Brands portfolios and competitive advantage:

an empirical study
Claude Chailan
Instituto de Estudios Superiores de Monterey, Escuela de Graduado y Innovación, Puebla, Mexico

Abstract
Purpose – The paper seeks to contribute to the understanding of brand portfolio management by examining the brand portfolio strategies of four
leading cosmetics companies. The research focuses on two questions: what reasons lead companies to develop, or not, a brand portfolio strategy, and
how brand portfolio management can create a higher and stronger level of competitive advantage that is harder to grasp and imitate.
Design/methodology/approach – The paper utilises an exploratory approach by means of case studies. Data were collected from the following
companies: L’Oréal, Clarins, Estée Lauder and Wella. The research involved in-depth interviews with 33 company directors.
Findings – The research results show that an aggregation of brands is not in and of itself a brand portfolio. The juxtaposition of brands is one of the
elements, but not the sole element, necessary for the development of a brand portfolio, which is a combination of a brand ensemble and key factors
born out of organisational savoir-faire.
Research limitations/implications – The results validate the existence of a link between brand portfolios and competitive advantage, a link based on
the existence of four key factors identified in the research.
Practical implications – A model is proposed to assist managers in better understanding and controlling brand regrouping, because the research
illustrates the benefits for a company that executes well-coordinated brand management.
Originality/value – This research fits into the complex context of strategic/marketing relationships and broadens the field of brand analysis, notably
its strategic dimension. The contribution of this research is to show how a brand portfolio can create a stronger and higher level of competitive
advantage, which is more difficult to copy.

Keywords Brands, Brand management, Strategic marketing, Competitive advantage

Paper type Research paper

An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
Marketers are looking to create and maintain a competitive
advantage in a complex and changing environment (Shocker
et al., 1994; Mattsson et al., 2006) and as brands are viewed as
key value creating resources (Ponsonby-McCabe and Boyle,
2006), brand management and the building of brand equity
have become a major component of corporate strategies
(Aaker, 1992; Shocker et al., 1994; Keller, 2001). As brands
are recognised as inimitable superior value-creating resources
that can play a key role in achieving a sustained competitive
advantage over rivals (Ponsonby-McCabe and Boyle, 2006),
one of the main questions when establishing the different
sources of competitiveness for a company is whether it should
use one or several brands (Cravens et al., 2000; He and
Balmer, 2006). Choosing a mono- or pluri-brands strategy is
a focal point for several companies, both for multinational
groups and local companies (Douglas et al., 2001; Strebinger,
2002; Kumar, 2003; Schuiling and Kapferer, 2004) and
strategic choices may become brand choices, choices of brand
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Journal of Product & Brand Management
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q Emerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420810887608]
organisation or choices about the kind of relationships
between brands inside the company.
Because among the most relevant problems when referring
to brands are those related to the management of a multi-
brand system (João Louro and Vieira Cunha, 2001;
Strebinger, 2002; Hill et al., 2005), a company must
formulate its basic strategic brand principles in view of two
central themes, which are:
1 brand architecture; and
2 a brand portfolio.
Brand architecture defines the way in which a brand signs a
product, and whether it does so independently of another
brand (Douglas et al., 2001; Rao et al., 2004). Olins (1989) or
Laforêt and Saunders (1994), for example, differentiate three
levels of brand architecture which are monolithic brands:
1 corporate branding (one name for all products);
2 endorsed brands/mixed branding (two brands associated
with one product); and
3 branded products/house of brands (each product has its
own brand).
Each of these strategies has its own benefits and shortcomings
for suppliers and customers, but in each case the focal point is
the link between the brand and the product.
A brand portfolio goes beyond this question of a
hierarchical or competitive relationship between one brand
with another, in order to examine ways of coexistence and the
balance between several brands that are incorporated within a
single company, whatever the brand architecture may be. The
focal point is the link between one brand and another.
Riezebos (2003, p. 184) defines a brand portfolio as “a set of
brands owned by one company” and Dawar (2004, p. 34)

