Building Brand Equity Across Cross-Cultural Markets A presentation by Leke Alder at the “What Is Your Africa Strategy?” Conference by Georgetown Capital Partners

June 17, 2008

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Introduction

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n 6 is a perfect number and signifies harmony & balance n 6 represents justice in Pythagorean theory n 6 relates to the dimensions of a cube. It

reflects matter

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This presentation is focused on 6 things:

1.The Book of Assumptions 2.Definition and Implications of Brand Equity 3.Peculiarities of African Markets 4.A Word on Brand Architecture 5.The Big Question 6.Lessons and Recommendations

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The Book of Assumptions

The biggest branding firm in Africa today is...

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CNN!

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An analytical study of its methodology quickly reveals serious flaws. It is terribly understaffed for the size of its ambition; and opinion often masquerades as objective analysis.

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For example, Jeff Koinange was the only African correspondent of CNN. Judging by the size and complexity of Nigeria, even a thousand Jeffs cannot cover Nigeria, not to talk of South Africa or East Africa, or West Africa.

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n Arabic n Hausa n Amharic n Oromo n Yoruba n Igbo n Somali n Ibibio n Fula n Malagasy n Afrikaans n Zulu n Chichewa n Akan n Shona n Xhosa

n Kinyarwanda n Gikuyu n More n Kirundi n Sotho n Luhya n Tswana n Kanuri n Umbundu n Northern

Sotho n Kongo n Tigrinya n Tshiluba n Wolof n Swahili

Nigeria alone has 389 ethnic groups and 521 languages

Major African languages

But as far as CNN is concerned, East or West, North or South, Jeff was enough!

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The second critical flaw in CNN's methodology is that the Network is guilty of Typification.

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According to CNN, Africa is about:

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When CNN is not showing slipper-breasted women carrying malnourished babies with flies buzzing around their heads...

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… it shows us a picture of Uncle Mugabe.

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Robert Mugabe

In CNN’s portrayal, he is a typification of the “African” leader:

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The Arabs wanted to escape CNN's racial profiling and someone figured out a way to do it.

Perhaps the smartest Arab leader is Sheikh Hamad bin Khalifa, the ruler of Qatar.

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Sheikh Hamad bin Khalifa Emir of Qatar

He established his own branding corporation and named it Al Jazeera.

The mission of Al Jazeera is “to provide accurate and impartial news with a global, international perspective”.

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And the vision of Al Jazeera?

“Al Jazeera (English) is destined to be the English-language channel of reference for Middle Eastern events, balancing the current typical information flow by reporting from the developing world back to the West and from the southern to the northern hemisphere.”

(Emphasis mine!)

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Now CNN is governed by 2 classes of assumptions:

1. Assumptions made by us about CNN 2. Assumptions made by CNN about us

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We assume for example that because CNN has a wide reach, it is an authority on what it says.

That is obviously a fallacy.

In logic, this fallacy is called Appeal to authority.

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Most times, what CNN says is the opinion of people who for the most are not even experts in their field. The term “Correspondent” is an omnibus clause.

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Again we assume that if you say something authoritatively, it means you are an authority.

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We assume that whatever we hear on CNN is gospel truth. Indeed, were CNN’s broadcast bound into a volume of transcripts, it will rival the Gospel of John!

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We do know that what we hear on CNN is not always gospel truth. Jeff was accused for example of staging Niger Delta militants. The poor guy had become a movie director/producer. He seemed to have mingled too much with Nollywood types.

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Now let’s turn to assumptions made by CNN about us.

Assumption 1: Africa is one!

There is no Francophone or Anglophone Africa. Africa is one! What the Organisation of African Unity (OAU) could not achieve, CNN achieved!

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Assumption 2: The nations of Africa do not have individual identities or peculiarities!

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Assumption 3: P=Q Q=P

Africa is Nigeria Nigeria is Africa

Where Nigeria is a variable and Africa is a constant.

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I do not want to make the same mistakes as CNN, even though we share one similarity: we both speak authoritatively!

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Therefore, in talking about building brand equity across cross-cultural markets - an Africa strategy, I will not assume:

n That Africa is one n That Nigeria is Africa or Africa is Nigeria n That there is only one phone network in

Nigeria. (There are more than 3 actually: Francophone, Anglophone, MTN phone and Celtel phone.)

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But I have already started making mistakes in this assumption thing. I am assuming for example that we all know what brand equity is.

Please permit me to delve into the subject.

