VO D.A Shi, Y, and

Gregory M (2010) “Brand and product integration in horizontal mergers

and acquisitions’, European J International Management, Vol 4, Nos 12,

PP7I-1I9

Biographical notes: Dũng Anh Vũ is Vice Dean of International Economics

Faculty, College of Eeotomics ~ Vietnam National University, Hanoi He

-was a member of Centre for Intemational Manufseturing at the Institute for

‘Manufacturing, University of Cambridge His rescarch focuses on the links

‘between product and brand management strategy implemented through M&AS in both diversified and homogenous conglomerates In particular, he hopes his

work leads to a better understanding of how to manage the synthesis between

{the existing portfolio and recently acquired produets and brands and operations

‘ystems,

Yongjiang Shi is Research Director of the TM's Centre for Intemational

Manufacturing He fas undertaken exteaive research into international

manufacturing network configurations and has taken a leading role in the

Copyright © 2010 Inderscience Enterprises Lid

S0 DA Va ¥ Shand M Gregory

<conceptuslsation and delivery ofthe Centre's research programme His research

‘interests include global manufacturing virtual networks and the strategies of multinational corporations in China Mike Gregory leads the Institute for Manufacturing, University of Cambridge

and is Head of the Manufacturing and Management Division within the

Department of Engineering He has researched and published in the areas

fof, manufacturing” strategy, technology management and snterational ‘manufacturing

In spite of the enormous increase in transaction numbers and volumes, around 60% of all transactions do not lead to the desired increase in value and retum on investments (Keamey, 1998; KPMG, 1999) The contribution of M&As to the performance of companies continues to be a controversial issue (Seth, 1990) Hopkins (1999) in his review of existing research on short-term, long-term, non-stock market-based, related and cross-border M&A performance states that ‘acquisitions do not appear to result in

Brand and product integration in horizontal M&As gì

an increase in value nor do they lead to strong financial performance In addition, Brewis (2000) and Habeck et al (2000) show that the majority of M&As actually result in a decrease in shareholder value and only 20% of all deals are ‘successful The reasons for the failure of M&As have been the subject of much attention from

‘both academic and managerial commentators Child et al (2001) demonstrate that the

‘post-merger integration in both domestic and cross-border M&As is vital for success This is in agreement with Keamey (1988), which shows that integration accounts for the highest percentage of the weighted success factors in the entire merger process, and Haspestagh and Jemison (1991) who state that ‘aif value creation takes place after the

‘acquisition’ At the same time Shimizu et al (2004) claim thatthe quantity of research

in ths Cntegration) area is to limited and normally fall into one of three main topies (challenges in post-M&:A integration caused by differences in culture; (2) the integration process and control system as crucial for success and good performance of acquisitions; and (3) the types of integration processes and control systems as a result of the nationality ofthe acquiring firms Similarly Child etal (2001, p.24) also find that “The study of post-acquisition change has beem rather fragmented Most attention has been

‘given fo human resource issues, which include HR planning and downsizing, training

‘and changes in communication and reward systems There is remarkably litle research into other changes following acquisitions In fact, successfil integration relies heavily on the integration of many other factors:

‘brands and products, production, management of information systems, and purchasing and logistics (Ashkenas et al, 1998; Vester, 2002; Burgelman and McKinney, 2006) According to Perrier (1997) the research from Interbrand shows that the sources of ceamings for an organisation come trom three types of assets ~ brands, tangible assets and other intangible assets Of these, the earnings which are attributed to the brand can account up to 70% depending on the market (Lindemann, 2003) Therefore, brand integration is certainly one of the most important areas to consider in M&AS MBAs can be classified into three categories ~ horizontal, vertical and conglomerate

~ by the Federal Trade Commission (Stacey, 1966, p.33) This classification has also

‘been applied to cross-border M&As (UNCTAD, 2000, p.101) horizontal M&A is when to companies in the same industry with similar brands or products combine According to UNCTAD (2000) horizontal M&As accounted for approximately 80% of all M&A transactions in 1990s-2000s, By the very nature of a horizontal deal, acquiring and acquired firms have similar or related brands or products In addition, brands and products play a central role in most organisations, Fombrun and van Riel (2004) demonstrate that brand favourable reputations (which are driven by well-managed brands) result in higher financial retums Therefore, the value generated in a horizontal M&A deal seems to be strongly related to the

‘management of merging brands and products owned by the acquiring and acquired firms

‘Areas such as brands and products, production resources and management of information systems must be rationalised; customer-related and back-office functions need to be synchronised; purchasing and logistics must be reviewed to bring down costs; and as much of the other redundancy as possible must be removed,

