Brand Equity among Producers of Chinese Mitten Crab 
 
by 
 
Chao Wang 
 
 
 
 
A thesis submitted to the Graduate Faculty of 
Auburn University 
in partial fulfillment of the 
requirements for the Degree of 
Master of Science 
 
Auburn, Alabama 
May 03, 2014 
 
 
 
 
Keywords: Chinese mitten crab, Brand equity,  
Cost benefit analysis, Risk analysis, Structural model 
 
 
Approved by 
 
Robert G. Nelson, Chair, Professor of Agricultural Economics and Rural Sociology 
Diane Hite, Professor of Agricultural Economics and Rural Sociology 
T Randolph Beard, Professor of Economics 
 
  
ii 
 
Abstract 
    In the Shanghai area of China there is considerable product differentiation 
among producers of Chinese mitten crab Eriocheir sinensis, with as many as 50 
brands available in the marketplace. At the same time, the brand awareness of each 
brand is quite different. A consumer survey showed that brand awareness differed 
greatly among consumers, with 10 well-known brands recognized by more than 80% 
of respondents, 34 less-known brands recognized by 20%~80% and 20 unknown 
producers recognized by less than 20%. The cultivation method, cost structure, and 
profitability of these three categories also vary widely. Achieving maximization of net 
revenues is the same long-term goal for every producer, and how to improve the brand 
equity to reach this goal is one of the most important problems. Thus the overall and 
detailed economic situations of each type of Chinese mitten crab brand need to be 
analyzed, and using the appropriate method to measure the brand equity of Chinese 
mitten crab brands is the central issue that needs to be resolved in this thesis. Data for 
the study was collected from mitten crab producers on prices, yields, size distributions, 
costs, and a number of other variables that may serve as proxies for production 
technologies and marketing efforts. Cost benefit analysis and risk analysis were used 
to show the overall and detailed economic situations of different types of brands. Net 
Revenue Premium was chosen as the appropriate measure for estimating brand equity. 
iii 
 
Acknowledgments 
    I would like to express my sincere appreciation to my major professor, Dr. 
Robert G. Nelson for all his help, encouragement and patience during my time as a 
Masters student, especially in the completion of this thesis. I would also like to thank 
Dr. Hite and Dr. Bread for their time in helping to improve this thesis. And I would 
like to thank Shanghai Ocean University and Auburn University for giving me the 
precious chance to be an exchange student.  
    I would also like to thank my family, especially my mother Li-Hong Fan, for 
without her support and encouragement, this study may have never been completed. 
And I would like to thank my roommates and friends, Jing-Lin Zhang, Yang-Xue Han, 
Hong-Gang Zhao, Hao Sun, and Hai-Cheng Ding, for their suggestions and help. 
    Finally, I would like to acknowledge all the Chinese mitten crab producers who 
participated in the survey, as well as my friends in China who helped me with the data 
collection work. Without their generous help, this would never have been finished.  
 
 
 
 
  
 
 
 
 
iv 
 
Table of Contents 
Abstract .......................................................................................................................... ii 
Acknowledgments ........................................................................................................iii 
List of Figures ............................................................................................................... vi 
List of Tables ................................................................................................................ vii 
I. Introduction ................................................................................................................ 1 
1.1. Background ...................................................................................................... 1 
1.2. Problem Statement ........................................................................................... 3 
1.3. Thesis Organization ......................................................................................... 5 
II. Literature Review ...................................................................................................... 6 
2.1. Chinese Mitten Crab ........................................................................................ 6 
2.2. Cost Benefit Analysis and Risk Analysis ......................................................... 9 
2.3. Brand Equity .................................................................................................. 10 
III. Data ........................................................................................................................ 14 
3.1. Key Production Factors .................................................................................. 14 
3.1.1. Cultivation Method .............................................................................. 15 
3.1.2. Stocking Density .................................................................................. 15 
3.1.3. Harvest Density .................................................................................... 15 
3.1.4. Yield ..................................................................................................... 15 
3.1.5. Survival Rate ........................................................................................ 16 
3.1.6. Size Distribution .................................................................................. 16 
3.2. Key Market Factors........................................................................................ 17 
3.2.1. Market Price ......................................................................................... 17 
3.2.2. Gross Revenues .................................................................................... 17 
3.2.3. Recognition .......................................................................................... 18 
3.3. Cost Factors ................................................................................................... 18 
v 
 
3.3.1. Production Costs .................................................................................. 18 
3.3.2. Retail Sales Costs ................................................................................. 22 
3.3.3. Brand Maintenance Costs .................................................................... 24 
IV. Methods .................................................................................................................. 25 
4.1. Cost Benefit Analysis ..................................................................................... 26 
4.2. Risk Analysis ................................................................................................. 27 
4.3. Brand Equity .................................................................................................. 28 
4.3.1. Revenue Premium ................................................................................ 29 
4.3.2. Estimated Model .................................................................................. 31 
     4.3.2.1. Correlations with Other Measures .............................................. 31 
     4.3.2.2. Structural Models ....................................................................... 32 
V. Results ..................................................................................................................... 35 
5.1. Benefit Cost Ratio in Cost-Benefit Analysis ................................................. 35 
5.2. Net Returns to Management in Risk Analysis ............................................... 37 
5.3. Modeling Brand Equity.................................................................................. 38 
5.3.1. Summary of Correlations ..................................................................... 38 
5.3.2. Structural Models ................................................................................. 39 
VI. Conclusions ........................................................................................................... 41 
Reference ..................................................................................................................... 43 
 
 
 
 
 
 
 
 
vi 
 
List of Figures 
 
 
Figure 1: Sales Trend of Chinese Mitten Crab ............................................................ 50 
Figure 2: Outdoor Cultivation Methods ....................................................................... 50 
Figure 3: Indoor Cultivation Methods ......................................................................... 51 
Figure 4: Security Lock ............................................................................................... 51 
Figure 5: Size Distribution ........................................................................................... 52 
Figure 6: Differences in Market Price ......................................................................... 52 
Figure 7: Differences in Gross Revenue ...................................................................... 53 
Figure 8: Relationship between Recognition and Net Revenue .................................. 53 
Figure 9: Structural Model ........................................................................................... 54 
Figure 10: Regression Coefficients of Well-known Brands ........................................ 55 
Figure 11: Regression Coefficients of Less-known Brands ......................................... 55 
Figure 13: Net Return to Management of Three Types of Producers .......................... 56 
Figure 14: Correlations between Net Revenue Premium and Other Measures ........... 56 
Figure 15: Regression of Net Revenue Premium ........................................................ 57 
Figure 16: Regression of Market Price ........................................................................ 57 
Figure 17-1: Regression of Proportion of Large Crab ................................................. 58 
Figure 17-2: Stepwise Regression of Proportion of Large Crab.................................. 58 
Figure 18-1: Regression of Recognition ...................................................................... 59 
Figure 18-2: Stepwise Regression of Recognition ...................................................... 59 
Figure 19: Overall Structural Model ............................................................................ 60 
 
 
 
 
 
vii 
 
List of Tables 
 
 
Table 1: Key Production Factors ................................................................................. 61 
Table 2: Key Market Factors ....................................................................................... 61 
Table 3: All Cost Factors ............................................................................................. 62 
Table 4: BCR of Three Types of Producers ................................................................. 63 
Table 5: Net Return to Management of Producers Based on Enterprise Budget ......... 64 
Table 6: Correlations of Various Measurements .......................................................... 64 
1 
 
