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 theminds of customers and other stakeholders. Strong brand equity is also one of themain reasons why the market capitalization 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 traditionally focused on asset-intensive industries. But it has been demonstrated that themost 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.
Intangible assets like brands play a significant role in value creation and can become an important driver of shareholder value formanymore Asian companies than today. On the New York Stock Exchange and NASDAQ, for example, intangible assets are known to account for 50–75 percent of the market capitalization of the listed companies, where the majority is accounted for by their brands. Themarket capitalization of corporations with strong brands demonstrates clearly that the market is putting a premiumon them.
The role of the Asian boardroom
A strong brand is characterized by a unique brand promise (the customer focus) and an outstanding brand delivery (the organizational systemand performance behind the promise). The brand promise and the brand deliverymust be consistently balanced in order to build and sustain strong brand equity. The modern brand-driven organization is characterized by three distinct characteristics which set it apart fromless brand-focused organizations:
- The right boardroom mindset toward and beliefs about branding
- The right skill sets to build and manage brands
- The right allocation of organizational and financial resources to achieve the various business objectives and build sustainable brand equity
Companies must ensure that everyone in the company is properly aligned with the brand values with the right mindset and belief. The entire company and its multiple and cross-functional actions and activities should be channeled towards this goal.
Internally, this comprehensive task of aligning and managing customer touch points cannot be left to or even controlled successfully bymarketing departments alone. The boardroom should take amore active role in the cross-functional orientation of marketing in the Asian organization.
Externally, the Asian business leaders can benefit tremendously by representing and leading their brands by example. Asian business leaders can help to build their brand portfolios by appearing more outside the boardroom, and acting as the primary spokesperson of the brand strategy and vision, internally and externally. This can add tremendously to the success of the brand and also be cost-effective inm any instances.
It is important to note that marketing function and discipline has come under increasing pressure to demonstrate financial results. Boardrooms must recognize this development and act accordingly. The first change is related to the role of marketing. As marketing is increasingly taking place along the entire value chain, marketing is not the responsibility of the marketing function alone. Instead, everyone in the organization is involved. This requires a more cross-functional orientation of marketing, with a solid understanding of all the elements in the value chain including skills within engineering, purchasing, manufacturing, logistics, finance and accounting. This might require an upgrade of skill sets and ongoing training of the marketing personnel. The second change required is related to the outcome of marketing. For the marketing function to become an integrated part of the boardroom agenda, the key issue for the future is to focus on demonstrating the financial consequences of marketing expenditures.