Brand Finance, the leading brand valuation and strategy consultancy, has released its annual report on the world’s 100 leading ‘nation brands’. Using a method more usually applied to companies, Brand Finance provides a comprehensive report on the world’s leading nation brands and the impact that a country’s reputation and image has on governments, investors, students and consumers.
Brand USA continues its domination of the Brand Finance Nation Brands report. Its $19.3 trillion brand value is more than three times that of second placed China, whose brand value comes in at $6.4 trillion. Though the actions of the US on the international stage are frequently in question and polarisation and deadlock beset domestic politics, decades as the preeminent force in finance, entertainment, democracy and technology means the US should continue to top the ranking for years to come.
GDP data forms a significant part of the calculation of nation brand value, another reason the US, with its huge economy, dominates. However the final figures are calculated by combining the GDP data with more qualitative information drawn from four ‘pillars’; Goods & Services, Tourism, Talent and Investment. The scores for each are combined to create a score out of 100 (and a matching letter grade on a scale from AAA+ to D similar to a credit rating) that represents nation brand strength. Looking at nation brand strength in isolation can in some ways be seen as the truest reflection of a government’s guidance of its nation brand, as the inherent GDP advantage of larger countries is removed.
Germany’s score of 76 (75.84 to be precise) means it has just pulled ahead of neighbour Switzerland, to become the world’s strongest brand. Despite fairly flat growth of late, Germany remains Europe’s powerhouse with an almost unrivalled reputation for quality manufacturing and efficiency. Unemployment is falling and the country’s World Cup win has, to a limited extent at least, generated a positive ‘halo’ effect. In terms of overall nation brand value, Germany sits in third with a brand value of $4.4 trillion.
The UK has enjoyed another surge in nation brand value as economic growth outstrips most other European states and as the GREAT Britain nation brand campaign continues to pay dividends. By far the biggest factor however has been the outcome of the Scottish independence referendum. The growth in the value of Brand Britain has been somewhat muted over the last two or three years in the run up to the referendum. Some investors have been put off by the uncertainty around the result and analysts attached a greater risk premium to the country’s growth. Had Scotland voted yes, the centuries of brand equity built up around the UK Nation Brand would have been lost. Scotland has developed a robust nation brand even within the greater UK, however what was left of the UK would have had a tricky task to stabilise its international reputation and to re-establish a credible identity. The UK total brand value has risen 20% to $2.8 trillion.
Qatar is this year’s fastest growing nation brand. Alleged corruption surrounding its bid for the world cup has focussed attention on Qatar’s social policies and political entanglements. However these reputational issues have by no means overwhelmed the emirate. For the region it is particularly stable and has been afflicted by neither civil war, nor conflict in neighbouring states; a rarity in today’s Middle East. Home grown brands such as Ooreedoo are flourishing internationally, laying the foundations for success beyond the era of liquefied natural gas. Total nation brand value is up 39%, making Qatar this year’s fastest mover.
The falling price of crude oil threatens to play havoc with Russia’s balance of payments and potentially destabilise the Putin government. The invasion of Crimea and support for rebels in Donetsk and Luhansk has alienated many foreign governments, investors and tourists and has led to the imposition of economic sanctions. The combined effect of all these issues has meant Russia has lost its status as an ‘A rated’ nation brand, a new BSI score of 49 gives it a BBB rating. Overall national brand value is also down, from $1.26 trillion to $1.17 trillion, which sees Russia fall behind Italy and into 12th place.
The impact of the conflict on Ukraine has been even greater however. Though a turn towards western values of transparency and democracy has certainly had some impact in improving Ukraine’s reputation in Europe, the US and beyond, continuing instability is a major problem for its nation brand. In losing Crimea, Ukraine has lost not just a significant landmass and economic base, but the better part of its tourist industry. With a continuing war in the east, as sympathetic as western investors would like to be, Ukraine remains a very risky prospect. A perhaps unsurprising consequence is that Ukraine has suffered the most dramatic drop in nation brand value of any country this year; total nation brand value is down 37% to $80 billion.
Brand Finance CEO David Haigh comments, “The states of the 21st century are participants in a global marketplace, with intense competition for tourists, students, the best workers and investment. The results of this year’s Brand Finance Nation Brands report show the advantages that a strong nation brand can confer; the effect of a country’s image on the brands based there and the economy as a whole makes a nation brand the most important asset of any state. Governments, trade bodies and businesses must take steps to ensure that their nation brand is strategically appropriate, well-managed and regularly monitored in order to maximise the benefits.”
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for more than 25 years, Brand Finance evaluates the strength of brands and quantifies their financial value to help organizations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes over 100 reports which rank brands across all sectors and countries.
Brand Finance also operates the Global Brand Equity Monitor, conducting original market research annually on over 5,000 brands, surveying more than 150,000 respondents across 38 countries and 31 industry sectors. Combining perceptual data from the Global Brand Equity Monitor with data from its valuation database enables Brand Finance to arm brand leaders with the data and analytics they need to enhance brand and business value.
Brand Finance is a regulated accountancy firm, leading the standardization of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671 and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.