Nation branding: A holistic perspective

Brand Finance’s Annual Global Nation Brand Analysis

Prologue

Over the past three years, nation branding has received an enormous amount of coverage in Sri Lankan newspapers. Whilst some of these are based on the need to provide a marketing approach to building a nation, and its brand; many of the articles focus on developing a theme (tag line) or stresses the importance of communication, which is highly superfluous.

The core essence of a nation branding exercise is firstly for governments to understand how national reputation is built. Secondly, having understood that, it is necessary for governments to act in accordance to those findings in areas which have the most impact on reputation. Hence, actions in relation to governance, legislation, regulations and resource allocations etc are more important than marketing or communications. And finally, it needs to be linked into relevant sectors within the nation (what Brand Finance calls the Nation Brand Impact framework, which is explained later) which can then result in growth in GDP.

The commonly held view is that through branding and marketing techniques that one can manipulate the perception of the nation. Nothing is further from the truth. As Simon Anholt an expert on nation branding says, “Nations are judged by what they do and what they make, not what they say about themselves. So nation branding is a wicked waste of taxpayers’ money and shouldn’t be tolerated!”

Thus, nation branding should be about setting a strategic course across all aspects of the nation, leading to establishing the areas of priority and focus, putting in place the right governance structures and legislative systems to be able to build the reputation of a nation.

Good governance is at the heart of building the base of a nation’s reputation, and unless our Government can live by this, it is not something that should be embarked upon lightly.

People will always form perceptions of a country based on what they have known about it for many years, sometimes even as children. This could be what they were taught at geography or history lessons, what they see on the media and the international friends they make. Disparaging remarks from close friends about his or her country (think Diaspora here!) will be more powerful than billions being invested in marketing.

Finally, it is not only the Government, but the people of this nation also need to be ready and outward looking to embrace nation branding. Reflect upon this as you read the education initiative being undertaken in Qatar in the article below. Is this something that FUTA (Federation of University Teachers Association) would support?

This is the complexity of nation branding. And the Brand Finance approach to this complex exercise is to simplify the process by breaking it down to the important components and adopting a step by step approach.

Some of the major highlights from the 2012 Brand Finance Nation Brand Report are published here.

For the complete report go to http://www.brandfinance.com/knowledge_centre

Brands and nations

 

A strong brand has become a defining feature of success in the current economic climate. Worldwide hyper competition for business, combined with an increasingly cluttered media environment, means that a clear strategic approach through a properly managed brand can provide the crucial leverage needed to thrive.

The financial uplift provided to a product or corporation from a strong brand is well known, and companies invest heavily in protecting their brands.

 Nations can adopt similar techniques to capitalise on the economic growth that comes first with a proper product and then positioning of a nation brand.

All nations should be working to actively realise this potential.

The Brand Finance Nation Brands 100 provides a comprehensive report on the world’s leading nation brands and presents an analysis of the impact that a country’s reputation and image has on foreign consumers and investors.

This report combines a wide range of economic, demographic, and political factors, and is based on in-depth research by Brand Finance’s global network of offices.  Each nation brand has been accorded a brand rating: a benchmarking study of the strength, risk and future potential of the brand as well as a brand value: a summary measure of the financial strength of the brand.

The brand of a country has a direct impact on the wealth of the nation and its ability to compete and grow in the global economy.  Brand Finance’s research shows that a strong nation brand can substantially improve the GDP of a nation with a focused nation brand strategy. Brand Finance’s three stage development strategy examines and offers solutions for nations at macro and micro levels to increase investment, tourism and exports.

About Brand Finance

 

Brand Finance Plc, the world’s leading brand valuation consultancy, advises strongly branded organisations on maximising their brand value through effective management of their brands and intangible assets. Founded in 1996, Brand Finance has performed thousands of branded business, brand and intangible asset valuations worth trillions of dollars.

Its clients include international brand owners, tax authorities, Intellectual Property lawyers and investment banks. Its work is frequently peer-reviewed by the big four audit practices and its reports have been accepted by various regulatory bodies, including the UK Takeover Panel.

Brand Finance is headquartered in London and has a network of international offices in Cape Town, Amsterdam, Athens, Bangalore, Barcelona, Colombo, Dubai, Geneva, Helsinki, Hong Kong, Istanbul, Lisbon, Madrid, Moscow, New York, Paris, Sao Paulo, Sydney, Singapore, Toronto and Zagreb.