$3 ĐA Vũ Y Shiand M Gregory

Inthe area of product or brand integration, the amount of the research is rather small Only a few (ie three) research studies are found, such as Clemente and Greenspan (1998) and Basu (2002, 2006) These works do suggest some strategies for integrating products or brands in post: M&As (cg stretching the product line upward ot downward more produets and eliminating products; positioning management of merging brands) However these are very limited in terms of implementing product and brand integration in M&As and by no means comprehensive They provide neither stategies nor specific guidelines for integrating brands and products effectively, Further research is urgently required to fill this gap

2 Research focus

“This paper focuses on horizontal M&As because this M&A type very often leads to resource overlaps (¢.g brands and products) which are required to be resolved in the integration phase

Both terms ‘product’ and “brand” are central to this peper However, itis cracia) 10 clarify the two terms "product" and ‘brand’ The former refers to the unadorned entity (whether physical object or service) that is created and offered by a company For instance, Aaker and Joachimsthaler (2000) define a product as consisting of scope, attributes, uses, quality and value, and functional benefit According to Kotler (2001) 8 product consists of three layers: core product, actual product (packaging, features, brand name, quality level and design) and augmented product (installation, delivery and credit, warranty and after sales service) These definitions conceptualise a product as an artifact with features and functional attributes that meet consumer's rational needs,

However, the later term ~ brand ~ is considerably more complex In this regard this, paper oniy considers brands of piysical goods rather chan service, people or places

By far and away the most commonly quoted definition of a brand is that given by

‘AMA (1960) which states that a brand is a ‘name, term, sign, symbol, or design or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition’ For neatly 20 years this definition remained unchallenged and is still in wide currency even today (Kotler and

‘Armstrong, 2008) However, by the atc 1970s a number of authors had begun to suggest that a brand included not just the idemtifying marks created by a brand owner but also the perceptions of these marks by consumers (see, e.g King, 1970 and Cooper, 19792) By 1992 de Chematony and McDonald (1992) were able to show that there were atleast

12 different brand definitions in use at that time, each one assigning a different rove and function to the brand, This approach to brand concept treats a “product” asthe most basic form of a brand that delivers the functional needs Beyond are the emotional, social, psychological and experiential attributes that the literature on Brands and Branding regulatly reer to (Table 1),

Park etal (1986) A brand comprises functional, emotional and experiential benefits

‘Amold (1992) {personality of the brand), benefits (delivered by the brand) and Band has three elements in its relation with consumers: essence

product actus] stibuts

de Cheratony and Brand can be one ofthe cight categories: signs of ownership, McDonald (1992) differentiating devices, functional devices, symbol devices, risk reducers, shorthand devices, legal devices und strategie devices [Upshaw (1995) Total brand identity comprises brand name, logo/graphic system, selling strategies, producuservce performance, promotion merchandising

‘marketing communications and brand essence (brand positioning and strategic personality) ~ as the core ofa brand,

Kapferer(1997) {@) personality (character like a person), (3) reflection (whom a brand A brand consists of (1) physique (physical quality like a product itelD),

Fepresent in consumers’ minds) (4) sejamage (sel interpretation of the types of people consumers think they are when consuming a brand), (S)euiture (from where the product derives) and (6) relationship, (Gransactions and exchanges among people)

Davidson (1997) Brandis considered as an iceberg: the upper (above-the-water) paris visible nd consists of logo and name which the managers often talk

about, The beloe-the-water partis less visible and comprises values, intellect and culture which actually give a brand competitive advantages, CChematony and A brand includes two fundamental elements: functional performance: Riley (1998) based values and emotional values

‘Aker and ‘Brand is set of atributs delivering both funtional product benefits

Jeachimetbaler (2000) (scope, attributes, uses, qualty'value and functional benefits) and other Benefits such as user imagery, country of origin, organisational

associations, brand personality symbols and brand/customer relationships In addition, a brand delivers sel-expressve benefits and emotional bene

‘elle (1998, 2008) A brand comprises salience (the identity Tike brand name, logo or symbol), performance (¥o meet functional neds), brand imagery

(Uae ways the brand attempts to meet customers’ psychological ot social aceds), brand judgements (customers" personal opinions about and evaluations ofthe brand), feelings (customers' emotional responses and reactions tothe brand) and brand resonance (nature of relationship between the brand and the customer)

In addition, several authors develop and discuss different brand evolution models which are given in Table 2 While there is much valuable detail describing the brand evolution

ach of these papers (not all of it in total agreement), from the viewpoint of

1 observation is that they all agree on the following points:

+ The defining characteristics oF many brands do change over time

+ This progression is regular and predictable

‘© Intheir youth, brands are largely defined in terms of Functional product characteristics;

a they evolve they become more complex mainly because, from a consumer perspective, they add emotional characteristics to themselves

