Brand Equity is NOT increasingly important to today’s business

MSc International MarketingMaria Shcheglakova

ID# 2826693

Content of debate

1. Definitions2. Key Arguments3. Four arguments, examples and findings4. Conclusion5. References

Definition of “brand equity”• The term “brand equity” emerged in 1980s.

• Marketing Science Institute definition :

“Brand equity is the set of associations and behavior on the part of a brand’s customers, channel members and parent corporation that permits the brand to earn greater volume or greater margins than it could without the brand name” (Leuthesser, 1988).

Focus of our discussion

Definition of “increasingly important”

Source: Longman Dictionary (2002,p.663)

Definition of “today’s business”

Source: Oxford Dictionary (2005)

Business objectives of all the time:

• Profitability

• Growth

• Improvement of shareholder value

• Sustainability

Key argument

1. Brand equity is important to today’s business as well as it was important before.

A. The importance of brand equity components today = the importance of brand equity components yesterday.

According to Aaker (1991), who brand equity consists of 5 key components:

• Awareness

• Association

• Perceived quality

• Loyalty

• Other proprietary assets such as patents and trade marks.

Does these components are more are more important today then before?

Example 1.

B. Financial brand equity valuation.

1. Brand equity is important to today’s business as well as it was important before.

Source: Interbrand, Best global brands 2009.

B. Financial brand equity valuation.

1. Brand equity is important to today’s business as well as it was important before.

Source: Millward Brown, BranZ Top 100, 2009.

• In 1985: for 2.6 times its book value.

• In December of 2000: for 3.2 times book value.

• In February 2010:

with a revised sum of $19.5 billion, whereas at the start bid of Kraft was $16.28 billion, which Cadbury's board found “ undervaluing” .

Example 2.

Source: Motameni, R.., Shahrokhi, M. (1998) Brand equity valuation: a global perspective

 2.Market shares are not important for every

business.

• Accroding to Mische (2001, p.13): “market shares are desirable strategic idea, but it does not necessarily indicates high organizational performance”.

• In fact Kay (1993) argues that market share leads to increasing profitability.

• Other writers suggest that a small market share can be financially healthy (Hamermesh et al, 1978; Woo and Cooper, 1983).

• While market shares might be important to the MNE, the primary goal for small retailers and SME at least in the short-term is profitability.

• A survey of 500 small businesses by Alliance & Leicester Business Banking indicates that over 71% are profitable (Financial advisor, Feb.21, 2002).

• Our local retail shops, or small family owned businesses do not have a huge market shares, but they do stay profitable, otherwise they wouldn’t be there for us.

Example 3.

3. Sustainability

• Corporate sustainability has been defined as ‘‘a business approach that creates long-term shareholder value by embracing the opportunities and managing the risks associated with economic, environmental and social developments’’ (World Commission on Environment and Development, 1987).

• In business, corporations that practiced sustainable development were those that incorporated environmental and social concerns in some of the ways they conducted business. In many cases, these companies were able to create win–win situations by ‘‘greening’’ the environment and enhancing their competitive advantage in the process (Elkington, 1994).

3. Sustainability

• Regular international polls from groups such as Globescan and Edelman show that around the world, society expects more and more from business

• Procter & Gamble’s Ariel washing powder reformulation which enables washing at the lower temperature of 30 degrees is an example of the environment-friendly product.

Example 3.

• Carbon Trust is UK non-profit organization which helps small and big business to reduce their carbon footprint, as well as make an economy e.g. on its companies energy bills ( the energy bills could be from the as much as £50K to £500K and more)

• Bioapply – a swiss company, that offers practical and economically viable solutions for ecological alternatives to plastic packaging and petroleum-derived products using renewable, biodegrabable and compostable materials of vegetal origin.

• Business and social development.

Example 3.

Vivo Miles –reward system created by privately-owned company in 2009 to increase school and university attendance, to improve academic results, to improve the health of young people, to prepare students for like’s financial reality and it’s completely web-based.