The Brand Finance Nation Brand Impact framework

The Nation Brand Impact Framework identifies the four segements that enable countries to identify, build and unlock the potential economic value within their nation brand. These four segements each have a crucial role to play in leveraging and improving a nation brands ability to enhance economic GDP growth.

The Nation Brands League Table

Brand Finance’s Nation Brand 100 measures the strength and value of the nation brands of leading countries using a method based on the royalty relief mechanism that Brand Finance uses to value the world’s largest companies. The report provides each nation brand with a measure of its brand strength and a valuation of its brand value.

Each nation brand is assigned a rating between AAA (very strong) to DDD (failing) in a format similar to a credit rating. This letter grade is the result of Brand Finance’s Brand Strength Index (BSI); a measure based on scores in the Nation Brand Impact segments of Investment, Tourism, Product, Talent and a general segment.

These segments are categorised as inputs, throughputs and outputs each worth 33% of the overall BSI.

Inputs are factors that can be directly controlled by the nation, throughputs are factors of internal and external reputation and outputs are measures of current performance. The BSI is based on factors such as the quality of a country’ s workforce and ability to attract foreign talent, perceptions of its quality of life, and its projected GDP growth. Brand Finance uses a combination of government statistics, consensus forecasts, and analyst projections to quantify these variables and create an overall brand rating.

Valuation

Nation Brands are also quantified by total value using a royalty relief method that quantifies the royalty that would be payable for a brand’s use if it were controlled by a third party. The royalty rate is precisely calculated based on different sectors of the economy, and then applied to projected GDP over the next five years. A discount rate is then applied to this total to account for the time value of money and associated risk. This result quantifies the value that the brand brings to the economy.

What difference does a nation brand make?

A strong nation brand helps in differentiating a nation’s output and gives it an advantage in competing for financing, top talent and tourism.

The nation brand can be leveraged by sub-brands within a nation, both public and private, to grow GDP and to help develop resilience in a nation’s industries during a downturn. It allows for positive connotations from products and services to support one another, easing entry for a nation’s companies into new markets, and allowing greater ease in developing a breadth of offerings.

Increased GDP can be achieved as a result of improved nation brand management. This increase comes from various sectors and industries across an economy, which makes gaining a segmented understanding of a nations brand health, risks and opportunities essential.

Brand Finance’s proprietary Nation Brand Impact framework reviews four segments which are crucial to a nation – Investment, Tourism, Product and Talent. These segments cover areas where a nation brand can enhance a country’s GDP growth.

The construction of the Brand Strength Index (BSI) and through it the Brand Value league table is a multi-step process in which Brand Finance captures a high level image of where the nation stands in its brand development and its place on the world stage relative to other nations.

The first step in the construction of the BSI is the collation of numerous international data sources to provide comparative data for all nations. Brand Finance calculates the strength of 142 nation brands in using a ‘balanced scorecard approach’. The scorecard benchmarks each nation across 147 nation brand attributes. The strength of each nation brand is expressed as an indexed score out of 100and represents how well the nation brand is being implemented against its peers. This information is then analysed using brand valuation tools that were adapted from valuation models used for corporate sector brands and intellectual property.

This model incorporates not only the strength of individual brand components but also the general impact and size of a nation’s output, trends in the nation’s GDP growth, its overall development and development within specific segments.

The BSI analysis provides the direction that Brand Finance uses within the three stage development strategy. This analysis explores in diagnostic and granular detail the impact of the four segments within a nation brand.

The strategy which comes from this analysis is more than simply valuing the brand. Combining visioning and stakeholder engagement with rigorous analysis one can develop solutions to build a nation brand.

Case Studies

Bringing Turkey’s best to the world: Turquality

A world class brand can act as a soft power ambassador for a country and bring with it both an increase in a nation’s brand value as well as investment and business partnerships for other companies within the nation. This is often an organic process, with the development of world class brands such as Nissan, Toyota (amongst many others) in Japan arising and developing naturally from improving manufacturing expertise.

Actively developing the intersection between company and nation’s brands is not new, with politicians regularly travelling on international trade missions. However Turquality, Turkey’s international branding program, is approaching it in a professional and a comprehensive manner.

The Turquality program is designed to support Turkish brands to improve their quality and international recognition, as well as the international perception of Turkish production as a whole. Turkey despite its growing economy and burgeoning regional power still suffers issues with its image abroad.

