MethodologyMethodology: 1. Determine forecast revenues (5 years) 2. Assess the brand‟s strengths 3. Establish royalty rates (Analyze margins and value drivers) 4. Determine the discount rates (to calculate NPV) 5. Brand valuation calculation (the NPV of post- tax royalties equals the brand value) Royalty relief approach: Ties back to the commercial reality of brands - their ability to command a premium in an arm‟s length transaction.
Apple Inc. Is an American multinational that designs and markets consumer electronics, computer software and personal computers. Best known for its Macintosh computers and line of iPods, iPhones and iPads After some ups and downs Apple really hit its stride in 1998 with the release of the iMac Apple surpassing Microsoft as the most valuable technology company is the latest chapter in a stunning turnaround for Apple and signals an important cultural shift – consumer tastes have overtaken the needs of business as the leading force behind shaping today‟s technology The consumer is now more important than the business and Apples value reflects this.
Products Despite some negative publicity with antenna problems Apple can‟t make iPhone 4 units fast enough to satisfy demand. At the moment, consumers cannot get enough of Apple products and with the iPad 3 on the way this trend looks to continue. A testament to this is Regent Street‟s Apple Store in London as the most profitable retail space in the world, earning an incredible £2,000 a year per square foot. Named as the most admired company in the US for the last four years by Fortune magazine, Apple has incredible brand loyalty.
So successful have Apple been that as of July 2011 they have bigger financial reserves than the US government; $76.4 billion. Threats Competitors starting to get their handheld devices right it will take clever strategy to maintain their position. 2011 has seen Apple continue to pursue its competitors over copyright infringements. Apple‟s court cases are an unpopular strategy drawing negative publicity to their brand and the technology sector as a whole. Apple could be greener. Apple‟s enthusiasm for litigation is not their only criticism, their labor, environmental and business practices often come under fire. How will the death of Steve Jobs affect apple in the long run is yet to be seen.
Google Inc. is an American multinational public corporation best known for its search engine, cloud computing and advertising technologies. 98% of Google‟s revenue is through advertising, using its popular and free software services to find an audience. In recent years it has put a concerted effort into moving away from being „just‟ a search engine, buying YouTube, releasing its internet browser Chrome, developing Android, a smart phone operating system and in 2011 releasing the first iteration of its Facebook alternative Google+ are just a few examples. Google plan to release a PC operating system in the not too distant future.
Since release in 2007, Android, Google‟s smart phone operating system, has rapidly grown capturing 43.3% of the smart phone market by the second quarter of 2011 Meanwhile in more established Google territory their internet browser Chrome is going from success to success. Released in 2008, Chrome has grown rapidly capturing a large proportion of the market and is now the 3rd most used browser. Founded in 2005, Youtube was bought by Google in 2006. After years of unprofitability it is now starting to emerge as a chief revenue stream for Google. A key part of Google‟s brand position is its motto, „do no evil‟, a very popular stance with consumers. As had made headlines in the news, Google took on China in 2010 when they refused to continue to adhere to the internet censorship policies of China. This was a huge marketing success for Google gaining universal support for their actions.
Threats Android are currently locked in a court case with Oracle for „knowingly, directly and repeatedly infringing Oracle‟s Java-related intellectual property. Microsoft is currently suing any manufacturers selling mobile & tablet devices with Android installed. It looks as if Google may have spent too long working in areas where it had no patent protection and is now suffering from the copyright consequences. This worry is reflected by Google‟s recent spate of patent purchases, in the form of directly buying over a thousand patents from IBM to acquiring Motorola Mobility outright to gain access to their giant raft of patents. Google‟s latest software launch Google+ is looking to take on Facebook but with little success so far.
Microsoft Corporation develops, manufactures, licenses and supports a wide range of predominantly computing related products. Established in 1975 Microsoft rose to domination in the mid-1980s after the release of MS-DOS a home computer operating system. Followed by the Microsoft Windows line of operating systems, Microsoft soon became the leading business in the office suite market with Microsoft office. In recent years the software giant has diversified into the games industry with the Xbox and into the consumer electronics and digital services market with MSN, Bing, Zune and the Windows Phone OS. After its entry into cloud computing Microsoft‟s latest diversification is into Microsoft-branded retails stores, the first opening in October 2009.
Microsoft continues to dominate the office suite market with its Microsoft Office range of products being the first choice for businesses. Microsoft‟s latest operating system (OS), Windows 7, received a much warmer critical reception than their previous OS Vista and has sold strongly since release. As of May 2011 Windows 7 is installed on around 30% of computers and rapidly gaining on first place - Microsoft‟s own Windows XP. Originally doing well in the smartphone market Microsoft missed out on the transition to touch screens losing a large amount of ground to Google‟s Android in particular. However, there may be a comeback on the cards with Microsoft‟s latest version of their Windows Phone 7 (WP7) OS, Mango, a marked improvement. The release of the HTC Trophy with WP7 saw market share grow by 97% and after Microsoft‟s technical partnership with handset manufacturing giant Nokia more WP7 phones look set to enter the market.
