When consumers shop for products, brand recognition weighs heavily on their choices. So too when companies shop around for their next expansion destinations. Although there is a science behind many decisions about where to invest – with elaborate benchmarking exercises carried out and numbers thoroughly crunched – underlying all of this is a human factor: people’s perception of a place and their immediate association with its name. After all, even the most hard-nosed executives are human.
While it is hard to quantify the precise impact these perceptions have on investment decisions, the results of a study on national brands suggest a match between the countries with the most highly regarded brands and those that attract the most FDI.
Nation Brands 2015, an annual report on the world’s most valuable country brands produced by consultancy Brand Finance, ranks the US as the world’s most valuable country brand. It also happens to be the number one destination for greenfield FDI projects, according to data from fDi Markets, a crossborder investment monitoring service affiliated with fDi Magazine. China, which ranks number two by brand value, happens to be the top destination for greenfield FDI when measured by capital expenditure. The countries that round out the top five on the brand value list – Germany, the UK and Japan – are all among the world’s top FDI destinations. The link is clear.
For the study, Brand Finance measured the strength and value of the brands of 100 leading countries using a method based on the royalty relief mechanism employed to value the world’s largest companies.
Brand Finance attributes the US’s top position to the country’s sheer economic scale. “Not only is there a large, wealthy market predisposed to ‘buy American’ but also an unrivalled group of established companies and organisations exporting worldwide, whose American heritage forms (to a lesser or greater extent) part of their appeal. The US’s world-leading higher education system and the soft power arising from its dominance of the music and entertainment industries are significant contributors too,” the report states. “This soft power will help the US to retain the most valuable nation brand for some time after China’s seemingly imminent rise to become the world’s biggest economy.”
While the US retains the most valuable brand, Singapore is judged to have the world’s strongest brand. According to the metrics used for the study, a country’s brand value is reliant upon GDP, i.e. revenues associated with the brand. “Singapore’s small size means it will never be able to challenge for the top spot in brand value terms, because its brand simply cannot be applied extensively enough to generate the same economic uplift as ‘brand USA’ for example,” the report says.
But in terms of its underlying country brand strength, Singapore does a lot with a little. It is also among the world’s most popular investment destinations, as are the countries that follow it on the Brand Strength index: Switzerland and the United Arab Emirates. Finland, which ranks fourth, and New Zealand (fifth) are interesting outliers: while both hold appeal as FDI destinations, neither are in the top tier of FDI countries, suggesting they have not fully maximised their strong brands in their inward investment drives.
To download a copy of the full report please visit www.brandfinance.com