Question

Topic: Student Questions

Is Acquisition A Brand Extension Strategy?

Posted by Anonymous on 5/31/2008 at 1:36 PM ET 250 Points
Hi, I am a graduate student majoring in Fashion Merchandising. I am doing my thesis on Fashion Brand Extensions. I have a brand extension question, i.e., Can acquisition be considered as an extension strategy? For instance Nike, Inc's acquisition of say, Cole Haan or Converse be considered as Nike's Brand extension or is it more a corporate strategy rather than extending the brand. Since Cole Haan say nothing to the consumers, and I believe most of them aren't aware of the fact.

Would like to take opinions!

Srikant
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RESPONSES

  • Posted on 5/31/2008 at 7:05 PM Author
    Hi Randell,
    I think what you said is right. What if the acquired brand's packaging flashes with the parent company's name on it or say customers are well aware that the newly acquired brand's parent company or say a brand acquires a local company in new geographic area so that it would be easier for them to introduce a relatively unknown brand there.
  • Posted on 5/31/2008 at 7:12 PM Author
    I have included new geographic areas because some experts view entering new market as brand extension.
  • Posted by Jay Hamilton-Roth on 6/2/2008 at 8:50 AM Accepted
    I agree with Randall, it's not a brand extension. Nike's name is not being used to build additional name recognition in its product category. Nike has multi-brands, which help diversify and build revenue.

    Resource: https://en.wikipedia.org/wiki/Brand
  • Posted on 6/6/2008 at 12:04 PM Accepted
    For what it's worth i will disagree with all of you. Businesses buy other businesses for financial reasons - pure and simple. The brand considerations are then shuffled off to the Marketing team later in the process, sometimes too late. But it is at that point the careful decisions must be made about branding. Here are some examples.

    Wachovia bought AG Edwards last year. This was a business decision to add revenues to its Wachovia Securities division. At first Wachovia left the AG Edwards brand alone. But last month it decided to kill the brand name (after 120 years of being around). M&A, division and corporate brand extended, acquiree name killed.

    Smuckers just bought Folgers coffee. Smuckers wants to have more revenues and smooth out its business cycle. HOWEVER, this will also extend the Smuckers brand as being more than just jams and jellies. M&A, corporate brand extended, acquiree name maintained.

    Microsoft wants to shift its business more toward search (which is only FIVE % of current revenue). It can only do this via acquisition. But when the acquisition is done, Yahoo or whoever, it must make a brand decision. Do they extend Live? kill Live? etc etc

    Brand mgt can not be separated from the M&A activity, whether it drove it (rare) or not (more common).
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