Brands portfolios
and competitive advantage: an empirical study
Brands
portfolios and competitive advantage:
an empirical study
Claude Chailan
Instituto de Estudios Superiores de Monterey, Escuela de Graduado y Innovacio´n, Puebla, Mexico
Abstract
Purpose – The paper seeks to contribute to the understanding of brand portfolio management by examining the brand portfolio strategies of four
leading cosmetics companies. The research focuses on two questions: what reasons lead companies to develop, or not, a brand portfolio strategy, and how brand portfolio management can create a higher and stronger level of competitive advantage that is harder to grasp and imitate. Design/methodology/approach – The paper utilises an exploratory approach by means of case studies. Data were collected from the following
companies: L’Ore´al, Clarins, Este´e Lauder and Wella. The research involved in-depth interviews with 33 company directors.
an empirical study
Claude Chailan
Instituto de Estudios Superiores de Monterey, Escuela de Graduado y Innovacio´n, Puebla, Mexico
Abstract
Purpose – The paper seeks to contribute to the understanding of brand portfolio management by examining the brand portfolio strategies of four
leading cosmetics companies. The research focuses on two questions: what reasons lead companies to develop, or not, a brand portfolio strategy, and how brand portfolio management can create a higher and stronger level of competitive advantage that is harder to grasp and imitate. Design/methodology/approach – The paper utilises an exploratory approach by means of case studies. Data were collected from the following
companies: L’Ore´al, Clarins, Este´e Lauder and Wella. The research involved in-depth interviews with 33 company directors.
Findings
– The research results show that an aggregation of brands is not in
and of itself a brand portfolio. The juxtaposition of brands is one
of the
elements, but not the sole element, necessary for the development of a brand portfolio, which is a combination of a brand ensemble and key factors
born out of organisational savoir-faire.
Research limitations/implications – The results validate the existence of a link between brand portfolios and competitive advantage, a link based on
the existence of four key factors identified in the research.
Practical implications – A model is proposed to assist managers in better understanding and controlling brand regrouping, because the research
illustrates the benefits for a company that executes well-coordinated brand management.
Originality/value – This research fits into the complex context of strategic/marketing relationships and broadens the field of brand analysis, notably
its strategic dimension. The contribution of this research is to show how a brand portfolio can create a stronger and higher level of competitive
advantage, which is more difficult to copy.
Keywords Brands, Brand management, Strategic marketing, Competitive advantage
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
Marketers are looking to create and maintain a competitive
advantage in a complex and changing environment (Shocker
et al., 1994; Mattsson et al., 2006) and as brands are viewed as
key value creating resources (Ponsonby-McCabe and Boyle,
2006), brand management and the building of brand equity
have become a major component of corporate strategies
(Aaker, 1992; Shocker et al., 1994; Keller, 2001). As brands
are recognised as inimitable superior value-creating resources
that can play a key role in achieving a sustained competitive
advantage over rivals (Ponsonby-McCabe and Boyle, 2006),
one of the main questions when establishing the different
sources of competitiveness for a company is whether it should
use one or several brands (Cravens et al., 2000; He and
Balmer, 2006). Choosing a mono- or pluri-brands strategy is
a focal point for several companies, both for multinational
groups and local companies (Douglas et al., 2001; Strebinger,
2002; Kumar, 2003; Schuiling and Kapferer, 2004) and
strategic choices may become brand choices, choices of brand
organisation or choices about the kind of relationships
between brands inside the company.
Because among the most relevant problems when referring
to brands are those related to the management of a multi-
brand system (Joa˜o Louro and Vieira Cunha, 2001;
Strebinger, 2002; Hill et al., 2005), a company must
formulate its basic strategic brand principles in view of two
central themes, which are:
1 brand architecture; and
2 a brand portfolio.
Brand architecture defines the way in which a brand signs a
product, and whether it does so independently of another
brand (Douglas et al., 2001; Rao et al., 2004). Olins (1989) or
Laforeˆt and Saunders (1994), for example, differentiate three
levels of brand architecture which are monolithic brands:
1 corporate branding (one name for all products);
2 endorsed brands/mixed branding (two brands associated
with one product); and
3 branded products/house of brands (each product has its
own brand).
Each of these strategies has its own benefits and shortcomings
for suppliers and customers, but in each case the focal point is
the link between the brand and the product.
A brand portfolio goes beyond this question of a
hierarchical or competitive relationship between one brand
with another, in order to examine ways of coexistence and the
balance between several brands that are incorporated within a
single company, whatever the brand architecture may be. The
focal point is the link between one brand and another.
