Another few millions on their Integrated Marketing Campaigns, for the sake of building brand equities.

As far as forecasts are concerned, they certainly seem bright with SIAM further claiming that despite the cyclical changes in the industry and economy as a whole, production figures for the passenger vehicle segment have appreciated (CAGR) by a stunning 15.6% during the past five years, to touch 1.22 million units in 2008-09. So while on one hand, we have a great growth story being written down in terms of domestic production and consumption, on the other, we have the much honoured Indian auto brands going places, our exports having grown at a CAGR of 30% in the past seven years, crossing 331,500 units during 2009 alone. But there’s the rub: no Indian auto brand has been featured amongst those most valued by either Millward Brown or Interbrand/BusinessWeek. Does this mean that names like Maruti Suzuki India Ltd. or Tata Motors, that are relatively unrecognised when it comes to brand value amidst global names, have nothing to worry about when it comes to brand-related payoffs? Strangely, even though the Indian auto brands are having a roll in a market, which according to the International Yearbook of Industrial Statistics 2008 released by United Nations Industrial Development Organisation (UNIDO), is ranked 12th in the list of the world’s top 15 automakers, various global researches across sectors strongly prove how brand value does matter when it comes to shareholder wealth and other financial implications. Prof. Natalya Delcoure of the College of Business Administration of the Sam Houston State University proved through her paper titled, ‘Corporate branding and shareholders’ wealth’ how “Corporations that own superior brands exhibit higher profitability and create shareholders’ wealth independent of economic downturns.” Using statistical analysis, she proved how, “Strong brands appear to have lower market risk and deliver greater returns to shareholders compared to the relevant benchmark.” Another empirical work by Professors Thomas Madden, Frank Fehle & Susan Fournier of Harvard Business School titled, Brands Matter: An Empirical investigation, testifies how “strong-brand portfolios significantly outperformed the market.” Their calculations showed how while the portfolio of strong brands “yielded an average monthly return of 1.98%, during the same time period, the benchmark portfolio on average returned 1.34% per month while the one-month Treasury bill returned 0.42% per month.” Further on, a 2001 Ernst & Young study claimed how “corporate reputation accounted for upwards of 30% of a company’s stock price.” A study by JPMorgan (in association with Interbrand) concluded that “on average, brands account for more than one-third of shareholder value. Brands create significant value either as consumer or corporate brands or as a combination of both.” Various other studies by academicians from Harvard and the University of South California, published in the book titled ‘Brands and Branding’, indicate that “companies with strong brands outperform the market in respect of several indices. It has also been shown that a portfolio weighted by the brand values of the Best Global Brands performs significantly better than Morgan Stanley’s MSCI index and the American-focussed S&P 500 index.”

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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