May 2011 saw Microsoft buy leading internet communication business Skype for $8.5bn. Among a host of advantages, the move will give WP7 and Nokia a competitive offering to take on Google Voice and Apple‟s Facetime in the smartphone OS market. Threats Microsoft‟s Internet Explorer has been losing popularity for years and for the first time in ten years more people are using alternative browsers such as Mozilla‟s Firefox or Google‟s Chrome. Microsoft‟s media platform Zune failed to take off and Bing, Microsoft‟s rebranded search engine, has failed to put a dent in Google‟s search engine dominance. In 2010 Microsoft unveiled a new company tagline, „Be What‟s Next‟ in an attempt to rebrand as an innovative company. However with no game-changing products on the way it seems a little difficult to view Microsoft as the company of the future and the branding change, for the moment at least, seems to be in vein.
IBM is a multinational technology and consulting firm and holder of more patents than any other US based technology company. Since its inception in 1911, IBM has invented many products that changed the way we live, including the ATM, floppy disk, hard drive, magnetic stripe card and the Universal Product Code to name a few. Recent years have seen IBM move away from building computers and more towards technology services where they now get more than half their revenue. Their current brand position is that of innovation. IBM has managed to continue revenue growth by expanding into infrastructure for emerging
Coupled with 2010‟s acquisition of SPSS for $1.2bn, IBM will look to further expand on their information on demand portfolio and business analytics capabilities – a key area of their core services business. (SPSS is a computer program used for survey authoring and deployment, data mining, text analytics, statistical analysis.) The mainframe business is a shrinking but strategically important area for IBM; as the only real player in the market their new products tend to only compete with their old ones. With new machines faster, more powerful, more energy efficient and with greater usability, IBM is looking to cement their position as suppliers to governments and businesses. In particular IBM have invested heavily in expanding into emerging markets and providing technology infrastructure to developing nations. As citizens in China and India start to join the middle classes, IBM are well positioned to take advantage of their accompanying needs.
IBM has been buying many different companies throughout the years acquiring a glut of patents in the process. As in the past, the sale of over a thousand patents to Google July 2011 would appear to be good business for IBM selling of patents they do not need. IBM has a great brand legacy as the inventor of so many life changing products. This brand strength resonates with a host of highly ranked positions in top publications. Fortune considers IBM as the #1 company for leaders and the 12th most admired. Newsweek considers it the greenest company and Fast Company rank IBM as their 8thmost innovative business.
Walmart Stores Inc. (Walmart) is the world‟s largest public corporation by revenue, according to the Fortune Global 500 ranking. Walmart serves customers and club members more than 200 million times per week at more than 8,000 retail units under 53 different banners in 15 countries. However, the brand value of Walmart fell by $5,145m in 2011 to $36,220m. At the same time, enterprise value has fallen to $239,634m. The company continues to dominate the US retail landscape, providing employment to more than two million people. It is also developing a laudable reputation for corporate philanthropy and is pioneering sustainable practices across its supply chain. The company‟s management is also focused on building up its online proposition. Walmart‟s CEO Raul Vazuqez is quoted as saying: „Our goal is to be the biggest and most visited retail Web site‟.
In uncertain economic times when conscious consumption is expected to continue, consumers prefer shopping at supermarkets and retailers they trust. With its strong sustainability management, Walmart aims at increasing its efficiency while pursuing various environmental goals such as creating zero waste, being supplied 100 percent by renewable energy and by selling products that sustain both people and the environment. Walmart provides financial and volunteer support to more than 100,000 charitable and community-focused organisations, following the philosophy of “operating globally and giving back locally”. Walmart follows a strong diversity management by making diversity part of its business plan. With Walmart‟s new brand positioning including the launch of a new logo in June 2008, the retailer now aims at appearing more environmental friendly and technology savvy, reflecting the corporation‟s increased focus on sustainability.
Threats In 2009, Walmart was involved in a child labour scandal in the US after children as young as five were found working on a farm that supplied blueberries to the company. In 2010/2011, Walmart has been accused of paying female employees less than males for the same job. In 2010, Walmart was repeatedly listed in the Sweatshop Hall of Shame published by the International Labour Rights Forum. Looking at the recent sweatshop scandals involving Walmart, consumers may lose trust, resulting in lower brand loyalty and consequently a lower brand value.
The Samsung Group is a South Korean multinational conglomerate with numerous international affiliated businesses specialising in everything from TV‟s to cars to insurance. Samsung Electronics is the most well known of these as the world‟s largest tech company by sales, overtaking HP in 2009. However, the size of its lesser known divisions may surprise, Samsung Heavy Industries is the world‟s second largest shipbuilder and Samsung Everland - Korea‟s first theme park - is now the fifth most visited in the world. Samsung Life Insurance is also particularly well respected in its field.
