Standards/Criteria
Background
After last year’s success Interbrand and BusinessNext have once again collaborated to conduct the third annual league table of Taiwanese global brands. As Taiwanese companies have continued to realise the importance of branding and have increased investment in marketing, this has led to a positive trend in brand value and consequently we have had to raise the number of brands from 10 to 15, out of the 20 reviewed in this study. Whilst other league tables of top Taiwanese companies exist, this is the only to focus on the brands themselves and to employ Interbrand’s proprietary methodology of brand valuation.
The main objectives of the study are to help Taiwanese companies recognise that a strong brand can be a core asset for a business and more generally, raise brand awareness in Taiwan.
The results of this study are outlined in this document alongside comparisons with the global and other country-specific studies performed by Interbrand. For more information on these other studies, please consult www.interbrand.com.
Relevant Experience
Interbrand has substantial experience in the calculation of brand value league tables; we produce an annual league table of the World’s 100 most valuable brands (published in Business Week) and we have developed country-specific assessments for France, Mexico, Brazil, Australia, Singapore, Spain, South Africa and the UK.
Interbrand has substantial experience in the calculation of brand value league tables; we produce an annual league table of the World’s 100 most valuable brands (published in Business Week) and we have developed country-specific assessments for France, Mexico, Brazil, Australia, Singapore, Spain, South Africa and the UK.
Brand Value is premised on the idea that brands, like any business asset, are valuable because they are able to generate economic benefit to their owners. Thus our evaluations are based on more than just awareness or popularity; it assesses the brand’s impact on generating and securing economic profit.
The table of the top 20 most valuable Taiwanese brands has been calculated, according to Interbrand’s methodology. This has been used to value more than 4,100 of the world’s leading brands, with an aggregate value in excess of US$400 billion. We are widely acknowledged as the leading source of intellectual property and latest thinking on brand valuation, and have written numerous publications on the topic. Our methodology is now universally endorsed by academics, accounting firms, tax authorities, regulators and industry.
In addition to the league table valuations detailed above, we have conducted valuations for brands such as BP, American Express, Prada and GE. In Asia, we have worked with a variety of clients, including Tiger Beer, Yaohan, Malaysia Telecom and Samsung.
Short-listing for Consideration
BusinessNext and Interbrand short-listed the companies for this study based on certain criteria:
BusinessNext and Interbrand short-listed the companies for this study based on certain criteria:
| ● | Since the study was based on publicly available information, the company owning the brand has to be listed. |
| ● | Business Next and the Taiwanese government is particularly interested in Taiwan’s global brands, so the brand has to have at least 30% of revenues outside of Taiwan. |
| ● | In order to qualify as a Taiwanese brand, the brands had to originate in Taiwan or at least be owned by companies listed on the Taiwanese stock exchange or brand had to be owned by a listed company headquartered in Taiwan for at least 10 years. |
Brand valuation approach
Brand value is most effectively measured in a manner that is broadly similar to the approach financial analysts use to assess business value. That is, on the basis of the future earnings they produce discounted back to a net present value.
In valuing a brand, the earnings produced by the brand are discounted to their net present value using a discount rate that reflects the risk associated with their being realised. The task in measuring brand value therefore is first to assess the earnings being created by the brand and second to calculate an appropriate discount rate to apply to forecast brand earnings.
Usage of this ‘economic value’ approach to valuing brands, which Interbrand developed over fifteen years ago, has now become widespread and is generally endorsed and used by a broad range of constituencies around the world.
UThe valuation itself is comprised of five steps, outlined in the following page and summarised in the diagram overleaf.
Brand valuation methodology
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Segmentation
The first step in any Brand Valuation is, as indicated above, to divide the branded revenue into a number of mutually exclusive segments.
For the purpose of this project we have not segmented further than at the total brand level as a result of information and time constraints.
Financial Analysis
The second phase of the analysis derives the intangible earnings for each unit within the segmentation.
We calculate brand value as the net present value of the expected future earnings from the brand in accordance with current financial theory. For that we begin by preparing a forecast of branded revenue, EBITA (earnings before interest, tax and amortisation) and capital employed.
Having derived the forecast EBITA we subtract appropriate taxes payable and a charge for the capital employed to derive the business’s ‘intangible earnings’ (similar to the concept of economic profit).
For the purpose of this exercise the forecast branded EBITA has been identified from a number of equity research sources such as Morgan Stanley, Citigroup Smith Barney andJP Morgan. These forecast earnings streams have also been considered with regard to the industry and marketing information available so as to ensure rigour and defensibility.
Role of Branding
The third phase of the analysis determines the ‘Brand Earnings’, which represent the economic value contributed specifically by the brand. This is achieved by means of our proprietary Role of Branding analysis. This separates the intangible earnings generated by the brand from those generated by the other intangibles of the business. The ‘Role of Branding Index’ represents the percentage of Intangible Earnings that is attributable to the brand. It is based on an assessment of the individual drivers that influence customer choice in preference to an alternative and the influence the brand has on each of them.
The third phase of the analysis determines the ‘Brand Earnings’, which represent the economic value contributed specifically by the brand. This is achieved by means of our proprietary Role of Branding analysis. This separates the intangible earnings generated by the brand from those generated by the other intangibles of the business. The ‘Role of Branding Index’ represents the percentage of Intangible Earnings that is attributable to the brand. It is based on an assessment of the individual drivers that influence customer choice in preference to an alternative and the influence the brand has on each of them.
We calculate the brand earnings by compounding the Role of Branding Index with the Intangible Earnings within each segment. This then represents the specific economic earnings within each business segment that can reasonably be attributed to the brand.
Brand Strength
A brand’s strength as a marketing asset is the primary determinant of its risk profile. The stronger the brand, the less risk of its future profit stream not being realised. The weaker the brand, the less secure its future profit stream. We analyse a brand’s strength against seven key attributes (market, stability, leadership, geography, trend, support, protection).
A brand’s strength as a marketing asset is the primary determinant of its risk profile. The stronger the brand, the less risk of its future profit stream not being realised. The weaker the brand, the less secure its future profit stream. We analyse a brand’s strength against seven key attributes (market, stability, leadership, geography, trend, support, protection).
Once the brand has been scored for its strength as a marketing asset, we convert this score into an appropriate discount rate using the Interbrand ‘S’ Curve. The ‘S’ curve is derived from the shape of the curve plotted on an XY graph, where the X axis refers to the brand strength score and the Y axis refers to the discount rate and based on the formula for a sine wave. The sine curve plots the development of a brand’s equity over time and as a result its strength in securing demand. The valuation of the brand is then represented by the aggregate value of each of the identified segments.
Brand Value Calculation
Brand value is the net present value of the forecast Brand Earnings, discounted by the Brand Discount Rate. The NPV calculation comprises both the forecast period and the period beyond, reflecting the ability of brands to continue generating future earnings.
Brand value is the net present value of the forecast Brand Earnings, discounted by the Brand Discount Rate. The NPV calculation comprises both the forecast period and the period beyond, reflecting the ability of brands to continue generating future earnings.
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