L2 INNOVATION FORUM 2010Presented by: Nima Rahnemoon

WHAT’S THE VALUE IN BRAND NAME?

Value

Dell Laptop 15”$800

Macbook Pro 15”$1200

Value

Honda Acura$70,000

Ferrari$250,000

Value

Rolex Oyster$10,000

Fake Rolex Oyster$10

Value Conclusion

• Having a well-known/respected brand -> selling products at a higher price = higher profit margins

• Logically people should attribute value to product quality, styling, service and reliability instead of brand

• Brand name value is easy to compute

Value Of Brand Name

Coca Cola$4/6 pack

RC Cola$2/6 pack

Example Cont.

Margins Coca Cola RC Cola

Current Revenue $21,962,000 $21,962,000

Operating Margin 15.57% 5.28%

Sales/Capital (Turnover Ratio)

1.34 1.34

Return on Capital 20.84% 7.06%

Growth rate during period (g)

10.42% 3.53%

Cost of Capital during period

7.65% 7.65%

Value of firm $79,611,000 $15,371,000

Value of brand name = $29,611,000 – 15,371,000 = $64,240,000

Proposition 1

•Brand is the most sustainable competitive

advantage

Proposition 2

•Luck and serendipity are just as important as

advertising

Proposition 3

•Brand Value is an Illusion

Proposition 4

•Even Valuable Brand Names Lose Value

Personal Application

•Understanding the importance of brand•Making a sustainable

company•Not being a smarter

consumer

Classroom Application

•Fustec•Documents on LMES•Entrepreneurship