Turquality was launched in 2005 to develop and promote Turkish brands. Starting initially with textiles, an area of strength and including the highly successful Mavi brand of jeans, it now covers 80+ companies and everything from industrial machinery to jewellery.

Turquality is not simply a branding program but rather one that works to develop all aspects of the member companies. It helps define strategic business plans for the companies, provides worldwide market intelligence and metrics to target markets, and supports the development of executives and middle managers through a specially designed executive MBA.

Further business development is available through a consulting subsidy program, where approved consulting companies’ charges are supported 50% by the Turkish government, allowing worldwide expertise to advise each company where and how they need it. Vision seminars with leading worldwide business leaders provide inspiration to the member companies.

Turquality has continued to expand the number of companies accepted into the program, showing it is having a positive impact on both improving quality with Turkish production as well as focusing these companies on international branding. It has also spun off the Turkish design awards to showcase the very best in industrial design in 2008 and beyond.

Brand Turkey is 19th in the world in terms of overall brand value. The results from Brand Turkey’s rankings in the Brand Strength Index paints the picture of a country with many crucial aspects, such as intensity of local competition and time required to start a business. But many others need improvement, such as degree of customer orientation, availability of scientists and engineers, image abroad and production process sophistication. The Turquality program is an excellent beginning to develop these areas.

The program is a truly world class plan to build enhance Turkish exports to the world by improving production quality and culture, and spreading Turkey’s reputation in the world.

Building domestic talent: Education City – A world class education in Qatar

For many countries ‘brain drain’ to major economies is a concern. In many cases educational institutions in developed counties help to fuel this, as their post-secondary institutions garner greater respect internationally than a prospective student’s home country. As a result of studying abroad students often end up settling outside of their home countries, resulting in lost innovation and expertise. The development of top quality educational hubs to help counteract this trend has been seen and Qatar’s Educational City is a world class example of how to develop such a hub.

Brand Qatar is 43rd in the world for overall Brand Value. The nation brand has seen large jumps in the past few years in the Brand Strength Index (BSI)rankings for metrics related to quality of the scientific research, level of collaboration in R &D and quality of the education system all now making it into the top 10.

Certain universities will always have an international draw for top students around the world, however Qatari students had few internal options in regard to their education, and nothing with the calibre of many American schools, leading to a large number of students travelling for post-secondary degrees.

Recognising both the need for high quality institutions that could provide a draw for students as well as the fact that time required to build up the institutional expertise and reputation was prohibitive for current goals Qatar founded the Education City. It provides a campus to host programs managed by top universities to their own standards, as well as act as a regional hub to improve the overall academic quality.

The Education City began development in 1995, with the first international institution opening its campus in 1998.Since then numerous other institutions have settled there, with a large teaching hospital under construction. The campus is still primarily for top US schools, though HEC Paris and University College London have also established programs there.

Beyond the universities the Education City also offers an Academic Bridging Program (ABP) designed to develop students with weak fundamentals in math, science and computer skills along with improving English skills. This focus is well placed as it is targets areas where Qatar is persistently weak within the BSI rankings. The ABP, along with the Education City acting as a hub for the SAT’s and other international testing programs, means that more than simply capturing talent from Qatar and the region it is acting as a training tool improving the skill base of potential students.

The Education City is becoming established and beginning to develop its potential. Its success in recruiting numerous prestigious institutions and their continued expansion of programs show that it is capturing top talent within the country and region as can be seen through the improved brain drain scores. There are also partnerships developing with technical colleges within the United States which will add to the range of expertise available to the country while adding a new class of student who will be able to consider staying in Qatar. It is a success, and similar arrangements can be seen developing in neighbouring countries.

The “Smart” Singapore Brand

Singapore is the flagship example of developing a nation brand and it has top results in all of the Nation Brand Impact (NBI) segments measured by the Brand Strength Index (BSI). In Singapore the nation brand and sub-brands are carried by the Singaporean Government, whose various Ministries work together to create and spread a cohesive story about Singapore internally and externally.

Singapore’s balance within the Nation Brand Impact framework

In the Nation Brand Index, Singapore’s BSI result are top three in the Investment, Product and Talent segments. These three segments are tightly linked together in producing success through development of knowledge intensive investment opportunities externally and internally, the training and education needed to support that, and the high quality production which results. The vision for Singapore’s nation brand can be seen as: being a world class city and international hub of high quality, innovation and knowledge intensive output. Singapore’s government has been highly successful in developing the experience and infrastructure required to support its positioning as highly skilled, unique producers.

