1 September 2006 Martin Roll
The face of business in Asia is changing faster than the blink of an eye. Martin Roll explains how Asian companies that used to be back-end workhorses, manufacturing consumer goods cheaply for Western companies, are slowly realising the benefits of branding.
In a market where competition implies slashing prices on unbranded products, Asian businesses are slowly becoming more attentive to the power of branding in capturing consumers and returning larger profits on their investments.
Firms are realising that they had been wearing themselves down on razor-thin margins to compete with the next supplier, but could increase returns by investing in their brands.
This then is the shift in thinking that is pushing boardrooms in Asia towards creating strong brands to differentiate themselves, and consequently realise greater profits. Branding is an investment that must be perceived as such and is required to deliver ROI and shareholder value like any other feasible business activity.
Most Asian firms, however, still view branding as advertising or logo design. If firms are to benefit from branding, they must recognise that it impacts the entire business – the structure, goals, attitude and outlook of those in the boardroom. Managers need to see branding not as an appendage to the ongoing business, but rather as an infusion that seeps through the very spirit of the organisation, as a healthy ROI.
Asia is still one of the world's biggest providers of commodity products. At the same time, Asian manufacturers mostly produce for other companies and the majority of these products are therefore non-branded. In other words, these are volume products without strong brand identities.
The largest part of the financial value is captured by the manufacturers' customers – the next player in the value chain – primarily driven by strong brand strategies and successfully planned and executed marketing programmes.
WHERE ARE THE STRONG ASIAN BRANDS
Many reputed global brand surveys have found that only four of the top brands originate in Asia: three classic brands from Japan – Sony, Honda and Toyota – and a fast-growing, ambitious brand from South Korea – Samsung.
But given the size and volume of Asian business today, it is evident that Asia could build many more prominent brands and capture more financial value from better price premiums and customer loyalty.
The diversification of businesses spanning many industries with limited overlap and synergies has been a major impediment to building brands in Asia.
The prevalent mindset in Asia is based on trading, rather than branding, and the generation of revenues, rather than profits. But it is hard to create a relevant, clear and differentiated brand strategy, and build a corporate brand that encompasses all areas, when a business has its hands in every pie.
DIVERSE BUSINESS INTERESTS
Another important reason for the lack of strong brands can be found in the prevalent business structure in Asia, which consists of many small and often family-owned businesses – with diversified business interests, as illustrated before.
The management perspective would favour short-term business wins against brand strategies, which require more resources and long-term perspectives.
The implications of IP protection in Asia have been a major barrier against building brands. In their own backyards, many Asian companies have faced rampant counterfeiting and infringement of IP rights.
Until legislation and law enforcement gets better in the region, it may be an obstacle to deeper appreciation and respect for intangible asset management in the Asian boardroom.
But the one factor that influences the creation of strong brands, more than any other mentioned above, is the mindset of the boardroom and the CEO.
Branding is a boardroom discipline and successful brands can be built only when the boardroom, led by the chairman and the CEO, understands, appreciates and commits to treating branding as a strategic discipline and devotes resources to support the brands in a continuous manner.
BRANDING DRIVES SHAREHOLDER VALUE
The primary objective of boardrooms is to build and sustain shareholder value, and deliver competitive returns to shareholders. One of the most effective ways to achieve this is to build brands with strong brand equity.
Brand equity is the 'reputational' asset that any successful business builds in the minds of customers and other stakeholders. Strong brand equity is one of the main reasons why the market cap of a company often exceeds its book value. The strength of the brand equity can therefore be an indication of future financial performance.
Many Asian companies have traditionally focused on asset-intensive industries. But it has been demonstrated that the most profitable Asian companies focus on intangibles such as human capital, exploiting network effects and creating synergies based on brands or reputation, rather than investing in tangible assets.
THE ROLE OF THE ASIAN BOARDROOM
A strong brand is characterised by a unique brand promise (the customer focus) and an outstanding brand delivery (the organisational system and performance behind the promise). The brand promise and the brand delivery must be consistently balanced in order to build and sustain strong brand equity.
The modern brand-driven organisation is characterised by three distinct characteristics, which set it apart from less brand-focused organisations:
- The right boardroom mindset towards and beliefs about branding
- The right skill sets to build and manage brands
- The right allocation of resources to achieve the various business objectives and build sustainable brand equity
Internally, this comprehensive task of aligning and managing customer touch points cannot be left to or even controlled successfully by marketing departments alone. The boardroom should take a more active role in the cross-functional orientation of marketing in the Asian organisation. Externally, the Asian business leaders can benefit tremendously from representing and leading their brands by example and acting as the public face of the brand strategy and vision, internally and externally.
Finally, the boardroom should recognise the critical importance of resource management in building strong brands. Therefore, the last cornerstone of successful Asian branding refers to organisational and financial resources, their allocation and management.
The more everyone throughout an organisation can be trained and involved in delivering on the brand promise, the more efficient and competitive the brand strategy will become.
Asian cultures have always valued the long-term aspects in almost any aspect of life. Asian business should use this unique strength to create more successful brands – but it requires a different mindset in the Asian boardroom.
This extract is taken from Martin Roll's book, Asian Brand Strategy. Reproduced with permission.