The Nation Brand Effect (NBE)

National Brand Identity & Its Effect On Corporate Brands: The Nation Brand Effect (NBE)

Jaworski, Stefan Paul

INTRODUCTION

“Govern a family as you would cook a small fish: very carefully”

-Chinese Proverb

The power of culture, ethos, and just “being” within the living Brand of a nation is something each citizen on earth experiences every day. Yet, few stop to consider that, since the dawn of time, human beings have been radically affected by the Brands they live within-and vice versa. From the hunter-gatherer group on the Serengeti, the ancient Egyptian nation built on the Nile, France Under Napoleon, newly emerging opensociety China, to today’s United States of America, human beings live within Brands and Branded systems that shape the way they act, think, and are perceived. In other words, the Core Values and essence (the Brand identities) of nations big and small diffuse throughout the native populations that live, reinforce, and spread them-a gigantic, churning circle of Brand building.

Like any Brand, nations have individual DNA or fingerprints that are unique unto themselves-no two nations are alike. From language and skin color, to music and art style, to customs and religion, no two nations on earth are exactly the same. Unlike company Brands where imitation/ copying is too often a norm, Nation Brands are often free from this because of their diversity of thought, effect of differing opinion, geographic separation and language, unique histories and experiences, genetics, unlimited product lifecycle, and the desire of societies to be special and original. Human populations like to be strongly differentiated Brands-and this desire has great effect on Nation Brand identity.

But, how about the Company Brands inside the nations? How are they affected by the Nation Brands they live within?

Say the word “Italian” in conjunction with clothes, sports cars, food, perfume, art, and craftsmanship and suddenly the item gets a very desired position-premium, better tasting, high quality and price point, and stylish. I have seen many examples whereby a restaurant sets up in a space haunted by previous bankruptcy and failure only to thrive and attract competitors. The reason for success-it was an authentic, old family Italian “ristorante” (probably run by non-Italians). The patrons are young, trendy, upper income, and stylish; the eatery is perceived, because of its Italian connection, as automatically the place to enjoy “Ia dolce vita” (“the good life”).

Perception is reality. The same with consumer goods such as suitsa Chinese mass garment maker putting a generic “Italian” designer name on its goods instantly increases their price point, perceived stylishness, and sell-ability. Franco Tassi is an excellent example. The garment sells for more than its like China made competitors (which usually become store house Brand products) and is perceived as a stylish, higher quality garment because “it’s Italian.” Take a look inside the inner vest pocket and you can see the look change on consumer’s faces: “Made in China.” Better yet is the change in their perception of the garment’s quality and stylishness with the new information-it goes down.

Swiss watches are a good example of Nation Brand power-anything with the “Swiss Made” moniker on it watch-wise receives tremendous punch. Of course, Swiss watch standards like Breitling, Piaget, and Rolex receive tremendous amounts (if not most) of their Brand equity from being Swiss made. But, recently, more moderate price point Brands such as Swatch, Guess, Anne Klein and even “no name,” ultra lowprice Chinese copies benefit from the words “Swiss Made” stamped on them. In fact, the first three Brands depend heavily on the Swiss connection to reinforce or even elevate their position as high quality, precise, and serious “time pieces.” Even third world counterfeit watch Brands make sure that the Swiss connection is evident on their offerings.

What we see here is simply the power of National Branding-the essence and Core Values (Brand identity) of the country of origin coming through, affecting everything from positioning, differentiation, and Brand identity to purchase decision. As Brand Strategist Mike Moser tells us, “Do any of your company’s Core Values mirror the Core Values of your culture (nation)? If they do, then leverage this advantage and you’ll find that your Brand resonates much deeper in people’s hearts and minds.” (Moser Mike. United We Brand. Harvard University Press. 2003. Pg. 23)

Apple Computers is an excellent example of a Brand that is benefiting by tapping into the Nation Brand effect of the USA with its “Think Different” campaign which attaches to the U.S. Core Values of independence, self expression, freedom, creativity, etc. Quite literally, when we purchase an Apple, we are really buying the Core Values of America (Nation Brand) and Apple (Corporate Brand). (Moser Mike. United We Brand. Harvard University Press. 2003. Pg. 23)

Of course, the opposite effect is true, too. A Nation’s Brand identity can transfer negativity to a company Brand. For instance, Yugo cars were an abysmal failure in North America, pulling out quickly simply because of their perceived “backward,” low-quality origin (coming from the Soviet East Block). Datsun suffered the same problem: negativity transference of the poor quality Japanese Nation Brand to its early carmakers. Remember, the Japan Nation Brand in the 1950’s and 1960’s was quite correctly perceived by the world as a low quality producer (especially of toys) before the Edward Demmings’ 14 points influence came to fruition. Hence, Datsun became Nissan and the other automakers spent decades on a total quality bent reinforced by focusing on this one issue.