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 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
states, “brands are not superstars but members of a team”,
while Kapferer (2000, p. 157), asks “how many brands must
we offer to consumers within the same product category? [. . .]
brand portfolio optimization is a strategic issue because the
chosen answer will have a profound and permanent impact on
the outcome [. . .] and because the chosen strategy will allow
or impede having a sustainable competitive advantage”. The
issue of brand portfolios concerns the number of brands a
company should manage and how to organise the “rules of the
game” between these brands. This raises the questions of the
need for positioning those brands in connection to each other
and of the strategic equilibrium of brands in a portfolio
(Douglas et al., 2001; Riezebos, 2003; Hill et al., 2005).
The brand portfolio concept is a core concern for most
world business leaders and companies because, as the
competitive environment becomes more and more complex
and entails a high level of competition of every nature,
companies are not only focusing on brand management, but
also on defining the number of brands required to reach their
goals. In addition, they are examining the links between
brands within the company and the organisation of these
links. Brand combination within a portfolio is a key factor for
many companies’ development, growth and risk management.
Lindsay Owen-Jones, L’Oréal’s CEO states[1]: “We have a
complete, balanced brand portfolio. Our eventual acquisitions
will only be of companies that complete our niche coverage or
our international reach”, while the Gucci group in turn has
taken advantage of its liquid assets to acquire or launch the
Yves Saint-Laurent, Alexander McQueen, Balenciaga,
Bottega Veneta, Bédat, Boucheron, Sergio Rossi and Stella
McCartney brands.
The notion of portfolio management is not new in
marketing, and academics have discussed the product
portfolio (Bordley, 2003) and the customer portfolio (Dhar
and Glazer, 2003; Johnson and Selnes, 2004). Ryals (2006)
reminds us that the theory of portfolio management is derived
from the financial field where the objective of investors is not
profit maximisation, since profit maximisation might entail
unacceptable levels of risk (Brealey, 1983). In fact, modern
portfolio theory holds that the aim of the investor is to
maximise return and minimise risk (Sharpe, 1981; Brealey,
1983). Applying portfolio theory to brand management
requires some consideration of the risk link to the brand
(Petromilli et al., 2002).
Yet the issue of brand portfolios has attracted very little
attention from researchers up to now. According to Barwise
and Robertson (1992), a brand portfolio is mainly an answer
to some key management goals, for example reaching multiple
market segments or taking advantage of economies of scale in
advertising, sales, merchandising and logistics, while Keller
(1998) emphasises that brand portfolio management requires
a long-term vision for every brand, where roles and
relationships between brands are carefully defined. Laforêt
and Saunders (1999) underline that managing a brand
portfolio is far more important than managing one individual
brand. More recently, Carlotti et al. (2004) asserted that the
brand portfolio is not only critical for financial reasons, but
because a brand portfolio allows companies to establish a
strategy for every brand, determine the need for repositioning,
identify underperforming brands and, finally, avoid the
exposure risks for the company related to a single-brand
strategy.
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But, as stated by Hill et al. (2005), the processes for
managing a brand portfolio have not grown at the same pace
as the creation and expansion of these portfolios, although
several strategic questions are connected to the idea of brand
portfolios, for example:
.
How many brands are necessary in order to obtain
balanced management?
.
What is the impact on brand portfolio policy of product
categories, markets, or globalization?
.
What is the best was to organise the relationships between
brands?
Therefore, brand portfolio management is a key issue for the
comprehension and development of companies’ competitive
advantage (Sharma, 1999; Slater and Olson, 2001) and its
marketing strategies (Day, 1994; Srivastava et al., 1999;
Ponsonby-McCabe and Boyle, 2006; Mattsson et al., 2006).
Both Juga (1999) and Reynaud (2001) show that by
displacing competition to a superior level, competitive
advantages become harder to understand and imitate. Brand
portfolio management may change the focus of marketing to a
superior, strategic decision-making level (Baldinger, 1990;
Brown, 2005), as it implicitly involves focusing on the whole
instead of on individual brands (Kumar, 2003; Riezebos,
2003; Hill et al., 2005).
No previous studies have surveyed different companies in
an industry to review approaches to the building and
management of brand portfolio. This article fills this gap by
reporting on a study of practices in four different cosmetics
companies. In a series of interviews with each company, the
researcher explores their approach to managing the brands
they own. The purpose of this article is to identify and
empirically examine the brand portfolio, and to focus on two
important research questions:
1 What reasons lead companies to develop, or not, a brand
portfolio strategy?
2 How can brand portfolio management create a higher and
stronger level of competitive advantage that is harder to
grasp and imitate?
The remainder of this article is divided into three sections.
The first presents the methodology, and the second the main
findings and results of our research. The final section
identifies the perspectives, managerial implications and
research opportunities that came out of this research.
Methodology
Setting
Webster (2005) states: “Our understanding of marketing
must be embedded in our understanding of organizations, not
just markets, and it must focus on issues of implementation,
not just strategy formulation”, and suggests a better balance
between methodological rigor and the relevance of research in
order to allow for a reconceptualisation of the marketing field
both as a business practice and an academic discipline.
Webster adds that it is critically important that research
become more idea-driven, not just data-driven. Because of the
novelty of the subject we chose an exploratory approach by
means of case studies. The lack of empirical work on the
phenomenon of brand portfolio was instrumental in the
decision to use the case study method.
 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
Research based on case studies is traditionally associated