$4 DA Vi, ¥ Shi and M Gregory

Table2 Different brand evolution models

‘Siclevel brand “Two diferent conceptualisations: Five-level brand

lifeeyele model: ‘of the “brand” incurrent usage: evolution proces:

Unbranded good ‘commodity selling + Theextended product ‘model: having the + Product: when brand is ‘referred as product it does (physicalproduet atnbutes with no brands), fametional product atts centre and teats brand as ‘ot offer added value beyond functional + Brondes reference: name ‘lifeless obectihatean be benefits

' ——.-

š _#2 M 2yØT8MGE The brand asa ving entity: involved customers

ponialadrenry that needs o be Weald eat level,

tenes be efits beyond holistically + Corporate brand baving

© Brand focusing on organisational as company

‘benefits and integrated

Brand culture: brand has stronger value and more involvement perceived by customers The brand Stands forthe Function it

sepreaeting eical ‘elevant to consumers seal and polite spets Brand religion: brandis “amust,a belie 0

Tan

‘These classifications are important in terms of identifying the elements and characteristics ofa brand although they are more customer-oriented For the sake of this research study

‘8 commonsense, pragmatic approach has been adopted to this issue As the respondents in the various case studies talked about brands it became clear that they also did not share

‘8 common definition However, all did seem to agree that:

‘© Abrand was a complex entity

‘© twas a mixture of both brand owner and brand user elements

‘© Iteontsined both functional

rational) and emotional components

This paper, therefore, defines a ‘product’ as the purely functional entity (to meet functional needs) that an organisation produces and/or sells and a brand as the development of this, through marketing activity, into a complex percept in the mind of the product's potential users A brand, therefore, includes a “produet’ (ihat meets purely functional needs) as its most basic form and added emotional attributes such as feelings, imagery, relationship, culture, personality and so on,

3 Lite ture review on product and brand management

Because different organisations operate under different philosophies, there are a number

of different approaches to product and brand management, They are as follows:

Brand and product integration in horlzontal M&As 85 The production view: this view places the emphasis on low cost production because

‘many consumers want low-cost products or brands, The most important task for the

‘management i to achieve production efficiency (see Keith, 1960, pp.35-38; Rachman and Romano, 1980; Grontoos, 1989, pp.52-60; Kotler, 1997; Kotler, 2001; Doyle, 2002; Kotler and Armstrong, 2008)

‘© The product view: this view highlights the importance of developing high-quality products because many consumers prefer products that offer superior performance and added festures The most important task for management is to focus their priority on developing ‘good’ products (see Kotler, 1997; Kotler, 2001; Kotler and

‘Ammstrong, 2008; and the first variant of the production-oriented view mentioned

by Doyle, 2002)

‘+ The sales view: this view contends that consumers only purchase the firm's products ‘when they are actively promoted by the firm through a range of selling activities (sce Keith, 1960, pp.35-38; Rachman and Romano, 1980; Kotler, 1997; Kotler, 2001; Doyle, 2002; Kotler and Armstrong, 2008)

‘The markering view: this view considers the needs and wants of markeVeonsumers as the most important factor in deciding what the organisation should do Managements key task is to understand the market in order to deliver the “desired satisfactions’ more effectively than the competitors (see Keith, 1960, pp.3S-38; Rachman and Romano, 1980; Groaroos, 1989, pp.52-60; Koller, 1997; Kotler, 2001; Doyle, 2002;

The societal marketing view: this view is similar to the marketing concept except

it takes into consideration societal benefits resulting from a firm's activities (see Kotler, 1997; Kotler, 2001; Kotler and Armstrong, 2008)

* The financial view: this view holds that generating the maximum retum on investment for investors from a given asset base is the ultimate task for the

‘management (see Doyle, 2002),

+ The volue chain view: this view places value at the core of product or brand

‘management (see Porter, 1980; Porter, 1985; Value Chain Group, 2000)

Based on these we classify and consolidate the product and brand management literature Into four main perspectives:

‘+The customer view (including marketing, marketing control and societal marketing concepts: this view contends that firms need to produce and market their products oF brands according to what customers want (market conditions) and allocate resources according to the market positioning of products or brands in order to deliver the desired satisfactions to customers more effectively than competitors and, therefore,

to increase customer's (and society's) well-being,

‘©The supply view (production or manufacturing and sales concepts) is concerned with the firm's capabilities for producing products or brands effectively and efficiently + The product development view (or product concept) focuses on processes and availble resources such as technology and R&D for creating new products or brands

to meet customer demands.