I. Introduction 
1.1. Background 
The Chinese mitten crab Eriocheir sinensis is a special aquatic product in China. 
People began to eat the Chinese mitten crab thousands of years ago. During the 
mid-autumn festival, people like these crabs as well as the moon cake, and they also 
send Chinese mitten crabs as a holiday gift to their friends. In 2009, the annual sales 
of these crabs were over 1 billion RMB. In 2012, the annual sales were almost up to 
1.6 billion RMB. In 2013, the annual sales were more than 2 billion RMB (Tan, 2013). 
The increasing trend can be shown in Figure 1. In the past few decades, the Chinese 
mitten crab has become one of the most popular aquatic products. Not only is the 
demand growing quickly but also the share in the aquatic market is increasing steadily. 
At the same time, the Chinese mitten crab producers have begun to export their 
products to other countries in Asia. 
    During the process of analysis and investigation of the aquatic market, it was 
found that the 10 famous brands, such as ?Yangcheng Lake?, ?Tai Lake?, ?Gucheng 
Lake?, and ?Hongze Lake?, represent 41% of the market by yield and 61% by revenue. 
Meantime the 34 less-known brands hold 56% and 38%, and the 20 unknown 
producers only hold about 3% and 1% respectively.  
Chinese Mitten crabs grow well in the Yangtze River basin since the water 
quality and climate are much more suitable than other river basins. There are several 
cultivation methods for Chinese mitten crab, including lake, pond, rice field, cages, 
etc. In general, these methods can be divided into outdoor cultivation and indoor 
2 
 
cultivation. For outdoor cultivation methods, the producers usually occupy a lake or 
pond. After inputting crab seed, they put some purse nets into the water to stop the 
crabs from running away and patrol the whole area regularly to make sure everything 
is in good condition. Figure 2 shows this kind of cultivation method. For indoor 
cultivation methods, the stocking density and degree of artificial control will be much 
higher. Generally, there will be several adjacent pools with 30-50 cm water depth each. 
Meanwhile every pool has both a water inlet and outlet, connected with oxygen 
supply equipment and coarse filter equipment respectively. Blocking nets are also 
installed in case that crabs escape. Figure 3 shows this kind of cultivation method.  
For all of the well-known brands and most of the less-known brands, maintaining 
their brand is an important task. One aspect is brand security protection. The main 
methods of security protection are ?Uniform Store Signs?, ?Distinctive Packaging?, 
and ?Security Lock?. The ?Uniform Store Signs? is the signboard hanging on the door 
of a retail store or set in front of a stall in the supermarket. The ?Distinctive Packaging? 
is the special and unique packaging with the trademark on it that is used during retail 
process for each brand. The ?Security Lock? method uses a tag locked on the claw of 
the crab that contains a unique laser-etched identification number. This is the most 
expensive method since the laser technology is expensive. Figure 4 shows this kind of 
tag. 100% of the well-known brands use all three of these methods. 50% of the 
less-known brands use ?Uniform Store Signs?, 68% of them use ?Distinctive 
Packaging?, and 23% of them use ?Security Lock?. None of the unknown producers 
use any of these methods.  
3 
 
1.2. Problem Statement 
Since the Chinese seafood market has so many mitten crab brands, this industry 
presents a complicated structure. For different producers, besides the cultivation 
methods, there are also many other factors that affect the production, distribution and 
marketing process. These influence the yield, quality and crab size directly while 
affecting consumer preference and price indirectly. Moreover, there are factors in the 
retail and brand maintenance processes which influence consumer preference and 
price directly and indirectly as well. 
We will assume that for every producer the main objective is maximizing profit. 
Thus the overall and detailed economic conditions of each type of Chinese mitten 
crab brand need to be analyzed first. Then, we need to find an efficient method to 
measure brand equity and suggest how to improve brand equity. These are the central 
issues that are investigated in this thesis. 
To solve the central issues, the first step is to do a cost benefit analysis and a risk 
analysis to show the overall and detailed economic situations and profitability of 
different types of brands. The second step is to apply appropriate methods to estimate 
the influence various factors have in determining brand equity. 
To accomplish these two steps, cost and return data are necessary, as well as a 
suitable methodology. In this study, the data are collected from several provinces 
around the Shanghai area. There are 64 producers represented in this survey who 
provided their data. Brands were initially divided into three types according to their 
brand awareness as determined from a survey of consumers. When the recognition of 
4 
 
a brand is more than 80%, it is defined as a ?well-known? brand. If the recognition is 
less than 80% but more than 20%, it is a ?less-known? brand, and if the recognition is 
less than 20%, it is an ?unknown? producer, of which 86% of these had 0% 
recognition. Thus there are 10 well-known brands, 34 less-known brands and 20 
unknown producers. Meanwhile, the costs can be divided into distinct processes, such 
as production costs, retail selling costs and brand maintenance costs, and there are 
several detailed cost factors that need to be considered within each of these three 
processes. Revenues are related to the price and yield, and price is thought to be 
determined by brand awareness, perceived quality and crab size. Therefore, the price 
of each crab size and the size distribution needs to be taken into account as well. 
To achieve the first step, cost benefit analysis and risk analysis were both used to 
show the overall economic situations of different types of Chinese mitten crab brands 
and to point out the differences in profitability for each category of brand. Cost 
benefit analysis is used to measure the profitability of each brand. Risk analysis 
focuses on the distribution of net returns to management. To complete the cost benefit 
analysis, the Benefit Cost Ratio (BCR) is used here. For the risk analysis, the entire 
probability distribution of net returns to management is simulated.  
To achieve the second step of evaluating the factors that influence brand equity, 
an appropriate method needs to be chosen first. Although there are many different 
variables that can be used as measures of brand equity, they usually have high 
correlation with each other. There are mainly three types of measure depending on the 
source of the data. The product-based level method is more complete than the 
5 
 
customer-based level method. It is also more convenient to get the needed data than 
the firm-based level method (Ailawadi, 2003). The ?net revenue premium per 
kilogram? will be used as the principal method to measure brand equity here. This 
measure can combines high external validity, strong conceptual grounding, 
completeness and ease of calculation. 
In summary, this thesis will mainly focus on estimating the influence that various 
factors have in determining brand equity, and will suggest strategies to improve brand 
equity. For producers, this will increase profits and brand awareness, while also 
protecting the quality and image of the authentic Chinese mitten crab. Thus, both 
consumers and producers can look forward to long-term benefits from a sustainable 
industry. 
1.3. Thesis Organization 
This thesis includes six major chapters. Chapter I includes an introduction to the 
Chinese mitten crabs including the background and problem statement. Chapter II 
presents a review of relevant literature relating to the Chinese mitten crab, cost benefit 
analysis, risk analysis and brand equity. Chapter III discusses the data used in this 
study. The data include the key production factors, market prices, cost factors, and 
gross and net revenues. Chapter IV describes the methods involved with the Benefit 
Cost Ratio (BCR), the simulated probability distribution of net returns to management 
and models to evaluate the factors that influence the revenue premium as a measure of 
brand equity. The latter part of chapter V discusses the results of the three analyses. 
6 
 
Chapter VI presents a summary of the study and the main conclusions drawn from it. 
II. Literature Review 
2.1. Chinese Mitten Crab 
There are many studies on the Chinese mitten crab Eriocheir sinensis in China. 
These studies include environment conditions, cultivation methods, nutritional value, 
and many other topics. 
Li (2006) showed that the Chinese mitten crab grows best on a diet of fish, 
shrimp, oysters, snails and rough rice. The Yangcheng Lakes in the Yangtze River 
Delta are the ideal place for crab culture owing to the full sunshine, clear water, 
adequate plankton and abundant aquatic plants. Compared to other common aquatic 
foods, the crab is rich in protein, lipids, carbohydrates, and vitamin A. In addition to 
their high nutritional value, these crabs are believed to possess other health related 
benefits such as digestive illnesses.  
Chen, et al. (2007) state that the mitten crab is native to the coastal rivers and 
estuaries of the Yellow Sea. However, from accidental releases it has now spread to 
Europe and California (Rudnick, et al., 2003). Although Chinese mitten crab is 
considered as a harmful invasive species in Europe and the USA, it constitutes a 
promising freshwater fishery industry in China where its annual output has increased 
from 200,000 tons in 2000 to 420,000 tons in 2004 and to 593,000 tons in 2010 
(China Fishery Yearbook, 2011). Chinese mitten crab is a traditional savory food in 
China. The crab not only has a delicious taste and unique pleasant aroma, but also has 
7 
 
good nutritive value. 
    Cheng, et al. (2008) described the increase in Chinese mitten crab culture as 
mainly resulting from breakthroughs and improvements in hatchery techniques over 
the last 20 years. During the 1990s, the hatchery techniques for mitten crabs were 
gradually developed and improved for practical, large-scale production of megalopae, 
juveniles, and adults. Other innovations included broodstock dietary enrichment, 
breeding systems, indoor intensive larviculture and outdoor extensive larviculture, 
and improvement of pond conditions for larval rearing. Stocking densities range from 
1500?9000 juvenile crabs per ha, depending on the habitat conditions of the net 
enclosure site and feeding conditions. These variations in successful approaches to 
culture and stocking of mitten crabs have spread extensively across China. 
Sui (2008) stated that in its native range in China, mitten crabs are mainly 
distributed in the Liao, Yangtze and Ou River basins and comprise different 
populations due to long term geographical and ecological isolation. Most demanded is 
the crab originating from the Yangtze River, due to their better growth rates and 
delicate flavor, and these stocks are therefore most frequently used in hatcheries and 
farms. 
  Paterson (2009) suggested crab farming has largely developed in advance of 
formal research programs, so there is probably still scope for significant 
improvements in production practices, particularly in the area of feed and genetics. 
Ongoing progress in mitten crab farming is evidenced by the emergence of genetics 
and broodstock quality as significant issues, while farming of portunid crabs has only 
8 
 
