Strong brands impact both the demand and supply curves to add value to the business, which in turn significantly adds to shareholders wealth

As a part of his presentation at recent Berkshire Hathaway annual shareholders’ meeting Warren Buffet said “I can make a whole lot more money skillfully managing intangible assets than tangible assets.” And if Warren Buffet is true to his words, one of the first types of intangible he will look at is brand, arguably the single most important category of intangible assets for any business.

The purpose of any business is to enrich shareholder value. The concept of “value based management” states that management should first and foremost consider the interests of shareholders in its business decisions. The business which offers differential advantage can create long term sustainable shareholder value. Differential advantage comes from core capabilities of the organisation which are derived from business assets, both tangible & intangible assets. Brands form part of the intangible asset base that derives the firm’s core business process.

Brand Finance’s Global Intangible Finance Tracker (GIFTTM) across 53 national stock markets covering more than 37,000 companies shows that brands add to a third of the world’s wealth. Like it or not, brands have become a principal economic lever of companies across sectors.

The economics between the shareholder value and brands is the ability of the brands to generate higher returns on a long term sustainable basis. Brands provide differentiation in terms of products, services,distribution and customer base which act as competitive advantage for the company to enable the company to provide long term sustainable shareholder value. Brands act as pivot of dynamic value exchange between customers, employees, channel partners & shareholders. Brands enable the company to align all its stakeholders & provide long term singular vision for it.    

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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