English Artikel
How much is a brand worth?
Indonesia has become one of
the center points of Asian economic growth. As such, the country’s favorable
economy has attracted many foreign investors to seize opportunities by means of
investing in various sectors, from infrastructure, finance, consumer goods, to
technology.
The growing economy has also led to the emergence of local
investment firms, all of which
have capitalized on the many sectors that Indonesia’s
rich resources have to offer.
In many
cases, investors are perplexed with circumstances where they have to make such
decisions as to whether or not to acquire the business of their interest.
Regardless of
the business transactions they engage in, business players will agree that the value of a brand can
determine where the business is heading. In other words, a good brand has the potential to drive a
business forward.
At a glance,
a brand looks like a simple thing. In many cases, it
only consists of a few words, or even one word. But a brand is very powerful. And in some cases, the brand of a business
can be worth more than a product or service than a particular business has to
offer.
There is a question that
people may wonder. “How much does a brand cost?”
The answer
really depends on how you value your brand before you sell your product or
service. A strong and sustainable business is
not only driven by what is only in the balance sheet. But the brand of a
particular business should also be highly considered as an engine that propels
the running of the business.
Not only
does the brand create awareness that usually stays in the minds of consumers,
but the brand also has the power to drive consumer purchase intent. In
other words, a brand can increase a company’s profit.
Apple brand
is a good example. The brand has contributed to a high market share in the global
market. Apart from the quality of the products per se, what makes people prefer
the Apple brand for their laptop and/or smartphones is simply because it’s
Apple.
Do you know
how much the Apple brand is worth?
In early
February 2014, Brand Finance Global 500 put Apple in first position, as the
brand was said to be worth US$104 billion. Yes, this amount is just for the brand itself. The clear crystal reason is
simply that the Apple brand is what has seen this gadget giant climb to the top
of the IT industry.
The next
question is how do we figure out the value of a brand? There are various
approaches used to estimate how much a brand is worth. But this article will highlight the most known approach,
which is the royalty relief method.
This ISO certificate method determines the value of a brand based on how much
a company would be willing to pay the license of its brand, as if the company
did not own its current brand.
The royalty
relief method involves an estimation of a company’s future revenue attributable
to the company’s brand. Then, the method calculates a royalty rate that would
be charge for the brand’s usage.
In deriving the figure of how
much a brand is worth, the method only estimates the future value of a
company’s brand. So, the method does not reckon either past or present.
There are
other aspects that also need to be considered, such as brand strength, revenue
forecast and royalty rate.
All in all, using such an
approach as a royalty brand method would help investors and/or companies create
the bigger picture of the brand or entity they plan to purchase or establish.
It is essential for a smart
investor to have an eagle view on seeing a business outlook. And a strong brand
can undoubtedly help the investor drive the business forward.
The writer is deputy managing
director of Brand Finance Indonesia.
red = past tense
yellow = present
tense
purple = future
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