Riezebos (2003, p. 184) defines a brand portfolio as “a set of
brands owned by one company” and Dawar (2004, p. 34)
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
17/4 (2008) 254–264
q Emerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420810887608]
254
elements, but not the sole element, necessary for the development of a brand portfolio, which is a combination of a brand ensemble and key factors
born out of organisational savoir-faire.
Research limitations/implications – The results validate the existence of a link between brand portfolios and competitive advantage, a link based on
the existence of four key factors identified in the research.
Practical implications – A model is proposed to assist managers in better understanding and controlling brand regrouping, because the research
illustrates the benefits for a company that executes well-coordinated brand management.
Originality/value – This research fits into the complex context of strategic/marketing relationships and broadens the field of brand analysis, notably
its strategic dimension. The contribution of this research is to show how a brand portfolio can create a stronger and higher level of competitive
advantage, which is more difficult to copy.
Keywords Brands, Brand management, Strategic marketing, Competitive advantage
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
Marketers are looking to create and maintain a competitive
advantage in a complex and changing environment (Shocker
et al., 1994; Mattsson et al., 2006) and as brands are viewed as
key value creating resources (Ponsonby-McCabe and Boyle,
2006), brand management and the building of brand equity
have become a major component of corporate strategies
(Aaker, 1992; Shocker et al., 1994; Keller, 2001). As brands
are recognised as inimitable superior value-creating resources
that can play a key role in achieving a sustained competitive
advantage over rivals (Ponsonby-McCabe and Boyle, 2006),
one of the main questions when establishing the different
sources of competitiveness for a company is whether it should
use one or several brands (Cravens et al., 2000; He and
Balmer, 2006). Choosing a mono- or pluri-brands strategy is
a focal point for several companies, both for multinational
groups and local companies (Douglas et al., 2001; Strebinger,
2002; Kumar, 2003; Schuiling and Kapferer, 2004) and
strategic choices may become brand choices, choices of brand
organisation or choices about the kind of relationships
between brands inside the company.
Because among the most relevant problems when referring
to brands are those related to the management of a multi-
brand system (Joa˜o Louro and Vieira Cunha, 2001;
Strebinger, 2002; Hill et al., 2005), a company must
formulate its basic strategic brand principles in view of two
central themes, which are:
1 brand architecture; and
2 a brand portfolio.
Brand architecture defines the way in which a brand signs a
product, and whether it does so independently of another
brand (Douglas et al., 2001; Rao et al., 2004). Olins (1989) or
Laforeˆt and Saunders (1994), for example, differentiate three
levels of brand architecture which are monolithic brands:
1 corporate branding (one name for all products);
2 endorsed brands/mixed branding (two brands associated
with one product); and
3 branded products/house of brands (each product has its
own brand).
Each of these strategies has its own benefits and shortcomings
for suppliers and customers, but in each case the focal point is
the link between the brand and the product.
A brand portfolio goes beyond this question of a
hierarchical or competitive relationship between one brand
with another, in order to examine ways of coexistence and the
balance between several brands that are incorporated within a
single company, whatever the brand architecture may be. The
focal point is the link between one brand and another.
Riezebos (2003, p. 184) defines a brand portfolio as “a set of
brands owned by one company” and Dawar (2004, p. 34)
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
17/4 (2008) 254–264
q Emerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420810887608]
254
Page
2
states,
“brands are not superstars but members of a team”,
while Kapferer (2000, p. 157), asks “how many brands must
we offer to consumers within the same product category? [. . .]
brand portfolio optimization is a strategic issue because the
chosen answer will have a profound and permanent impact on
the outcome [. . .] and because the chosen strategy will allow
or impede having a sustainable competitive advantage”. The
issue of brand portfolios concerns the number of brands a
company should manage and how to organise the “rules of the
game” between these brands. This raises the questions of the
need for positioning those brands in connection to each other
and of the strategic equilibrium of brands in a portfolio
(Douglas et al., 2001; Riezebos, 2003; Hill et al., 2005).
The brand portfolio concept is a core concern for most
world business leaders and companies because, as the
competitive environment becomes more and more complex
and entails a high level of competition of every nature,
companies are not only focusing on brand management, but
also on defining the number of brands required to reach their
goals. In addition, they are examining the links between
brands within the company and the organisation of these
links. Brand combination within a portfolio is a key factor for
many companies’ development, growth and risk management.
Lindsay Owen-Jones, L’Ore´al’s CEO states[1]: “We have a
complete, balanced brand portfolio. Our eventual acquisitions
will only be of companies that complete our niche coverage or
our international reach”, while the Gucci group in turn has
taken advantage of its liquid assets to acquire or launch the
Yves Saint-Laurent, Alexander McQueen, Balenciaga,
Bottega Veneta, Be´dat, Boucheron, Sergio Rossi and Stella
McCartney brands.
