Wednesday, 18 December 2013 00:00
How a holistic approach beyond tourism is required to build a strong nation brand
Sri Lanka’s value growth is the second highest, amongst 100 countries
Sri Lanka is the highest gainer on tourism amongst them all
The Brand Finance Nation Brands analysis provides a comprehensive report on the world’s leading nation brands and presents an analysis of the impact that a country’s reputation and image has on stakeholders and investors. The analysis combines a wide range of economic, demographic, and political factors, and is based on in-depth research by Brand Finance’s global network of offices.
Each nation brand has been accorded a brand rating: a benchmarking study of the strength, risk and future potential of the brand as well as a brand value: a summary measure of the financial strength of the brand. The brand strength component of the nation brand rating has also been analysed and ranked.
Brand Finance Nation Brands measures the value and strength of the nation brands of leading countries using a method based on the royalty relief mechanism that Brand Finance uses to value the world’s largest companies. The report provides each nation brand with a measure of its brand strength and a valuation of its nation brand value along with an underlying analysis.
Each nation brand is assigned a rating between AAA (very strong) to DDD (failing) in a format similar to a credit rating. This letter grade is the result of Brand Finance’s Brand Strength Index (BSI); a rating measurement based on scores in the Nation Brand Impact Framework segments of investment, tourism, product and talent.
These segments are categorised as inputs, throughputs and outputs each worth 33% of the overall BSI. Inputs are factors that can be directly controlled by the nation, throughputs are factors of internal and external reputation and outputs are measures of current performance.
The BSI is based on factors such as the quality of a country’s workforce and ability to attract foreign talent, perceptions of its quality of life and its projected GDP growth. Brand Finance uses a combination of government statistics, consensus forecasts, and analyst projections to quantify these variables and create an overall brand rating.
Nation Brands are also quantified by total value using a royalty relief method that quantifies the royalty that would be payable for a brand’s use if it were controlled by a third party. The royalty rate is precisely calculated based on different sectors of the economy, and then applied to projected GDP over the next five years. A discount rate is then applied to this total to account for the time value of money and associated risk. This result quantifies the value that the brand brings to the economy.
Key findings on brand value
Nation brand value growth continues to outstrip GDP recovery, with a 13% rise in the total brand value of the top 100. The US and China are responsible for much of this growth. The world’s number one and number two nation brands have grown in value by 23% and 26% respectively, with China also improving its BSI brand rating (now AA-). The US continues to dominate the table, with a nation brand value greater than the total for China, Germany, the UK, Japan and France combined though the current congressional deadlock, government shutdown and looming debt ceiling are significant threats.
Switzerland has just edged ahead of Singapore to become the world’s strongest nation brand, topping the Brand Strength Index (BSI) with a rating score of 76 (which is AA+). The country has also moved up a place to become the world’s 14th most valuable brand, though brand value growth has been a relatively modest 9%.
The UK has performed well. Brand Britain is now the world’s 4th most valuable having pushed Japan into 5th. Brand Japan has suffered an 11% drop in value as the country continues to recover from the fallout of the tsunami and the Fukushima nuclear plant, whilst facing stiff competition from growing high-tech exporting nations such as South Korea.
In contrast Britain has grown 8%. Though relatively modest, this represents a strong performance for a developed and in particular an EU country. The UK has benefitted from last year’s high profile events, in particular the Olympics and the Diamond Jubilee, but also from the hugely successful ‘Great’ campaign.
Malaysia is this year’s fastest mover; its brand value is up 48% on2012. Reasons for its rapid climb up the nation brand rankings (it has risen two places just this year) include its growing status as a hub for Islamic banking and growing demand for commodities such as palm oil, driven by an increasingly wealthy world population.
Malaysia’s ambitious ‘Wawasan’ or ‘Vision’ 2020 goal, to reach developed nation status by 2020, had looked to have been faltering, however in the last year Prime Minister Najib Razak said progress towards the target is firmly back on track, with GDP per capita set to reach the milestone $ 15,000 by 2018, two years ahead of target.
