Swissness Bill free essay sample

In the era of globalization, manufacturing processes are no longer confined to a single country. As a result, it is often challenging for consumers to know the true origin of the products that they buy. At the same time, a product’s country-of-origin can have significant influence on consumers’ perceptions of the products. Swiss products present an exceptionally good reputation around the world; consumers perceive Swiss products as highly reliable and with very high quality. In fact, stating their â€Å"Swiss origin† induces substantial economic value for the producers; products can be marked up by at least 20% 1 with the â€Å"Switzerland† country-of-origin label alone. Essentially, the â€Å"Swiss† origin acts as a brand on its own. As a result, the â€Å"Swiss† brand has attracted increasing number of â€Å"free-riders† and instances of wrongful uses. The Swiss officials are concerned about the potential damages that such wrongful uses can bring to the â€Å"Switzerland† brand. The deceptive usages of the â€Å"Switzerland† brand may mislead consumers and cause them to lose confidence to all other Swiss products; hence damaging the value of the â€Å"Switzerland† brand as a whole. As a result, the Federal Council of Switzerland proposed the Swissness Bill in an attempt to promote and strengthen the protection the â€Å"Swiss† brand. In this essay, I will explain why the Swissness Bill was proposed under globalization and the impacts of the Bill on local producers and consumers. 2. Why was the Swissness Bill proposed under globalization? 1 Stephan Feige, Benita Brockdorff, Karsten Sausen, Peter Mathias Fischer, Urs Jaermann, Sven Reinecke, 2008. Swissness Worldwide – International Study on the Perception of the Brand Switzerland, University of St. Gallen. 1 In this section, I will first analyze the â€Å"Switzerland† brand itself to explain why a brand, which is essentially just a country-of-origin label, requires protection. Secondly, I will explain how globalization addresses he need of such protection by looking at the influences from contemporary global production networks. Thirdly, I shall look at the current situation of statutory rules concerning the protection of â€Å"Switzerland† designations to explain the necessity of the Swissness Bill. 2. 1 â€Å"Swissness†- the â€Å"Switzerland† Brand The term â€Å"Swissness† has been used widely in anything that is typically Swiss since the late 1990s. In essence, the term refers to the application of Switzerland as a brand to Swiss products 2 . By applying â€Å"Swissness† to one’s brand, the positive attributes associated with Switzerland- such as efficiency, exclusivity, high quality, precision and reliability- can be transferred to the brand; this is commonly referred to as co-branding 2. Essentially, the Switzerland brand is a nation brand. Like all other nation brands, it is a common property. Unlike other ordinary product brands, it does not have a brand owner who can manage the brand. Ideally, a brand should provide consistent values across its products to generate a homogenous identity. However, the values that the â€Å"Switzerland† brand delivers can be rather inconsistent as it is a common property that can essentially be used by anyone. The management of the Switzerland brand is essentially carried out by all the brands which present themselves as Swiss. The activities and actions that these brands conduct can directly affect the Switzerland brand- if these actions are inconsistent with the values of the â€Å"Switzerland† brand, they can potentially weaken the brand. To avoid such 2 Regine Wieder Veronika Hubl, 2012. What is Swissness?. School of Management and Law, Zurich University. 2 inconsistencies, it is crucial for the Swiss officials to take actions to coordinate and manage the â€Å"Switzerland† brand. 2. 2 Global Production Network Consumers are willing to pay premiums for the â€Å"Switzerland† country-oforigin label because of the positive attributes associated with conventional Swiss products and Switzerland itself. According to studies conducted by the University of St. Gallen, the premium can amount to 20% of the original sales price; and even up to 50% for luxury products 3. However, consumers are willing to pay this premium because they expect these â€Å"Swiss† products to be Swiss both inside as well as outside; they expect the â€Å"Swiss† products to be actually made in Switzerland. They expect goods that are produced in Switzerland to have higher quality. In fact, over 80% of Swiss products consumers expect food products that are produced in Switzerland to have stricter controls than those produced elsewhere 4 ; hence they expect food products from Switzerland to have better quality. However, a product under a Swiss brand may not necessarily be fully produced in Switzerland anymore in today’s world of globalization. Therefore, can we still associate the Switzerland attributes to these products even when they are no longer produced in Switzerland? 