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The Humbling of Brand USA

October 01
2011

The brand size and strength of the nation and its companies are in a free fall, a leading brand-valuation firm says.

Looking at the United States as a brand, how much is that intangible asset worth? According to one educated guess, $1.2 trillion less than it was five months ago.

That's from U.K.-based Brand Finance, which claims to be the world's largest brand-valuation service. Corporate customers use the firm to calculate the worth of their branded businesses, to provide insight on how to allocate resources so as to best grow such businesses, and to value the intangible assets of acquisitions.

Brand Finance also rates the value of "national brands," or the total worth of all branded products and services from companies based in each country, including an incremental amount attached to being from a certain country. Brand USA, which was valued at $12.6 trillion in April of this year, plummeted to $11.4 trillion as of September 1.

The measurement uses data from the Organization of Economic Cooperation Development, the World Economic Forum, and Swiss business school IMD. The valuation also takes into account national gross domestic product, broken down by primary revenue sources (agriculture and other commodities), secondary sources (manufacturing), and tertiary sources (services). The number crunching produces an estimated royalty that would have to be paid to the country, plus royalties to each branded business, in order to license their brands, and applies those royalties to present and future revenues in order to arrive at a net present value.

That is a size measurement, but Brand Finance separately rates the strength of each national brand, which factors in the country's infrastructure (including education, in addition to traditional elements like roads and bridges), brand equity (a measure based on market research), and economic growth.

While U.S. brand value remains approximately four times the size of its closest trailers, Germany and China, its brand strength has spiraled from 5th a few years ago all the way to 17th, hampered by inflation, cost of capital, reduced volume of capital, higher unemployment, and declining image abroad.

As to the latter, Brand Finance CEO David Haigh says: "As a Brit, I hesitate to go around criticizing America. But the fact is that a number of unfortunate foreign-policy decisions, the economic crises, Enron [and the other corporate scandals], the banking crisis, and now the debt downgrade have not helped people's perceptions of America. Anyone who underestimates America is a fool, and it probably will rebound. But the last few years, it's been on a downward track."

Of Standard & Poor's downgrade of U.S. debt, Haigh opines that it should have come long ago. "I mean, they do owe $14 trillion," he notes.

The United States is not the only country on a downward track, though. Brand Finance calculates that this year's renewed economic crisis has caused the value of intangible assets worldwide to sag by $6.2 trillion since January.

Meanwhile, in the firm's newest assessment of the brand value owned by individual companies worldwide, Apple has streaked to second place, from 20th in January 2010 and 8th as recently as January of this year. The ranking is volatile overall. For example, Wal-Mart has fallen from first to fifth over the past 20 months, opening the door for Google to take the top slot. And just since January, Bank of America has sunk from 6th to 14th, with HSBC taking over as the strongest bank brand, in the 10th position.

Other companies in the current top 10 include Microsoft, IBM, Vodafone, General Electric, Toyota, and AT&T.

The Economy | September 01, 2011 | CFO.com | US

David McCann  

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Top Economist to CFOs: Get Happy

November 01
2010

Gloom among finance chiefs about the state of the economy doesn't square with the reality of current trends, attendees at CFO Rising are told.

David McCann - CFO.com | US

October 26, 2010

Although CFOs may be mired in pessimism about the economy, in fact "the cup is more than half full," a leading economist told attendees at the CFO Rising conference in Las Vegas on Monday.

While the U.S. economy will grow no more than 2.5% annually for the next two or three years, that will buy enough time for the world's emerging markets — which are already providing a majority of demand growth — to save the day, said Raghuram Rajan, a professor at the University of Chicago Booth School of Business and former chief economist of the International Monetary Fund.

"Even though the fiscal stimulus is ending, and though the inventory rebalancing that gave companies a kick this year is ending, I think the probability of a double-dip recession is very small," said Rajan in his keynote address. "There is tremendous opportunity building up in the world economy. It's not a time to stretch too far, but it's a time to start becoming more optimistic."

That sentiment could hardly be farther from the outlook held by many finance chiefs. According to the latest quarterly Duke University/CFO Magazine Global Business Outlook Survey, which polled 937 CFOs in early September, 57% of U.S. CFOs are less optimistic about the economy than they were last quarter, while only 14% are more optimistic.

Indeed, Rajan did sound a few cautionary notes. Because of the high level of debt that consumers have taken on, the U.S. economy will be limited to modest growth in the next few years, he said, no matter how hard the Federal Reserve pushes its monetary policy or whether Congress finds room for additional fiscal stimulus after the midterm elections. Also, it remains to be seen whether Europe will avoid another major debt crisis, said Rajan.