with exploratory and descriptive studies and is recommended
(Yin, 2003) when:
.
you have “why” and “how” research questions;
.
the field of study is relatively new; and
.
being an exploratory study, control mechanisms are not
mandatory.
Case studies are useful in understanding an emerging
phenomenon when there is significant theoretical
indecisiveness and they give a more concrete basis to
observations, allowing for better comprehension of
contextual influences (Colarelli O’Connor and Rice, 2001).
According to Aharoni (1993), well-conducted case studies
can establish rules permitting the identification of new ideas,
breaks from previous ways of thinking, or new ways to modify
the environment, put into effect at the heart of companies,
thus creating competitive advantages for said companies.
We decided to choose our cases from the cosmetics industry
because of the extensive use of brands and multiple brands in
this category of products. A spread of companies across the
sector was sought in order to ensure robust and generic
results as stated by Johnston et al. (1999), who underlined
that a precise selection of cases is imperative to compensate
for the absence of statistical representativeness of cases. The
selection of cases stems from hypotheses for research and each
case must be chosen to complement the rest, either because it
will produce similar results or because it will produce different
results for predictable reasons. Our case choices correspond
to Pettigrew’s (1990) approach of “planned opportunism”
and his criteria suggested to execute this choice, with the
choice of extreme situations to look for strong contrasts
between cases and search for strong polar situations to oppose
cases, over a longitudinal period.
Data were collected from the following companies: L’Oréal,
Clarins, Estée Lauder, and Wella (Appendices 1 and 2 present
key figures for each of theses companies and part of their
brand portfolio). These companies offer several advantages
for our study. They belong to the same industry, and Hadida
(2002) concluded after analysing 50 different empirical
studies that the use of companies within the same industry
was far more fruitful. The four companies are well established
but vary greatly in size. The firms also provide rich settings
because each links brand management to overall
organisational success. In addition, the firms contrast on
several dimensions, therefore providing some variation in our
study conditions, as stated by Moorman and Miner (1998):
these companies differ strongly in ownership (some are
family-owned or managed, others not), in their level of
internationalisation (some are much more regionalised than
others), and in their market scope (some are more
concentrated on luxury only products, others selling from
FMCG to luxury cosmetics).
L’Oreal is the world’s leading cosmetics company in terms
of size, total sales, profitability, and growth rate. This group is
armed with a singular strategic axis and regularly
communicates (via press interviews with its CEO, annual
reports, financial publications) its conviction that its brand
portfolio, combined with its capacity for innovation, is the
main vehicle for its development. As a consequence, L’Oréal
was chosen to be our pilot case.
Estée Lauder is the second case in our study. The Estée
Lauder group has created new brands alongside its famous
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flagship brand since 1965. This process was considerably
accelerated at the start of the 1990s with numerous takeovers
of highly targeted brands. One of the characteristics of this
company is that it is concentrated within the world of top
quality cosmetic products and avoids spreading out its savoir-
faire within the network of distribution circuits, contrary to
L’Oreal’s eclectic practices. This case can therefore
significantly complete and enrich the information gathered
from our pilot case, which was much more diversified.
With our next case, the Wella group, it was also this
contrast to our pilot case that led us to study it. The Wella
group forced its way onto the market beginning in 1996,
creating a cluster of cosmetic brands through buy-outs of
brands already in existence on the market. The approach of
this group is therefore understandably quite different from
that of L’Oréal, which was founded in 1907 and has
historically favoured internal brand development.
Our fourth case is Clarins. This company owns “only” four
brands, either taken over (Loris Azzaro) or created (Thierry
Mugler, Stella Cadente) over the course of the last ten years.
It seemed to us very worthwhile to get to know the viewpoints
of this company’s executives and analyse their strategic
choices.
Data collection procedures
We chose non-directive key informant (Moorman and Miner,
1998) interviews. We call key informants any individuals who,
because of their position, hold privileged and valid
information. Top-level managers in charge of the planning
and implementation of brands policies were chosen. We
interviewed executives in charge of the strategic planning, as
well as managers in charge of the implementation of brand
policies.
Using public information we selected, contacted, and
interviewed three levels of executives inside each company, so
as to gather data at different levels (Pettigrew, 1990)
(Appendix 3):
.
strategic level – CEO and/or the highest executive in
charge of strategy;
.
intermediate level – brand managers and marketing
managers; and
.
operational level – country or zone manager.
We obtained, tape-recorded and transcribed 33 interviews of
between 60 and 105 minutes in length. Fifteen were for
L’Oreal, five for Estée Lauder, seven for Wella, and six for
Clarins.
Fern (1982) and Miles and Huberman (2003) highlight
that individual interviews produce more ideas than group
interviews in terms of the number and quality of the ideas
produced and are a good technique when the purpose is to
collect highly intangible and difficult-to-achieve strategic
ideas. We used semi-structured interviews. These interviews
used very open questions in order to allow the expert free
range to elaborate his/her own ideas.
While collecting and analysing our data we coded,
summarised and identified the relevant subjects and
clustered the data in coded blocs in order to create a
cognitive map (Miles and Huberman, 2003) and achieve
qualitative data reduction. This necessitated reading through
the transcripts to identify themes, clusters or patterns and
then coding these. Starting with the raw data, intermediate
tables were created to form meaningful categories and groups.
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Claude Chailan Volume 17 · Number 4 · 2008 · 254 –264

