Asian firms need better brands

22 November 2010

HONG KONG: Companies in Asia need to build brands with international potential, as these "must-have assets" hold the key to their long term survival, a report has argued.

"The region has spawned countless large multinationals … But few of these companies have managed to build globally-recognised brands," the Economist Intelligence Unit argued in a new report.

While Japan's Toyota and Sony, Korea's Samsung and Hyundai, Singapore Airlines and Hong Kong's Esprit command such a status, representatives from China, India and Indonesia are notable by their absence.

The growth of the Asian middle class, outside Japan, from 570m in 2010 to 945m by 2015, and slow demand in the West has accelerated the impetus to create brands over exporting low-cost goods.

Singapore's Banyan Tree Holdings, previously a conglomerate making products from fridges to trainers, has morphed into a luxury hotel and leisure chain during a 20 year period.

"To build a strong, sustainable business, you need to have proprietary, absolute advantage," said executive chairman Ho Kwon Ping. "There are really just two types of proprietary advantage: technology and brands."

China's BYD similarly moved from commoditised telecoms parts to automotive, but while it trades in 50 countries, mostly emerging, some perception problems persist.

"American consumers are happy to buy Chinese computers and Chinese DVD-players, but with cars it takes much longer to build trust," said Paul Lin, BYD's head, international brand building.

Korean electronics specialist LG might serve as a model, having ramped up its efforts based around the tagline "Life's Good", in a competitive sector boasting numerous powerful multinationals.

"Historically, we've had great products, but a weak brand," said cmo Dermot Boden. "You have to bring brands to life at a local level, but within a consistent framework ... over the long term."

The EIU estimated it took 40 years for Japan's Nissan, Panasonic and Fujitsu to gain acceptance abroad, and 25 years for Korea's Samsung and Kia to reach the same stage.

Alibaba, an online B2B marketplace, has attracted 53m customers from 240 regions and countries since launching in China in 1999, aided by a name and purpose with universal resonance, said ceo David Wei.

"Advertising is an important part of building a brand, but it is only a small part," he suggested. "The biggest part of branding is understanding and defining how you deliver value to your customers."

Thanks to globalisation and digitisation, the EIU predicted it could be just 15 years before brands in modern Asia's leading nations succeed overseas, particularly as the economic balance tilts to their home region.

Osim, a Singaporean healthcare retail operator, bought American rival Brookstone in 2005, but reduced its US focus in the downturn.

"The Brookstone brand is coming back now and looks healthy," said chief financial officer Peter Lee, "but our main focus has shifted. We're all about China these days."

New models may equally be evolving, as shown by India's Tata Group, which owns carmaker Jaguar, Corus Steel and Tetley Tea.

"The Tata brand is unusual in that it is not defined by a product or a set of customers," said Tata Sons'
executive director, R Gopalakrishnan. "What defines our brand is a commitment to responsible capitalism."

Infosys, the Indian IT services provider, also emphasises its "corporate soul" rather than pursuing a single goal.

"Thirty years ago we were doing completely different things to today," said global head of branding, Aditya Nath Jha.

"In another 30 years we'll be different again … But the corporate soul is always there, unchanging, in the background."

Data sourced from Economist Intelligence Unit; additional content by Warc staff