Two-Tier Name Brands: Drop One or Take Both?
By Jane Han
Staff Reporter
Asked the nationality of Renault Samsung, GM Daewoo or Samsung Tesco, ordinary consumers may mull. While many know that the majority ownership isn't held locally, the Korean bit of the corporate identity leaves positive implications.
Despite the branding benefit, there are still other considerable factors, including royalty costs for some, which leads firms pondering over the domestic part of the two-sided name: Leave it or lose it?
``The name `Samsung' has such strong brand power that it undoubtedly helped the automaker appeal to local car buyers at first and even now,'' said Choi Min-soo, a communication official at Renault Samsung.
French carmaker Renault bought Samsung Motors in 2000 and kicked off under the new name ``Renault Samsung Motors,'' which is to be kept until 2010 stamped by a license agreement.
For Renault, it doesn't hurt to associate itself with the continuously rising brand value of Samsung. And for Samsung, the name brings them some extra income.
The group gets 0.8 percent of sales as a royalty fee, which amounts to about almost 20 billion won per year.
``The figure is big, but Samsung isn't a company that would let its name be used for that,'' said Choi. ``An obvious two-way benefit must exist to continue the joint identity and for Renault Samsung, the contact is set to be renewed once again.''
But Choi said regardless of the name factor, the auto company has built trust with consumers over the past seven years.
``The name only does so much and it's really a matter of quality that defines success,'' he added.
Another business credits Samsung for its image boost, but is more pleased because it sees the emphasis transitioning from the company name to the specific brand.
``Samsung Tesco forged ahead in the initial stage of business,'' said Im Chee-beom, PR team leader at Samsung Tesco. ``But the brand `Homeplus' is now more recognized by our consumers. I'd say we made a successful transition.''
The discount store is currently at second place in the market share of the local retail front.
Initially forming a 50/50 partnership with British retailer Tesco, Samsung now has about 11 percent and looks to reduce further to around 5-6 percent.
``Many benefits came with the name because it helps a business' soft landing when a familiar name comes across,'' said Im, adding that the company's employees appreciated it as well because a large number of Samsung workers shifted over to the retail division at first. ``But as for future partnership, all I can say is that nothing has been decided yet. We're continuously observing.''
While some are shifting the outlook, companies like Thyssenkrupp Dongyang Elevator, in which the German group holds a majority stake in the Korean elevator manufacturer, is confident that the company name of both countries will continue.
``There are no plans to withdraw because a sense of familiarity among consumers is so crucial,'' said a company PR official.
But some experts say that phasing out to an independent name reflecting the business ownership is ideal.
``New names from overseas seem standoffish for domestic consumers, but it's a natural process for companies to work on strengthening their own name after a given time,'' said Park Sang-hoon, CEO of global brand consultancy Interbrand. ``When a business declares an independence in its name, that means they're confident enough to do that.''
In this respect, GM Daewoo may be feeling that way, as GM is seen as the most aggressive in moving to stand alone.
Efforts have been made internally to roadmap a smooth transition, says a GM Daewoo official, adding, ``The company will begin more detailed plans to shift the name in the next two to three years.''
A KPMG study shows that 83 percent of all mergers and acquisitions (M&As) failed because they neglected to pay attention to cultural issues, which implies the underlying importance of how a group of consumers respond to a newly entering business.
``While many corporations involved in M&As in the days of the financial crisis were wary that local consumers would feel a sense of detachment toward foreign names, situations have changed recently,'' said Tyler Kim, managing director of international PR firm Edelman Korea. ``However, we need to understand that a brand or corporate reputation is not achieved overnight. It is built over a long period of time by constantly reaching out to its stakeholders through various public relations and marketing campaigns.''