The next stage consisted of finding metacodes linking all the
topics in a particular cluster with a single umbrella title.
To ensure that our identification of the codes was complete
and unbiased, an independent researcher was invited to codify
our first six interviews in order to improve their internal
coherence and check the reliability of the groupings. The
inter-coder reliability coefficient was found to be 92 per cent,
an acceptable level. Where differences of opinion were found,
these were discussed between the coders and an agreement on
meaning was reached.
Results/findings
This section presents the leading results of our research. We
start by identifying the different steps that characterise the
brand portfolio building process. We will then present both
the expected and produced effects of this process, then the
key factors for transforming a brand group into a brand
portfolio. Based on this data, we propose a model that helps
to clarify the acquisition process of specific skills by the
companies at the time of brand portfolio creation, and also
the link between a sustainable competitive advantage and a
brand portfolio.
Adopting a brand portfolio: a progressive process
There are three different stages in the brand portfolio building
process, and the companies studied are all in different stages
of this process. Building a portfolio is a chronological and
experience-building process. Three phases have been
identified which correspond to an evolution, starting with
the simple juxtaposition of brands to respond to diverse
consumer needs, all the way to formalising a brand portfolio
as a company’s strategic tool. Table I presents each of the
phases, along with its corresponding main drivers.
The study shows that a brand portfolio is not only an
accumulation of brands. A brand portfolio is a cumulative
process, related to time and experience factors. A brand
portfolio is a consequence of phases within a time frame.
These phases are described below:
1 Brand accumulation. The brand accumulation phase
addresses the needs created by market segmentation. A
company launches or buys new brands so as to respond to
the many customer expectations, cultural differences or to
develop opportunities in new product categories.
2 Brand portfolio reformation. This phase corresponds to a
transition period during which the company tries to limit
the number of brands it is using and reorganises the brand
group emerging from the previous phase. This phase is
created by pressure from different company stakeholders,
particularly shareholders, to avoid dispersing resources
and to develop concentrating their means (capital, media,
brand extensions) on a more limited number of brands.
Brands are no longer considered as individual responses to
consumer demands, but rather as part of a whole. The
criteria for brand selection and the coordination of
managing those brands are established.
3 Creation of a development model based on a structured brand
grouping. In this third phase, specific criteria for operating
an ensemble of brands are established in order to make
said groups a permanent source of sustainable competitive
advantage. The key skills that allow the company to make
the most of an organised ensemble of brands have been
built up. A company growth model based on each brand’s
role is put into place.
The study shows that the companies analyzed are not in the
same phase. L’Oréal and Estée Lauder are in Phase 3 and
have made managing their brand portfolio a key tool to their
expansion. Wella is in Phase 2, and is establishing brand
selection criteria as well as the internal structure to organise
brands acquired over the past ten years. Clarins is in Phase 1,
and is proceeding to launch new brands (such as Stella
Cadente) to widen the scope of what it has to offer to various
consumer segments.
A brand portfolio is therefore more than just the sum of its
parts. A brand portfolio is built around a group of brands,
management criteria, and key skills combined with the
accumulated experience of the company. The combination of
these factors makes possible the creation of a model at the
company’s core and can transform a brand portfolio into a
competitive advantage.
A brand portfolio’s expected and produced effects
Brand portfolios provide an answer to various company
concerns and leanings, which can be categorised into four
expected effects of its implementation, outlined in Table II.
To begin with, a brand portfolio allows for the organisation of
internal growth relays to cope with the limitations of current
brands, whether they be economic (costs of obtaining
additional percentage of the market plus costs of breaking
into new markets), or conceptual (credibility in different
consumer segments).
A portfolio is also conceived as a compensation system
between brands, which allows for equalising and balancing
out the results within the company itself.