Founded in 1938, Samsung now has more than 275,000 employees and accounts for about a fifth of South Korea‟s total exports. Samsung have created a strong brand based around innovation and quality. Having successfully taken on Japanese technology giants in the TV market they are now looking to break Apple‟s smart phone and tablet PC dominance. As of April 2010 all mobiles and MP3 players produced by Samsung will be free of PVC and BFR‟s. Growing a „green‟ image is becoming an increasingly important part of any company‟s brand and Samsung look to be ahead of its major competitors, listed 5th on Greenpeace‟s Guide to Greener Electronics.
Samsung are a World Wide partner of the London 2012 Olympic Games. In a smart move they have signed football star and brand machine David Beckham to be there Brand Ambassador and look to make major brand awareness gains in the UK. Samsung‟s Japanese competitors are finding life difficult after the unfortunate events of the March Tsunami. However these Japanese firms were already suffering from a strengthening Yen and aging population with, for example, Samsung rivals Sony reporting net losses.
Threats There are question marks over whether Samsung has the brand strength to take Apple‟s top spot. The two giants of the smart phone and tablet PC industry continue to clash heads with a spate of court cases over copyright infringement being launched by both sides. With both keen to battle in court it seems there will be no quick solution – bringing negative publicity to both brands. Meanwhile, Samsung is also facing stiff competition from below, the Taiwanese HTC and Chinese RIM‟s cheap labour and high technology are looking to steal Samsung‟s second spot in the smart phone market.
Coca-Cola is the world‟s best selling soft drink by volume and one of the most easily recognisable brands in the world. The company‟s drinks are sold in stores, restaurants, and vending machines in more than 200 countries. Approximately 74% of the company‟s volume sales stem from outside the USA.
Threats The market for carbonates is under pressure from a strong health and wellness trend. Non-carbonates continue to prevail as consumers opt for bottled water, fruit juice, and RTD tea. Coca-Cola has responded by pushing its low calorie caffeine free Coca Cola, but growth in the carbonates sector (low calorie or not) is falling way short of soft drinks as a whole. Moreover, Coca Cola‟s parent company – The Coca Cola Company (TCCC) – is over reliant on its carbonates sector. TCCC has a vast portfolio of carbonates brands, and only a few that are really geared towards health and wellness. Another factor that may explain Coca Cola‟s poor 2011 performance is its 2010 acquisition of Coca Cola Enterprises (CCE), TCCC‟s largest bottler. Although the move may well give long term benefits to TCCC – products can be brought to market faster and for cheaper – the deal has landed TCCC in a substantial amount of debt. Thus, in the short term, and whilst the company reorganises its already complex infrastructure, the effect is likely to be negative.
Global Telecommunications Company headquartered in London, United Kingdom. It is the worlds largest mobile telecommunications company measured by revenues and the worlds second-largest measured by subscribers (behind China Mobile), with around 341 million proportionate subscribers as of November 2010. It operates networks in over 30 countries and has partner networks in over 40 additional countries. It owns 45% of Verizon Wireless, the largest mobile telecommunications company in the United States measured by subscribers.
Vodafone is looking to compensate for underperformance across the board by restructuring the company, starting with cuts to over 500 jobs and selling off none-controlling stakes in various companies such as China Mobile and SFR. As part of this restructuring Vodafone is pursuing business in emerging markets with a £3.1 billion buyout of Essar‟s 33% stake in their Indian joint venture. The selling off of certain minor stakes in various Vodafone operations and the cutting of 500 jobs may appear to be a negative however the overall picture will show that the company‟s restructuring will result in a more efficient and profitable Vodafone. Vodafone group revenue for 2011 was £45,884m indicating 3.25% growth. Net profit was reported at £ 8,776m showing a 3.6% growth.
The e-commerce giant, Amazon, has had a year of growing revenue and falling profits. Amazon, which has established itself as the world‟s number one online retailer, sells more than three times as much as its nearest rivals. It has the widest range of products as well as the fastest delivery times and often charges the lowest price. The company initially only sold books, but its success soon led it to diversify into the many products it retails today with separate websites for all of its major country markets. It was able to grow very rapidly taking full advantage of being able to charge prices that excluded sales tax (within the USA) and other running costs that are associated with running a brick and mortar business.
Since its inception, the company has developed from a US online book retailer into the world‟s largest online merchant, selling its own range of products, the most prominent of which is the Amazon Kindle e-book reader. The company recently reached a milestone by revealing that it now sells more e-books than real books. Huge amount of excitement surrounding the long anticipated Amazon multimedia tablet which will serve as a platform for more of its products such as music, games and film.
Threats Profit at Amazon was down 8%, the fall was largely due to investments in a large number of new distribution centres as well as new technology. Amazon will be putting itself in direct competition with Apple‟s iPad and other third party tablet devices with the launch of its own tablet. However, experts have argued that, unless Amazon is highly price competitive, it will be a very difficult market to break into.