3 Stephan Feige/Benita Brockdorff/Karsten Sausen/Peter Mathias Fischer/Urs Jaermann/Sven Reinecke: Swissness Worldwide – International Study on the Perception of the Brand Switzerland, University of St. Gallen et al St. Gallen et al. 2008 4 Bern 2007. Origin of Agricultural Products. Demoscope Research Marketing, Federal Office of Agricultural. 3 Transnational Corporations (TNCs) are now able to coordinate and control their production networks across national boundaries, to take advantage of the geographical differences between their factors of production. Many products nowadays consist of parts from all over the world and are produced in more than one country. This raises the question of how much of a production process should a product have in order for it to be considered â€Å"made in Switzerland†. Therefore, it is crucial for Swiss officials to determine the criteria required for such internationally produced products to be considered as â€Å"Swiss†; so that the â€Å"Switzerland† brand can be preserved in the long term. 2. 3 Current Situation The contemporary conditions for the use of â€Å"Switzerland†, â€Å"Swiss made† or other designations are imprecise and thus lead to legal uncertainty. According to the Federal Act on the Protection of Coats of Arms, the â€Å"Swiss coat of arms† may not be registered as a trademark for goods and may not be affixed to goods for commercial purposes† 5 . Using the Swiss cross to indicate a product’s origin is regarded as a commercial purpose and hence is considered illegal. However, non-commercial and decorative uses are considered legal. Yet, in actual situation, distinguishing between the legal decorative usages and the illegal commercial usages can be difficult. It is clear that firms have been exploiting this ambiguity. Similarly, the conditions for the use of â€Å"Switzerland† and â€Å"Swiss† are very general in the Federal Law on the Protection of Trademarks and Indication of Source6. It states that â€Å"the origin of goods shall be determined by the place of manufacture or 5 Federal Law on the Protection of Coats of Arms and Other Public Insignia of 5 June 1931 (WSchG; SR 232. 21) 6 Federal Law on the Protection of Emblems and the Name of the Red Cross of 25 March 1954 (SR 232. 22). 4 by the origin of the basic materials and components used† 7 . However, there is a lack of judicature on the specifications of such conditions; the decision of the commercial court of St. Gallen is one of the very few. It specifies that the manufacturing costs of a product must be at least 50% and the essential manufacturing process must be conducted in Switzerland. However, what is considered â€Å"essential manufacturing process† remains vague and unclear. Moreover, in the international context, the Federal Institute of Intellectual Property often has to forgo litigations against illegal uses of â€Å"Switzerland† designations because of the nature of the â€Å"Switzerland† brand as mentioned above- it is a common property and hence it does not exist in legal sense. Therefore, a legitimate plaintiff cannot be assigned to any â€Å"Switzerland† designations. Consequently, there is no clear legitimacy for the Swiss officials to file any actions against the illegal uses internationally. They can merely â€Å"notify† the illegal parties involved. The current statutory rules and their implementations are inadequate to protect the â€Å"Switzerland† brand. More precise, clearly defined statutory rules should be proposed in order to preserve the â€Å"Switzerland† brand in the long term. 3. The Swissness Bill The existing statutory rule provides very general regulations on the use of â€Å"Switzerland† designations and the conditions of using geographical indications. The proposed legislations, under the Swissness Bill, strives to strengthen the protection of the â€Å"Switzerland† designations by imposing more precise criteria when determining the geographical origin of products and services. It defines precisely how much 7 Article 48, para. 1 Trademark Law 5 â€Å"Switzerland† a product has to be for it to be labeled as â€Å"made in Switzerland†. The specific criteria are summarized below: Natural products must be harvested in Switzerland for them to be considered â€Å"Swiss†. For processed natural products, at least 80 percent of the weight of the raw materials composing the product must be from Switzerland. Moreover, the production process that gives a product its unique characteristic must be conducted in Switzerland. For industrial goods, at least 60 percent of the manufacturing costs must be incurred in Switzerland, including research and development costs. Moreover, at least one essential manufacturing procedure must be conducted in Switzerland. For a service provider, its headquarter and an administrative centre must be located in Switzerland for it to be considered â€Å"Swiss† 4. Impacts on local companies We may now look at how these proposed changes in the statutory rules regarding the designation of Swiss origin affect the local producers. Opposing views are likely to occur between smaller Swiss companies and the larger transnational Swiss companies. 