Table I The three steps of the building process of a brand protfolio

Phase Aggregation phase (Phase 1)
Description Main objective is to answer to
customers’ very different needs
Competing against oneself in many
segment in order to grow
Opportunistic acquisitions
Main Limits within existing brands
drivers Market segmentation
Concentration of the distribution
Reformation phase (Phase 2)
Reformation is first a strategy of
brand reduction
Brands are considered as part of a
whole
Globalisation
Cutback in the number of brands
Integration of the concept of
diversity in the marketing policy
Theorisation phase (Phase 3)
Definition of criteria for operating the group of brands and making
a competitive advantage of this management
Economic and industrial optimisation
Research
Organisational optimisation

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 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
Table II The effects of a brand portfolio
Produced effects Advantages
Growth relay To grow and move into other segments, to master
new markets
To reach and appeal to different generations of
customers
Balancing fund Harmonious growth
To counterbalance the success or failure of one brand
or another
To provide flexibility
Critical size Effect of size in relation to distribution
Presence within different distribution circuits
Speeding up globalisation
Sharing costs for Synergies
research and Easier amortisation
industry
With a brand portfolio, a company can reach critical mass
more easily and rapidly (particularly when faced with the issue
of distribution centralisation), and can have a presence within
different distribution circuits. This critical size is furthermore
a globalisation accelerator for the companies concerned.
Lastly, brand portfolios permit shared research costs as well
as the optimisation of market placement for technological
innovations, which can be made available in very different
ways by very different brands. This shared research and
innovation plays a key role in the product category studied.
Significant industrial synergies are put into effect by merging
production methods.
Key factors for transforming a brand portfolio into
competitive advantage
Our study shows that Phase 3 requires the creation of specific
skills inside the company in order to transform the brand
portfolio into a sustainable competitive advantage. Four key
factors have been identified. They are:
1 the precise identification of brand selection criteria;
2 the definition of arbitration-equilibrium processes;
3 the company’s ability to adapt its structure; and
4 the creation of a general strategic brands management
framework, an expansion matrix.
We detail each of these factors below.
Key factor 1: brand selection criteria
This criterion is an inherent factor to the brand portfolio
concept because it implies choosing brands. Companies took
four elements into account when considering whether to add
or remove a brand in their portfolio:
1 complementarity of brands within a group and target
additions (in terms of price, distribution circuits,
segmentation);
2 international (or potentially international) brands;
3 profitable brands or critical thresholds (turnover, market
share); and
4 a brand’s capacity to be made available in different
product categories.
Applying these criteria leads to a brand positioning
radicalisation process. By using this approach, the company
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re-centres each brand according to its attributes, added value,
and internal cohesion (history, character traits, values,
distinctive placement), thus forcing the company to clarify
and maintain these characteristics. This radicalisation allows
each brand to emerge with its own DNA, or soul, and also
renders brands completely distinctive from each other – thus
maximising their capacity to complement each other and
avoiding any overlap. Radicalisation brings about the research
and selective integration of original and distinctive brands,
even those smaller ones.
Key factor 2: balancing criteria
This factor establishes the modus vivendi of brands between
themselves, and defines the conditions that allow a group of
reassembled brands in a portfolio to represent more than just
the sum of the brands’ individual values. In other words,
balancing criteria illustrate the added value that the portfolio
gives to each brand. These criteria are as follows:
.
a balanced portfolio is conceived like a brand network
made up of mature brands and brands in development,
highly profitable brands and brands in an investment
phase, and finally, brands that are either potentially or
already global;
.
the presence of strong flagship brands is a prerequisite
because they generate significant financial resources which
in turn can be invested to develop less powerful brands;
and
.
the equilibrium is dynamic, with new brands being
recruited and others rejected from the network if they no
longer meet the criteria as defined.
The economic aspect plays an important role and each brand
must project self-sufficient profitability in the relatively near
future.
Key factor 3: adapting the company’s internal structure
This key factor highlights the role and importance of a
structure that permits a brand portfolio to be implemented
and to develop. This organisational factor is made up of
several tacit approaches, the majority of which are based on
years of cumulative experience and on individuals working
together as a team at the company’s core. Traits characteristic
of the link between this key factor and a brand portfolio can
be identified. They are:
.
very strong centralised brand management to ensure
overall consistency for all brands (communication,
extensions, distribution), and the positioning of brands
within the portfolio;
.
entrepreneurial spirit and very strong individual
accountability with a lot of flexibility and operational
autonomy for each brand; and
.
top management’s major role in controlling and
regulating, in particular for the allocation of
technological furrows.
Key factor 4: creation of an expansion matrix
Brand portfolios only create competitive advantage when
people inside the company understand and share this role.
This assumes a certain conceptualisation and modellisation
on the company’s part to create a brand portfolio, and its
organisation as a replicable and lasting strategic development
axis. This key factor is very unevenly mastered amongst the
companies studied. For the moment, only L’Oréal and Estée
Lauder have integrated this essential dimension and have
developed a real idea theorising their brand portfolio model.
 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
The expansion matrix for L’Oréal and Estée Lauder is a four-
dimensional matrix:
Consumers’ attitudes ðsegmentsÞ*categories
2 products*distribution channels ðprice levelÞ*countries:
The other companies are strongly aware of it but lack mastery
of this key factor, characteristic of Phase 3.
Proposition of a model
At the end of the study, the aforementioned findings led us to
create an interpretive model from the results obtained in the
research. This model integrates decisive elements stemming
from inter-company analysis. It clarifies and highlights:
.
the phasal construction of a brand portfolio and thus the
major roles of company history and cumulative
experience;
.
the acquisition process of specific skills by companies
during their evolution towards the higher-level phases of
portfolio development; and
.
the link between lasting and sustainable competitive
advantage and a brand portfolio.
This model is presented in Figure 1, and reflects the
evolutionist character of the strategic approach based on
brand portfolios. This results in:
. A necessary accumulation of experience and savoir-faire,
both of which are characteristic of path dependency. The
phases identified in the process follow one another and
Phase 3 skills can only be acquired over the long term.
Figure 1 Model of the transformation of a brand group into a brand portfolio, a source of lasting and sustainable competitive advantage
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Volume 17 · Number 4 · 2008 · 254 –264
.
A strong causal ambiguity connecting competitive
advantage and brand portfolios because of the
impossibility of an inexperienced outside observer
comprehending and then appropriating this relationship.