Sri Lanka is continuing to build on the stability and confidence brought about by the ‘peace dividend’ and is the second fastest brand value riser. Its nation brand has grown in value by 46% and it has climbed eight places to become the 65th most valuable nation brand. Sri Lanka is the top mover in the ‘Tourism’ input Nation Brand Impact framework, rising 18 points
Asian nations dominate the list of fastest risers, though Peru and New Zealand round out the top ten.
Cyprus is this year’s fastest faller. Its well publicised and disastrous financial crisis is unsurprisingly the main factor. Exposure to overleveraged property companies, dependence on the troubled Greek economy and the subsequent downgrading of Cypriot bonds to ‘junk’ status led to the government being unable to maintain expenditure.
Egypt’s nation brand value has also dropped 38% as a result of the instability following the country’s revolution. Violent protests have been a persistent feature for the last two years and crime has risen significantly whilst tourists have stayed away from the previously popular resorts of the Red Sea coast and the ancient sites along the Nile. The ousting of Mohammed Morsi by the army earlier this year places further question marks over the country’s stability and future direction.
Key findings on brand strength (ie Brand Rating)
The strength of a nation brand across the four segments of the Nation Brand Impact framework is measured by the Brand Strength Index (BSI). Looking at the BSI in isolation to the nation brand value can be the truest reflection of governments’ guidance of their nations’ brands, as the inherent GDP advantage of larger countries is removed.
Singapore has held sway at the top of the BSI table but this year it has just been edged out by Switzerland. Both countries have performed well, serving as benchmarks for other nation brands. However Switzerland’s impressive growth, particularly in the ‘Tourism’ segment of the BSI where it has increased its score from 66 to 73, has allowed it to claim the top spot.
Malaysia is this year this year’s fastest mover in terms of nation brand value. It is unsurprising that part of this success is down to a significant improvement in its BSI score. Last year the country’s overall score was 66. It has bettered that by 5 points in 2013, with its biggest strides being made in tourism and investment. It has jumped from outside the top 20 into the top 10 to become the world’s 8th strongest brand.
Top performers by segment
Tourism - Thailand tops this segment of the BSI, though Sri Lanka has made the biggest gains. Hospitable people, winter sun, unspoilt beaches and heritage combine are the enticing offerings of both countries; however the end of Sri Lanka’s Tamil rebellion and greater security has allowed it to make the greatest strides in recent years.
Goods and Services - Germany has added four points to its already impressive score in this segment to make it the fastest mover. The gradual recovery of the global economy sees many well established exporters, including the US and China, improve on last year.
Investment - The Philippines and the United Arab Emirates have made the greatest gains here, while Singapore remains the world’s most investment-friendly nation. The UAE is aiming to make Dubai the host city of Expo 2020.
Brand Finance research suggests that success could boost the nation brand value by $ 8 billion, by showcasing the city and the country as a whole as a prime destination for investment and talented workers from all over the world.
People and Skills - In fact the UAE seems to be succeeding here already; having improved its score by six points it has made greater gains this year than any other nation. Switzerland retains its position at the top of the talent ranking however and a two point rise is partly responsible for its position as the overall strongest brand of 2013.
Brand Finance PLC, the world’s leading brand valuation consultancy, advises strongly branded organisations on maximising their brand value through effective management of their brands and intangible assets. Founded in 1996, Brand Finance has performed thousands of branded business, brand and intangible asset valuations worth trillions of dollars.
Its clients include international brand owners, tax authorities, intellectual property lawyers and investment banks. Its work is frequently peer-reviewed by the big four audit practices and its reports have been accepted by various regulatory bodies, including the UK Takeover Panel.
Brand Finance is headquartered in London and has a network of international offices in Cape Town, Amsterdam, Athens, Bangalore, Barcelona, Colombo, Dubai, Geneva, Helsinki, Hong Kong, Istanbul, Lisbon, Madrid, Moscow, New York, Paris, Sao Paulo, Sydney, Singapore, Toronto and Zagreb.
More details of this Nation Brands analysis is available on - www.brandfinance.com/images/upload/brand_finance_nation_brands_2013.pdf