And longer term, while emerging markets are expected to be delivering the majority of the gross world product within 10 years, there undoubtedly will be bumps and hiccups along the way. "There are reports saying these countries are going to grow in a straight line for 50 years," said Rajan. "That is not going to happen. There will be crises from overinvestment and overconsumption, especially in countries that rely on a lot of foreign debt."

On the other hand, large U.S. banks look like they will remain healthy for the foreseeable future. Even more important, fears that a sustained, destructive period of deflation are on the way are probably groundless, Rajan said. For one thing, China and some other emerging markets are already experiencing some capacity restraints that will produce inflationary pressures. For another, in a country like the United States, where there is high outstanding debt and politicians can't agree to either cut expenses or raise taxes, the fiscal situation may assert dominance over the market situation. "At some point the markets are going to take fright and there will be inflationary expectations," predicted Rajan.

He speculated that if Republicans win one house of Congress in the midterm elections, there could be gridlock on fiscal policy as both sides blame each other and neither wants to allow any movement. But if the GOP were to win both houses, said Rajan, "they would have a responsibility to show that they were part of the solution, and maybe we'd actually get some progress."

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MIT Sloan CFO Summit Panelist on FOX Business Today

November 16
2009

FOX Business' Dagen McDowell interviewed Eric Spitz, CFO of the Narragansett Brewing Company, today. Here is a link to the segment.

The interview highlighted the benefits of social media for his small company competing with larger ones. He notes that social networking is a strong area of concentration for his company; it is a critical tool to engage with consumers and get his company's brand out in the marketplace.

Eric is participating on the "Social Networking for the CFO" panel taking place at 3:00 pm during the Summit this Thursday.

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New Economic Data and Keynote Panel on Competitive Position in an Economic Downturn"

November 09
2009

It will be interesting to hear the strategies and responses to the economic times at the up coming key note panel: "Strengthening your Competitive Position in an Economic Downturn"

Recent unemployment figures inched up to 10.2 percent indicating a lack of faith in the economic recovery and consequent lack of hiring.  Deeper into the figures reveals that unemployment for college graduates and professional management dropped slightly in the same period to 4.7%.

Temporary employment enjoyed the largest increase with 34,000 new hires in the same period.  Many pundits are stating that the temporary hires are a leading indicator and is indicative of a broader hiring rebound soon to come.  

I asked Bob Badavas, who until recently was President and CEO of TAC Worldwide, a leading provider of Engineering staffing, IT staffing and workforce management solutions, what he thought the increase in temporary workers meant.   He responded "things need to get done and companies are unwilling to commit to a full time workforce at this time. At the same time I would say that the # of new job orders, i.e. companies looking for talent, is increasing, which is a positive sign. I believe companies will, coming out of this recession, look to a more variable workforce in the years ahead...things need to get done, competitive edge needs to be sharpened, etc but with the availability of talent companies may not move aggressively to shore up their 'permanent' workforce." 

How our panelists are meeting the challenge of todays economic uncertainty and how they expect to respond in the near future will be an enlightening discussion.

 

George Emmanuel
MIT CFO Summit Organizing Committee
gemmanuel@alum.mit.edu
 

 

 

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Most CIOs say company policies ban social media in the workplace … what do CFOs Think?

October 27
2009

A recent Baseline story examines the results of a survey of 1,400 Chief Information Officers and their positions about social networking. More than half (54%) say their company policy prohibits employees from using sites such as Facebook and Twitter while at work. It is seen as a “time-waster,” affecting productivity.

Wonder what participants of the “Social Networking for the CFO" track think of these findings? Is it valuable? Does it matter what kind of company you are? What industry you are in? Your size – if you are public or private? Or is it a must-have since communications with customers and investors is changing instantaneously?


Do CFOs see other benefits or value than their CIO counterparts?


Here is a link to the Baseline story.


Please tell us your thoughts.

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Bernanke's talk in Wyoming

August 24
2009

An interesting closing in Bernanke's address on Friday (8/21) was his stressing the need for stricter oversight of companies that could cause widespread disruption to the financial system and a process to wind down globally interconnected companies like the federal reserve does for failing banks.   This seems like a potential landmine of regulation and conflicting goals of growth vs. constraint. 

 

George Emmanuel 

Coordinating Committee for the MIT Sloan CFO Summit

 

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