This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-ShareAlike 0 License without attribution as requested by the work’s original creator or licensee. Preface

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Brand Strength Score

As brands are assets, valuing them requires an assessment of their ability to secure future earnings on behalf of the businesses that own them. Brand strength is a measure of the brand’s ability to secure demand, and therefore earnings, over time. Securing customer demand typically means achieving loyalty, advocacy, and favorable levels of customer trial, as well as maintaining a price premium. Interbrand’s methodology generates a discount factor that adjusts the forecasted brand earnings for their riskiness based on the level of demand the brand is able to secure. Brand strength is calculated by assessing the brand’s performance against a set of seven critical factors, including measures of relevance, leadership, market position, customer franchise, diversification, and brand support.

Brand Value

A brand’s value is a financial representation of a business’s earnings due to the superior demand created for its products and services through the strength of its brand. Brand value is the absolute financial worth of the brand as it stands today. Accordingly, the brand’s value can be compared to the total value of the business as it would be assessed on the stock exchange.

The winner and number 1 global brand on Interbrand’s 2009 list, once again, is Coca-Cola, which has topped the list for more than 20 years. IBM is number 2,Microsoft ranks third, GE comes in fourth, and Nokia has moved up to fifth position. Rounding out the top 10 are McDonald’s (6), Google (7), Toyota (8), Intel (9), and Disney (10).

Interestingly, not one of the 100 Best Global Brands emanates from the developing world, at least for now. But Interbrand’s research suggests this may soon change. With their huge populations, there is a decided shift in economic power to countries like China, India, Russia, Brazil, and Africa, and former global giants are making way for new leaders from fast developing markets.

The following brands are strong leaders in their home markets and already show some early signs of globalization:

  • China: Lenovo (PCs), Haier (refrigerators, Tsingtao (beer)

  • India: Tata (communications and information technology, engineering, materials, services, energy, consumer products, and chemicals), Reliance(energy and materials), ArcelorMittal (steel)

  • Russia: Kaspersky Lab (information security to computer users, Aeroflot(airline), Gazprom (gas)

  • South Africa: MTN (communications), Anglo American (mining), SABMiller(beer and soft drinks).

  • Brazil: Banco Itaú (finance), Vale (mining), Natura Cosmético (cosmetics)

[1] Holt, Quelch, and Taylor (2004, September).


7.6 Points to Remember

  1. As companies expand globally, a brand like Coke or Nike can be the greatest asset a firm has, but it can also quickly lose its power if it comes to signify something different in every market.

  2. Successfully leveraging a brand’s power globally requires that marketers consider aggregation, adaptation, and arbitrage strategies all at the same time.

  3. Multinational companies typically operate with one of three brand structures: a corporate-dominant, a product-dominant, or a hybrid structure.

  4. A company’s international brand structure is shaped by three sets of factors: firm-based characteristicsproduct-market characteristics, and underlying market dynamics.

  5. An effective global brand structure reflects parsimonyconsistency, and connectivity.

  6. Companies must also think about how to globally manage and monitor key strategic brands to ensure that they build and retain their integrity, visibility, and value.

  7. A strong corporate branding strategy can add significant value in terms of helping the entire corporation and the management team with implementing its long-term vision, creating unique positions in the marketplace for the company and its brands, and signaling a commitment to a broader set of stakeholder issues.

  8. The number 1 global brand on Interbrand’s 2009 list is Coca-Cola, which has topped the list for more than 20 years. Next on the list are IBM, MicrosoftGE, and NokiaMcDonald’sGoogleToyotaIntel, and Disney round out the top 10.

Chapter 8

Globalizing the Value Chain Infrastructure

Globalizing a company’s value creation infrastructure—from the sourcing of raw materials and components, to manufacturing and research and development (R&D), to distribution and customer service—has three primary dimensions: (a) deciding which activities to perform in-house and which ones to outsource, and to whom and where; (b) developing the right partnerships to support a company’s globalization efforts; and (c) implementing a suitable supply-chain management model for integrating them into a cost-effective, seamless value-creating network. This chapter looks at the first two dimensions; the third—supply-chain management—is the subject of the next chapter.

8.1 Core Competencies

Core competencies represent unique capabilities that allow a company to build a competitive advantage. 3M has developed a core competency in coatings. Canon has core competencies in optics, imaging, and microprocessor controls. Procter & Gamble’s marketing prowess allows it to adapt more quickly than its rivals to changing opportunities. The development of core competencies has become a key element in building a long-term strategic advantage. An evaluation of strategic resources and capabilities must therefore include assessments of the core competencies a company has or is developing, how they are nurtured, and how they can be leveraged.

Core competencies evolve as a firm develops its business model and incorporates its intellectual assets. Core competencies are not just things a company does particularly well; rather, they are sets of skills or systems that create a uniquely high value for customers at best-in-class levels. To qualify, such skills or systems should contribute to perceived customer benefits, be difficult for competitors to imitate, and allow for leverage across markets. Honda’s use of small engine technology in a variety of products—including motorcycles, jet skis, and lawn mowers—is a good example.

Core competencies should be focused on creating value and should be adapted as customer requirements change. Targeting a carefully selected set of core competencies also benefits innovation. Charles Schwab, for example, successfully leveraged its core competency in brokerage services by expanding its client communication methods to include Internet, telephone, offices, and financial advisors.

Hamel and Prahalad suggest three tests for identifying core competencies. First, core competencies should provide access to a broad array of markets. Second, they should help differentiate core products and services. Third, core competencies should be hard to imitate because they represent multiple skills, technologies, and organizational elements. [1]

Experience shows that only a few companies have the resources to develop more than a handful of core competencies. Picking the right ones, therefore, is the key. A key question to ask is, which resources or capabilities should be kept in-house and developed into core competencies and which ones should be outsourced? Pharmaceutical companies, for example, increasingly outsource clinical testing in an effort to focus their resource base on drug development. Generally, the development of core competencies should focus on long-term platforms capable of adapting to new market circumstances; on unique sources of leverage in the value chain in which the firm thinks it can dominate; on elements that are important to customers in the long run; and on key skills and knowledge, not on products.
[1] Prahalad and Hamel (1990, May/June).

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