4. 1 Smaller Swiss companies Smaller Swiss companies are likely to welcome the new amendments because most of their productions are located domestically. They are likely to prefer more restrictive statutory rules because they are the ones who have been following the rules and are particularly vulnerable to the damages brought by the free-riders. Free-riders who present their products as â€Å"Swiss†- but are not originated from Switzerland in 6 actual fact- may carry contradicting attributes that damage the â€Å"Switzerland† brand as a whole. Their qualities are often inferior to those of the authentic Swiss products. This causes damages to the â€Å"Switzerland† brand as a whole because consumers are deceived and are led to perceive Swiss products as having deteriorating quality. The damage of the â€Å"Switzerland† brand is likely to affect small Swiss companies more significantly because their branding strategy are much more reliant on the co-branding effect from the â€Å"Switzerland† brand. They do not have the resources that the large companies have to develop extensive marketing campaigns to induce a strong brand image themselves. Consumers generally place more weight on the country-of-origin when they are faced with the weaker brands. 4. 2 Large Swiss Companies On the other hand, large Swiss companies are likely to oppose the new amendments because of their global production network. In most of the cases, these large companies were able to grow to such an extent in the first place because they were able to internationalize their value chain activities to grab hold of the comparative advantages of different countries. These locational-specific advantages are superior features of a country- such as natural resources, land, labour and climatethat create competitive advantages for the companies. However, with the new amendments, they may have to abandon some of these comparative advantages to keep hold of their â€Å"Swissness† competitive advantage. Consequently, they may become less competitive in the international market. 4. 3 Local companies as a whole Despite the potential opposing views from different companies, I believe the Swissness Bill can be beneficial to local companies overall. The Bill protects those 7 who are truly â€Å"Swiss†, barring against the free-riders who do not carry the â€Å"Swissness† attributes but are trying to take advantages from presenting themselves as â€Å"Swiss†. It protects the core competitive advantage of many â€Å"Swiss† brands by ensuring the delivery of consistent â€Å"Swiss† values to consumers. Large transnational Swiss companies should not lose sight of their core competitive advantage when they internationalize. The â€Å"Switzerland† brand is a common property that requires collaborative efforts from all its stakeholders to manage and protect against inconsistent usages. At the same time, the values of the â€Å"Switzerland† brand that they are able to preserve and create can be shared by all the stakeholders. 5. Impacts on Consumers It is apparent that consumers can benefit from the Bill. The â€Å"Swiss† products that they purchase under the Bill are truly â€Å"Swiss† both inside and outside. The products are ensured to deliver consistent â€Å"Swiss† attributes to consumers. Consumers are promised to enjoy these â€Å"Swiss† attributes in return for the premium they pay on the â€Å"Swiss† products. However, there is a possibility that the extra costs of production, as a result of large transnational companies having to relocate some of their value-chain activities back to Switzerland, will be borne by the consumers. Therefore, consumers may have to pay even higher premiums for â€Å"Swiss† products in the future. Nevertheless, despite the possibility of higher premiums incurred by the â€Å"Switzerland† brand, consumers will no longer be deceived by the wrongful uses of the â€Å"Switzerland† brand, which I believe is the more important issue. 6. Conclusion 8 In the contemporary era of globalization, distinguishing a product’s countryof-origin can be challenging due to the complexity of the global production networks nowadays. This issue poses significant threats to genuine Swiss products specifically because of the special co-branding effect derived from â€Å"Switzerland† as a brand itself on the Swiss products. As a result, the Swissness Bill was proposed and it aims to protect the â€Å"Switzerland† brand by imposing stricter criteria for determining whether a product can be considered as being â€Å"Swiss†. The impacts of the Bill on local producers can vary according to their specific circumstances but I believe a well-managed and consistent â€Å"Switzerland† brand can strengthen the core competitive advantages of most Swiss products. In turn, consumers also benefit from the certainty about the value that the â€Å"Swiss† products deliver. Therefore, the Swiss Bill will be a beneficial decision for Switzerland to implement fully in the future.