All businesses today are subject to turbulent, accelerating change. But Asian companies experience this to a greater degree as they try to catch up and overtake the competition.
Periods of profound and rapid change put a premium on the ability to survive. Look at the Fortune 500. A surprising number of corporations on the list a decade ago are no longer on it, while recent economic and social crises have eliminated others entirely. But Coca-Cola, Colgate, Kellogg’s and other top brands of the 1920s have maintained their industry leadership in many disparate and changing markets despite changes of management over the years.
Strong brands are amazingly durable. By contrast, relative newcomers such as Nokia have also dominated markets in really short time spans and are likely to stand the test of time. The key to the success of all these companies is their meticulous attention to the development and management of their brands as the key driver for achieving corporate goals.
The pursuit of longevity and sustainability has always been a powerful part of Asian cultural thinking. But Asian companies have not helped themselves in managing their futures via the branding route. As evidence of this, leaving Japan aside, there are few truly global Asian brands, except perhaps Samsung from Korea. And even the Japanese brands such as Sony are suffering. Why?
Illustration: Malay Karmakar / Mint
Many Asian businesses still suffer from strategic myopia, often settling for complacency and short-term gains. Symptomatic of this is the OEM trap, where companies build components and end products, or assemble them for their customers, who then place their own brand names on the finished products, adding large price premiums to the production cost. The strategy of relying on OEM business can reap rewards in good times but the same customers usually turn out to be only fine weather friends, disposing of the OEM companies’ services whenever an adverse change in the demand curve occurs.
Second, many Asian companies have desperately pursued operational efficiency through quality programmes, re-engineering and other prevailing trends that promise success. Necessary though these may be, they are not sufficient to help companies differentiate themselves in this world of parity. Long-term profitability depends on climbing out of the commodity trap via the only route to sustainable differentiation — branding.
Asian companies have failed to create strong brands but faced with increasing market deregulation, they are now starting to adopt a more strategic brand-centric focus to achieve sustainable growth. Interestingly, governments have had to kick-start this revolution. For example, significant financial assistance is available in Singapore, Malaysia and South Korea for companies wishing to undergo branding activities. The public sector rationale is that the more successful private sector brand ambassadors they have, the better the national brand image will be.
This wake-up call from governments, coupled with the outright fear of even more intense competition, has ensured that branding is now firmly on boardroom agendas. Both sectors understand the benefits branding brings and the consequences of not pursuing it. Chinese and Indian companies, realizing the need to get into the branding game, are buying Western brands; witness Lenovo’s purchase of the IBM PC business, a loss-making entity and the Tata group’s acquisition of Jaguar and Land Rover brands from Ford.
But buying a brand is one thing, developing and managing it is another. There is no quick fix and few companies have sufficient experience or knowledge of brand management. As a Chinese minister explained: “We have plenty of people, low costs of production, the latest technology and high quality products. But our weakness is branding. We do not know how to do it and yet it is essential for our future success.”
Some people say that Asian companies find it incredibly difficult to build global brands because world markets and product categories are already dominated by powerful Western brands. Furthermore, they claim that Asian companies have to overcome deep and widespread consumer perceptions of sub-par quality.
There is some truth in these comments but the very nature of the fast changing business world can help Asian companies. There are no hard and fast rules anymore. Innovation no longer belongs to the privileged few. We now find Asian corporate leaders who are harnessing technology and ideas, both of which are freely available.
For example, Samsung and LG are at the forefront of innovation in consumer electronics but neither bothers to create costly new technologies with large R&D budgets. Instead, they take new technologies and beat the technology creators with speed to market, realizing that speed and agility are not strengths possessed by many of the existing global giants. Toyota can build a car in 50 minutes and continually innovate with design and product to give consumers what they want—and now is the world leader in automotive sales.
As for negative perceptions associated with quality, Asian companies are making similar strides forward. For example, the Chinese brand Haier has made inroads into the highly competitive US market for consumer durable white goods products. It is now the No. 2 brand in the world. But it took one CEO to line up his factory workers and take a sledgehammer to each defective unit to impress upon them the critical importance of product quality.
What should firms do?
Corporate thinking has to stop focusing rigidly on short-term profits and concentrate more on long-term brand building. Brands are assets that require investment and there has to be a better balance here. There has to be a top management mindset change also about the strategic role of what branding is and what building a brand really involves. A brand is not merely a logo, slogan or advertising but a relationship with every customer that needs to be carefully built and managed.
Behind all corporate success these days are solid brand strategies with clearly defined brand visions, values, positioning statements and plans for fulfilment. Brand strategies have to be brought to life by people and the development of a brand culture is vital if companies are to deliver on the messages projected by market communications. Brand successes and failures are linked directly to levels of consumer delight and consumers want new things fast. The great brands of the future will be those that consistently generate emotionally engaging and innovative products and experiences. In India, some companies such as Wipro and Infosys Technologies realize this and have used branding to help gain international status.
For Asian companies wishing to create sustainable, profitable global market positions, branding is the road to travel. This is the strategy missing from many boardroom discussions in recent years — yet it could have saved a number of firms in adverse situations. With more turbulence on the way, strong brands built on innovation and speed to market will be essential for survival and sustainability in the 21st century.
Paul Temporal is a visiting fellow at Saïd Business School and associate fellow of Templeton College, University of Oxford. He is a leading global expert on Asian brand creation, development and management.
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