achieved reliable hatchery production relatively recently. The most desirable mitten 
crabs reputedly come from the water of Yang Cheng Lake in Jiangsu Province. 
However, it is widely reported in the Chinese media and elsewhere that total sales of 
'Yang Cheng' crabs regularly exceed the lake's actual production figures. To counter a 
burgeoning trade in these 'counterfeit' crabs, increasingly sophisticated labelling and 
tagging methods are being adopted by Yang Cheng growers to defend their product 
quality, prestigious image and premium prices (Paterson, 2009).  
Wang (2011) emphasized that no matter which cultivation method is used, ample, 
fresh and non-polluted water is required for optimal production. For indoor cultivation, 
culture vessels are fitted with both oxygen supply and coarse filter equipment. In pond 
culture, before producers put juvenile crabs into the water, ponds and pools are 
disinfected with quicklime and bleaching powder to kill pathogens and natural 
enemies such as frogs, snakes, and black fish. Furthermore, 30% of the water surface 
should be covered with aquatic plants for water quality improvement and to provide 
places for crabs to moult. The first step of cultivation is to condition the water, mixing 
in calcium, magnesium and iron until the PH is between 6 and 8. After that, the water 
needs to be oxygenated to at least 3mg/L. The temperature of water should be 20-29?
at stocking. Filtration, oxygenation and temperature control characterize the 
recirculating system.  
According to the statistical report of the Ministry of Agriculture of China (China 
Fishery Yearbook, 2011), the annual output of Chinese mitten crab has been 
increasing sharply in recent years, almost doubling in a decade. Nowadays, 
9 
 
aquaculture of E. sinensis has become the largest commercial crustacean industry. 
From a document entitled ?The administrative measures for protection of 
original Chinese mitten crab of Yangcheng lake? (Su Zhou government, 2005), there 
appear to be some policies that explain some of the differences among the types of 
brands listed in the data section. For example, No.5, the producers can enter 
Yangcheng Lake only when they have some brand foundation and meet the standards 
set up by the relevant departments. No.9, the relevant departments deal with the entry 
requirements for producers and manage their entry process. No.11, when the 
producers get permission to enter Yangcheng Lake, they need to register and provide 
the basic information including cultivate location, total area, seed source, stocking 
density, etc. No.17, the producers who obtain the appropriate permissions should also 
meet following conditions: (1) Have a business license and suitable places of business; 
(2) Have the eligible storage conditions and business conditions; (3) After filing of an 
application, the producers need to pass an examination by the relevant departments. 
2.2. Cost Benefit Analysis and Risk Analysis 
Cost benefit analysis is a systematic process for calculating and comparing 
benefits and costs of a project, decision or government policy. It is also a process by 
which multiple business decisions may be evaluated and compared. The benefits of a 
given situation or business-related action are summed and then the costs associated 
with taking that action are subtracted. Cost benefit analysis, a common economic 
analysis method, is used in many researches and studies, including the aquaculture 
10 
 
area. 
Risk analysis helps to define preventive measures to reduce the probability of 
detrimental factors occurring and to identify countermeasures to successfully deal 
with constraints. Risk analysis refers to the uncertainty of forecasted future cash flows 
streams, variance of returns on assets, statistical analysis to determine the probability 
of a project's success or failure, and possible future economic states, all of which can 
also be applied to aquaculture enterprises. 
2.3. Brand Equity 
  Aaker (1996) proposed ?The Brand Equity Ten? in an effort to create a set of 
brand equity measures. He listed ten sets of measures that were grouped into five 
categories. The first four categories represent customer perceptions of the brand along 
the classical four dimensions of brand equity?loyalty, perceived quality, associations, 
and awareness. The fifth category includes two sets of market behavior 
measures?market share and distribution that represent information obtained from 
market based information rather than directly from customers. Thus the ten factors are 
price premium, satisfaction/loyalty, perceived quality, leadership, perceived value, 
brand personality, organizational associations, brand awareness, market share, and 
indices of price and distribution. 
  Cravens and Guilding (1999) argued that the financial-based valuation involves 
various measures of price premium that may be attributable to quality perceptions on 
the part of customers. Several means are available for calculation of price premiums 
11 
 
on branded products including the cost method, market method, income method, and 
the formulary method. These four methods were examined in detail by Seetharaman 
et al. (2001). For the cost-based method, a brand is valued by considering the cost 
involved in developing the brand. The costs incurred are the actual costs associated 
with acquiring, building or maintaining the brand. The market-based method is based 
on the price at which a brand can be sold. To determine its market value, the future 
benefits associated with owning the brand are discounted to the present value. The 
formulary method involves multiple criteria in determining a brand?s value. For 
computing brand profitability, the factors that need to be considered are the factors 
that relate directly to the brand?s identity. After determining brand profitability, a 
multiplier is then attached to the valuation. This includes seven factors: leadership; 
stability; market; support; protection; international image; and trend. Net profits from 
the branded product are equal to profits from the branded product minus profits from 
a similar but unbranded product minus profits from assets that do not contribute to the 
strength of the brand. The value of the brand is then equal to net profits from branded 
products times the multiplier. 
    Keller (2003) described brand equity as ?a multidimensional concept and 
complex enough that many different types of measures are required. Multiple 
measures increase the diagnostic power of marketing research? (p. 477). Brand equity 
is supposed to bring several advantages to a firm. For example, high brand equity 
levels are known to lead to higher consumer preferences and purchase intentions 
(Cobb-Walgren et al, 1995). 
12 
 
Ailawadi et al. (2003) measured brand equity at the product level. They listed 
three measures of brand equity: customer mind-set, product-market outcomes, and 
financial market outcomes. They did correlations of all these measures, but found that 
most of them have high correlation with each other. Thus they only used the revenue 
premium measure in their study. They mentioned that the unit sales of one firm can be 
represented by a function of marketing mix, price, equity, preexisting firm strength, 
and category characteristics of this firm and another similar firms. And if this firm has 
a brand, the outcome of the brand?s equity is its revenue premium. Then the brand 
equity equals to the revenue of a branded firm minus the revenue of an unbranded 
firm. To make the estimation more accurate, they suggested that the revenue premium 
measure be adjusted for variable costs, and defined the adjusted revenue premium as 
equal to the revenue premium minus costs. 
Srinivasan et al. (2005) defined brand equity as ?the incremental contribution ($) 
per year obtained by the brand in comparison to the underlying product (or service) 
with no brand-building efforts? (p. 1433). Their approach takes into account three 
sources of brand equity: brand awareness, attribute perception biases and 
non-attribute preference. Their approach also reveals how much each of the three 
sources contributes to brand equity. 
    Fern?ndez-Barcala and Gonz?lez-D?az (2006) linked both marketing and 
transaction cost economics literature to explain factors determining brand equity from 
the buyer's perspective. Their main argument was that the ability of a brand name to 
resolve situations in which transaction costs are potentially high increases with brand 
13 
 
equity. They advanced four research propositions: (1) Consumer-oriented brands will 
be more valuable to the buyer than distributor-oriented brands; (2) Brands related to 
products which yield high search/measurement costs are more valuable to the buyer; 
(3) When the quality control of a brand name is performed by an external and 
independent controller, the buyer reliance on the brand name is greater than when it is 
only performed internally; (4) Co-branding adds more value to the product from the 
buyer's perspective than a single brand name. They used a case study research 
approach involving brand names, types of produce, owner, countries, types of brand 
name, addressees of brands, search cost of each type of produce, and type of quality 
control. Their results broadly support the argument that the higher the contractual 
hazards, the higher the price premium. 
    Liu and Sporleder (2007) proposed that brand equity requires development and 
maintenance expenditures, but management often questions how much investment a 
brand needs. This question often is complicated by the ambiguity of brand value. 
Brand equity is expected to exert a positive effect on the firm?s growth options value. 
They focus on the impact of a firm?s brand value in terms of a firm?s growth option 
value. These two values of can be regarded as jointly dependent variables and a 
simultaneous equations model is appropriate. Brand value is regarded as a function of 
advertising expense, disaggregated uncertainty indicators and the endogenous variable 
of the firm?s growth option value. Besides brand value, other explanatory variables 
regarded as strategic drivers for the firm?s growth option value include measures of 
the individual firm?s strategic factors regarding operations, investment, financing and 
14 
 
dividends. Results indicate that brand equity has a positive effect on the growth option 
value of the firm, after accounting for other major drivers of firm growth. The 
categorizing advertising expenditures solely as an expense item may be too narrow 
from a strategic viewpoint. Brand equity building strategies are long-term investments 
for the stakeholders of the firm, broader than mere expense items. 
III. Data 
    The dataset used in this thesis is from a survey of producers of 10 well-known 
brands of Chinese mitten crab, 34 less-known brands and 20 unbranded products. 
Here the well-known brands are defined as the brands that are recognized by more 
than 80% people in consumer survey, and the less-known brands are known by 20-80% 
of the consumers while the unknown producers are rarely known by people or just do 
not have a brand. The dataset contains key production factors, market price, gross 
revenues and cost factors. 
3.1. Key Production Factors 
These factors include the basic information from survey respondents about 
cultivation method, survival rate, stocking density, harvest density, yield, and harvest 
size distributions. The latter two factors are used directly in the calculation of gross 
revenues while cultivation method, stocking density, harvest density and survival rate 
indirectly reflect management characteristics of the producer. Averages of these 
factors for the three type of brands are shown in Table 1. 
15 
 