Singapore’s output

Singapore’s GDP relies on foreign direct investment and demand for knowledge intensive goods and services. It is made up of primarily service industries such as shipping, banking and finance, international R & D and education. Production of high end manufacturing, in chemicals, biomedicine, electronics, and transport and precision engineering are also significant areas.

Investment

Brand Singapore’s Investment segment ranked 1st in the BSI in 2012 and is the crucial backbone of Singapore’s success. Singapore’s work in spreading the message about this segment externally attracts funds for research facilities, major regional offices and global headquarters. This external message is carried by the Economic Development Board through offices worldwide with the rest of Government supporting their efforts by streamlining visa applications, construction of a straightforward tax and R & D incentive system, and the active development of business parks.

Internally this segment of the nation brand is used to encourage the founding of new firms and the growth of established mid-sized ones. The internal component is tightly connected with the Product segment as the encouragement of internal investment and the development of internal companies are both led by the Standards, Productivity and Innovation Board (SPRING).

Tourism

Brand Singapore’s Tourism segment is ranked 6th in the BSI in 2012. Despite this relative weakness it is an area seeing increasing focus by the Government of Singapore. Promotion of tourism externally and coordination of investment and planning internally is handled by the Singapore Tourism Board, currently running the ‘Your Singapore’ campaign in markets worldwide.

Product

Brand Singapore’s Product segment ranked2nd in the BSI in 2012, and is led overall by the Ministry of Trade and Industry of which SPRING is a part. It provides the support necessary for the development of all of Singapore’s output in both service and manufacturing. This support ranges from the Energy Market Board’s involvement in developing the energy component of Singapore’s output to International Enterprise Singapore (IES), which helps to promote Singapore’s companies internationally. SPRING works to both spread information and skill training to encourage development as well as ensure that the quality of production is high.

Talent

Brand Singapore’s Talent segment is ranked 2nd in the BSI in 2012 and is led by the Ministry of Education and Ministry of Manpower. The Ministry of Education funds and develops the highly educated workforce which has driven investment in Singapore.

The Ministry of Manpower works to ensure that the best workforce is available for both internal companies as well as external investors. This ranges from skills training to recruitment of labour from outside of Singapore.

Brand architecture

The brand architecture of Singapore is in many ways quite similar to the structure of responsibility within Government ministries. As an example the goal of increasing Singapore’s manufactured exports is managed by the Ministry of Trade and Industry and is a tight integration between two of its agencies with the development of internal quality by SPRING and the promotion of that product internationally by IES.

An illustrative view of Singapore’s brand architecture can be seen below.

Sri Lanka’s performance continues to improve

The value of Brand Sri Lanka grew from $25.8 billion in 2011 to $30.7 billion in 2012, an increase of 18.9% year-over-year. The Brand Strength Index for Brand Sri Lanka saw an increase from 58 (A) in 2011 to 60 (A+) in 2012.

Brand Sri Lanka is now ranked 73rd by brand value up from 75th in 2011 in the brand league table and No. 16 amongst the Asia Pacific brands.

This year’s data set indicates that the Sri Lankan economy is showing strong development, with GDP growth levels remaining above 7.0% and unemployment levels remaining below 6%. The continued support by the IMF of Sri Lankan infrastructure development has also been a strong factor bolstering growth and driving Governmental initiatives. Recent government action taken towards simplifying the tax system and introducing tax incentives for investment have also served to boost the outlook of Brand Sri Lanka.

At an overall level, the international reputation of Sri Lanka is still suffering from the after effects of the cessation of hostilities in 2009, however the positive results of resettlement of displaced citizens and the clearing of ordnance has helped the international narrative begin to shift.

Brand Sri Lanka has shown steady improvement over the past four years with the significant reduction in internal tensions. There has been solid growth in the fundamentals of nation brand strength and value and based on the available data the projections for Sri Lanka’s future look good.

Sri Lanka should draw lessons from other countries, and it would be useful to review how they have excelled by focusing on specific sectors to build their reputation. Several interesting case studies that are relevant for Sri Lanka are Turkey’s focused initiative on building its exports and Qatar’s initiative on building its local talent through world class education.

Having fixed the fundamental issues that drive perception at a sector level, nations can then graduate to the national level, which is to build a holistic nation brand. Two very good examples of this can be seen through the Singapore and New Zealand examples, which are described here.