S6 DA Va, ¥ Shiand M Gregory

‘+ The value creation view (including value chain and financial concepts) takes value as the key concept in product and brand management Under this view product or brand

‘management can be assessed from the firm's financial perspective, from the strategic

‘management perspective or from the entire value chain perspective

‘Table3_ Tae review framework forfour different views towards product and brand

mangement

Proder developmen Customer view “Sub or @D)view Vole creation ew

© Frodutandiand cò Some poplar Tectnologyand © Generic

° Beheeaohmiey personal poten positonng

omumen market + Flomasine "develpment’ + Brand vison + Segneing ring AO 8 pentoring(ST?) n New product band bjetves development’ + Resouce based

+ ARpehees ch PO

+ — PrOduetin4Ps: — Product life eye © Supply network ecision decides integrated product Š quality function 6 Vale ch andsupply Cang thay

= Product portfolio management the scope of polotorbnnd —- malleiv sẻ development, ‘chain

© Brand management: 6 Others: ‘product platform

+ + Proc and naman epial, "proces

= Brand vale and Stdcornie’ Fenner

+ Brand porto management

© Distabution and Aistributors* own

‘organisation where the product oF brandis cental: marketing management, operations

‘management, technology management and strategic management The content of the literature review is given in Table 3 For instance, under the customer view the key

‘concepts developed by this approach as revealed in the literature are product and brand, Business-to-Business (B2B) and Business-to-Consumers (B2C), segmenting, targeting and positioning (STP), 4s policy, product lifecycle, product ponfoio management and brand management, and distribution and disteibators' owe brands Table 4 summarises the key contributions ofthe existing literature (which have been reviewed by this paper) to product and brand management field (that are relevant 10 brand integration in the M&A conten)

Brand and product integration in horizontal M&As 7

‘Table 4 Major contributions of literature inthe product and brand management field

oduct and Customer view Kole and Armsong (997); MeCary (1960), Borden (963),

‘wand management (1993); Doyie (1976, 2000, 2002); Leva (1965): Frey (1961; Biner and Booms (1981; Lauetborm (1990); Hamine and Champy Cox (1967); Pol and Conk

(1969; Moots and Pessemier (1993); Day (1981), Dhalla and Yuspeh (1967; Day 1977}; Abernathy and Uterbak (1978); Vernon (1966) Kotler eta 2001), Wind and Claycamp (1976); Boston Consulting Group; Shell Dicctional Matix, Mekinsey'GE, Wheelwright and Clark (1992), Coope eal, (2001); Matheson tnd Menke (1994), Hall nd Naudia (1990); Goodyear (1993), Hanby (1959), Kunde 2000); AMA (1940; Park et al (1986), Upshaw (1998); Davidson (1997) Shipley and Howard (1993): Hutton (1997): Gordon etal (1993); Meda (2002); Madnby t l (1997}; Low and Blois 2002), Ulaga and Chacout (2001; Sharma etal (2001) Hamer et 2) (2008); Keller and Webster (2008: Kaper (197) Gardner and Levy (1955); Amoi (1992); de Cheratony and MeDonal (1992); Aer (1996), Kamkara and Russell (1991); Aaker and Joachinstaler 2000),

de Cheratony and Dal Olmo (1998), de Cheratony (2006); Keller (1993, 1998, 2008) Olins (1985), Laforet and Saunders (1994, Riezebas (1998), Simon and Sullivan (1990; Ailaeai et al (2003); Barwise etal (1989), Wentz (1989), Chu and Keh 2006), Farquhar (1989): Lassar etal (1995); Kish etal, 2001) Shave et al (989; Michell tl (2001); Abrat (1986): Moriarty and Moran (1990), Simmons and Meredith (1983), Nandan and Dickinson (1994), Hoch (1996; Corstens and Lal 2000); Dunne and Narasimhan (1999) MeMaster (1987) Qxelch and Haring (1996)

Supply view: Shi and Gregory (1058; Flaherty (1989); Hayes and Wheelwright (196), Ferdows (1997) Dicken (1992); Levy and Samat (1976); Baset 1991), ‘Welch and Nayak (1992) emnings (1997); Prober etal (1993; (2002); Nonaka (1994); Hansen etal (1999) Del and Kennedy (1982): andy (0985); Trompenaas and Hampden-Turer (1997), Cummings and Worley (2008) Korte (1995); Hanky (1999)

Prduet developmen view: Gregory (1998), McGinn (1991; Abell (1980); Miter tnd Davis (2000; Friar and Horwich (1985); Burgsimen etl (196), Fusfld (1978, Hams etal (1981); Bower and Chnstensen (1995), Kusmmetle (1997); Zearwitz and Gassnann 2002), Arimura (1999): Reger (2004, Booz-Allen (1982) Coope (19798, 1988, 2001); Adamee (1981) King (1973); Cooper and

Klsinschmit (1994, Cooper and Brezani (1984); louse ad Price (1991) Hauser and Clusing (1998), tu (1993), Roberson and Ulich (1998),

