As Asia’s companies grow ever more internationally ambitious, the need for strong brands will grow significantly. Just as important, the shifting business landscape within Asia, particularly China and India, will also demand the use of stronger brands, according to "Brand and Deliver: Emerging Asia’s New Corporate Imperative," a new report from the Economist Intelligence Unit.
The report notes that in the past, Asia’s emerging multinationals could thrive without strong brands. In the future, they will need brands just to survive. Companies in emerging Asia have grown quickly into large businesses without using brands because they have been in the right place at the right time. Construction companies have benefitted from urbanisation and car companies from rapid motorisation. Banks have thrived in protected markets. Many others have seized on Western multinationals’ search for low-cost production. But this “brandless success” will not continue, warns the report. "Cost advantages are eroding, markets are opening and competition for customers is intensifying."
The transition to managing a branded business demands major changes in corporate thinking, organisation and staffing, says the report. Building and guarding a brand requires specific expertise—and companies will need to obtain this, if necessary externally. LG Electronics, for example, in 2007 hired its first ever chief marketing officer and first ever C-level executive from outside South Korea, notes the report.
To build successful brands, emerging multinationals will need to increase significantly their investments in research and development, marketing and design. This will require overcoming their traditional aversion to investment in intangible assets as opposed to plant and property.
"Today, businesses in emerging Asia have vaulting ambition. But they will find it difficult to succeed in 'going global' without a strong brand identity," says the report. It notes that Chinalco and CNOOC from China were rebuffed in their attempts to buy assets in Australia and the US partly because, in the absence of a clear identity of their own, they were viewed as merely extensions of the Chinese government. Indian Hotels Company was rejected in its attempt to associate more closely with Orient Express Hotels, in which it was the largest shareholder, because management worried that association with an Indian business would diminish the value of its own brand. Indian automakers found similar resistance when they announced plans to acquire Jaguar from Ford.
According to the report, branding strategy, as practised in the West, is not well understood in Asia. While the benefits of brands—both to customers and companies—are easy to grasp, the science of creating and managing them is far from straightforward. In emerging Asia, that science is a work in progress. According to leading branding consultants in the region, many companies regard brands as their reward for building a successful business. They often confuse branding with advertising. But a brand is more than just a name or a logo, and while marketing is an important part of branding, it is only one part. Companies need to think about quality, design, style and all other aspects of a customer experience that together make up the brand. Most importantly, they need to think about what will differentiate them from the competition.
"The experience of Japanese and South Korean firms shows that quality and safety are crucial to brand success. Many lessons can be drawn from the rise of Japanese and South Korean brands. Paramount is the need for product quality and reliability," says the EIU report.