1. Temporal – Brands are introduced first at “home” and then expand gradually from this core. Closer to home => more time to capture market and grow loyalty
2. Patriotism – people intentionally buy local out of pride
3. Customization for local customers – initially based on need in home-base market, employees understand the local market better given that they live in it, “home” customers are used for testing etc. Customer preferences change with distance.
4. Corporate focus – the farther from corporate the less control (e.g., sales force slacking-off), higher barriers to monitor/understand the market, less importance given to expanding than defending home turf.

It would certainly be interesting to determine the relative importance of these factors, and to see a comparison to brands/products/industries that do not display this pattern.

To become a successful nation-wide brand, it had to first become extremely popular within its hometown. If a brand is created to meet the needs of a particular region, then naturally it will do best in that region, despite expansion elsewhere.

Culture can be taught. Or we are taught by certain cultures to sustain some of the cultural elements. It sometimes feels like Neo in the Matrix movie, when he jumped off the skyscraper in the virtual world, being taught to make a decision beyond the convenient illusion our eyes see. Sometimes we live within one culture by our own choices. Sometimes it is a decision beyond our own. Sometimes we just happen to live within a culture.

In our Venture Capital Strategy class, we were taught that home town advantage is one thing venture Capitalists tend to value on entrepreneurs. And many venture capitalists form syndicate to increase their geographical coverage while maintaining a sense of home town base. If some of my classmates make to the venture capital industry after a few years, home town advantage would be more salient because of the knowledge imbued through the class education and the rationality being taught. Is there a possibility for an arbitrage opportunity here? For example, many graduate students and researchers at University of Toronto are not originally from Toronto. Will the lack of home town advantage put this group of people at disadvantage for starting up new ventures? Highly likely if they pitch their ideas to investors who believe so and have no much knowledge of these entrepreneurs, especially when their venture ideas are at very early stage of business development. Interesting enough, there is a research group at Ryerson University that dedicates their efforts to study transnational ventures. One culture may teach us to like products produced locally while it also teaches us to look for arbitrage opportunities.

When I was enjoying my riding days in Vancouver, I always wanted an Arc ‘teryx jacket (a Vancouver local high end outdoor soft good brand). Not only for the cool logo, but also for its functional design and slim style. Nevertheless, I ended up getting a summit series jacket from North Face because my value drivers were also on the colors and price tag that Arc’teryx was not offering. For a home-base effect to take place, the brand must have sufficient target customers locally as well as sustainable competitive advantage over other entries. I have no data but I doubt North Face has more concentrated customers in the San Francisco Bay area than locations like Vancouver for its snow sports soft goods.

What if we look at a broader scale, say home country. Based on PBS (http://www.pbs.org/kqed/chinainside/quiz.html), the country that has the most KFC stores is not the US, but China, with about 1700 KFCs and opening 200 more per year than the US in 2007. Realizing its competitive advantage is in the market size, China has been playing the strategy of letting the world compete in China, which is similar to what the USA did around 1880s.

What we value about short physical and/or cultural distance remains to be tested by the globalizing broadband networks. I have been living in Louisville, KY; Cupertino, CA; Beijing, China; Vancouver, BC; and Toronto in the past 12 years. Product origin has no effect in my decision of purchases. I tend to believe the cultures we have been taught, and living within, could be substantially re-shaped by better connections.

Still I think it varies by place. I (without a speck of proof) doubt that the local advantage for Cold Stone Creamery is very large in Tempe. And I KNOW that there are just as many cowboys fans as cardinals fans in the greater phoenix area.

Maybe attachment to place, which is influenced by history and social capital and density and public space- is a key variable here?

Given this, what brands bring authenticity to Toronto? One apparent one is Tim Hortons which started in Hamilton and is HQed in Oakville. Although this has been hijacked by the country as a whole.
Another would be local beers which have had strong uptake in recent years (Steam Whistle, Mill St., Amsterdam).

Also, Heinz ketchup is something that anyone can buy. The very fact that it’s (a) substitutable with other items and (b) just different enough to be distinguishable (it doesn’t taste _exactly_ like other ketchups, it’s not a pure commodity), might make it particularly susceptible to this sort of effect.