‘Gersenson et al (2003; Meyer and Uneback (1998); Meyer and Lehter (1997) Johannesson and Claesson (2008); Hammer and Suston (1998), Edosomwanin (1996) Value creation view: Pore (1980, 1985): Miller (1992: de Chematony 2006), ame and Prahalad (1994, 1995); Daf (1983), Johnson and Scholes (1983); Barney (1991); Das and Teng 2000); Morgenstern and Neuman (1947) Gul (1887); Nai (1940.1950) lỤM (2007); Raypor and Sviokla (1995); Sawhney and Park (2001); Normans and Ramirer (1993), Payne (1988); Stevens (1989)

The existing research has indicated possible factors and issues that a firm needs to consider when designing, planning and implementing the integration of brand and product portfolios within horizontal M&As For example, the stage of the product life cycle or supply capability can significantly influence portfolio planning decisions about individual brands or products in a combined portfolio; or the availability of resources (eg technology or patents) can have a substantial impact on portfolio invegration decisions

88 DA, Va, ¥ Shiand M Gregory

However, there are still many research gaps in this area, First of all, although the

‘cxisting literature contains within it four dominant views, each seemed to place too much

‘emphasis on their own view with a litle consideration of the other views There is very litle research that considers the entire value chain process in the context of product and

‘brand management As such there is a lack of research that merges different points of view towards product or brand management Secondly, existing research has focused on

a single business entity rather than the two or more different entities that are necessarily involved in M&As Thirdly, current research has not provided a comprefiensive sotution that can be cross-applied in order to address brand and product integration issues in MAA situation Specific imtegration strategies, processes and best practices as well as the factors that affect them ate overlooked

4° Research design

4.1 Research question and objectives

‘This paper aims to solve wo types of research questions in an integrated way The main research question is “How should brands amd products be integrated in onder to create value in horizontal Mdts, where the merging companies market similar brands and products?" Resolving this question successfully involves ereating a systematic, robust and flexible strategic model for dealing with the integration of the merging brands and products and appropriate processes for implementing this

Secondly, through observations for the brand and product integration in various M&As we want to understand what a brand really is or what is covered in a brand's sphere which is still mysteriously dressed Because the core of this research is towards brand of physical products underneath “brand” is the entire business system Our research aims to seek an understanding of the interdependency between brand and its business system

4.2 Conceptual framework development

In an earlier paper we have proposed four archetypes of brand and product integration strategies in horizontal M&As ~ ‘Choice’, ‘Growth Maximisation’, “Harmonisation’ and Foundation’ (Wu etal, 2009):

‘Choice’ strategy refers to the divestment ofa brand and produet

‘Growth Maximisation’ strategy represents the combination snd subsequent

‘management of merging brands and products to maximise their growth,

© ‘Harmonisation strategy is the process of aligning merging brands and products in

‘order to capitalise on their scale to achieve cost savings and operating improvements

© ‘Foundation’ strategy refers to the development or ereation of new brands and products based upon the combination of merging brands and products or their elements

Brand and product integration in horizontal M&As 89 The four main integration strategies represent the four available strategic directions (underlining different integration objectives) forthe acquiring companies o consider and choose when implementing brand and product integration In addition each of these four integration strategies might contain within it different sub-strategis which represent various different ways to achieve its objectives (€.8 “Repositioning” as a sub-strategy within the *Groweh Maximisation’ integration sưategy) While we were able to identify and conceptualise these four integration strategies, further empirical work is needed in this aca to refine these strategies and to determine whether there are yet more strategies being used in practic tn addition the funher empirical work also helps to establish what other sub-strategies exist and the circumstances in which they occur

43° Research design

Because cach M&A is extremely complex in terms of the number of factors that influence its outcome relevant and reliable quantitative studies (surveys, for example) are very difficult to realise, This paper adopted a qualitative methodological approach using ssuhiple sources of data Such an approach can yield "she Sosricate details af phenomena that are difficult to convey with quantiative methods’ (Strauss and Corbin, 1990, p.19)

‘This paper also aims to make generalisations on brand and product integration strategies and to identify key processes supporting the strategies based on different individual M&A events As the result of this, process oriented observation and inductive reasoning are a more suitable approach (Popper and Miler, 1983; Cussens, 1996; Manktelow, 1999) Further, this study will utilise data from a number of uifferent, but complementary, sources to enable the gradual build up of understanding as information from previous sources is added to new ones This approach is very much in line with recommended best practice (Easterby-Smith eta, 2002)

