The face of business in Asia is changing faster than one can blink one’s eyes. Asian companies that used to be back-end workhorses, manufacturing consumer goods cheaply for Western companies, are slowly realizing the benefits of branding.
In a market where competition implies slashing prices on their 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 realizing that whereas they were wearing themselves down on razor-thinmargins to compete with the next supplier, they could increase returns by investing in their brands. This then is the shift in thinking that is pushing boardrooms in Asia toward creating strong brands to differentiate themselves and consequently realize greater profits. Branding is an investment thatmust be perceived as such and is required to deliver 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 recognize that it impacts the entire business – the structure, goals, attitude and the very outlook of those in the boardroom. Managers will need to see branding not as an appendage to the ongoing business, but rather as an infusion which seeps through the very spirit of the organization, as a healthy return on investment (ROI). In fact, it will require a shift in focus and priority for every functional aspect of the organization aligned around multiple customer touch points.
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 programs.
Reasons for lack of strong brands in Asia
Many reputed global brand surveys have found that only four of the top brands originate in Asia. Three classic brands come from Japan and a fast-growing ambitious brand comes from South Korea: Sony, Honda, Toyotaand 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.
There are many reasons why Asian companies have not fostered many global brands until now. The appreciation of branding as a strategic concept can be influenced by such reasons as broad diversification of businesses, the Asian business structure and implications of intellectual property (IP) protection among many others.
- 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 which encompasses all areas, when a business has its hands dipped in every pie.
- Another important reason for the lack of strong brands can be found in the prevalent business structure within Asia, which consists of many small and often family-owned businesses – with diversified business interests as illustrated before. The management perspective would favor 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 and unless legislation and law enforcement get better in the region, it may be a hurdle that prevents a deeper appreciation and respect for intangible asset management in the Asian boardroom.
But the one reason,more than any othermentioned above, that influences the creation of strong brands is themindset of the boardroomand 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 the resources at the company’s disposal to support the brands in a continuousmanner.