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Spreading the Word
Companies in the Middle East are getting a crash course on the advantages of branding, thanks to global firms operating in the region.
February 28, 2011 3:38 by Eva Fernandes
In the region, however, there is a general perception that a very few brands have made to the global scene. Contrary to common perception, Wolff Olins’ Wright says there is a long list of global brands from this region, but many of them are niche products, places or people. However, there are very few global business brands from this part of the world. This is not a branding problem but a business issue because economic development came late to this region and partly because the strength of the oil and gas sectors can crowd out initiative and innovation in
other sectors of the economy, he says.
One of the other by-products of the strength of the oil and gas sector is abundant liquidity. Some of this is being channelled into buying brands, rather than building them from scratch. There are some honourable exceptions to this such as Emirates airlines, Qatar Airways and Etihad that are world-class brands by anyone’s standard, says Wright. There are some encouraging signs for the future. We are now receiving briefs from regional governments trying to stimulate economic diversification and innovation and from businesses trying to expand regionally and, in some cases, internationally. Watch this space, maybe the list of global brands from this part of the world will be longer in 10 years time, he says.
In Wright’s opinion regional brands such as Sheikh Mohammed, Dubai, Emirates, Qatar Airways, Queen Rania, Zaha Hadid, Sheikha Mozah, Al Jazeera, Jumeirah Group, Ski Dubai, Burj Khalifa and Kingdom Holding are among the brands that are recognized globally. On the regional level, he says, Almarai, MBC, City Centre, Chocodate, Patchi, Bateel, Orascom, Air Arabia, Fly Dubai and Emaar have built strong brand names in the Arab world.
The brand value of company and products help move the share prices in the right direction. Wright says various studies conducted by companies such as Brand
Finance, Interbrand, etc, show the brand and other intangible assets can account for a large part of the valuation of publicly traded companies. Not just companies such as Coca-Cola, but also engineering groups such as General Electric. The reason brands become valuable is precisely when they can influence customer behaviour and therefore profit, risk and growth, which are three of the drivers of share prices, he says.
One of the most effective ways to enhance shareholders’ assets is to build brands with strong brand equity, says Roll. Brand equity is the reputational asset that any successful business builds in the minds of customers and other stakeholders. Strong brand equity is also one of the main reasons why the market capitalization of a company often exceeds its book value, he says. The strength of the brand equity can therefore be an indication of future financial performance. On the New York Stock Exchange and Nasdaq, for example, intangible assets are known to account for 50 to 75 percent of the market capitalization of the listed companies, where the majority is accounted for by their brands. The market capitalization of corporations with strong brands clearly demonstrates the market is putting a premium on them, says Roll.
Although building brands is not an easy task, some of the challenges posed by the Middle East markets are unique. Wright says the gap between ambition and ability does seem more marked here than in Europe and America, barring some exceptions.
Wolff Olins describes itself as a branding business. Twenty years ago we described ourselves as a corporate identity firm. That is because in Europe and America branding no longer means identity. On a bad day it feels branding means identity, which in turn means logos, guidelines and so forth, Wright.