HTC & Beats Electronics: The Example of Ingredient Branding

Hi, I have found a piece of news that related to co-branding from BBC: Dr. Dre, one of the famous American rapper sold just over half of his audio company Beats Electronics to a famous smartphone maker HTC. The two fast-growing brands will focus on bringing high performance sound to HTC phones (HTC and Beats by Dr. Dre set t introduce new era in mobile audio 2011). 

Here is the link:

http://www.bbc.co.uk/newsbeat/14504110

The co-operation already begin and the relevant products already in the marketplace.

About Beats Electronics and HTC

Beats Electronics is an audio company that founded in 2006 by the famous American rapper and music producer Dr. Dre, and Jimmy Iovine, the CEO of Interscope Geffen A&M Records which is a division of Universal Music Group (HTC and Beats by Dr. Dre set t introduce new era in mobile audio 2011). The aim of this company is to design and produce the headphones which has the features and functions that can fully present high quality of the music and vocal through the headphones just as same as what the musicians and producers do in the studio (HTC and Beats by Dr. Dre set t introduce new era in mobile audio 2011 2011). 

As we known, HTC is a famous world-class mobile device company from Taiwan. It was a global third-party mobile device manufacturer before 2007. In 2007, HTC released its first cell-phone (htc.com/tw 2011). In 2008, HTC has become popular all over the world because of its Touch Diamond cell-phone, a product that has strong features and functions to compete with iPhone at that time.

Co-operation between HTC and Beats

With the rapid development in mobile device industry, the competition between different brands has become more and more intense. Some companies raise up but some doesn't, such as the separate of Sony Ericsson. The competition now is not only focus on the software area such as operating system and different kinds of application but also focus on the hardware such as chip, camera and also the touch screen so the innovation is critical to the smartphone manufacturers. 

The strategic partnership between Beats Electronics and HTC is an opportunity for two companies to redefine the smartphone industry and define the future. According to this news, the purchased will be HTC’s fifth acquisition this year and it is seems as the competitive force to fight with Apple's iPhone. With this co-operation HTC will impact the smartphone industry in its own way in the future  especially in the music function even it used to do very well before this co-operation. 

As mentioned, co-branding takes three forms. The cooperation between Beats Electronics and HTC is ingredient branding, it is the placement of one brand within another brand (Clow and Bacck 2010, 64).

HTC can subjoin a new series for its smartphone that focus on the audio quality such as music player to compete with iPhone’s iPod function, or even provide a higher quality of the audio system with Beats' audio chip or relevant technology. This form of co-branding just like Intel microprocessors in HP computers. 


Co-branding like any other alliance cannot guarantee consistent attractive results for both sides (Thakare 2009). For example, when one of the partners feels that the return is inadequate or that the program is no longer fits its strategies or the existing products can no longer competitive with the competitors, this may cause the partner to withdraw or stay in the venture but lose the main competitive force just like the separation of Sony Ericsson. However, the difference between Sony Ericsson and HTC is that the form of Sony Ericsson is joint venture, the form of HTC and Beats is ingredient branding and the owner of Beats sold 51% stake to HTC, which means HTC now is one of the owner of Beats so the potential risks of the cooperation can be avoid in some way because the strategies are set around HTC. HTC may be successful in the field of music or audio system. Furthermore, it is more easier to control no matter the new product promotion or R & D process if HTC is in the leading position of the cooperation. 


According to Clow and Baack (2010, 65), for companies and brands that are not as well known, co-branding is an excellent strategy. Even Beats Electronics is a very famous audio company in USA, however, it may not be that famous in other countries especially some Asia countries. According to this, the advantages increase brand awareness and more sales income will be achieved by this cooperation. 

In conclusion, the cooperation between Beats and HTC is good for both sides but it must based on good communication and well consensus. The cooperation between HTC and Beats Audio can be seems as a kind of innovation and it is also a key part for smartphone company to survive in the strong competition. 
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Sony Ericsson: The Example of Cooperative Branding

It has no doubt that co-branding is one of the main methods for two or more companies to do the business in co-operate way. Co-branding has various advantages such as risk-sharing, more sales income, expanding customer base, technological benefit, resources-sharing for cost reduction, and also better product image by association with another renowned brand. Different companies co-operate with other companies for different reasons but the common thing is to earn more. The reason I chose this topic is because even co-branding is usually a helpful method for two or more companies to work together but it is still full of uncertainties factors that may affect the business during the co-operation. 
The key factor in co-branding determined by product or business complementarity. (Park, Jun & Shocker 1996, p.465). Mismatch could occur when combining two brands, thus co-branding may affect partner bands negatively if one side is lack of the ability to solve the specific problems. Moreover, it is also easily loss of control if the communication between the two companies is poor. 