A brand portfolio can bring together differing needs and
reconcile those needs over the long term. Firstly, there are the
“external” needs expressed by consumers, which lead
companies to develop new brands to accentuate the
perceived differentiation by consumers. Secondly, there are
the “internal” needs for reform linked to pressure for
economic performance (focusing capital on a more limited
number of brands), but also to open up new markets and to
expand internationally. A brand portfolio is a strategic-level
tool which can surpass this contradictory pattern.
Discussion and perspectives
The research results show that an aggregation of brands is not
in and of itself a brand portfolio. The juxtaposition of brands
is one element, but not the sole element, necessary for the
development of a brand portfolio, which is a combination of a
brand ensemble and key factors born out of organisational
savoir-faire. The mastery of these key factors comes from
cumulative experience originating from company history, and
it is the company’s cumulative experience and its progressive
evolution that makes the competitive conceptualisation phase
of a brand portfolio possible.
This fact supports the suggestion of a path dependency in
the transformation of a brand portfolio into a sustainable and
durable competitive advantage. The notion of path
dependency (Dierickx and Cool, 1989; Teece et al., 1997)
 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
affirms that the history of a company influences its future and
that time remains a primordial variable, one that is impossible
to eradicate through supplementary financial investments.
Barney (2001) states that numerous studies show that
companies who build their strategy upon path dependency,
causal ambiguity, social complexity and intangible assets
outperform those who base their strategy on tangible assets.
In keeping with Peteraf (1993), we also note that the
development of co-specialised assets makes them more
difficult to imitate because they are not as common. This is
even truer when an asset is the consequence of path
dependency, because this slows down the the competition’s
ability to copy this second resource. In this manner, the
juxtaposition of a brand ensemble with a developmental
model, originating from company history so as to make the
most of the portfolio, allows a company to generate a lasting
and sustainable competitive advantage.
The study also brings to light the fact that the brand
portfolio model is difficult to copy due to its idiosyncratic
nature, and because it is a powerful generator of causal
ambiguity (Weick, 1976; Orton and Weick, 1990). Causal
ambiguity refers to an uncertainty pertaining to reasons for
performance differences between companies. It hinders
potential imitators from knowing not only what to imitate
but how to do it (Reed and DeFilippi, 1990). In Phase 3 of
brand portfolio competitive conceptualisation, it becomes
impossible to determine if the portfolio is in and of itself a
source of competitive advantage, or if the results it generates
(for example, harmonious growth, market presence,
acceleration of globalisation) are not themselves the origin
of a brand portfolio. This indecision concurs with Hunt and
Morgan (1997), who identify this ambiguity as a key
characteristic in building supply formulation since even
when competitors know that consumers prefer the products
of their own competition, there can be much ambiguity to
determine precisely which of the product’s attributes make it
seem superior.
The study shows that a brand portfolio generates a powerful
causal ambiguity because it is something which is:
.
complex, as it is composed of both simple elements (the
brands) and also the process and methods to implement it
(internal organisation necessary to make the most of a
brand ensemble);
.
specific to each company being made up of brands that are
by definition inimitable; and
.
tacit, because even if its existence is clearly formulated, its
internal functioning mode is not.
It is therefore impossible for competitors to try to copy it
because they do not know what to copy, nor how: should they
try and amass the same number of brands, with the same
characteristics, in the same product categories? Or rather
should they try to replicate the internal organisation of the
targeted competitor? Or both? Or should they try and recruit
brand managers from the competitor? But will it be enough to
obtain managerial skills and strategic organisation in order to
create an equivalent brand portfolio model? These questions
do not have a general answer due to causal ambiguity
provoked by the brand portfolio concept. As such,
competitive advantage generated by a brand portfolio is
more difficult to comprehend and copy. It creates a new entry
barrier. The difficulties in implementing and executing it
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Volume 17 · Number 4 · 2008 · 254 –264
represent a lasting and sustainable competitive advantage for
the company that has it.
Limitations
Our research has several limitations. First, the use of four
companies limits the generalisability of our results. The
challenge of getting access to strategic pieces of information in
the different companies made our choice more reasonable,
particularly given the difficulty of interviewing top-level
managers. Although other approaches may have been more
externally valid, our approach offers solid and internally valid
evidence of brand portfolio management that further research
might examine in more companies. Second, other approaches
could develop a more general framework on the advantages
and consequences of brand portfolios by examining, for
example, the role of culture, structure or company size as
catalysts or impediments for brand portfolio management.
Lastly, it would be valuable to examine the impact of product
category on long-term portfolio policies. Further research
could complement this approach by studying other companies
in the same industry or by comparing companies having a
portfolio versus companies without it. Other potential tracks
for research could be comparative studies inside other
industries.
Conclusion and managerial implications
This article examines the reasons that lead certain companies
to develop a brand portfolio and the role of a brand portfolio
in creating a lasting and sustainable competitive advantage.
This study has permitted the enumeration of the strategic
nature of a brand portfolio. The contribution of brand
portfolio analysis brings to light new guiding principles for
brands and company management.
Four in-depth case studies were performed in the cosmetics
industry. Our exploratory study was based on a group of
interviews with cosmetic company directors and executives.
Our results prove the existence of a link between brand
portfolios and competitive advantage, a link founded on the
presence of four key factors identified in our research. These
key factors are central to the evolution of a brand group into a
brand portfolio, in and of itself the generator of sustainable
competitive advantage.
This research fits into the complex context of strategic/
marketing relationships and broadens the field of brand
analysis, notably its strategic dimension (Baldinger, 1990;
Barwise and Robertson, 1992; Kapferer, 2000; Riezebos,
2003). The findings, with respect to brand portfolio
management, were particularly interesting when the
implications for long-term competitive advantage are
considered. We have proposed a model to assist managers in
better understanding and controlling brand regrouping
because the research illustrates the benefits for a company
that executes well-coordinated brand management. A brand
portfolio is a tool for managing the complexity originating
from the accumulation of brands, and surpasses the
competitive brand question by creating a higher level of
lasting and sustainable competitive advantage, in doing so
reconciling expressed consumer demands with organisational
necessities and company profitability.
 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
Note
1 Interview in Le Figaro, a French newspaper, 21 February
2003.
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 Brands portfolios and competitive advantage: an empirical study Journal of Product & Brand Management
Claude Chailan Volume 17 · Number 4 · 2008 · 254 –264

