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Brand as an anchor for global governance

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 6 June 2018 00:00


A versatile tool for global brand management

By Ameya Kapnadak and Mike Rocha

As Sri Lankan companies and brands nurture global ambitions, they are faced with a plethora of choices – and challenges. Understanding new markets, new sets of customers (with their own cultural nuances, functional and emotional needs), new channels and newer (entrenched) competitors can be a daunting task for the most seasoned brand owners.

Traditionally, both Sri Lankan and Indian companies have taken a considered and a measured approach to growing global – understand the market, customer and competition as best as you can, begin to take the first baby steps and then evolve as you begin to gain traction in the new market. And for the most part, this approach has paid off as Indian brands slowly but surely gain a foothold in their new homes.

However, there is also a flip side to this. As one focuses on the individual market and the customer and competition it houses, the danger is for a brand to stand for varying things – and ultimately, create varying experiences – in different markets. In other words, the proverbial whole can end up becoming smaller than the sum of the parts. This in fact, is the exact opposite of what truly global brands are able to achieve – a uniform and consistent global experience regardless of the market and the competition. 

It behooves the Indian brands growing global to put in place a global governance system that ensures and encourages a uniform, consistent experience in all their markets. Logically, there is no better anchor than the brand, to become the anchor for this global governance system.

As one focuses on the individual market and the

customer and competition it houses, the danger is

for a brand to stand for varying things – and ultimately,

create varying experiences – in different markets.

In other words, the proverbial whole can end up

becoming smaller than the sum of the parts. This, in fact,

is the exact opposite of what truly global brands are able

to achieve – a uniform and consistent global experience

regardless of the market and the competition.

Strong brands enhance business performance primarily through their influence on three key stakeholder groups: customers (current and prospective), employees and investors. They influence customer choice and create loyalty; attract, retain, and motivate talent; and lower the cost of financing.

The influence of brands on current and prospective customers is a particularly significant driver of economic value. By expressing their proposition consistently across all touchpoints, brands help shape perceptions and, therefore, purchase behaviour, making products and services less substitutable. In this way, brands create demand, allowing their owners to enjoy higher returns. Strong brands also create continuity of demand into the future, thus making expected returns more likely – or less risky. Brands, therefore, create economic value by generating higher returns and growth, and by mitigating risk.

Interbrand’s Brand Valuation methodology has been specifically designed to take all of these stakeholders and value-creation levers into account. While a Role of Brand Analysis helps

brand managers understand purchase behaviour and the brand’s ability to drive choice and generate demand, Brand Strength measures its ability to sustain the demand, engender loyalty and ultimately, reduce risk.

A Role of Brand Analysis lets us know where investment in (and focus on) brand improvements will have the biggest impact. It can be thought of as a measure of ‘brand leverage.’ Brand Strength Analysis, on the other hand, is the key diagnostic tool to measure brand performance and better understand the reasons behind its strengths and weaknesses, both internally and externally. It supports strategic brand management by prioritising areas of highest impact for managers.

For the brand manager or the brand owner, a Brand Strength analysis is of special interest because it offers a robust, evidence-based and data-driven methodology to manage and govern the brand across markets. 

A Brand Strength Analysis

1. Enables constructive dialogue about the business by creating a common language for discussion of brand performance. By introducing a common set of metrics across the organisation, it ensures that different parts of the organisation begin to view the brand through the same lens.

2. Provides global and local managers with an actionable tool to make informed marketing decisions – empowering management with insights to implement brand strategy. Since Brand Strength is always relative to the competition in that specific market, it allows local managers their individual market-level insights to tailor specific tactics. On the other hand, it provides the corporate office a high level ‘dashboard’ detailing the relative strengths and weaknesses in the brand at a more strategic level.

3. Allows responsibility for performance on the ten Brand Strength factors to be allocated to functions across the business, building engagement and a sense of responsibility for the brand across the organisation.

When the Role of Brand and Brand Strength Analysis are connected to the financial model, they provide a framework for resource allocation and prioritisation based on the opportunities expected to have the greatest impact on brand and business value. Ultimately, everything we do as brand managers is best considered through a value-creation lens.

Considerable investments are made in brands and it is important to determine if these actions are creating value for our customers and in turn, our shareholders. Interbrand’s Brand Valuation methodology seeks to determine, in both customer and financial terms, the contribution of the brand to business results.

A strategic tool for ongoing brand management, nothing can be more robust than Brand Valuation, because it brings together market, brand, competitor and financial data into a single, value-based framework within which the performance of the brand can be assessed, areas for improvement identified, and the financial impact of investing in the brand quantified.

Other Applications

While Global Brand Management is the most relevant application for brand managers and brand owners (global giants like Samsung, for example, have deployed this very methodology to drive consistent and focused efforts at creating a truly global brand), there are two other applications that Brand Valuation finds:

Financial Applications

Increasingly, CEOs are placing more emphasis on their companies’ brands in investor communications. Many more annual report column inches are now dedicated to discussing an organisation’s commitment to its brand, from the CEO down. Numerous companies take their brands seriously enough to report their value over time to investors.

The brand also continues to be a key driver of acquisition premiums in M&A. Often, it is the latent potential of the brand that is driving this premium through its ability to enter new markets and extend into adjacent categories. A broad skill set, combining market research, brand and business strategy, together with business case modelling, is required to quantify the latent financial potential of the target brand. 

Interbrand’s Brand Valuation methodology can also be used to complement other more traditional techniques for setting royalty rates for brands. By identifying the value created by a brand for its business, combined with an evaluation of the relative bargaining power of the parties involved, we are able to advise on the proportion of brand value that should be paid out as a royalty rate in return for the right to exploit the brand.


Case Applications

From time-to-time, businesses need to evaluate significant changes in brand strategy, whether it be repositioning, brand architecture, brand extension, or even a complete rebrand. These kinds of changes typically involve significant financial outlay upfront, along with a high degree of uncertainty over when, or whether, a positive return will be made on that investment.

Some CEOs are willing to make these critical brand strategy decisions based on qualitative strategic analysis and intuition. The majority, however, are looking for a business case that goes further. They want to understand the likely overall financial impact on the business over time, covering a range of alternative scenarios. 

In addition to a detailed breakdown of the expected costs to deliver, a rounded business case will also quantify the expected impact on the topline through the modelling of key revenue drivers (these will vary based on the business, but could include customer acquisition, churn, price premiums, share of wallet, frequency of purchase/visit, average basket size, and so on) and on profit margins from any operational changes required to deliver the new strategy. Finally, sophisticated techniques such as Monte Carlo simulation may be employed, running thousands of possible permutations in order to estimate the most likely outcome.

By bringing together market, brand, competitor and financial data, the brand valuation model is the ideal framework within which such business case modelling can be conducted. As global competition becomes tougher and many competitive advantages, such as technology, become more short-lived, the brand’s contribution to shareholder value will only increase. 

Brands are one of the few business assets that can provide long-term competitive advantage. 

Companies as diverse as Samsung, Philips, Hyundai and AXA, among many others, have used brand valuation to help them refocus their businesses on their brands, motivate management, create an economic rationale for branding decisions and investments, and make the business case for change. Although many brand metrics are available, few can link the brand to long-term financial value-creation and this, along with its many other applications, makes Brand Valuation a versatile strategic tool for your business.

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