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Definition of Brand Equity

Now there are many definitions of Brand Equity:

1. Brand equity is that incremental value that accrues to a product when it is branded. V. “Seenu” Srinivasan, Adams Distinguished Professor of Management, Stanford University

2. Brand equity is an intangible asset that depends on associations made by the consumer and it can be viewed from 3 perspectives: financial, brand extensions and consumer-based. NetMBA, Business Knowledge Center

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3. Brand equity is used to describe both the value of the brand and the brand's component values. Dobney.com

4. A brand's power derived from the goodwill and name recognition it has earned over time, and which translates into higher sales volume and higher profit margins against competing brands. www.businessdictionary.com

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5. An intangible value-added aspect of a particular good that is otherwise not considered unique. www.answers.com

6. Brand equity is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firm's customers. David Aaker, Professor of Marketing & Policy, University of

Berkeley

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We can see from the foregoing that there’s no consensus on the definition of brand equity. For some, it translates into customer loyalty; for others, it translates into financials.

I will therefore settle the score by giving my own definition.

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Brand Equity is the intrinsic and extrinsic value inherent in a brand. It includes semi-tangible assets like the name and logo valuation and other abstract assets like reputational advantage, market preference, etc.

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Implications of Brand Equity

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Generally, brand equity manifests as follows:

1. Increased market value (market capitalisation) 2. Rising stock price 3. Product/service preference 4. Goodwill 5. PR equity 6. Top-of-the-mind name/brand recall 7. Transfer of value to new products 8. Leverage during mergers and acquisition

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Consider some brands with immense brand equity in Africa

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Event horizon: The big bang

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The accepted chronological model of the universe is the Big Bang.

We do know that the universe is expanding because of Edwin Hubble’s discovery in 1929 that galactic distances are generally proportional to their red shifts.

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Thus, the age of the universe is determined by the light emitted from distant galaxies and quasars. Because they have been red shifted to longer wavelengths, we have an idea of the age of the universe - 13.73bn (give or take 120m years).

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But this methodology imposes certain limitations.

Because the universe is expanding, some lights from the past may never get to us. And because the universe is expanding, future lights may never reach us.

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Thus, we have a past event horizon and a future event horizon.

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In considering some of the global brands on our list, we are limited by past event horizons. And because their expansion is in the future, we also have a future event horizon.

However this much we can gather from these brands - this is the history we see (I’m going to illustrate with a few case studies).

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Nestle Nestlé is a multinational packaged food company founded and headquartered in Vevey, Switzerland.

It resulted from a merger in 1905 between the Anglo-Swiss Milk Company established in 1866 by the Page Brothers in Cham, Switzerland and the Farine Lactée Henri Nestlé Company set up in 1867 by Henri Nestlé.

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1860 Nestle founded 1905 Nestle merges with the Anglo-Swiss

Condensed Milk Company 1910s Doubles operations through World

War I government contracts 1947 Nestle merges with Maggi 1950 Acquires Crosse & Blackwell 1963 Acquires Findus 1971 Acquires Libby's 1973 Acquires Stouffer's 1977 Acquires Alcon Laboratories Inc. 1984 Nestle launches new round of acquisitions

1997 Acquires San Pellegrino 1998 Acquires Spillers Petfoods 2002 Acquires Ralston Purina, Chef

America 2005 Acquires Delta Ice Cream 2006 Acquires Medical Nutrition division of

Novartis Pharmaceutical 2007 Acquires Gerber

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Standard Bank Standard Bank Group Limited is one of South Africa's largest financial services groups. It operates in 18 African countries and a total of 38 countries worldwide.

In 1862, a group of businessmen led by John Paterson founded the bank named Standard Bank of British South Africa and began banking operations in 1863, in Port Elizabeth, South Africa.

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1863 Standard Bank of British South Africa begins operations; merges with Commercial Bank of Port Elizabeth, Colesberg Bank, British Kaffrarian Bank & Fauresmith Bank

1883 Renamed Standard Bank of South Africa

1886 Opens branch in Johannesburg 1890-1955 Owns 600 branches 1962 Registers as Standard Bank 1965 Merges with Bank of West Africa

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1969 Merges with Chartered Bank of India, Australia and China to become Standard Chartered Bank; Standard Chartered Bank Group established as holding company

1987 South African investors acquire 100% ownership

2006 Acquires BankBoston Argentina 2007 Acquires IBTC Chartered Bank & 67%

share in Turkish bank Dundas Ünlü Securities; Industrial and Commercial Bank of China acquires 20% interest in Standard Bank

Multichoice M-Net was founded as one of the first two subscription television services outside of the United States, and MultiChoice was incorporated to provide subscriber management services for M-Net’s pay television bouquets. It is one of the first pay-TV channels to launch outside the US.

