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R. L. Polk & Co.’s Ask the Industry: What Impact Does Globalization Have on Brands?

Whether it’s a well-known U.S.-based aftermarket manufacturer opening facilities in Asia, or a strong new foreign player entering the U.S. market, today’s market place is a virtual melting pot. For this week’s Ask the Industry, we asked three knowledgeable industry executives for their thoughts on whether globalization has any impact on brand in the aftermarket. Here’s our question: How does the increasing presence of global competitors in the aftermarket impact the importance of brand?

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AKRON, OHIO — Whether it’s a well-known U.S.-based aftermarket manufacturer opening facilities in Asia, or a strong new foreign player entering the U.S. market, today’s market place is a virtual melting pot.

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For this week’s Ask the Industry, we asked three knowledgeable industry executives for their thoughts on whether globalization has any impact on brand in the aftermarket.

Here’s our question: How does the increasing presence of global competitors in the aftermarket impact the importance of brand?

Dick Morgan, president and CEO of Aftermarket Auto Parts Alliance:

“I’m a firm believer in brands and the equity of brands. A lot of brands that we handle are 50 to 70 year old names. Personally, I don’t think it [globalization] will have an adverse affect on brands. Just look at the TVs we buy today. A lot of U.S. brand name TVs are made in China. There are a lot of strong Asian brands out there today – Toyota, Sanio and others.

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“Our domestic vendors are doing the same thing, partnering up with global companies to make their products and keep their brand name. The “Made in USA” label or country of origin is not near the issue as it once was. There was a time when if a product label said it was made in some country other than the U.S., an installer would shy away from it, but not anymore.

“I think people would still like to see “Made in USA;” it’s a positive, but the negative impact is not what it once was. “Made in Japan” in a sign of quality today.”

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Kathleen Schmatz, President and CEO, Automotive Aftermarket Industry Association:

I feel very strongly about [brand]. Take an industry program like Be Car Care Aware. We are urging American consumers to be highly involved in the appropriate maintenance of their vehicles. So, we’re counting on them to begin their relationship with their technicians, and brand plays an important role. A brand must give the technician the belief that the part will fit right, or better, than an OE part. My concern is with the manufacturers. Right now, many of them don’t have any choice but to outsource production. If there is any lag in quality as a result, the technician loses confidence in that brand. Given that, I think brand is more important now than ever.

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I’m not saying products from India or China can’t have good quality. Quality is of utmost importance. It has to be a quality part regardless of whether it was made in Indianapolis or in India.

Given the international marketplace today, we must communicate at the very highest levels. I think it’s more important than ever to support the brand and talk directly to the independent repair shops. They’ve got to believe in the technical expertise and quality that stands behind a product.

Layne Gobrogge, Vice President of Marketing Support, Proliance International, Inc., and a member of the Automotive Aftermarket Suppliers Association Brand Protection Council:

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Globalization has brought two primary challenges. First, the increased competition in the United States and abroad is more intense than ever. What we worry about is a marketplace driven on price alone and not on all the other value-added services that many established suppliers provide today, such as printed and electronic catalogs, training programs, marketing co-op funds, industry involvement, in-the-field sales and technical staffs, special order capabilities, websites and much more. When the marketplace becomes price-only, service and quality will suffer and no one wins.

The second challenge deals with intellectual property violators. We’ve seen a dramatic growth in these types of violations, which range from blatant patent infringement to counterfeiting. For emerging markets in particular, the easiest way to gain entry into the marketplace is by stealing another company’s intellectual property and brand name. Aftermarket suppliers spend many years of research and development investment, marketing dollars and other promotion and customer service activities to develop their brands as a differentiator. By developing a strong brand, they become a first call for their customers and often are able to charge a premium price.

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Protecting your brand globally costs a significant amount of money, not to mention the time involved. These are costs that much of the supplier base cannot currently afford to take on. When you consider higher raw material and energy costs, health care and pensions costs, and all the other expenses that must be currently absorbed, intellectual property theft is just another kick in the gut to the manufacturer. Another problem faced by manufacturers is the inability to grow into new markets because the IP violators have already beat the legitimate manufacturers to that region — usually with substandard and much cheaper product. We have already begun to see in the Middle East and parts of Asia and Europe. This is a serious impediment to growing your brand.

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Can we beat these challenges? It’s possible, although the odds are stacked against us. Education of the marketplace and supply and distribution chains is still the key. They have to understand the advantages of dealing with value-added suppliers and the consequences of purchasing and selling counterfeit and inferior components.

SUMMARY by Amy Antenora, Editor, aftermarketNews:

Does the country of origin have an impact on the quality or value of the part’s brand? Ten years ago, when “Made in the USA” was not just a slogan, but also a political statement, the answer would have been a resounding “YES.” However, in today’s increasingly global marketplace, the country in which a part was made no longer matters to most consumers.

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What does matter is quality, and the support that goes with it, as AAIA’s Kathleen Schmatz pointed out. That’s where a company’s brand plays critical a role today. A well marketed brand communicates everything a company wants its customers to know. A brand defines a company — its culture, its expertise, its product and its quality. And now, with the marketplace becoming more global every day, protecting one’s brand — particularly in terms of intellectual property rights and counterfeiting — becomes even more important.

For many longtime aftermarket parts manufacturers, their brands have become synonymous with quality, trust and expertise; however, as new global players bring more quality products to market, a brand, and its messengers, must work even harder to maintain the technicians’ loyalty and trust.

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