The notion of portfolio management is not new in
marketing, and academics have discussed the product
portfolio (Bordley, 2003) and the customer portfolio (Dhar
and Glazer, 2003; Johnson and Selnes, 2004). Ryals (2006)
reminds us that the theory of portfolio management is derived
from the financial field where the objective of investors is not
profit maximisation, since profit maximisation might entail
unacceptable levels of risk (Brealey, 1983). In fact, modern
portfolio theory holds that the aim of the investor is to
maximise return and minimise risk (Sharpe, 1981; Brealey,
1983). Applying portfolio theory to brand management
requires some consideration of the risk link to the brand
(Petromilli et al., 2002).
Yet the issue of brand portfolios has attracted very little
attention from researchers up to now. According to Barwise
and Robertson (1992), a brand portfolio is mainly an answer
to some key management goals, for example reaching multiple
market segments or taking advantage of economies of scale in
advertising, sales, merchandising and logistics, while Keller
(1998) emphasises that brand portfolio management requires
a long-term vision for every brand, where roles and
relationships between brands are carefully defined. Laforeˆt
and Saunders (1999) underline that managing a brand
portfolio is far more important than managing one individual
brand. More recently, Carlotti et al. (2004) asserted that the
brand portfolio is not only critical for financial reasons, but
because a brand portfolio allows companies to establish a
strategy for every brand, determine the need for repositioning,
identify underperforming brands and, finally, avoid the
exposure risks for the company related to a single-brand
strategy.
But, as stated by Hill et al. (2005), the processes for
managing a brand portfolio have not grown at the same pace
as the creation and expansion of these portfolios, although
several strategic questions are connected to the idea of brand
portfolios, for example:
. How many brands are necessary in order to obtain
balanced management?
. What is the impact on brand portfolio policy of product
categories, markets, or globalization?
. What is the best was to organise the relationships between
brands?
Therefore, brand portfolio management is a key issue for the
comprehension and development of companies’ competitive
advantage (Sharma, 1999; Slater and Olson, 2001) and its
marketing strategies (Day, 1994; Srivastava et al., 1999;
Ponsonby-McCabe and Boyle, 2006; Mattsson et al., 2006).
Both Juga (1999) and Reynaud (2001) show that by
displacing competition to a superior level, competitive
advantages become harder to understand and imitate. Brand
portfolio management may change the focus of marketing to a
superior, strategic decision-making level (Baldinger, 1990;
Brown, 2005), as it implicitly involves focusing on the whole
instead of on individual brands (Kumar, 2003; Riezebos,
2003; Hill et al., 2005).
No previous studies have surveyed different companies in
an industry to review approaches to the building and
management of brand portfolio. This article fills this gap by
reporting on a study of practices in four different cosmetics
companies. In a series of interviews with each company, the
researcher explores their approach to managing the brands
they own. The purpose of this article is to identify and
empirically examine the brand portfolio, and to focus on two
important research questions:
1 What reasons lead companies to develop, or not, a brand
portfolio strategy?
2 How can brand portfolio management create a higher and
stronger level of competitive advantage that is harder to
grasp and imitate?
The remainder of this article is divided into three sections.
The first presents the methodology, and the second the main
findings and results of our research. The final section
identifies the perspectives, managerial implications and
research opportunities that came out of this research.
Methodology
Setting
Webster (2005) states: “Our understanding of marketing
must be embedded in our understanding of organizations, not
just markets, and it must focus on issues of implementation,
not just strategy formulation”, and suggests a better balance
between methodological rigor and the relevance of research in
order to allow for a reconceptualisation of the marketing field
both as a business practice and an academic discipline.
Webster adds that it is critically important that research
become more idea-driven, not just data-driven. Because of the
novelty of the subject we chose an exploratory approach by
means of case studies. The lack of empirical work on the
phenomenon of brand portfolio was instrumental in the
decision to use the case study method.
Brands portfolios and competitive advantage: an empirical study
Claude Chailan
Journal of Product & Brand Management
Volume 17 · Number 4 · 2008 · 254–264
255
while Kapferer (2000, p. 157), asks “how many brands must
we offer to consumers within the same product category? [. . .]
brand portfolio optimization is a strategic issue because the
chosen answer will have a profound and permanent impact on
the outcome [. . .] and because the chosen strategy will allow
or impede having a sustainable competitive advantage”. The
issue of brand portfolios concerns the number of brands a
company should manage and how to organise the “rules of the
game” between these brands. This raises the questions of the
need for positioning those brands in connection to each other
and of the strategic equilibrium of brands in a portfolio
(Douglas et al., 2001; Riezebos, 2003; Hill et al., 2005).
