A Brand by Any Other Name Is Not as Sweet

When you think of brand names, Sony, Benz, and Rolex come to mind. But how about Herman Aulter, Clinique, or Daewoo? Opinions differ. You can't find a definition of "world name brands" in any textbook. Thus, if Taiwan wants to create 50 to 100 such products, what criteria can be used?

One standard is total sales. Stan Shih, chairman of BIPA, uses an annual volume of US$100 million. Among the leading exporters in Taiwan last year, 34 reached this level, but only four did it with finished products under their own labels.

But there are problems with using a fixed sales volume. Each product differs--it's no problem for automobiles to hit 100 million, but what about tennis racquets? Some advocate using market share--by this measure Kennex would be the world's number two in the tennis racquet racket.

There are also considerations of quality. President M.T. Hong of the Tera Electronic Company, Ltd., believes that the key to becoming a world brand name is to have a respectable image and reputation. Others cite the need for product tradition or the product's ability to affect the international market.

If everyone's views are brought together for a strict definition, "Taiwan still doesn't have one name brand, but there are several with considerable potential," says Paul Y.J. Cheng, executive director of the Industrial Design Promotion Center (IDPC) of the China External Trade Development Council (CETDC). These include five of the founding members of the BIPA: Kennex (athletic equipment), Acer (computers), Giant (bicycles), Travel Fox (casual shoes), and Tera (electronics).

Aside from the youthful Tera, the others all got started through OEM (manufacturing under contract from, and under the label of, another company) or through a combination of OEM and their own product lines.

To start with one's own products, though control is entirely within one's own hands, because production volume is small, it is hard to attain economies of scale, and costs aren't competitive. To avoid this problem, Tera decided to go for the narrow, high priced, high quality market.

For most domestic companies, the relationship between OEM and their own products is like that between water and boats--it can carry them along or swamp them.

"I want to thank our OEM customers for making us big," says King Liu of Giant Manufacturing Co., Ltd. Over the course of bilateral cooperation, the quality of products has been continually lifted, and overseas businesses came to know this Taiwan company. Thus it was easy for clients to accept the self-made Giant line. Companies doing OEM can also pick up management concepts and market information, more reasons why some established companies keep a large amount of OEM work.

But many OEM companies fail in their "revolution," dying cruelly or reverting to the status of "nameless concubine."

Kennex was ruthlessly encircled when it struck out on its own. Because of collective resistance by foreign customers, Kennex had o abandon all but the U.S. market and put all its strength there. The company's serious losses caused constant rumors that "Kunnan [parent company of Kennex] is going belly up."

Giant had a similar experience, but "I can understand their [boycotters'] feelings," sympathizes King Liu. "OEM brought you up, and now you turn around and strike us. Customers will certainly band together to resist, withdraw orders, and make operations difficult." The more OEM one does, the harder it is to create one's own product.

Companies going out on their own also need research, development, and design abilities. Acer invested 5-6 percent of its operating costs for R&D, establishing capabilities that allowed it to grab clients rather than the other way around.

The most important task is to establish a place in the hearts of consumers, so that they buy your product by name. Besides high appraisals from authoritative organizations, one must look to the power of advertising.

In terms of investment in this area, compared with Japan or Korea, Taiwan is the weak sister. Nevertheless, some companies have had success. Acer's Stan Shih noted that his company invariably put its ads in the most authoritative business publications, like Forbes, and always multiple pages. The costs were high, but the authoritative feeling was crucial.

The most successful example, however, has to be Travel Fox. With a limited budget, Chen Rei-wen of Travel Fox told the advertising company to go for a deep impression, and not worry about directly selling shoes. The resulting ads of nake couples (later scantily clothed) wearing nothing but their Travel Foxes hit home and set off a debate that earned Travel Fox vast amounts of free media time. It was named both one of the "Ten Sexiest" and "Ten Least Tasteful" ads, and Travel Fox's name rolled across the U.S.