advantage”, Academy of Management Review, Vol. 15 No. 1, Appendix 2

pp. 88-102.
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l’AIMS, Laval. L’Oreal
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Practical Approach, Prentice-Hall, Harlow. Profit e1,833 million
Ryals, L. (2006), “Profitable relationships with key Turnover by region
customers: how supplier manage pricing and customer Western Europe 46.6 per cent
risk”, Journal of Strategic Marketing, Vol. 14, pp. 101-13. North America 26.3 per cent
Schuiling, I. and Kapferer, J.N. (2004), “Real differences Rest of world 27.1 per cent
between local and international brands: strategic
implications for international marketers”, Journal of Estée Lauder
International Marketing, Vol. 12 No. 4, pp. 97-112. Turnover 2006 (June to June) $6,464 million
Sharma, S. (1999), “Trespass or symbiosis? Dissolving the Profit $620 million
boundaries between strategic marketing and strategic Turnover by region
Americas 55 per cent
management”, Journal of Strategic Marketing, Vol. 7,
Europe, Africa, Middle East 32 per cent
pp. 73-88.
Asia-Pacific 13 per cent
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Englewood Cliffs, NJ. Clarins
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“Challenges and opportunities facing brand management: Profit e127.3 million
an introduction to the Special Issue”, Journal of Marketing Turnover by region
Research, Vol. 31, pp. 149-58. Europe 63.6 per cent
Slater, S. and Olson, E. (2001), “Marketing’s contribution to North America 18.5 per cent
the implementation of business strategy: an empirical Rest of world 17.9 per cent
analysis”, Strategic Management Journal, Vol. 22,
pp. 1055-67. Wellaa
Srivastava, R.K., Shervani, R.A. and Fahey, L. (1999), Turnover 2005 (June to June) e2,761 million
“Marketing, business processes and shareholder value: an Profit e462 million
organisationally embedded view of marketing activities and Turnover by region
Germany 26.5 per cent
the discipline of marketing”, Journal of Marketing, Vol. 63,
Europe 41.1 per cent
pp. 168-79. Americas 18.9 per cent
Strebinger, A. (2002), “Strategic brand concepts and brand Rest of world 13.5 per cent
architecture strategy – theoretical considerations”, AFM-
IRG Congress on Branding Proceedings, Paris, pp. 1-17. Note: aThe company was bought by Procter & Gamble two years ago. As it
Teece, D.J., Pisano, G. and Shuen, A. (1997), “Dynamic has been transformed into a business unit of Procter & Gamble, data are no
capabilities and strategic management”, Strategic longer directly comparable with other companies
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Journal of Marketing, Vol. 69, pp. 4-6.
Weick, K. (1976), “Educational organizations as loosely Appendix 3
coupled systems”, Administrative Science Quarterly, Vol. 21,
March. Table AII Some brands of the companies studied
Yin, R.K. (2003), Case Study Research: Design and Methods,
3rd ed., Sage Publications, Thousand Oaks, CA. Estée Lauder L’Oreal Wella Clarins
Estée Lauder L’Oréal Paris Tony & Tina Clarins
Clinique Armani Parfums Gucci Thierry Mugler
Further reading Aramis Helena Rubinstein Escada Loris Azzaro
Eisenhardt, K.M. (1989), “Building theories from case study M.A.C. Lancôme Mont Blanc Stella Cadante
research”, Academy of Management Review, Vol. 14 No. 4, Aveda Vichy Rochas L’Occitane (partly)
pp. 532-50. Tommy Hilfiger Kérastase Ana Sui
Darphin Redken Trussardi
Origins Matrix Yardley
About the author Prescriptives Garnier Dunhill
La Mer Kiehl’s Ellen Tracy
Claude Chailan can be contacted at: claude.chailan@ Bobbi Brown Maybelline Maxx
hotmail.fr Donna Karan Shu Uemura Ghost
Michael Kors Softsheen-Carson Puma
Appendix 1 Stila Biotherm
La Roche Posay

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Claude Chailan Volume 17 · Number 4 · 2008 · 254 –264