‘Among the available qualitative methodologies, multiple case studies were chosen a8 the most suitable method for this research mainly seeking to answer “how".type of research questions (Yin, 1994) As noted by Herrott and Firestone (1983, pp.14-19), smuliple case studies allow the research to produce more compelling and robust data than

is possible with a single case study, The ease study approach is also more appropriate for situations where multi-faceted and dynamic situations and processes are being studied (Easterby-Smith et al, 2002), In addition this research relies on multiple sources such

as interviews, company references, filings and documents rather than a single source Therefore in-depth cases with within-case and cross-case analyses will be the most feasible and effective way to conduct the esearch (Yin, 1994) ‘The specific inductive process adopted by this paper is derived from Flynn et al (1990) and is shown in Figure 2 In the previous research phase, existing literature is reviewed which demonstrates the lack of research in brand and product integration arca

in M&As (i.e currently no research that has resulted in a model describing the process and strategies for the successful integration of brands and products in post-horizontal Mé&As) although it is one of the most important aspects in M&AS Based on the existing literature and the exploratory case studies the four conceptualised brand and product imegration strategies have been developed and proposed Therefore, in this paper the rescarch is designed to seck an enrichment and improvement of the four conceptualised strategies and the đeiled development of their sub-strategies through the choice of

‘multiple case studies as an appropriate method

90 DA Wi, ¥ Shand M Gregory

Figure2 Sequential low chart ofthe research (see online version for colours)

Pa esearch Gp nd esearch Pomona

Source: Adapted from Flynn etal (1990)

44 Multiple case selections

nem ave Sate tt Rach Finds

Table $ summarises the horizontal M&As used as case studies inthis research

Tahje€ Listof the conducted case studies

Tipe of Case Case candidates Industry Year Deal value Nationalities business

Ta Guinness-GrandSpiris Metropolitan 1997, £28 billion UK-UK BAC

Ye Diageo-Seagram Spirits 2003 S¥2billion UK-France BIC

2 Glaxo Wellcome- Pharmaceutical 2001 £130illion UK-UK ‘SmithKline Beecham Bac 3a Ford-Jaguar Automobile 1989 $6biion USA-UK tác Ford-Volvo-Land 1999 $6.4Sbillion USA-Sweden

4 Packaging 2001 Sl2milHon USA-Rly BB

S LenovotBMPC TT Division 2008 $1756lfion Chim-USA — B3B mc

61 SAB-Miller Beet 2002 $5.6billion Sowh Afica-USA B2C

đồ SABMiller-Bavaria Boce 2005 SP2biltion UK-Columbia — B2C

7 Cadbury Scowepes- Conestonery 2001 $4.2bilion UK-USA ‘Adams BỌC

8 Ericsson-Marconi Telecoms 2006 £12 billion Sweden-UK — BởB

9 Dainippon-tnca Printing 300% £30 million Japan-UK Bạn

10 Millward Brown- Market Research 2005 Umeveled UK-USA Dynami Losi Bạn

Notes’ B2C— Business to Consumers; B2B — Business yo Busines,

Brand and product integration in horizontal M&As a

“These deals were diverse in terms of size (small, medium, large and mega), and types of business that these companies were involved (ie B2B and B2C) The merging firms in Case $ were involved in both B2B and B2C because thee products were offered to both organisational customers and end-users, The conducted cases are numbered from 1 to 10 However, Cases 1,3 and 6 contain different M&A events within them Therefor, leters (@) and (6) are added into indicat this ‘The Key criteria for selection of the cases are (1) horizontal M&As when the merging firms owned competing brands or products in the same industry and market; (2) the acquiring firm did not have any equity in the acquired firm before the M&AS: {G) adequate access tothe case firms: (4) deals were ideally announced before the end of

2006 but after 2000; and (5) the case fimms operated in diferent industries and involved different types of businesses, e.g B2B and B2C ‘According to Veloutsou and Panigyrakis (2001) the brand team comprises strategists! implementers (who are the core of the team who devise brand strategy und tead the team), supporters (e.g R&D, HR and production), facilitators (eg market research and finance) and incidentals (eg legal advisors) In an ideal situation (i.e having full access

to the case company) the researcher Would conduct interviews with all ofthese functional teams to access brand and product integration information from different perspectives However, such situations are very rare because M&As are always considered ss highly confidential Therefore, in most of the cases the researchers conducted interviews with top senior management (e.g chairman, president), marketing and sales management

‘eam, and brand/product managers who were involved in the M&AS

4.5 Protocols of case data presentation and analysis

‘Adapted from Yin's and Miles and Huberman's case study framework (Yin, 1994; Miles and Huberman, 1994) examining both individual and cross-case analyses, cach case study needs to provide the following information:

+ 4 brief introduction to the M&A event: it explores, describes and explains general information about merging firms such as corporate overviews, location, brands, products, markets and customer groups, M&A motives and deal value