3.1.1. Cultivation Method 
    There are several cultivation methods for Chinese mitten crab depending on the 
cultivation area and process. These include lake, pond, rice field, industrial, and cages, 
etc. These methods can be divided into outdoor cultivation and indoor cultivation. For 
the well-known brands, all producers used the outdoor cultivation method in lakes. 
For the less-known brands, some of them used outdoor cultivation while others of 
them used indoor cultivation. For the unknown producers, most of them used indoor 
cultivation. 
3.1.2. Stocking Density 
    The average stocking density of the well-known brands is 5,287 juveniles per 
acre, the average stocking density of the less-known brands is 6,516 juveniles per acre, 
and the average stocking density of the unknown producers is 10,458 juveniles per 
acre. The higher rates reflect high-density cultivation in indoor, recirculating systems, 
so they are not directly comparable on a per acre basis. 
3.1.3. Harvest Density 
  The average harvest density for each type of brands is 4,265, 4,590, 6,445 adult 
crabs per acre for the well-known, less-known and unknown producers respectively.  
3.1.4. Yield 
The average yield of the well-known brands is 682 kg/acre while the average 
16 
 
yield of the less-known brands is 705 kg/acre and it is 893 kg/acre for the unknown 
producers. Again, these value are not directly comparable in terms of production 
efficiency.  
3.1.5. Survival Rate 
    The survival rate reflects a variety of management aspects in production, 
including quality of juveniles, stocking density, and cultivation techniques. Survival 
was calculated from the survey data in the following way. At the beginning of the 
survey, the number of juveniles purchased was elicited; thus the amount of adult crabs 
can be estimated by the formula ?yield ? proportion of each size/ estimated average 
weight of one crab in this size?. The survival rate equals the number harvested divided 
by number stocked. The average survival rate of the well-known brands is 80.5%, 
which is 10 percentage points higher than the less-known brands and 19 points higher 
than the unknown producers.  
3.1.6. Size Distribution 
    Since the gross receipts are related to the price by size, yield, and proportion 
each size of crab, the size distribution is important too. For the well-known brands, 
the proportions of the two larger size categories (200g-250g, and more than 250g) are 
much higher than for the other two types of brands. The less-known brands have the 
largest proportion of the medium 150g-200g size. Meanwhile, the unknown producers 
have higher proportions of the smaller 100g-150g, and less than 100g sizes. Figure 5 
17 
 
shows the size distribution by brand category.  
3.2. Key Market Factors 
3.2.1. Market Price 
   Market price per kilogram is influenced differs by brand awareness, quality 
and notably for crustaceans size. Therefore, in estimating brand equity the market 
price of each size must be taken into account. The unit of price is in renminbi (RMB) 
which is the circulation currency of China. What is more, the price in the same crab 
size of the well-known brands is almost twice that of the less-known brands. There is 
also a marked difference between less-known brands and unknown producers as well. 
Figure 6 note that for most undifferentiated products the price per kilogram is a single, 
horizontal line regardless of size. The average market price of each size category of 
all three type of producers is shown in Table 2. 
3.2.2. Gross Revenues 
  There are dramatic differences in gross revenues by brand type. For a given crab 
size, gross revenues are calculated as the sum of the weight in each size class times 
the price per kilogram of that size class. Gross revenues show phenomenal differences 
among the different types of brands. This can be seen in Figure 7. The average gross 
revenue of each size category of all three type of producers is shown in Table 2. Each 
category in increasing recognition returns more than twice the average gross revenue 
per kilogram of the previous category. 
18 
 
3.2.3. Recognition 
   Recognition reflects brand awareness, which has a relationship with revenues. 
Here the recognition data was taken from a consumer survey. More than 800 
consumers tool this survey to answer which brands they are familiar with. For the 
well-known brands, the average recognition was close to 90% which means most 
people know the brand when shown it on a list. For the less-known brands, the 
average recognition was 47% which means almost half the respondents were familiar 
with these brands. However, some of them are close to 80%, while others are just over 
20%, so the difference are quite variable. For the unknown producers, a small number 
of them were recognized, but all were less than 20%, and most of them had no 
recognition. The relationship between recognition and net revenue per kilogram is 
shown in Figure 8. The average recognition of all three type of producers is shown in 
Table 2. 
3.3. Cost Factors 
    Cost is divided into three different processes: production costs, retail sales costs 
and brand maintenance costs. Within each of the three processes there are more 
detailed cost factors. Averages for these cost factors among the three types of brands 
are shown in Table 3. 
3.3.1. Production Costs 
Mechanical Investment 
19 
 
    The mechanical investment is a fixed cost which includes payments to principal 
or depreciation on machines and other fixed facilities. Examples include air 
conditioning for temperature control of the indoor environment, aeration to add 
oxygen to the water, and pumps for water circulation. The average mechanical 
investment of the well-known brands is 0.39RMB/KG which is close to that of the 
less-known brands and a little higher than the unknown producers at 0.35RMB/KG. 
Rent 
    Producers doing outdoor cultivation usually rent space in the lake or pond. 
Factory and cage producers rent space to construct their factory or put in their cages. 
So the rent is a necessary fixed cost factor no matter what cultivation method the 
producers choose. The average rent of the well-known brands is 3.77 RMB/KG, 3.66 
RMB/KG for the less-known, and 2.48 RMB/KG for the unknown. The local 
governments prefer to rent the lake to the well-known brands because they want to 
control the numbers of producers using the lake and protect the water quality, and 
since most well-known brands have a lower stocking density this is considered 
beneficial to the lake environment.  
Tax 
    In this study, the tax is also taken as a fixed cost, which comes from the 
requirements of tax policy. When the producers operate their companies, build their 
factories, rent space, or buy machines, they are taxed some fixed fees every year. The 
main taxes that they need to pay in this process are the stamp tax, urban maintenance 
and construction tax, additional education tax, land use tax, vehicle purchase tax, and 
20 
 
building tax. In the per kilogram data, the tax of the less-known brands is higher than 
for the well-known brands. Most well-known brands have the qualifications and 
opportunity to apply for a tax subsidy, which is provided to the companies 
representing traditional cultural practices and characteristics.  
Financial Expense 
    During the production process, some companies may not have enough working 
capital to ensure the production process runs smoothly and successfully, so they need 
to get loans from a bank or borrow money from other financial institutions. All these 
methods will produce interest and handling charges that should be accounted as 
financial expenses. Unknown producers do not have enough guarantees and 
qualifications to get loans from banks or other institutions, and they also have little 
financial activity, thus they have zero financial expenses. On the other hand, the 
well-known brands have numerous financial activities and are large-scale enterprises, 
so their average financial expense per kilogram is the highest at 2.58 RMB/KG. 
Less-known brands are in between at 1.81 RMB/KG. 
Crab Seed 
    The unit price of crab seed reflect a difference in demand for male and female 
crabs. The price of the female is more expensive than the male since female crabs are 
more popular because of their eggs. Also high quality seed commands a higher price 
than low quality seed. Well-known brands prefer to buy high quality seed and much 
more female seed and this gives them the highest cost per kilogram at 10.84RMB/KG. 
The less-known brands may buy half male crab seed and half female crab seed. The 
21 
 
