"It's now widely accepted that the CEO is the ultimate custodian of brand and reputation" says David Haigh, CEO, Brand Finance
London, UK (PRWEB UK) 27 February 2013
He has presided over the massive strengthening of the Samsung brand (now valued at US$58.7 billion) by a combination of advertising and marketing investment coupled with R&D and new products that added US$20bn to the brand in the last year, a 54 per cent increase.
In comparison, Tim Cook at Apple (US$87.3 billion) has presided over a 24 per cent increase in brand value, achieved despite the roller coaster ride the US electronics giant has had within highly competitive global consumer markets.
In contrast, several boardroom titans have presided over significant declines in brand value of over the last 12 months.
Commenting on the mixed fortunes of some of the world’s most valuable brands, David Haigh, CEO of brand valuation and marketing experts Brand Finance, says: “It is now widely accepted that the CEO is the ultimate custodian of brand and reputation. CEOs are increasingly focussing on ways of building brand strength and value.”
Click here for the full results of the BrandFinance® Global 500
Note to Editors
The full results of the BrandFinance® Global 500 and further analysis are published in the latest edition of World Trademark Review and on our website.
The methodology used in compiling the Global 500 uses a discounted cash flow (DCF) technique to discount estimated future royalties at an appropriate discount rate and to arrive at a new present value (NPV) of the trademark and associated intellectual property rights in order to compute brand value.
Royalty Relief Approach
The royalty relief methodology determines the value of the brand in relation to the royalty rate that would be payable for its use if it were owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value.
There is a six-step process involved in making the brand value calculations:
1. Obtain specific financial and revenue data.
2. Model the market to identify market demand and the position of individual brands in the context of all other market competitors. There are three forecast periods used:
- historical financial results up to 2012. Where these are not available using Institutional Brokers Esti-mate System (IBES), consensus forecasts are used;
- a five-year forecast period (2012-2016), based on three data sources (IBES, historic growth and GDP growth); and
- perpetuity growth, based on a combination of growth expectations (GDP and IBES).
3. Calculate the royalty rate for each brand by:
- calculating brand strength – on a scale of 0-100, according to the number of attributes such as financial, brand equity, market share and profitability, among others;
- using brand strength to determine βrandβeta® index score; and
- applying Brand Strength Score to the royalty rate range to determine the royalty rate for the brand. The royalty rate is determined by a combination of the sector of operations, historic royalties paid in that sector and profitability of the company.
4. Calculate the future post-tax royalty income stream.
5. Calculate the discount rate specific to each brand, taking account of its size, geographical presence, reputation, gearing and brand rating.
6. Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value – ie. the brand value
These are calculated using Brand Strength analysis, which benchmarks the strength, risk and future potential of a brand relative to its competitors on a scale ranging from AAA to D. It is conceptually similar to a credit rating. The data used to calculate the ratings is taken from a variety of sources including Bloomberg, annual reports and proprietary research by Brand Finance. Note: The AAA to A ratings can be altered by including a plus (+) or minus (-) sign to show their more detailed positioning.
All brand values in the Global 500 are for the end of the year, 31 December 2012.
Brand Finance plc
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