8.1 Introduction

Famous brand names make a big difference in the marketplace. Figure 8.1 shows that several T-shirts are made of exactly the same fabric, the same style, and the same quality, but because they have different brand names, the retailing prices of these T-shirts are vastly different.

Figure 8.1: The Power of Brand Names

A good brand name brings extra value to the product and the company that makes the product. McDonald s, Coca-Cola, Disney, Kodak, and Sony are among the most globally recognized names in the world (Kochan et al., 1997). The name recognition of these brands brings tremendous marketplace successes and high profitability. In modern history, brand development is one of the key sources of competitive advantage for companies worldwide. Brands are regarded among the most valuable assets owned by a company (Batra 1993, Davis 2000). Some brands are valued so highly that companies have paid huge amounts of money to acquire the rights to them. For example, in 1988 Philip Morris bought Kraft, the maker of cheese products, for $12.9 billion, a sum that was four times the value of the assets of the company (Murphy 1989). Sometimes companies that have good brand names can defend their market positions for a long period of time (Arnold 1992), as illustrated by Table 8.1.