But there are few as lucky as Travel Fox. Most build an image bit by bit. It is said Japan's Teac spent US$100 million; Acer estimates it has spent US$50 million.

It's worth it though. Acer estimates it could sell its name for US$100 million. A company like NEC in Japan might get one billion. Kennex has taken its name from tennis racquets to golf equipment and even a sports drink. Name brand companies find partners more cooperative. Another advantage is that their stocks are strong and stable, creating a pool of ready capital. No wonder M.T. Hong says, "A name brand is a priceless gem."

But Professor Dah Hsien William Seetoo of National Chengchi University warns that not all companies are suitable for the big investment to put out their own brands. He has a checklist: Is your quality high enough? Is it a field where name brands matter to consumers? Do you have econom of scale? Are product lines complete?

Current Taiwan industries suitable to create their own products are communications, electronics, audio equipment, shoes, umbrellas, stationary, furniture, household appliances, and even agricultural products. And, despite Seetoo's warning, Casper Shih, president of the China Productivity Center, believes small companies can break away from OEM.

"In the past small enterprises liked price competition, and didn't pay attention to quality, dragging down the MIT image," he says. He believes they must now focus on quality and wait for opportunities. It will be much easier for the second or third brand name to make it.

Then there is the alternative of buying an existing brand name. But it could be a trap: First, the entry is too easy, and in the dog-eat-dog competition it will be easy to make a mistake. Second, the brand name is closely linked to corporate culture and management practices; can these be as easily adapted?

Whatever the path, Taiwan's skilled, knowledgeable young entrepreneurs are the best asset. Already the BIPA has 54 members and many more waiting to join, and the government plans to guide and cultivate 20 world class name brands. But will Taiwan consumers support them? Just ask the next young kid you see running down the street with his Travel Foxes on.

[Picture Caption]

Giant Manufacturing Co. is the first mass-production bicycle frame manufacturer to break into the European market with its own brand name bicycle. (photo by Ch'en Ming-cheng)

Kennex is the second largest maker of tennis rackets in the world and su pports many players. (photo courtesy of Kunnan Enterprise Ltd.)

Acer invests as much as five percent of its operating revenue in R & D a nd has become a star with the international media.(Sinorama file photo)

After using sexual motifs to create a name for themselves, Travel Fox ha s turned to humor and mystery to continue to create a unique image. (photo courtesy of Hongson International Co.)

Tera television sets beat out eight American and Japanese brands in being picked as "number one in the world" by a specialist magazine. (photo courtesy of Tera Electronic Co.)

Furniture is another of Taiwan's star industries. The leading maker of office furniture on the domestic market is U-Bix, which is planning to break into the international market (photo courtesy of U B Office Systems Incorporation)

Giant Manufacturing Co. is the first mass-production bicycle frame manufacturer to break into the European market with its own brand name bicycle. （photo by Ch'en Ming-cheng）

Giant Manufacturing Co. is the first mass-production bicycle frame manufacturer to break into the European market with its own brand name bicycle. （photo by Ch'en Ming-cheng）

Kennex is the second largest maker of tennis rackets in the world and su pports many players. （photo courtesy of Kunnan Enterprise Ltd.）

Kennex is the second largest maker of tennis rackets in the world and su pports many players. （photo courtesy of Kunnan Enterprise Ltd.）

Acer invests as much as five percent of its operating revenue in R & D a nd has become a star with the international media.（Sinorama file photo）

Acer invests as much as five percent of its operating revenue in R & D a nd has become a star with the international media.（Sinorama file photo）

After using sexual motifs to create a name for themselves, Travel Fox ha s turned to humor and mystery to continue to create a unique image. （photo courtesy of Hongson International Co.）

Tera television sets beat out eight American and Japanese brands in being picked as "number one in the world" by a specialist magazine. （photo courtesy of Tera Electronic Co.）

Furniture is another of Taiwan's star industries. The leading maker of office furniture on the domestic market is U-Bix, which is planning to break into the international market （photo courtesy of U B Office Systems Incorporation）