Winning the war for markets. Strong names break through trade barriers

ublished in Philippine Daily Inquirer, Business Features Section, May 15, 2009

As the world economy is likely to contract and advanced economies, from whom developing and emergent markets rely heavily, project less than a half percent growth, it is not surprising if the world’s highly industrialized nations protect their own.

Like the rest, the world’s wealthiest nations are affected by lesser foreign direct investments, decreasing options for stand by credits and development funds, decelerating demand for commodities and services and plunging foreign remittances.

Protectionism comes in many forms like raising trade tariffs and other barriers to free trade, subsidies and financial assistance to highly inefficient local companies and domestic industries, legislations that substantively provides tax incentives for locally produced goods and services, excessive dumping, among them.

While leaders of the G20 member countries pledged to fight anti-global trade policies in their last meeting in 2008, the first quarter report of the World Trade Organization (WTO) was no consolation when it released its findings in March 2009 that 17 of the G20 members have failed to keep their promise.

The G20, first established in 1999, is made up of finance ministers and central bank governors of 19 countries, whose aim is to provide a forum and open dialogue between industrialized and developing economies to discuss key issues that affect global trade. The G20 membership include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States of America and the European Union. Also participating in the G20 economic dialogue is the Managing Director of the International Monetary Fund (IMF) and the President of the World Bank.

Like Damocles sword, protectionism hangs

In a move to prop domestic economy, Argentina has imposed tariffs on a variety of goods including shoes, appliances, machinery, processed food, steel, iron and textile. Paraguay, Ecuador and the United States, will implement a Buy National campaign providing a substantive competitive margin and preference for domestic goods and services over imports. The more populous countries that advanced nations salivate for like Indonesia is likely to support restricted entry, India an outright ban and China with more stringent standards.

The degree of protectionism depends on the speed, depth and length of time that a recession is likely to stay. So far indications of a recovery are not yet in sight as world industrial production continue to fall at a 20 percent annual rate; unemployment figures rise, now estimated to be 50 million worldwide, due to global recession; and global demand for commodity products and services are reduced.

Why is there a need to brand

Branding cuts across trade barriers worldwide. Many of the world’s most successful businesses have been fueled by single or multiple company owned brands, most of which have cut across geographical barriers. In many instances, customers’ needs are universal and when a single brand comes to be identified with being responsive to a particular need, the chances for this brand to be accepted across several markets is high. Zara is among the world’s most valuable and youngest brand of retail apparel originating from Spain and now with a brand value of $5.95. Zara’s unique proposition is its ability to bring stylish and trendy apparel from design to retail at quick speed, most often in less than a month in contrast to the average industry rate of six months.

Top 15 World’s Most Valuable Brands 2008

BrandCountry of OriginBrand Value (in US$B)
Coca ColaUSA66.66
Mercedes BenzGermany25.57
Hewlett PackardUSA23.50
American ExpressUSA21.94

Source: Interbrand 2008

Brands are measured by its own unique value proposition and not by the originating country. Brands, protected by trademarks and patents, are identified as legal assets of business owners, and go beyond the country of origin. Thus, when trade barriers are set, they are immune from the same fate that commodity products and services suffer. Business owners with brands have the option to partner with stakeholders in other global markets who share the same passion for building and sustaining the brand in their home country.

In the last decade, more and more valuable brands have emerged from Asia in categories that are highly competitive worldwide. These include car manufacturing, appliances and technology.

World’s Most Valuable Brands 2008 From Asia

RankBrandCategoryOriginating CountryBrand Value (In US$B)
21SamsungConsumer ElectronicsRepublic of Korea17.68
25SonyConsumer electronicsJapan13.58
36CanonComputer hardwareJapan10.87
40NintendoConsumer electronicsJapan8.77
72HyundaiAutomotiveRepublic of Korea4.84
78PanasonicConsumer electronicsJapan4.28

Source: Interbrand 2008

Branding domestic products reduces the entry and proliferation of dumped foreign brands, products and commodities in developing countries. Developing nations are favorite dumping grounds for excessively manufactured foreign brands and commodities, also fueled by a prevailing colonial mentality among a massive customer segment. The right branding for domestic products and services guarantees a perception of quality that is parity or superior to foreign brands thus, creating fair if not more difficult competition for dumped foreign brands.

Brands provide for better trade, gross and net margins over commodity products and services that make it more appealing for trade partners worldwide. When commodity products and services are traded in open markets, trade buyers perceive that everything is generic and there is no one differentiation from one supplier to another. Thus, it becomes illogical for one supplier to acquire a better margin than the others. Commodity trade buyers take advantage and resort to pushing down prices at the lowest possible rate, never mind if fair trade is compromised. Not so, with branded goods and services where trade buyers are largely careful in the manner they carry the negotiations.

Brands bring pride of ownership on the negotiating table and a level of national patriotism for its owners. Provided business owners carry the same trade name, trademark and legal patents worldwide; knowingly, there is that innate feeling that one has done one’s country proud by contributing a Filipino-owned, designed, manufactured and marketed brand into the global free trade market.