Branding has come a long way from its humble beginnings as an identification mark to its current position as a tool for communicating with consumers. Firms use branding as a way to control and manage consumers’ perceptions about their products and image. In many cases, branding creates sustainable competitive advantage for firms.
How much a firm should invest in branding is critically dependent on the business model that the firm pursues. For example, many recent buyers of a smartphone would attest, as firms that invest heavily in branding often also invest heavily in innovation.

Required:
Demonstrate clearly how firms’ branding strategies interact with their innovation strategies.        [4 Marks]
Using relevant examples, explain how branding affects innovation and competition in the marketplace.        [4 Marks]
Backed by related examples, explain how branding activities may substitute for product innovation, especially in the case of vertical product differentiation, where firms introduce higher quality products to rival their competitors.      [12 Marks]