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1986 M-Net founded as Africa’s 1 st pay-TV station

1990 Listed on Johannesburg Stock Exchange 1992 Launches analogue satellite TV in 20

African countries 1993 Multichoice splits from M-Net to become

an independent company 1995 Launches digital satellite TV & Greek TV

platform 1996 Changes name to MIH Holdings 1997 Expands into Thailand; invests in OpenTV

(supplier of interactive TV operating systems)

1999 Launches Direct-to-Home in China; increases OpenTV ownership to 80%; OpenTV IPO; launches Greek digital TV

2000 Launches new satellite for sub-Saharan Africa & Indian Ocean islands

2001 Acquires 46.5% in QQ, China; launches services in India & Portugal

2002 Launches interactive TV 2003 Improves service offers 2005 DSTV Premium subscribers cross the 1

million mark for the 1 st time 2007 Acquires Tradus (internet auction

company)

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There are 3 immediate lessons we can learn:

1. The brands achieve growth through mergers and acquisitions (e.g. Nestle, Standard Bank)

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2. The brands seem less concerned with growth than with acceleration.

F = M x A where a=acceleration, f=force, m=mass

Acquisition is a good acceleration model.

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3. The brands are generally seen as a compendium of the events that make up their timelines/history. The history dissolves into the brand.

Unilever for example started with Lever Brothers which produced Sunlight soap - the 1 st branded product in 1888.

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Impact of national brand equity on corporate brand equity

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A nation’s brand equity impacts greatly on its emergent brands:

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Peculiarities of African Markets

1. The regional nature of the continent. Africa is made up of several countries and not one region

2. The regional nature of the psyche of the population

3. Socio-economic factors 4. Political factors 5. Educational factors 6. Cultural factors 7. Religious factors

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A Word on Brand Architecture

Let’s consider brand architecture from the perspective of other successful cross-cultural brands:

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Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. Revenues around the world in 2006 exceeded £10 billion (approx. US$20 billion).

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Business Focus Entertainment, travel, financial services, consumer products

Conceptual Definition/Brand Essence Rebellion against the establishment. Value for money, quality, innovation, fun and a sense of competitive challenge.

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Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world. HSBC's international network comprises over 10,000 offices in 83 countries and territories in Europe, the Asia- Pacific region, the Americas, the Middle East and Africa.

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Business Focus

Integrated financial services

Conceptual Definition/Brand Essence

The world’s local bank

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Societe Generale is one of the leading financial service groups in the Euro zone. It employs more than 120,000 people worldwide in 3 three businesses – retail banking and financial services, global investment management & services and corporate & investment banking

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Business Focus

Financial services group

Conceptual Definition/Brand Essence

Extreme focus on the customer; Synergies that add value to the customer

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From the foregoing, we surmise that 2 kinds of brand architecture can work for cross-cultural brand strategy: monolithic as in HSBC and graphical unification as in SG.

Consumer goods corporations like Unilever however sometimes adopt a product-based brand architecture or house-of-brands.

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The big question: How do you build brand equity across cross-cultural markets?

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The starting point is to identify cross-cultural features and platforms:

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Features Platforms 1 Quality and excellence Web and new media 2 Strong HR Sports 3 Innovation etc. Youth culture e.g.

music, films etc.

Other key areas of focus include:

1.Core definition 2.High level of professionalism and institutional outlook 3.Strong processes and discipline 4.High ethical standards 5.Global outlook with local adaptation 6.Strong HR culture

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7. Innovation 8. Succession planning 9. Strategic planning 10.Wisdom (to deal with the political terrain and

environmental factors. Understanding of the signs of the times)

11. Regionalised strategies 12. Government relations competence 13. Home government backing

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Bringing It Home

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Lessons from home-grown brands

1.They focus on their competitive advantage in new markets

2.They have sheer willpower and guts 3.They grow through mergers / acquisitions /

strategic partnerships

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Recap of lessons and recommendations: Keys to building brand equity across cross-cultural markets

1. Have a strong business definition and conceptual definition

2. Think big 3. Put in place structures to manage growth 4. Adopt international standards 5. Be sensitive to cultural nuances and regional

differences 6. Put in place a government relations strategy 7. Shed limitations and cultural baggage 8. Embrace knowledge

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Do not be like CNN!

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Don’t assume that this lecture is exhaustive.

Broaden your horizon!

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Thank you!