The brand portfolio concept is a core concern for most
world business leaders and companies because, as the
competitive environment becomes more and more complex
and entails a high level of competition of every nature,
companies are not only focusing on brand management, but
also on defining the number of brands required to reach their
goals. In addition, they are examining the links between
brands within the company and the organisation of these
links. Brand combination within a portfolio is a key factor for
many companies’ development, growth and risk management.
Lindsay Owen-Jones, L’Ore´al’s CEO states[1]: “We have a
complete, balanced brand portfolio. Our eventual acquisitions
will only be of companies that complete our niche coverage or
our international reach”, while the Gucci group in turn has
taken advantage of its liquid assets to acquire or launch the
Yves Saint-Laurent, Alexander McQueen, Balenciaga,
Bottega Veneta, Be´dat, Boucheron, Sergio Rossi and Stella
McCartney brands.
The notion of portfolio management is not new in
marketing, and academics have discussed the product
portfolio (Bordley, 2003) and the customer portfolio (Dhar
and Glazer, 2003; Johnson and Selnes, 2004). Ryals (2006)
reminds us that the theory of portfolio management is derived
from the financial field where the objective of investors is not
profit maximisation, since profit maximisation might entail
unacceptable levels of risk (Brealey, 1983). In fact, modern
portfolio theory holds that the aim of the investor is to
maximise return and minimise risk (Sharpe, 1981; Brealey,
1983). Applying portfolio theory to brand management
requires some consideration of the risk link to the brand
(Petromilli et al., 2002).
Yet the issue of brand portfolios has attracted very little
attention from researchers up to now. According to Barwise
and Robertson (1992), a brand portfolio is mainly an answer
to some key management goals, for example reaching multiple
market segments or taking advantage of economies of scale in
advertising, sales, merchandising and logistics, while Keller
(1998) emphasises that brand portfolio management requires
a long-term vision for every brand, where roles and
relationships between brands are carefully defined. Laforeˆt
and Saunders (1999) underline that managing a brand
portfolio is far more important than managing one individual
brand. More recently, Carlotti et al. (2004) asserted that the
brand portfolio is not only critical for financial reasons, but
because a brand portfolio allows companies to establish a
strategy for every brand, determine the need for repositioning,
identify underperforming brands and, finally, avoid the
exposure risks for the company related to a single-brand
strategy.
But, as stated by Hill et al. (2005), the processes for
managing a brand portfolio have not grown at the same pace
as the creation and expansion of these portfolios, although
several strategic questions are connected to the idea of brand
portfolios, for example:
. How many brands are necessary in order to obtain
balanced management?
. What is the impact on brand portfolio policy of product
categories, markets, or globalization?
. What is the best was to organise the relationships between
brands?
Therefore, brand portfolio management is a key issue for the
comprehension and development of companies’ competitive
advantage (Sharma, 1999; Slater and Olson, 2001) and its
marketing strategies (Day, 1994; Srivastava et al., 1999;
Ponsonby-McCabe and Boyle, 2006; Mattsson et al., 2006).
Both Juga (1999) and Reynaud (2001) show that by
displacing competition to a superior level, competitive
advantages become harder to understand and imitate. Brand
portfolio management may change the focus of marketing to a
superior, strategic decision-making level (Baldinger, 1990;
Brown, 2005), as it implicitly involves focusing on the whole
instead of on individual brands (Kumar, 2003; Riezebos,
2003; Hill et al., 2005).
No previous studies have surveyed different companies in
an industry to review approaches to the building and
management of brand portfolio. This article fills this gap by
reporting on a study of practices in four different cosmetics
companies. In a series of interviews with each company, the
researcher explores their approach to managing the brands
they own. The purpose of this article is to identify and
empirically examine the brand portfolio, and to focus on two
important research questions:
1 What reasons lead companies to develop, or not, a brand
portfolio strategy?
2 How can brand portfolio management create a higher and
stronger level of competitive advantage that is harder to
grasp and imitate?
The remainder of this article is divided into three sections.
The first presents the methodology, and the second the main
findings and results of our research. The final section
identifies the perspectives, managerial implications and
research opportunities that came out of this research.
Methodology
Setting
Webster (2005) states: “Our understanding of marketing
must be embedded in our understanding of organizations, not
just markets, and it must focus on issues of implementation,
not just strategy formulation”, and suggests a better balance
between methodological rigor and the relevance of research in
order to allow for a reconceptualisation of the marketing field
both as a business practice and an academic discipline.
Webster adds that it is critically important that research
become more idea-driven, not just data-driven. Because of the
novelty of the subject we chose an exploratory approach by
means of case studies. The lack of empirical work on the
phenomenon of brand portfolio was instrumental in the
decision to use the case study method.
Brands portfolios and competitive advantage: an empirical study
Claude Chailan
Journal of Product & Brand Management
Volume 17 · Number 4 · 2008 · 254–264
255
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