Executive summary and implications for

managers and executives
This summary has been provided to allow managers and executives
Table AIII List of interviewees a rapid appreciation of the content of the article. Those with a
Level 1 particular interest in the topic covered may then read the article in
toto to take advantage of the more comprehensive description of the
Site 1: L’Oréal
research undertaken and its results to get the full benefit of the
Béatrice Dautresme Vice-President
material present.
Nicolas Rosselli Deputy General Manager, Hair
Loı̈c Armand General Secretary How aggregation differs from a brand portfolio
Jacques Challes World Director, Garnier Readers of this journal are more likely than many others to
Nicolas Hiéronimus World Director, L’Oréal have both the wherewithal and the need to pass through the
Guillaume de Lesquen Deputy General Manager, Lancôme world’s airport departure lounges and their ubiquitous duty-
Site 2: Estée Lauder free shopping. BBC economics and political commentator
Patrick Bousquet- President Andrew Marr highlights as the central recurring theme of his
Chavanne political history of post-war Britain that politics has been
Cédric Prouvé Vice-President, International defeated by shopping. It is a hypothesis that could be tested
Site 3: Wella more widely around the world. Big political ideas have been
Michel Beaugier Vice-President, Japan swept away by a credit-fuelled consumer boom that may be
Laurent Lautier Vice-President, Asia turning to various degrees of bust.
On getting back to the office the job is often to sift through
Andrew Auwerda General Manager, Tony & Tina
the pile of receipts and separate expenses from airport
Site 4: Clarins
impulse buys. Any receipt containing L’Oréal, Clarins, Estée
Patrick Bizot President
Lauder and Wella will have been an expense, but sadly not
Gérard Delcours President, Azzaro one that can be recharged.
Research by Dr Claude Chailan, French-based Visiting
Level 2 Professor at ITESM in Mexico, has used these four
Site 1: L’Oréal companies as the basis of a study examining the connection
Jean Pierre Gouttebroze General Manager, Professional Products, between brand portfolios and competitive advantage,
Latin America interviewing 33 company directors in the process.
Alain Evrard General Manager, Asian Pacific The study does the reader the great service of providing an
Martin Guilloux General Manager, Luxury Products, France insight into the world of these premium cosmetics brands and
Marion Pujot General Manager, Professionnal Products, how they are managed. More significantly, however, is the
France transferrable learning that is revealed. Central to this is the
Christophe Ruffat General Manager, Hair, France realisation, based on earlier research, that many of the
problems associated with brand management relate to
Site 2: Estée Lauder
multiple products being managed under a brand name by a
Fabrice Weber Vice-President, Fragance
given company.
Marie Rose Tricon Marketing Director
The concept of brand portfolios has resulted from the desire
Site 3: Wella to do better. However, it needs to be understood. Aggregating
Philippe Founes General Manager, Middle East and Asia products within a brand, or collating a number of brands,
Marie L. Michalland Marketing Director, Rochas bundling them together, does not constitute meaningful brand
Site 4: Clarins portfolios. It is simply aggregation. Brand portfolios bring
Joël Palix General Manager, Thierry Mugler together the brands of a company but seek coexistence and
Jonathan Zrihen General Manager, Asia balance between the various brands and points of focus and
connection. If it sounds soft, it isn’t: it works.
Level 3
Site 1: L’Oréal Focusing on the strategic dimension in three phases
Joseph Biton General Manager, Latin America The shift to adopting a brand portfolio approach requires a
Thierry Houssin General Manager, Middle East focus on the strategic dimension – it takes time, relies on
Pierre Lauzeral Deputy General Manager, Eastern Europe experience and requires a steady eye on the company’s
strategic goals. Chailan identified a three-phase process, with
Jean Michel Ripol General Manager, Consumer Products, Asia
the companies studied being at different stages.
Site 2: Estée Lauder .
Phase one is described as the aggregation phase, where
Audrey Guetta Development Director, France criteria are ill-defined, if they exist at all. Very different
Site 3: Wella customer needs are catered to, the company’s own brands
Denis Lanel General Manager, Belgium may be competing with each other, and acquisitions are
Donatienne de Fontaine Vice-President, Duty Free opportunistic. Of the companies in Chailan’s research,
Site 4: Clarins Clarins was considered to be at this stage of development,
Arnaud Naintré Executive Vice-President, Duty Free for example launching new brands including Stella
Patrice Pollet General Manager, Canada Cadente to widen the scope of its offer to different
market segments.

263
 Brands portfolios and competitive advantage: an empirical study
Claude Chailan
.
Phase two is identified as the reformation stage, in which
brand rationalisation is first introduced and the
management of brands is seen within a bigger picture.
Wella is categorised as being in this phase of development
as its portfolio of brands is organised according to brand
selection criteria.
.
Phase three is identified as the theorisation phase, in which
competitive advantage is sought through the
categorisation and management of brands as a whole.
L’Oréal and Estée Lauder were placed in this category, the
justification being their management of their brand
portfolio as the basis for their global expansion.
A central point made is that this process is not for those
seeking a quick fix: it accumulates over time, it is based upon
experiential factors, it needs careful management and
strategic thinking to be successful.
What to take from this study and use
Research based upon case studies, when done well, always has
richness to it of subtle, nuanced ideas. The outcomes tend to
be pragmatic – they are directly related to practice. Which
doesn’t mean that they can be directly lifted and used by every
firm, and there can be legitimate concerns about how
replicable such research can be.
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
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Volume 17 · Number 4 · 2008 · 254 –264
For the executive seeking best practice to consider, modify
and adapt, they can provide nuggets of gold, however. From
the cases of L’Oréal, Clarins, Estée Lauder and Wella the
following can be taken and used:
.
the strategic development of a brand portfolio can provide
a lasting source of competitive advantage for firms;
.
the strategic dimension developed by the researcher builds
upon and is in line with earlier research – it is a robust line
of argument;
.
the three-phase model can be used as a tool to understand
and manage brands against a backdrop of complexity in
multi-brand businesses; and
.
the model seeks to reconcile consumer demands with
organisational operational factors together with the need
for profitability – in short, the pressures facing most
brand managers.
For many companies, mapping their current position against
this model, with an eye on what then to do next, could be the
starting point.
(A précis of the article “Brands portfolios and competitive
advantage: an empirical study”. Supplied by Marketing
Consultants for Emerald.)