unknown producers buy the lower quality crab seed and more male crab seed since 
their prices are much lower, averaging 8.08 RMB/KG. 
Feed 
    The difference in the unit price of feed between the three types of brands is not 
as large. The highest price feed reported was 3600RMB/TON while the lowest was 
3300RMB/TON. The expensive feed has more animal feed and less plant feed while 
the cheap feed has more plant feed and less animal feed. The animal feed contains 
fresh fish, earthworm, apple snail and other meat products. The plant feed contains 
potato, soybean, pumpkin and other vegetables. Feed expenses for the well-known 
brands are higher than other two types of brands because lake cultivation may use 
more feed due to the presence of other aquatic animals that may also eat the feed, and 
thus their feed conversion ratio is poorer. 
Utilities (Water and Power) 
    The utility expense includes supply of water and power used to operate machines 
and provide illumination for daily work. This factor is related to the cultivation 
method, so if the producers choose outdoor cultivation, they may check more often 
the health condition and escape crabs, and thus need more water and power support.  
Labor 
    Labor is an important cost factor since the production process needs lots of 
workers to focus on cultivation, especially for feeding and monitoring. For outdoor 
cultivation, the producers need more people to do the feeding and need more patrols 
to prevent the escape of the crabs. More important, for the well-known brands, most 
22 
 
of them have some employees who focus on the advanced technology of cultivation 
that may improve the survival rate. These professional employees will earn much 
higher wages than other workers. It is not clear why the unknown producers spend 
more on labor than the less-known producers. 
Others (Medicine) 
    The main items in this factor are medicine and chemicals used for disease 
prevention, consumable supplies used in patrolling and monitoring process, and 
miscellaneous expenses due to emergencies such as water quality deterioration.  
3.3.2. Retail Sales Costs 
Advertising Expense 
    Many producers place advertisements on TV, and in newspapers, internet and 
other media. Advertisements can inform the consumer and are an effective way to 
improve brand awareness. For the well-known brands, the producers put lots of 
money into this aspect since it can keep brand awareness at a high level. For the 
less-known brands, the producers need to make more people aware of their brands. 
For the unknown producers, most of them do not have brands to advertise so they 
spend very little on this aspect unless they are trying to develop a brand. 
Packaging charge 
    Packaging refers to the use of a cooler, foam box or other materials to package 
the crabs for transport and storage. This cost per kilogram is related to the type of 
materials that are used during the process. For the unknown producers, they choose 
23 
 
the cheaper materials for crabs that are not transported far or stored. Thus their 
average cost per kilogram is much lower than well-known and less-known brands. 
Transportation 
    The main modes of transportation are air transportation, railway transportation, 
and highway transportation. For the well-known brands, there are many seafood 
dealers who will come and pick up the crabs and some consumers will buy crabs from 
the direct-sale stores, thus the producers can save a part of transportation cost. And the 
lee-known brands offer some delivery services, which may explain why their 
transportation cost per kilogram is so much higher than the well-known brands. 
Unknown producers, usually sell crabs in close proximity to their production area and 
use cheaper modes of transportation.  
Operating Expense 
  This aspect of cost contains the administration expense and fees to enter a 
supermarket or upscale seafood market, as well as other expenditures incurred during 
distribution. Notably, all of the well-known brands have their own direct-sales stores. 
The rent and daily expenditures of these stores are included in the operating expense 
category. Making it much higher than other two types of brands. For the unknown 
producers, most of them will not enter the supermarket or upscale seafood market, but 
rather enter small stores or markets that charge lower fees.  
Tax 
Here the tax is accounted as a variable cost and comes from the retail sales 
process. When producers sell their crabs, they are levied a business tax by the 
24 
 
government. The more revenue they make, the more tax they pay. Meanwhile, 
transportation and some other actions during retail process will also generate tax fee. 
Labor 
    This factor concludes the wages of the salesforce and administrative staff. Since 
the well-known brands have their own direct-sales stores, they need more employees 
to do the sales and administrative work, thus they put more capital in the labor factor 
totaling 3.98RMB/KG. The less-known brands sell mostly through supermarkets and 
large seafood markets which may not need salesman all the time. And for the 
unknown producers, they enter the small market which really need salesman to do the 
sales work. Thus their labor cost per kilogram is 2.44RMB/KG which is higher than 
the less-known brands at 1.98 RMB/KG. 
Others 
    This cost factor contains all the other expenses occurred in the sales process 
besides those factors mentioned already. The main components of this factor are 
consumable supplies and equipment used in the sales function, and expenses for 
special events such like sales promotions and miscellaneous expenses. 
3.3.3. Brand Maintenance Costs 
Materials Fee 
Well-known brands use sophisticated techniques and expensive materials to 
prevent counterfeiting of their brands. The main technique is to use a security lock. 
The material fee for this technique is much higher than for other techniques. 
25 
 
Less-known brands need to maintain their brands identity too but their main purpose 
is to improve the ability of consumers to distinguish between different brands. So 
most of them will use the uniform store signs and distinctive packaging but will not 
use the security lock. For the unknown producers, they are not trying to differentiate 
their product or protect their identity so they do not spend anything on this aspect. 
Labor 
This factor includes the wages of security technicians and other fees incurred 
during the brand maintenance process. The well-known brands use more progressive 
techniques that must employ professional technicians and these employees require a 
higher salary. Since the unknown producers do not focus on the brand maintenance 
process, they do not incur this cost.  
Others (Holding Events) 
  Organizing public events is also an efficient way to maintain brand image. For 
instance, the government will hold a competition to elect the ?crab king? and ?crab 
queen? by consumers every year, and this will attract many producers. During the 
competition, each producer can introduce the main characteristics of their crabs and 
teach consumers how to distinguish the counterfeits, all of which improves brand 
awareness. In addition, the well-known brands will organize some of their own 
activities, such as ?who can eat the most crabs?, to attract consumers.  
IV. Methods 
  Various economic methods were used to show the overall and detailed situations 
26 
 
of different types of mitten crab brands. Cost benefit analysis contains the basic 
economic index that shows the profitability of each brand. Risk analysis focuses on 
the net return to management under conditions of uncertainty. An important part of 
this thesis is to build an appropriate model to estimate the influence various factors 
have in determining brand equity. 
4.1. Cost Benefit Analysis 
  Cost benefit analysis is a systematic process for calculating and comparing the 
benefits and costs of a project, decision or government policy. It is one process by 
which business decisions are analyzed. The benefits of a given situation or 
business-related action are summed and then the costs associated with taking that 
action are subtracted. Cost benefit analysis, a common economic analysis method, is 
used in many studies, including the area of aquacultural economics. 
  In this study, the Benefit Cost Ratio will be used to show the profitability of each 
brand. BCR represents the ratio of total benefits over total costs. The economic 
outlook for the enterprise is good when the BCR is larger than 1.0, and the larger the 
ratio is, the better the economic situation of the enterprise is.  
  Since Chinese mitten crabs are grown to different sizes and each size category 
has a different price, the ?Gross Revenue? can be shown as: 
  Gross Revenue = ? Gross Revenue in each size 
                =? (Price of each size ? Total weight in each size) 
  Where the total weight in each size category is calculated from the following: 
27 
 
  Total weighti = yield ? proportion of crabs in size categoryi 
i = <100g, 100-150g, 150-200g, 200-250g, >250g 
    Price, yield and proportion come from a survey of 10 well-known brands of 
Chinese mitten crab, 34 less-known brands and 20 producers of unbranded products. 
All these data have already been described in previous sections under ?3.2.1.Market 
Price?, ?3.1.4.Yield?, ?3.1.6.Size Distribution?. 
  To distinguish production efficiency from brand equity, cost can be divided into 
different processes. Thus the data from each producer is divided into production costs, 
retail sales costs and brand maintenance costs, as described in the ?3.3.Cost Factors? 
section.  
4.2. Risk Analysis 
  Risk analysis is a technique to quantify and assess variability in factors that may 
enhance or jeopardize the success of an enterprise. This technique also helps to 
identity preventive measures to reduce the probability of negative factors occurring 
and to identify countermeasures to mitigate these constraints. Risk analysis is used to 
evaluate the uncertainty of future cash flow streams, the variance of stock returns, the 
probability of a project's success or failure, and the likelihood of future economic 
states, all of which can and have been used in the evaluating aquaculture enterprises. 
  In this study, a risk modeling and analysis procedure will be used to examine the 
distribution of net returns to management among different types of Chinese mitten 
crab brands. Risk analysis can show an entire probability distribution of net returns to 
28 
 
