Brand is one of the many intangible assets which drive profitable growth
London, UK (PRWEB UK) 18 February 2013
The Global 500 analyses financial and brand performance of leading brands across all major business-to-consumer (B2C) and business-to-business (B2B) sectors, making it the most extensive brand valuation study of its kind in the world. Leading brand valuation and marketing experts, Brand Finance, provide the following analysis.
Apple pips Samsung
Electronics giant Apple had a roller coaster year in 2012 -- its enterprise value rocketed from US$350 billion to US$600 billion only to dip to US$400 billion in the space of 12 months. Despite a raft of new product launches such as the new iPhone and iPad, the company continued to lose ground to Samsung and it was only its sheer size that helped Apple maintain its lead position over its smaller but more nimble South Korean rival.
The net result for Apple’s brand value was a rise from $70 billion to $87 billion but a slight weakening of its brand rating from AAA+ to AAA.
The mighty Apple brand is supporting the company as it arguably loses its competitive edge to Samsung in the wake of the launch of Galaxy S3, the most pre-ordered smart phone of all time. Samsung’s brand value leaped by a staggering 54 per cent (US$20.6 billion) and more new digital consumer products are expected to be launched during 2013.
Commenting on the findings, Brand Finance CEO David Haigh said: “Brand is one of many intangible assets which drive profitable growth. Technology, contractual, human capital and customer intangibles as well as general goodwill all drive overall corporate value. With revenues in the tens of billions, Apple and Samsung are slugging it out for global brand supremacy and are vying with each other to create strong ‘customer love’ for their brands. However, there are other brands in the Global 500 that though they may never challenge the brand value giants, are nonetheless extremely powerful and well-loved.”
A case in point is Ferrari, owned by Italian car giant Fiat, that achieved the highest brand rating in the Global 500 despite being a niche sports car manufacturer with a much smaller enterprise value than many of the other global brands in the Top 500.
“I often think that the Italian genius for car design is based in the language of craft,” comments world renowned design critic Stephen Bayley. “Theirs is a workshop vocabulary with words for a car’s features and contours many of which simply don’t exist in English. If you have a word for it you can draw it. That word is beauty,” he says.
A key driver of brand value is revenue. Clearly Ferrari cannot compete in terms of the size of the multi-national brands. However its brand rating takes into account other financial metrics such as net margins, average revenue per customer, marketing and advertising spend as well as qualitative measures such as brand affection and loyalty.
Taken together, Ferrari outperforms not only rival auto manufacturers BMW, VW, Mercedes Benz, Lexus and Audi but all brands worldwide.
Ferrari today announced record results for the first nine months of 2012, recording an increase in net profits by 7.6 per cent to €152.4m on a turnover of €1.76 billion.
David Haigh concludes:
“As the Global 500 powerfully demonstrates, customer expectations of brands are much higher than ever as trust becomes a critical business issue in a time of increased economic uncertainty. To fulfil such expectations, brand owners must continue to innovate whilst at the same time deliver quality with value, choice with social responsibility and sustainability with growth.”
Consultant Director of Public Relations
Brand Finance plc
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Note to Editors
The methodology used in compiling the Global 500 uses a discounted cash flow (DCF) technique to discount estimated future royalties at an appropriate discount rate and to arrive at a new present value (NPV) of the trademark and associated intellectual property rights in order to compute brand value.
Royalty Relief Approach
The royalty relief methodology determines the value of the brand in relation to the royalty rate that would be payable for its use if it were owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value.
There is a six-step process involved in making the brand value calculations:
1. Obtain specific financial and revenue data.
2. Model the market to identify market demand and the position of individual brands in the context of all other market competitors. There are three forecast periods used:
- historical financial results up to 2012. Where these are not available using Institutional Brokers Estimate System (IBES), consensus forecasts are used;
- a five-year forecast period (2012-2016), based on three data sources (IBES, historic growth and GDP growth); and
- perpetuity growth, based on a combination of growth expectations (GDP and IBES).
3. Calculate the royalty rate for each brand by:
- calculating brand strength – on a scale of 0-100, according to the number of attributes such as financial, brand equity, market share and profitability, among others;
- using brand strength to determine βrandβeta® index score; and
- applying Brand Strength Score to the royalty rate range to determine the royalty rate for the brand. The royalty rate is determined by a combination of the sector of operations, historic royalties paid in that sector and profitability of the company.
4. Calculate the future post-tax royalty income stream.
5. Calculate the discount rate specific to each brand, taking account of its size, geographical presence, reputation, gearing and brand rating.
6. Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value – ie. the brand value
These are calculated using Brand Strength analysis, which benchmarks the strength, risk and future potential of a brand relative to its competitors on a scale ranging from AAA to D. It is conceptually similar to a credit rating. The data used to calculate the ratings is taken from a variety of sources including Bloomberg, annual reports and proprietary research by Brand Finance.
All brand values in the Global 500 are for the end of the year, 31 December 2012.