© Brand and product integration: it explores, describes and explains the details of the brand and product integration process ~ integration themes, strategic actions undertaken, influential factors to consider, and processes and procedures (if any) The data captured from each case study was first analysed within that case The individual case analysis was conducted based on the objectives set by the research in order to refine the conceptualised brand and product integration strategies ~ *Choice’,

‘Growth Maximisation’, “Harmonisation’ and " Foundation’ ~ and to identify if there was any other strategy available apart from these In addition the research also aimed to dovclop a set of sub-strategies within each main brand and product integration strategy

‘The eross-case analysis also used a format derived from the research objectives It is based on a summary of the findings drawn (or extracted) from the analyses of the individual case studies The cross-case analysis includes the tasks summarised below:

‘© Analysis, development and synthesis of sub-strategies wit

93 DA Va, ¥ Shi and M Gregory

5 Case studies: an exemplar This section intoduces one case study in detail from a pool of 13 conducted ease studies

‘The inoduetion of only one case aims to provide an example that demonstrates how the data of each case is organised and analysed The researcher picked this ease to introduce because it can cover all the four brand/product integration strategies developed by this research

5.1 Overview of the acquisition

In August 2001 Sealed Air Inc (SA), 2 global manufacturer of a wide range of food and protective packaging materials and systems, acquired Soten SpA, an lalian packaging firm, in a USSI2 million deal The Soten group then became a part of Scaled Air Cryovac's (SAC) shrink film business (a division of SA) in Europe Soten’s products

‘were polyolefin and PVC shrink film as well as production equipment for this display film: Soten was a manufacturer of technical display film which competed with SAC’S display, bakery and produce packaging businesses Soten was one of three European polyolefin line manufacturers and had a broad technical capability in the production of low cost polyolefin and PVC film production equipment

‘The acquisition ofthe Soten group offered SA the opportunity to:

* develop a significant second brand of display shrink film: to achieve growth in the low cost packaging segment and to enable targeted action against strategically important competitors (in order to defend and grow SA's existing ditect and distributor

‘based Cryovac film market share) without jeopardising the market price and reputation

of SA's Cryovac brand (the Ist premium brand)

‘© improve the overall competitiveness of the Sealed Air Display film business by providing additional and significant lower capital cost capacity and production line capabilities to extend shrink packaging division (SPD) supplementary brand strategy

SA's post-acquisition sales strategy was (1) to defend existing sales of Soten's products

‘and (2) then grow new business with these products Seles managers of SA/Soten were required to draw up a list of customers authorised to buy Soten’s film products SA planned to supply these products to 85/90% of its existing distributors SA also targeted Soten's products at the customers who wanted to buy the packaging film at a lower price than the *Cryovac’ brand

SA's low-cost brand strategy was to divest itself of its imtemal *FIT" brand, rename Soten's products under the ‘OPTI’ name, and focus all efforts on the OPT!" brand The

“FIT” brand was phased out because of

‘= its insignificant performance and contribution to SACs business

‘= the overlap with one of their own brands in the low-cost packaging film segment (resource limitations)

# its very close positioning to the “Cryovac" premium brand,

Brand and product integration in horizontal M&As 3

As a result several actions were taken:

‘all of Soten’s products were renamed under the "OPTI" brand: The “OPTI” range is summarised in Table 6

# SEIT” was switehed to “OPTI”

terms of product specifications

‘+ all of Soten’s business was switched to ‘OPTI’ (e.g customers, reporting systems)

‘Table 6 Renaming Soten's products to "OPTI brand

Name of Soten's products Renamedas OPV brand Application

SA also harmonised the PVC products made at the Soten and Volgograd plants to reduce production complexity and to enhance production efficiency As the result of this the PVC products had different formulations but their dimensions were standardised and similar,

‘Three to five years after the acquisition the R&D team of SA developed new products for both the “OPTI” shrink film brand and its associated production equipment:

© 'NTSEL’ (New Technology Single Round Extrusion Line): Soten was very experienced

in small (weight and capacity) and low cost line design and extrusion equipment

manufacture ($1-2 million ne) On the other hand SAC designed high capacity,

high speed, good quality and high cost extrusion lines ($7-8 millior/line) SA set up

4 project that merged the two line design approaches This resulted in the creation of

4 new, hybrid design called "NTSEL", which combined the best features of each line design

New formulations for the “OPT! range: The existing R&D organisation of SA was integrated with Soten to develop new formulations for the “OPTI” brand that performed better and were also cheaper

5.3 Sealed air brand and product integration strategies

‘The SA's acquisition of Soten presents different situations for the brand and product integration (see brand integration mapping of Case 4 in Figure 3) and its contents (driven forces, sub-strategies, criteria and process) which is summarised in Table 7,