4.Business ethics.

• The legal standards and ethical practices of firms operating in the target nation are also crucial factors in today’s business (Combs and Nadkarni, 2005; van Tulder and Kolk, 2001).

• As the contract between business and society expands, the ethical dimension of managerial decision-making is becoming more of a major concern for corporate leaders, organizational researchers, policy makers, and society as a whole. (Akhter, 2004; Dyer and Chu, 2000; Myers, 1999).

• The result of rapid globalization in recent years =>

an increase in ethical awareness for managers of multinational

firms (Velasquez, 2000).

Example 4.• In 2005 Google went into China.

• Under demands of the Chinese authorities, Google censored its search engine.

•Web users in China who Google "human rights," say, or "Tibet," will get sanitized results, or none at all.

• In December 2010, the Chinese government was about to pry into the e-mail accounts of human-rights activists and their supporters by attacking “corporate infrastructure”.

• Google is treataning to pull out of the country altogether.

•At Google's offices in Beijing, ordinary Chinese came to present flowers, in appreciation (National Review, 8 Feb. 2010).

Conclusion

Brand Equity in NOT increasingly important to today’s business

• Arjun Chaudhuri (1995) Brand equity or double jeopardy? Journal of Product&Brand management. Vol.4 No. 1,pp. 26-32.

• Aaker, D.A. (1996) Measuring brand equity across products and markets, California Management Review. Vol. 38, Spring, No. 3, pp. 102-20.

• Akhter, S.H. (2004) Is globalization what it’s cracked up to be? Economic freedom, corruption, and human development, Journal of World Business. Vol. 39 No. 3, pp. 283-295.

• Charles Holme (2008) Business ethics – Part One: Does it matter? Industrial and Commercial Training.

Vol. 40 No. 5 2008, pp. 248-252.

• Combs, G.M. and Nadkarni, S. (2005) The tale of two cultures: attitudes towards affirmative action in the United States and India, Journal of World Business. Vol. 40 No. 2, pp. 158-171.

• David Y. Choi and Edmund R. Gray (2008) The venture development processes of ‘‘sustainable’’ entrepreneurs, Management Research News. Vol. 31 No. 8, pp. 558-569.

• Dyer, J.H. and Chu,W. (2000) The determinants of trust in supplier-automaker relationships in the US, Japan, and Korea, Journal of International Business Studies. Vol. 31 No. 2, pp. 259-285.

• Ehrenberg, A.S.C., Goodhardt, G.J. and Barwise, T.P. (1990) Double jeopardy revisited, Journal of Marketing. Vol. 54 No.3, pp. 82-91.

• Elkington, J. (1994) Towards the sustainable corporation: win-win-win business strategies for sustainable development, California Management Review. Vol. 36 No. 2, pp. 90-100.

• Hamermesh, R.G., Anderson, M.S. and Harris, J.E. (1978) Strategies for low market share business, Harward Business Review. Vol.56, May-June, pp.95-102.

• Kamakura and Russell (1993) Managing brand-value with scanner data, International Journal of Research in Marketing. Vol.10, March, pp. 9-22.

ReferencesAcademic Journals:

• Keller, K.L. (1993) Conceptualizing, measuring and managing customer based brand equity, Journal of Marketing. Vol. 57 No.1, pp. 1-22.

• Kish, P., Riskey, D.R., Kerin, R.A. (2001) Measurement and tracking of brand equity in the global marketplace: The PepsiCo experience, International Marketing Review. Vol. 18 No. 1, pp. 91-99

• Leuthesser, L. (1988) Defining, Measuring and Managing Brand Equity, Report 88-104, Marketing Science Institute, Cambridge, MA.

• Motameni, R., Shahrokhi, M. (1998) Brand equity valuation: a global perspective, Journal of Product&Brand Management. Vol. 7 No. 4 1998, pp. 275-290.