management by using simulation software that allows the user to express the many 
possible outcomes of a simulated decision situation as a probability distribution. 
  Here the risk model is based on the same enterprise budgets that were used to 
assess the costs and returns among different types of brands. The budgets are 
presented on a per kilogram basis. They each contains six main items: gross receipts, 
production cost, sales cost, maintenance cost, total costs and net return to 
management. 
  After developing the risk model, the simulation process was done using @RISK 
software. Firstly, the values for stochastic variables are chosen. In the current situation, 
since the survey datasets have considerable detail, it is simple to complete this step by 
assuming normal distributions for all variables. Secondly, recalculate 1,000 times 
using the @RISK software. Each recalculation is called an ?iteration? and the 1,000 
outcomes of net returns to management are stored in a file for later use in describing 
the distribution. 
4.3. Brand Equity 
  Brand equity is a core concept concerning brand management and it is viewed 
from different perspectives. Brand equity is accepted as the overall utility that 
customers place in a brand compared to its competitors. Generally, measures of brand 
equity can be divided into three main categories or levels (Ailawadi, 2003). The first 
one is the consumer-based level. It is the most popular one which contains factors that 
elicited from consumers, such as brand awareness, attitudes, associations, attachments 
29 
 
and loyalties. This method uses the survey data from a large number of consumers. 
  The second category is the product-based level. It is focused on the 
product-market which means the value of brand equity should be reflected in the 
performance of the product in the market place. The most common method of 
measurement is the revenue premium which primarily reflects the ability of a branded 
product to charge a higher price than an unbranded one. Other measures in this level 
include market share, relative price, demand models, and residual in hedonic 
regression (Ailawadi, 2003). At this level, most of the data are obtained from surveys 
of enterprises while some data comes from consumers. 
  The third category is the firm-based level. It uses information about the whole 
financial situation of the enterprise, such as purchase price at the time a brand is sold 
or acquired, discounted cash flow valuation of licensing fees and royalties, stock 
market value, market capitalization, etc. This method needs data from both the firm 
and the financial market. 
  The measurement method used in this study was the product-based level. 
Furthermore, after considering various alternatives, the revenue premium was used 
during the detailed evaluation process.  
4.3.1. Revenue Premium 
    In this study, the revenue premium is defined as the difference in revenue 
between branded producers and unbranded producers for the same product (Ailawadi, 
2003). This measure combines high external validity, strong conceptual grounding, 
30 
 
completeness and ease of calculation. The Revenue premium is calculated as?  
Revenue Premium = Sales Volume branded ? Price branded 
                  ? Sales Volume unbranded ? Price unbranded 
    In the market, there are four main aspects that influence the brand equity. The 
first one is the producer?s price and marketing mix; this will influence consumer 
choice directly since they are the most sensitive factors in the consumption process. 
The second one is competitor?s price and marketing mix, since this affects consumer 
choice indirectly, because the competitor?s strategy and activity will influence 
purchasing intentions as well. The third one is firm strength, which comes from brand 
image, product quality, research and development and so on. The fourth one is 
category characteristics. This is an exogenous factor including market size, and 
perceived risk.  
  Thus for Chinese mitten crab producers, the firm?s current revenue with a brand 
(no matter whether it is a well-known one or less-known one) is Rbrand, while the 
revenue without a brand (i.e. an unknown one) is Runbrand. The brand equity can be 
shown as: 
  Ebrand = Rbrand - Runbrand = Sbrand ? Pbrand ? Sunbrand ? Punbrand  
Here the revenue premium is a better measure than others since it includes sales 
volume premium as well as price premium. Both sales volume premium and price 
premium can represent the brand equity from different perspectives since they are all 
relevant to consumer choice. Furthermore, considering the cost factors, the brand 
equity can be adjusted to this form: 
31 
 
  Ebrand = NRP = NRbrand - NRunbrand  
  = (Sbrand ? Pbrand ? Cbrand) ? (Sunbrand ? Punbrand ? Cunbrand)  
    In this study, NRP means the net revenue premium, NRbrand will be the net 
revenue of each branded producer while NRunbrand will be the average net revenue of 
unknown producers. 
4.3.2. Estimated Model 
4.3.2.1. Correlations with Other Measures 
    Ailawadi et al. (2003) argued that the validity of a brand equity measure can be 
assessed by examining whether it is stable over the short and medium runs and 
correlates with other measures of brand equity consistent with the brand?s marketing 
efforts, and with other variables, such as the characteristics of the product category, as 
well as with price sensitivity (p. 6). In this study we do not have time series data, and 
the relationship between marketing actions and brand equity occurs through a 
complex chain of simultaneous relations that are not easy to model. Meanwhile, there 
is only one product -- the Chinese mitten crab -- and we do not have data on consumer 
sensitivity to price.  
    In theory, various measures of brand equity reflect the same underlying construct. 
However, brand equity is a multidimensional construct (Aaker 1996), and each 
measure may reflect somewhat different dimensions. What is more important, any 
proposed measure should correlate well with other conceptually similar measures, but 
it should not correlate so highly as to be redundant. Thus if there are many feasible 
32 
 
methods to measure brand equity, the estimated process should only use one of them, 
in order to avoid the problem of multicollinearity. 
    Therefore, although ?net revenue premium? (NRP) is chosen as the appropriate 
measure in this case, it still needs to be justified why NRP should be the one measure 
to represent brand equity in the estimation process.  
Generally, price, volume, market share, revenue, recognition and their premiums 
are all measures that can reflect some characteristics of brand equity. Thus we conduct 
correlations of all these measures, along with NRP. 
In our study, there are eleven variables. The variables ?aveprice? and ?avepricep? 
represent each firm?s average price of all sizes of crabs and its premium above the 
average price of unbranded products, in units of RMB per kilogram. The variables 
?volume? and ?volumep? are nominal sales and sales premium, in metric tonnes. The 
variables ?gr? and ?grp? are gross revenue and its premium, in units of RMB/kg. The 
variables ?nr? and ?nrp? are net revenue its premium, again in units of RMB/kg. The 
variables ?marshare? and ?marsharep? are market share its premium, with units in 
percentages. The variable ?recognition? represents brand awareness (mentioned 
earlier), also in percentages. 
4.3.2.2. Structural Models 
    Since the many variables representing brand equity are expected to be highly 
correlated the regression model will need to be specified carefully to avoid problems 
with multicollinearity. Therefore, a structural model is an appropriate method for the 
33 
 
estimation because it will avoid some of those problems and show the results clearly 
and directly. 
    Net revenue premium is used as a preferred measure to estimate brand equity in 
this study. The factors that influence it are sales volume, price, and costs. Here the 
sales volume is represented by yield, so we can use the per kilogram net revenue 
premium data to eliminate sales volume as a variable. Then the most important factors 
in determining net revenue premium are just prices and costs. 
    The costs here should be the ?total costs? which include product costs, retail costs, 
and maintenance costs. All the detailed cost factors are directly and deterministically 
related to total cost so they cannot be used in the regression. However, some of the 
detailed cost factors can indirectly exert their influence on net revenue premium 
through the recognition variable. 
    In this market, although different sizes of crabs receive different prices per 
kilogram, we use the yield-weighted ?average price? to represent the price variable.  
On the other hand, larger crabs are harder to produce, are more highly prized, and are 
associated with the premium brands. Also, if the brand has a better awareness among 
consumers, the price will be higher. Thus the proportion of the two largest size classes 
of crabs (>200g) and brand recognition have the most influence on average price.  
    Then the next question is which factors will have an impact on the proportion of 
big crabs. Certain factors in the production process may influence the crab size a lot. 
Mechanical investment, rent, tax, and financial expenses in production chain are all 
fixed or difficult to change and have little direct connection with crab size. Thus we 
34 
 
can delete all these factors during the estimation process and just consider 
expenditures for crab seed (juveniles), feed, utilities, production labor, and other 
production expenses such as water quality treatments. Cultivation methods (lake, 
pond, cage, and recirculating) are categorical variables that also should be taken into 
account. These are grouped into ?outdoor? (lake and pond) and ?indoor? (cage and 
recirculating) dummy variables. 
    Lastly, uncovering which factors influence recognition is another important task. 
In general, investment in retail establishments and brand maintenance processes could 
increase recognition of a brand among consumer groups. Therefore, the 
sub-categories of operating expenses, advertising expenses, retail labor, others retail 
expenses, branding materials, brand maintenance labor, and others maintenance 
expenses (such as public events) are necessary independent variables. Packaging 
expenses, transportation, and sales tax will not be included in estimating brand 
recognition. 
    In conclusion, we can do a series of regressions to complete the structural model 
estimation. In the first step, the dependent variable is ?NRP? while the independent 
variables are ?average price? and ?total costs?. In second step, the dependent variable is 
?average price? while the independent variables are ?proportion > 200g? and 
?recognition?. In third step, the dependent variable is ?proportion >200g? while the 
independent variables are ?cultivation method?, ?seed?, ?feed?, ?utilities?, ?labor in 
product?, and ?others?. In fourth step, the dependent variable is ?recognition? while the 
independent variables are ?operating expenses?, ?advertising expenses?, ?labor in 
35 
 
