9/6/2014 Best Indian Brands 2014: Decoding brand value & strength - The Economic Times

http://economictimes.indiatimes.com/magazines/brand-equity/best-indian-brands-2014-decoding-brand-value-strength/articleshow/39684369.cms 1/6
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For brands that met the criteria, the next step was to look at
current financial health of biz & brand, brands role in creating
demand, & future strength, leading to brand value.
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Best Indian Brands 2014: Decoding
brand value & strength
Interbrand compiled a list of Indian brands
based on the following criteria:
1. The brand's country of origin must be
India.
2. There must be substantial publicly
available audited financial data.
3. The brand must have a broad public
profile and awareness or the brand must be
positioned to play a significant role in the
consumer's purchase decision.
4. The economic profit must be positive,
showing that there is revenue above the
company's operating and financing costs.
For brands that met the criteria, the next step was to look at the current financial health of
the business and brand, the brand's role in creating demand, and the future strength of
the brand as an asset to the business, all leading to the final brand value.
Brand Valuation Process
The valuation process comprised an analysis of the financial performance of the branded
products or services, of the role the brand plays in the purchase decision, and of its
competitive strength.
Financial Analysis
This measures the overall financial return to an organisation's investors, or its 'economic
profit.' Economic profit is the aftertax operating profit of the brand minus a charge for the
capital used to generate the brand's revenues and margins.
A brand can only exist and, therefore, create value, if it has a platform on which to do so.
Depending on the brand, this platform may include, for example, manufacturing facilities,
distribution channels, and working capital.
Interbrand, therefore, allows for a fair return on this capital before determining that the
brand itself is creating value for its owner. A set of financial forecasts over five years for
the business, starting with revenues and ending with economic profit, form the foundation
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9/6/2014 Best Indian Brands 2014: Decoding brand value & strength - The Economic Times
http://economictimes.indiatimes.com/magazines/brand-equity/best-indian-brands-2014-decoding-brand-value-strength/articleshow/39684369.cms 2/6
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of the brand valuation model.
A terminal value is also created, based on the brand's expected financial performance
beyond the explicit forecast period. The capital charge rate is determined by reference to
the company's weighted average cost of capital.
Role of Brand
Role of Brand measures the portion of the purchase decision that is attributable to the
brand, relative to other factors (for example, purchase drivers like price, convenience, or
product features).
The Role of Brand Index ('RBI') quantifies this as a percentage. Customers rely more on
brands to guide their choice when competing products or services cannot be easily
compared or contrasted, and trust is deferred to the brand (eg computer chips), or where
their needs are emotional, such as making a statement about their personality (eg luxury
brands).
RBI tends to fall within a category-driven range, but there remain significant opportunities
for brands to increase their influence on choice within those boundaries, or even extend
the category range where the brand can change consumer behaviour.
RBI determinations were derived in three ways (in order of preference):
1. Primary research: Specifically designed research, such as choice modelling (although
other techniques are available), where RBI is statistically derived.
2. Existing research plus Interbrand opinion: Existing research addressing the relative
importance of purchase drivers were combined with Interbrand's opinion on the extent to
which the brand influences perception of how the product or service will perform against
each driver.
3. Qualitative assessment: Based on management discussions and past experience. This
was used where no market research is available.
RBI findings were cross-checked against historical roles of brand for companies in the
same industry. Finally, RBI was multiplied by the economic profit of the branded products
or services to determine the earnings attributable to the brand ('brand earnings') that
contribute to the valuation total.
Brand Strength
Brand Strength measures the ability of the brand to create loyalty and, therefore, to keep
generating demand and profit into the future. Brand Strength is scored on a 0-100 scale,
based on an evaluation across 10 key factors that make a strong brand. These include
four internal and six external factors (see table).
9/6/2014 Best Indian Brands 2014: Decoding brand value & strength - The Economic Times
http://economictimes.indiatimes.com/magazines/brand-equity/best-indian-brands-2014-decoding-brand-value-strength/articleshow/39684369.cms 3/6
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Performance on these factors was judged relative to other brands in the industry and
relative to other worldclass brands. The strength of the brand is inversely related to the
level of risk associated with the brand's financial forecasts (a strong brand creates loyal
customers and lowers risk, and vice versa). A proprietary formula was used to connect
the Brand Strength Score to a brand-specific discount rate.
Brand Value
The brand-specific discount rate was used to discount brand earnings back to a present
value, reflecting the likelihood that the brand will be able to withstand challenges and
deliver the expected earnings into the future. This is equal to the brand value.
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9/6/2014 Best Indian Brands 2014: Decoding brand value & strength - The Economic Times
http://economictimes.indiatimes.com/magazines/brand-equity/best-indian-brands-2014-decoding-brand-value-strength/articleshow/39684369.cms 4/6
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NEWEST OLDEST RECOMMENDED (1) MOST DISCUSSED AGREE
Whatever be the brand valuation approach, if this list does not include brands like Amul ,
Parle , Aditya Birla, Oberoi, TVS, Voltas, Indian Oil, Hindustan Petroluem, Bharat
Petroleum, Big Bazaar, Shoppers Stop, MDH, MTR, Eureka Forbes, Raymond, Arvind,
Fabindia then this list is nonsense. Even Flipkart is a notable omission. Just because a
company makes huge profits does not make it a big brand and vice-a-versa if a company
is loss making does not make it a small brand. It is the revenue that the brand generates
and not its profitability that matters.
Agree (1)
Disagree (0)
Recommend (1)
Offensive
Other notable omissions are MRF, Apollo Tyres, Havells, Apollo
Hospitals, JK Tyres, Cera, Sriram Transport Finance, Sun Pharma,
Cadilla, Lupin, Dr. Reddy's, Himalaya, Parachute, Ashirwaad Atta,
Cosco, Atlas Cycles, Croma, Rupa, La Opala, DMart. The Interbrand
compiled list lacks research and is indeed nonsense.
Agree (0)
Disagree (0)
Recommend (0)
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9/6/2014 Best Indian Brands 2014: Decoding brand value & strength - The Economic Times
http://economictimes.indiatimes.com/magazines/brand-equity/best-indian-brands-2014-decoding-brand-value-strength/articleshow/39684369.cms 5/6
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9/6/2014 Best Indian Brands 2014: Decoding brand value & strength - The Economic Times
http://economictimes.indiatimes.com/magazines/brand-equity/best-indian-brands-2014-decoding-brand-value-strength/articleshow/39684369.cms 6/6
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