• Myers, Ch. (2003) Managing brand-equity: a look at the impact of attributes, Journal of Product&Brand Management. Vol.12 No.1, pp.39-51.

• Myers, M.B. (1999) Incidents of gray market activity among US exporters: occurrences, characteristics, and consequences, Journal of International Business Studies. Vol. 30 No. 1, pp. 105-107.

• O’Regan, N. ( 2003) Market shares: the conduit to the future success? European Business Review. Vol.14 No.4, pp. 287-293.

• Simon, C.J. and Sullivan, M.W. (1993) The measurement and determinants of brand equity: a financial approach, Marketing Science. Winter Issue, pp. 28-52.

• Shrinivasan , V. (1979) Network models for estimation brand-specific effects in multi-attribute marketing model, Management Science. Vol.12, Winter, pp. 11-21.

• Temple, P. (1989)What’s in a name? Equity International. Vol. 18, pp. 14-17.

References

• Ricks Jr, J.M. (2005) An assessment of strategic corporate philanthropy on perceptions of brand equity Variables, Journal of Consumer Marketing. Vol. 22 No.3, pp.121–134.

• Rake, M. and Grayson, D. (2009) Embedding corporate responsibility and sustainability – everybody’s business, Corporate Governance. Vol. 9 No. 4 , pp. 395-399.

• Robertson , Ch. J. and Athanassiou Nicholas (2009) Exploring business ethics research in the context of international business, Management Research News. Vol. 32 No. 12, pp. 1130-1146.

• van Tulder, R. and Kolk, A. (2001) Multinationality and corporate ethics: codes of conduct in the sporting goods industry, Journal of International Business Studies. Vol. 32 No. 2, pp. 267-283.

• Velasquez, M. (2000) Globalization and the failure of ethics, Business Ethics Quarterly. Vol. 10, pp. 343-352.

• Woo, C.Y. and Cooper, A.C. (1983) Evaluations of strategies and performance of low ROI market share leaders, Startegic Management Journal. Vol.4, pp.123-35.

• Winters, L. (1991) Brand equity measures: some recent advances, Marketing Research. Vol. 3 No. 3, pp.70-73.

• Ying Fan (2007) “Gu¯ anxi ”, government and corporate reputation in China . Lessons for international companies, Marketing Intelligence & Planning. Vol. 25 No. 5, pp. 499-510.

References

Book: • Aaker, D.A. (1991) Managing Brand Equity: Capitalizing on the Value of a Brand Name. Free Press, New

York, NY.• Kay, J. (1993) Foundations of Corporate Success: How business strategies add value. Oxford University

Press, Oxford. • Mische, M.A. (2001) Strategic Renewal: Becoming a high-performance organization. Prentice-Hall,

Englewood Cliffs, NJ.• Sudharshan, D. (1995) Marketing Strategy, Relationships, Offerings, Timing & Resource Allocation.

Prentice-Hall, Englewood Cliffs, NJ.Magazines:• [ No author] (2002) UK: Profit for small companies , Financial Adviser. 21 February 2002: 67. [Online]

Retrieved from Academic OneFile Web on 13 March 2010.• Smith, Rod (2010) Kraft selling pizza empire to buy Cadbury, Feedstuffs . 11 January 2010. [Online]

Retrieved from Academic OneFile Web on 10 March 2010.• Beaudin, Guy (2010) Kraft-Cadbury: Making Acquisitions Work, Business Week Online. 10 February

2010. [Online] Retrieved from Academic OneFile Web on 10 March 2010.• [ No author] (2010) In 2005, Google, the Internet giant, went into China , National Review . 8 February

2010: 14. [Online] Retrieved from Academic OneFile Web on 14 March 2010.• [ No author] New? Improved? The brand name mergers, Business Week . 8 October 1995. pp.108-10. • Interbrand (2009) Best global brands 2009.• Millward Brown (2009) BrandZ Top 100 most valuable global brands 2009.

References

Any questions?