retail?, ?others in retail?, ?materials?, ?labor in maintenance?, and ?others?. 
The whole structural model is shown in Figure 9 
V. Results 
  The objective of this study was to show the overall and detailed economic 
situations of different types of Chinese mitten crab brands, and attempt to estimate the 
influence various factors have in determining brand equity. 
  Cost benefit analysis shows the profitability of each brand. Risk analysis shows 
the distribution of net returns to management by brand type. Brand equity modeling 
uses linear regression to show how various factors influence brand equity. 
5.1. Benefit Cost Ratio in Cost-Benefit Analysis 
  Since BCR = PVbenefits / PVcosts and all needed values can be taken from the 
survey mentioned above, the ratios of the three different types of brands can be shown 
in Table 4. There are three categories named well-known brands, less-known brands 
and unknown producers which are distinguished by their recognition percentage. All 
the results in this table are mean values of all producers in each category and the units 
are in RMB/KG. 
  The gross revenues have major differences among different size and different 
types of brands. For the producers who have a well-known brand, their gross revenues 
are more than two times the less-known brands, and more than four times the 
unknown producers. For the producers who have a less-known brand, their gross 
36 
 
revenues are more than two times the unknown producers. 
  The total costs also have differences among different types of brands. For the 
well-known brands, the total costs are about 1.7 times the less-known brands, and 
about 3.8 times the unknown producers. For the less-known brands, the total costs are 
about 2.2 times the unknown producers. 
  The benefits of well-known brands are about 2.5 times those of the less-known 
brands, and about 5.6 times the unknown producers. The benefits of the less-known 
brands are about 2.2 times the unknown producers. 
  Finally, when it comes to BCR, it is obviously that all Chinese mitten crab 
producers no matter which category they belong to, are operating under good 
economic condition since their BCRs are much larger than one. And the BCR of 
well-known brands is 3.62 which is the largest among the three categories, showing 
that this kind of firm has strong profitability and can generate more benefits when 
investing a certain amount of capital since the larger the BCR, the better the economic 
situation of enterprise. However, less-known and unknown producers also have 
earning potential because their BCRs are 2.46 and 2.42.   
  In addition, improving benefits by acquiring more brand equity is one of the 
methods to become more profitable for all producers, which should be interested in 
the results from brand equity analysis since that is an important factor for obtaining 
higher prices, sales and revenue premium. 
37 
 
5.2. Net Returns to Management in Risk Analysis 
  Table 5 shows the budget used in the risk analysis procedure after one random 
simulation of the stochastic variables under lying each cell. The three categories 
distinguished by the percentage recognition by consumers are well-known brands 
(recognition ? 80%), less-known brands (20% ? recognition ? 80%), and unknown 
producers (recognition ? 20%). The budget is presented on a per kilogram basis and 
contains six main items which are gross receipts, production cost, sales cost, 
maintenance cost, total costs and net return to management.  
  Since there are 64 producers who provided the necessary data, each variable can 
be described in the budget by using the distribution @RISKNORMAL (mean value, 
standard deviation) for the average values in that brand catogory. The mean values 
and standard deviations of each variable are calculated from the dataset.  
  Using @RISK, after saving to the output field the ?net return to management? 
(NRM) after iterating 1000 times, the regression and rank information of each 
variable for ?net return to management? is shown in Figure 10 (well-known brands), 
Figure 11 (less-known brands), and Figure 12 (unknown producers). 
  The coefficients for each variable show their properties of them. For all types of 
brands, gross revenues have a positive impact on ?net return to management? while 
cost factors have a negative impact. The variables showing the larger absolute value 
of their coefficients, have the greater influence on the net return to management. 
  The ranks of each variable show the sensitivity of NRM to them from highest to 
lowest. For all of the producers, the gross revenues from the different sizes are the 
38 
 
most influential variables.  
  For all producers, the labor used during the production process is influential. For 
well-known and less-known brands, the operating expenses are influential, however, 
the material fee is more influential for well-known brands while the feed cost is more 
influential for less-known brands and the unknown producers. 
  The simulation outcome of net returns to management among the three 
categories is shown in Figure 13. This figure contains information about the 
maximum, minimum, mean, and standard deviation of each type of brand. The highest 
net return to management of less-known brands is much less than the lowest net return 
to management of well-known brands and there is no overlap between these two areas. 
However, the highest one of unknown producers is close to the lowest one of 
less-known brands but there is little to no overlap between less-known and unknown 
producers. 
5.3. Modeling Brand Equity 
5.3.1. Summary of Correlations 
    Table 6 shows the results of the correlation analysis. We see that all the 
correlations are higher than 0.9, so we could just choose any one of them to measure 
brand equity. And since all of the variables have perfect correlations with their 
premiums, we can pick any one of them in either their nominal or premium forms. 
Comparing these variables, recognition only represents the consumer market situation 
but does not include any production information, thus it may not be the best measure. 
39 
 
Also, although the gross revenue captures the market price differential, it dose not 
include cost factors, where net revenue does include those factors. Thus the net 
revenue should be considered as the best measure.  
When it comes to choosing ?net revenue? or ?net revenue premium?, we should 
consider which one represents brand equity better. The net revenue premium can be 
defined as the difference in net revenue between branded producers and 
corresponding unbranded producers, which means that after adjusting for scale by 
converting all variables to a per kilogram basis, the remaining stochastic differential 
or premium may then be attributable to brand equity. Thus the ?net revenue premium? 
is the measure used for most of the following estimation processes.  
Figure 14 summarizes the correlations of ?net revenue premium? with other 
measures.  
5.3.2. Structural Models 
    Following the steps mentioned in ?4.3.2.2. Structural Model? and using SAS 
software, we get the results below. 
    Firstly, after doing the regression ?NRP = f (average price, total costs)?, we get 
some interesting information. The regression results are shown in Figure 15. ?Average 
Price? is significant while ?Total Costs? is non-significant. Thus we should focus on 
factors that influence the average price such as size of crabs and recognition. The 
adjusted R-square is 0.974. 
Secondly, after doing the regression ?Average price = f (proportion of large crab, 
40 
 
recognition)?, the results are shown in Figure 16. Here we find that ?prolarge200g? 
variable is only marginally significant (P = 0.13) while ?recognition? is highly 
significant (P < 0.0001) suggesting that the relation between the latent variable of 
?quality? and the observed proportion of large size is less influential than the relation 
between the latent variable brand awareness/image and the observed recognition 
variable. The adjusted R-square is 0.863. 
    Thirdly, after doing the regression ?Proportion of large crab = f (outdoor 
cultivation method, seed, feed, utilities, production labor, other production expenses)?, 
the results are shown in Figure 17-1. And if we use stepwise regression to choose a 
minimal set of influential variables, the results are shown in Figure 17-2. In Figure 
17-1, the P-values of ?cultivation method?, ?seed?, ?laborprod?, and ?otherprod? are 
significant. These are also the only variables to enter solution in the stepwise model in 
Figure 17-2. The parameters of three of these variables are positive which means 
increasing these factors will produce a higher proportion of large crabs. The parameter 
of ?laborprod? is negative which means that increasing this factor will bring a lower 
proportion of large crabs. The reason for this negative relation is not readily apparent. 
The adjusted R-square for the full model is 0.830. 
Fourthly, after doing the regression ?Recognition = f (operating expense, 
advertising expense, labor in retail, other expenses in retail, materials, labor in 
maintenance, other expenses in maintenance)?, the results are shown in Figure 18-1. 
And if we use stepwise regression to limit the set of significant variables, the results 
are shown in Figure 18-2. In Figure 18-1, the variables of ?advertising expense? and 
41 
 
