| Author | Perapong Chiewattanakul |
| Call Number | AIT RSPR no.ESM-04-03 |
| Subject(s) | House brands--Thailand
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| Note | A research study submitted in partial fulfillment of the requirements for the degree of Master in Business Administration (Executive) |
| Publisher | Asian Institute of Technology |
| Abstract | Industry observes believe that balance of power in the grocery channel has shifted in recent years in favor of retailers. We examine both theoretically and empirically the question of why a retailer would want to introduce a store brand in a particular category. Store brands differ from other brands in being both unadvertised and located at a position in product space that is determined by the retailer instead of by a manufacturer. We propose three explanations for why retailers use store brands: to improve their negotiating position vis-a-vis manufacturers, to price discriminate among consumers, and to take advantage of the marginal-average cost gap of national brand manufacturers. By collecting and investigating the size of markups for nationally brands product sold in US retail grocery industry. Under reasonable assumption - the wholesale price of a private label product is an upper bound for the marginal manufacturing cost of its nationally branded equivalent, while the retailer's margin on the national brand is an upper bound on the retailer's marginal handling cost for both the brand and private label versions,we construct a model to generate hypotheses and show that a retailer can gain from locating a store brand near a leading national brand in product space. The first contribution of the paper is to show theoretically and to provide empirical evidence that the existence of a store brand in a category changes the bargaining over supply terms between a retailer and national brand manufacturers in that category. We find that retailers are more likely to carry a store brand in a category if the share of the leading national brand is higher, but that the leading national brand share does not affect the market share of the store brand. This indicates that there may be a bargaining motive for the introduction of the store brand. We proposed that this because the retailer can position the store brand to mimic the leading national brand. The last section of paper we consider the retailer's store brand (SB) positioning problem in a market with two national brand (NB) competitors. In the context of our model, two brands are assumed to be positioned close to each other if the "perceptual" distance between the two brands is small and positioning affects the degree of price competition. In product perception study in Thailand, we found that although explicit targeting by store brands influenced consumer perceptions of physical similarity, it had no influence on consumers' perceptions of overall or product quality similarity. In fact, the SB was rated as more similar to the lower share national brands. And so while it appears that retailers do follow a positioning strategy consistent with our model, it meets with more limited success in changing consumer perceptions and demand side behavior. |
| Year | 2004 |
| Type | Research Study Project Report (RSPR) |
| School | School of Management (SOM) |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (Executive)-(EMBA) (Publication code = ESM) |
| Chairperson(s) | Swierczek, Fredric W.; |
| Examination Committee(s) | Sununta, Siengthai;Quang, Truong; |
| Degree | Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 2004 |