Sony and Ericsson go separate ways:

http://www.telecoms.com/35666/sony-ericsson-split-good-news-for-both-parties/

Co-Branding takes 3 forms: Ingredient Branding, Cooperative Branding, and Complementary Branding (Clow and Baack 2010, 64). The form of Sony Ericsson is cooperative branding.

It is the joint venture of two or more brands into a new good, service, or brand (Clow and Baack 2010, 64).   Sony and Ericsson are two independent companies. Both of this two companies are mature in their own field. The co-operation between Sony and Ericsson started at 2001 and the two companies got the early successes with its Walkman and Cyber-Shot phones. However, in recent years it suffered from the competitive climate in the smartphone market and at the end of last year the two companies decided to separate the business and Sony Ericsson will become a wholly owned subsidiary of Sony and integrated into Sony's platform of network.

Sony Ericsson was a successful cellphone company because of its Walkman and Cyber-Shot products. However, Sony Ericsson did not catch the chance when the smartphone become the main product in the cellphone market and even the main Walkman products cannot compete with Apple's iTunes and iPhone. Furthermore, the lack of creative product and the uncertain of operating system selection is also the key issues to Sony Ericsson. Keep changing the platform for the smartphone will easily mislead consumers' understanding of its product segmentation. On the contrary, Apple, HTC, and Samsung's product segmentation strategies are more clear, and the innovate products from the 3 companies already gain the largest marketing shares in the smartphone market, it is hard for Sony Ericsson to change the situation already. 

When iPhone and Black Berry focusing on the high-end market, Sony Ericsson was still focused on the mid section of the smartphone market and lack of innovated products to compete with Apple and Black Berry, it is another reason for the lost. 

In a word, lack of innovation and unclear segmentation of the products and platform selection are the direct reasons that cause the breakdown of this co-operation. When the problem occurs, the two companies did not have a good communication to find out the solution and even the top manager of Sony distrust the co-operation. At this point of view, the situation is easy to loss control and hard to fix the problem. There are a lot of uncertain things will affect the the co-operation in co-branding even the both sides are mature in their area. In order to minimise the lose and avoid the risks, it is essential for both sides to have a good communication and trust each other. 

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About Co-Branding: Advantages, Disadvantages & Risks

My topic is about co-branding. In my blog I will talk about the advantages and potential issues of co-branding. I will use 3 different examples to explain how different types of co-branding work and the potential risks which may impact the cooperation.

In nowadays more and more companies work together for different kinds reasons. One the most useful method is co-branding. Co-branding occurs when two separate organisations come together to generate unique values for their respective consumers. It involves the presentation of multiple brands and product to the public under a single marketing strategy (Reader 2011).

There are various advantages of co-branding such as risk-sharing, resources-sharing, expanding customer, more sales income, and technological benefit. Moreover, if a company is planing to do co-branding, one essential thing is to choose a partner that is closely related to the product or service that the company offering or the partner is mature. For instance, Sony Ericsson used to be a successful cellphone company, it consists of Sony and Ericsson. Sony is a leading Japanese electronic product company and Ericsson is a famous provider mobile network and mobile device from Sweden.

Sony and Ericsson made good used of their own resources and technologies to developed a series of successful products with Sony's famous Cyber-shot and Walkman technologies. However, at the end of October, 2011, Sony and Ericsson announced that they will go separate ways as Ericsson sells its 50% stake in mobile phone maker Sony Ericsson to Sony for $1.46 billion. Sony Ericsson used to be one of the leading mobile phone companies in the world, however, some reasons causes the separation of Sony Ericsson. According to this, even co-branding is a good method for two companies to run a new business in a new area or maintain and expand their own business but the uncertain risks and potential disadvantages will also impact the cooperation if the problems cannot be solved well.

Here are the common potential risks of co-branding:
1. Loss of control (lack of well communication)
2. Risk of brand equity dilution
3. Negative feedback effects
4. Organisational distraction

Furthermore, Co-branding may fail when there is a difference in vision and mission, and even value of the two companies. Co-branding may affect partner brands in adverse manner. If the customers associate any adverse experience with a constituent brand, then it may damage the total brand equity. Moreover, lack of communication and innovated product or service will also impact the quality of the partnership especially in the electronic product industry.

Sony Ericsson is a good example of the failure of co-branding and the case will be discussed in the next post.




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