?materials? are large, significant and positive, which means inputting more dollars into 
these factors may increase recognition. ?Labor in retail? is also significant but negative, 
which would tend to suggest that moving dollars out of this factor and into the other 
two would bring more recognition. The adjusted R-square for the full model is 0.840. 
Finally, the overall, conceptual structural model is shown in Figure 19. The solid 
line indicates positive impact while the dotted line means negative impact. 
VI. Conclusions 
  For every Chinese mitten crab producer, the objective function, net revenue 
maximization, is presumed to be identical, but their observed profitability is totally 
different, even on a per kilogram basis. Thus the central issues that need to be 
resolved in this thesis are uncovering the overall economic situation of each brand (or 
brand category), then estimating the influence various factors have in determining 
brand equity and suggesting ways to improve brand equity. To uncover the overall 
economic situation, cost benefit analysis and risk analysis were both used here. To 
estimate the influence various factors have in determining brand equity, net revenue 
premium was chosen as the appropriate measure method to complete the structural 
model.  
  The cost benefit analysis results showed that all Chinese mitten crab producers, 
no matter which category their brand belongs to, are operating under favorable 
economic conditions, since their Benefit Cost Ratios (BCRs) are much larger than one. 
The BCR of well-known brands is 3.62, which is the largest one among the three 
42 
 
categories, meaning that this kind of firm exhibits strong profitability and can make 
more benefits from investing their capital. Similarly, less-known and unknown brands 
also have good earning potential because their BCRs are 2.46 and 2.42. Therefore, the 
producers of less-known and unknown need to improve some processes based on 
further analysis of which factors are more worth to invest in for obtaining more 
profits. 
  The risk analysis results showed that, after running the simulation process with 
1000 iterations, the highest net return to management of less-known brands is lower 
than the lowest net return to management of well-known brands and there is no 
overlap between these two types of brands. This means that if the producers have a 
choice to make a change in brand type, all producers would like to be a member of the 
well-known brands since the net returns to management of this type will be much 
higher. On the other hand, although unknown producers have lower mean returns they 
are also less variable than less-known brands.  
  The appropriate measure chosen for the estimate of which factors have an impact 
on determining brand equity was net revenue premium. The correlation results 
showed that all the measures were correlated at higher than 0.9, thus only one of them 
can be chosen to measure brand equity. While recognition represents the consumer 
market situation, it does not include any production information. The gross revenue 
variable contains market price but still does not include cost factors. However, the net 
revenue variable includes all those factors and is thus the best measure of brand equity 
for the estimation process. With brand equity represented by the net revenue premium, 
43 
 
the structural model was set up using a series of regressions as detailed previously. 
Thus the final structural model was composed of four separate regression models 
showing which factors have a positive or negative impact on brand equity. 
    For the Chinese mitten crab producers, the results above will provide some 
suggestions for improving profitability and brand equity. This is valuable for 
protecting the whole Chinese mitten crab industry, and for consumers it will also 
bring long-term benefits in the form of higher quality and more reliable supplies. 
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50 
 
Figures and Tables 
Figure 1: Sales Trend of Chinese Mitten Crab 
 
Figure 2: Outdoor Cultivation Methods 
 
1.08 1.24 1.45
1.62 2.03
0
1
2
3
2009 2010 2011 2012 2013
SALES ? billion RMB?
51 
 
Figure 3: Indoor Cultivation Methods 
  
Figure 4: Security Lock 
 
52 
 
Figure 5: Size Distribution 
 
 
Figure 6: Differences in Market Price 
 
 
 
0%
5%
10%
15%
20%
25%
30%
35%
40%
< 100g 100g~150g 150g~200g 200g~250g > 250g
Propo
rtion 
of c
rab
s h
arv
est
ed
UKP LKB WKB
$0
$50
$100
$150
0 100 200 300
price per 
kg (US$)
average weight (g)
WKB
LKB
UKP
53 
 
Figure 7: Differences in Gross Revenue 
 
 
Figure 8: Relationship between Recognition and Net Revenue 
  
 
 
16 
35 
79 
 -
 10
 20
 30
 40
 50
 60
 70
 80
 90
unknown producers less-known brands well-known brands
Gr
oss 
Revenue
($/k
g)
0
10
20
30
40
50
60
70
80
0 20 40 60 80 100
Net 
revenue
 ($/kg)
Recognition (%)
unknown less-known well-known
54 
 
Figure 9: Structural Model 
 
 
 
 
 
 
 
 
 
 
 
55 
 
Figure 10: Regression Coefficients of Well-known Brands 
 
Figure 11: Regression Coefficients of Less-known Brands 
Figure 12: Regression Coefficients of Unknown Producers 
 
56 
 
Figure 13: Net Return to Management of Three Types of Producers 
 
Figure 14: Correlations between Net Revenue Premium and Other Measures 
Product-Market Measure Correlation with NRP 
Average price 0.9913  
Average price premium 0.9913  
Volume 0.9445  
Volume premium 0.9445  
Gross revenue 0.9947  
Gross revenue premium 0.9711  
Net revenue 1.0000  
Market share 0.9584 
Market share premium 0.9584  
Recognition 0.9163  
57 
 
Figure 15: Regression of Net Revenue Premium 
 
 
Figure 16: Regression of Market Price 
 
 
 
 
 
 
58 
 
Figure 17-1: Regression of Proportion of Large Crab  
 
 
Figure 17-2: Stepwise Regression of Proportion of Large Crab 
 
 
 
 
59 
 
Figure 18-1: Regression of Recognition 
 
 
Figure 18-2: Stepwise Regression of Recognition 
 
 
 
 
60 
 
Figure 19: Overall Structural Model 
 
 
 
 
 
 
 
 
 
61 
 
Table 1: Key Production Factors 
 
 
Table 2: Key Market Factors 
 
 
 
 
W e l l - k n ow n L e s s - k n ow n U n k n ow n
S c al e  ( acr e ) 351 139 11 .6
S t ock i n g D e n s i t y ( am ou n t / acr e ) 5287 6516 10458
H ar ve s t  D e n s i t y ( am ou n t / acr e ) 4265 4590 5450
Y i e l d  ( k g/ acr e ) 682 705 893
S u r vi va l  R at e 80 .5 % 70 .5 % 63 .7 %
<  1 00 g ( s i z e  d i s t r i b u t i on )  23 .3 % 25 .8 % 35 .4 %
10 0g ~ 15 0g  ( s i z e  d i s t r i b u t i on )  23 .4 % 25 .9 % 31 .4 %
15 0g ~ 20 0g  ( s i z e  d i s t r i b u t i on )  29 .4 % 30 .7 % 24 .6 %
20 0g ~ 25 0g  ( s i z e  d i s t r i b u t i on )  14 .1 % 11 .9 % 6. 4%
>  2 50 g ( s i z e  d i s t r i b u t i on )  9. 8% 5. 7% 2. 3%
W e l l - k n ow n L e s s - k n ow n U n k n ow n
R e c ogn i t i on 88% 47% 4%
M k e t  P r i c e  ( R M B / K G )
<  100 g 156 82 40
100 g~ 150 g 363 168 86
150 g~ 200 g 565 251 140
200 g~ 250 g 734 336 185
>  250 g 843 470 246
G r os s  R e ve n u e  ( t h ou s an d  R M B )
<  100 g 8495 4404 123
100 g~ 150 g 20266 7909 241
150 g~ 200 g 40721 4115 312
200 g~ 250 g 25434 2785 113
>  250 g 20325 21318 59
t ot al 115240 40532 847
62 
 
Table 3: All Cost Factors 
 
 
 
 
 
 
 
R M B / K G W e l l - k n ow n L e s s - k n ow n U n k n ow n
P r od u c t i on  C os t s
M e c h an i c al 0.39 0.40 0.35
P on d  R e n t 3.77 3.66 2.47
T axe s 0.93 1.32 0.35
F i n an c i al 2.58 1.81 0.00
C r ab  S e e d 10.84 10.00 8.08
F e e d 11.47 8.03 6.35
U t i l i t i e s 3.22 1.89 1.03
L ab or 12.53 3.40 3.18
M e d i c i n e 6.57 2.82 0.43
T ot al 52.30 33.32 21.90
R e t ai l  S al e s  C os t s
A d ve r t i s i n g 4.63 4.23 0.19
P ac k agi n g 2.10 2.71 0.25
T r an s p or t at i on 1.81 3.09 1.14
L ab or 3.98 1.98 2.44
T axe s 2.14 1.64 0.59
O p e r at i n g 17.63 6.82 0.17
O t h e r s 4.87 3.03 0.21
T ot al 37.15 23.49 5.00
B r an d  M ai n t e n an c e  C os t s
M at e r i al  F e e 7.40 1.86 0.00
L ab or 3.62 0.90 0.00
E ve n t s 2.07 0.64 0.00
T ot al 13.10 3.41 0.00
T O T A L 102.55 60.23 26.89
63 
 
Table 4: BCR of Three Types of Producers 
 
 
 
 
 
64 
 
Table 5: Net Return to Management of Producers Based on Enterprise Budget 
 
Table 6: Correlations of Various Measurements