Today the Financial Times had a special report on Global Brands 2008. The heart of the report is the valuation and ranking of the world's top 100 brands, the valuation and ranking of the top 10 brands in 16 sectors, and the valuation and ranking of the top 10 brands by geographic or political region.
To value the brands, FT relied on the brand strategy and financial consultant Millward Brown Optimor. Of the over 50,000 brands in the WPP database, MB Optimor "prepare[d] financial models for each brand that link brand perceptions to company revenues, cash flows, and ultimately shareholder and brand value." This resulted in a brand rankings based on a dollar value which represents "the sum of all future earnings that that brand is expected to generate, discounted to a present day value."
Of the top 10 brands in the world, only two are non-American: Nokia and China Mobile. And China Mobile weighs in at the number 5 position, ahead of IBM, Apple, McDonald's, Nokia and Marlboro. Google, GE, Microsoft, and Coca-Cola round out the top 4 positions. This puts China Mobile in good company. But it is company that China Mobile is used to, as they retain the same brand ranking as last year. Interestingly, it is the only non-financial Chinese brand to make it in the top 100.
The only other three Chinese brands in the world's top 100 brands are ICBCat 18, China Construction Bank at 31, and Bank of China at 32, all financial brands. These three brands also rank at positions 3, 6, and 7, respectively, in the top 10 financial brands. Two questions might come to mind. First, why are Chinese banks ranked so high? FT writes that "Chinese banks have had two big years but it is hard to tell how much of their performance is due to better management and how much to the exceptionally favorable economic conditions." I see, they are ranked so high because they've made a ton of revenue and/or cash in the past couple of years but depending on how management has improved this increase in brand ranking is tenuous. Second, one might ask, why are the Chinese banks ranked so low? FT writes that MB Optimor actually adjusted the value of the Chinese banks down to account for the "Shanghai bubble" on the the stock market. Had they not accounted for the alleged bubble, the banks overall brand value would have been even higher. Maybe BofA should rethink not exercising all of their options?
The only other sector where a Chinese company made a splash was in motor fuel with Petrochinacoming in at number 5.
Why don't other Chinese brands make an appearance in the top 100? I would surmise that China's financial institution brands are so strong because they have made a lot of money very publicly over the past couple of years. China Mobile is so strong because they're pretty much the only mobile game in China. We have not seen the entrance of other Chinese brands into the top 100 brands because Chinese brands have yet to make a serious entrance into the worldwide marketplace, despite any dominance they might have in China's in domestic market. This summer the world's cameras will be on China, and China's star companies will have the opportunity to showcase their brands. It might not happen immediately, but I'd look for more Chinese brands to jump into the top 100 as early as the 2010 list and as late as the 2011 list. If I had to guess, I'd look for Chery or Lenovo to be the first non-financial, non-China Mobile Chinese brand to break into the top 100 brands.
Monday, April 21, 2008
The Growth of Chinese Brands
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3 comments:
Hmm..I do find something eerily disturbing that the most recognized Chinese brands are owned primarily by the Chinese state. Petrochina, China Mobile, the banks, have the majority of their shares owned by the state. Somehow I feel that the lack of true competition (assuming that as majority owner, the state has quite the incentive to monopolize the industry the brand is in) should detract from the value of the brand. These brands were not created out of the crucible of competition, and the businesses behind the brands have not been truly tested.
This is not to say that there are no China brands worth mentioning as a top brand. Huawei and Lenovo, if they can weather the international competition, will come out stronger. Chery, I don't know. They make cars right? Who's going to buy Chinese cars? Chinese in China I guess, but they like American cars anyway. But that just makes Chery a domestic brand. Even if they do go international who is going to buy Chinese made cars? China made an SUV that had the worse safety test records of any car of all time. True that was just the first of many, but I tend to think Chinese businesses like to cut corners when and where they can.
Cutting corners lead to the main point I want to make. Cutting corners is something that all businesses do. In China, its cool if its cutting corners on materials for textiles and shoes and other manufacturing light products. But when businesses in heavy manufacturing and high end electronics start cutting corners, the end result is a bad business and people getting hurt in various ways.
Of course I am assuming that Chinese companies cut more corners than normal. That is just the feeling I get since I can't think of any objective data from the top of my head. But I must admit that my experience with China does not make me feel very confident about the way business is done there. Of course I know I am talking out of my ass. My gut feeling is that all the top brands are driven by the massive growth of the Chinese economy in recent years. The hump is coming, and growth will have to be driven by better business plans and operations instead of depending on sheer massive growth of the economy. But I am sure the government will step in if a big guy fails, so why have better plans.
But I think this article is confusing me. What is a top brand? It seems that in my mind a top brand is a brand with international standing and recognition. A purely domestic business cannot have a top brand in my opinion. Perhaps this paragraph should have come at the beginning of my comment.
The compiled data was used to value the brands by their total future earning potential. For example they valued Google at 86,057 ($M), which means that according to their data Google will return $86.057 billion in profits over the life of the brand. China Mobile is at $57.225 billion, ICBC $28 billion, CCB $19.603 billion, and BoC $19.418 billion. PetroChina's motorfuel brand is only $1.373 billion. The number is so low because the oil company does not have a brand that sells a product, but the motor fuel arm of PetroChina does. Here's the link to the full report by MB Optimor.
I think Chery only has room to grow, especially as their capital base increases. We just saw Tata of India buy Land Rover and Jaguar which is amazing in itself and would've seemed like a joke a year or two ago. Of course Tata is a diversified company with a lot of capital, or at least credit-assets, but considering their quick emergence on the world stage I wouldn't be so quick to dismiss Chery.
In regards toward Tata buying Land Rover and Jaguar, I think you give Tata too much credit. Ford needed to find buyers for both of them since Ford's business was going down the crapper. Nobody else really wanted Jaguar or Land Rover. If I remember correctly, one of them is bleeding like a stuck pig and the other is just turning itself around.
As for Chery, I don't know. I see just way too many obstacles in the future for a Chinese car manufacturer to become a global brand. I can see it dominating China on the lower end of the product line, but I don't think it will ever become a global player that rivals Honda/Toyota, GM, Renault. Here, if the day it ever comes where Chery makes it big, globally big, I'll buy you the most expensive steak dinner in Shanghai. Hopefully by then I'll be a very rich and successful lawyer.
I just don't know that it is a good idea to place brands as a top brand because of their future sales. Especially if those brands belong to state owned enterprises like in China. The lack of domestic competition brings into question the true value of those brands.
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