DA Vit, ¥ Shi and M Gregory

Brand and product integration in horizontal M&As 95

‘Table? Summary of within-Case (8) event analysis

brand) phong ets foie ¬- Poe dHmnin Proton din

Seaton cone Orr

me

1 Renaming all Soten’s products to the ‘OPTI brand: SA's initial post-acquisition sales strategy was to defend the existing sales of Soten products and then grow new business with these products These defending and growing tasks mainly aimed to achieve growth for SA in the low cost packaging segment, Therefore, this sales strategy was in line with the conceptualised ‘Growth Maximisarion’ brand and product integration strategy The change of the name of the Soten's products (0

‘OPTI aimed to create an identity for the low-cost brand (to differentiate it from the

‘premium *Cryovac’ brand) and maximise its position in the market place to achieve growth, Therefore, this change can be classified as a sub-strategy of the brand and product “Growth Maximisation’ integration strategy

2 The divestment of te ‘FIT’ brand after acquiring Soten company: SA divested itself of the “FIT" low cost brand by withdrawing it from the market This situation is in line withthe conceptualised “Choice’ brand and product integration strategy The reason SA discontinued the ‘FIT’ brand was because there was an overlap between the "FIT" and 'OPTI' brands SA used sales contribution criterion (of both FIT and OPTI) to make the divestment decision for ‘FIT’, In addition the *FIT" brand was also seen to be 100 close t0 the "Cryovac’ brand, the company's premium brand Inthe divestment process SA gradually switched al the eustomers and specifications

of IT" to the ‘OPTI brand before discontinuing “FIT

3 The harmonisation of PVC products made at the Soten and Volgograd plants: the reason SA standardised the size specifications of the PVC products of SA and Soten

‘was to reduce production complexity and, therefore, to achieve cost savings

‘This situation is in line with the conceptualised "Harmonisation’ brand/product integration strategy

96 ĐA Eũ,Y.ShiandM Grgoy

4 The creation of new products: SA's R&D team combined the strengths of both SA and Soten to create two new types of products: the new NTSEL extrusion line and the new formulations for “OPT” shrink film This situation is, therefore, in line with she “Foundavion’ brand/product integration svategy

6 Further case analysis and key findings

6.1 Further case analysis

Following the same structure of the above case presentation and analysis, this section summarises 12 other case analysis and cross-case analysis, Table 8 illustrates © generic picture that 13 studied eases produced different types of brand and product integration strategies The following individual case analysis and cross-case analysis seek to understand the details of each brand and product integration strategy and their backgrounds

‘Table8 The four main brand and product integration strategies in the casestudies

‘Case studies Choice Growth Maximisation Harmonization Foundation

62 Refinement of the four brand and product integration strategies

“The within-case analyses of individual case studies show four different situations that are

in line with our conceptual brand and product integration strategies ~ ‘Choice’, ‘Growth

‘Maximisation’, “Harmonisation” and "Foundation"

Brand and product integration in horizontal M&As 9 + Cases 2, 3a, 3b, 4,7 and 8 describe situations where the merging brands or products ‘were reconfigured to share and use similar parts, production resources, platforms and processes ‘of manufacturing complexity) These cases, and Cases 1b, 6a and 6b, also show that to achieve both cost savings and operating improvements gteducton the merging firms also leveraged ther size as well as their marketing and commercial knowledge by combining their brands or products to realise both objectives (cost saving and operating improvement) {see Appendix 3)

© Cases 1a, 2, 3b, 4, 5, 6a, 7, 9 and 10 demonstrate the situations in which the post- MRA organisations combined their merging brands or products (or elements of the

‘merging brands of products) to create new products or brands (sce Appendi 4)

[Apart from these four main directions the case studies do not stow any other option for integrating brands and products in the postM&A organisations Although the scope of the ‘Choice’, "Growth Maximisation’ and *Foundation’ is unchanged based

‘on the analyses given above, the within-case and cross-case analyses raise the need

to expand the scope of the initial “Harmonisation’ integration strategy to covet more activities, i, the merging firms also leveraged their marketing and commercial knowledge (apan from ther size) by combining their brands or products to realise both cost saving and operating improvement objectives Therefor, the definition of the ‘Harmonisation’ strategy i refined as the re-configuration of merging brands or products or the capitalising

‘on the scale offered by the merging brands or products and on the marketing and commercial knowledge of the merged organisation in order to achieve cost savings and

of the brands or products which are off-strategy to the firm or are atthe end of their life cycle

© The “Growth Matimisation’ integration strategy represents the combination and

‘management of merging brands or products to maximise a firm's market coverage

nd growth in horizontal M&As

+ The "Harmonisation" strategy refers to the re-configuration of merging brands

fr products or the capitalising on their seale and on the marketing and commercial knowledge of the menged organisation to achieve cost savings and operating improvements