Currently, we see the very same scenario being played out by Korean automakers like KlA and Hyundai. Hyundai has spent two decades and considerable efforts (especially over the last 10 years) trying to overcome the “Nation Brand Effect” whereby its Brand (and products) was disregarded as the “low quality Asian maker.” Regardless of the fact that Hyundai for decades has been a major player in building cargo ships, oil tankers, and numerous products that require considerable technology and engineering prowess, the negative Korean connection was just too powerful. Even television ads were commissioned to show that the car came from a super-ship building company: “Hey, if we can be trusted to build one of those, we can easily be trusted to make a car!” It took most of the 1990’s; a hell bent dedication to quality, engineering, design and image change; and the longest warranty in the world at 10 years, but Hyundai is emerging from the results of its past negative Nation Brand Effect. In 2002, a JD Powers Initial Quality Study ranked Hyundai, along with fellow Korean KIA, as the most improved automaker (with Hyundai up 21 percent and KIA bettering its 2001 rating by 19 percent). Especially impressive for 2003 is that Consumer Reports magazine ties Hyundai with much respected Honda in its “problems per 100 vehicle” rating. This is only slightly behind Toyota-which holds the top rating. But, still, people’s minds and hearts are not fully convinced: Japanese, sure!…but Korean? This is the power of the Nation Brand Effect.

The Chinese are also an excellent example of how Brands are affected negatively (often unjustly) by the power of their Nation’s Brand identity. “Made in China” is a synonym for poor quality, plasticky, low value, bargain basement, copycat products. Of course, for decades, China has produced some very poor quality, low price point goods but, at the same time, hidden behind many of the West’s largest Brand names (like Nike, Adidas, Reebok, and New Balance that are China-made products). But, with the Western Brand name comes the perception of quality and the transferring of positive Core Values that instantly negate the China Nation Brand Effect. In essence, Nike shoes being made in China does not cause them to be considered Chinese shoes. They are still seen as American, with all of the benefits of both the Nike Brand’s Core Values in combination with the USA’s very positive Nation Brand Effect. The USA’s Nation Brand Effect (and the cognitive shields formed regarding it) is so strong that consumers are easily quite willing to overlook such hypocrisy Brand wise.

THE BRAND CHALLENGE & OPORTUNITY FOR CHINA

One Chinese Brand that has learned the lesson of the Nation Brand Effect is Haier, a respected maker of high quality fridges and electronics. Once a state-owned company that made very low-quality goods for the Chinese market (which would rather have much higher quality and better styled U.S. goods like GE and Whirlpool), Haier radically changed its ways after privatization. They adopted a philosophy and culture of world class quality, innovation, and Brand-first attitude. Haier also realized the power of the Nation Brand Effect. The company knew that, to be successful in the U.S., it must circumvent the negative connotations of a “Made in China” Brand. The strategy Haier used was very simple: “Haier, Made in America.” In other words, leverage the U.S. Nation Brand so as to overcome whatever China objections arise. Haier achieved this by first establishing its headquarters in a visible landmark building in New York. Next, they built a large plant in the Southern part of the United States (Camden, South Carolina) to manufacture its products for the North American market, allowing for a “Made in the USA” stamp on each product box.

The result? In America, this Brand is on the march in a hyper competitive, Brand name dominated market. Haier is quickly gaining acceptance in nearly every state in the Union, all within less than a decade. Although relatively new to the U.S. scene-and having no where near the Brand power of a GE or WhirlpoolHaier is making its mark, especially in the specialty refrigerator and appliance market. We will see the same for many Chinese Brands as their quality and innovation increase over time across multiple sectors, combined with the country’s intense dedication to becoming a first-world nation in every regard-particularly in Brand marketing skill.

However, Chinese Brand power (both nation and corporate) is increasing slowly with many obstacles and Brand traps waiting. First, past Brand perceptions of Nation/Country Brands are hard to change (if significantly changeable at all). They live on like all Brands for decades in the back of consumer consciousness. Nation Brands, especially, have very long life cycles, whether good or bad. The good news is that a positive Nation Brand identity tends to stay in the consciousness for a very long time, thus giving that country and its Brands significant leverage, leeway, and benefits to “live off of for decades.

One of these points of leverage (benefits) is helping to reduce purchase decision barriers. For example: “If it’s Japanese, it’s got to be good,” even if Japanese quality as a whole gets surpassed by a new nation contender like Korea (cars) or China (mass merchandise). Hence, China and its industries must collectively focus their efforts on all aspects of excellence in terms of quality, innovation, and Brand marketing. They must associate this effort and the results to the China Nation Brand. This must be done for the long-term as Japan did during the 1960’s, 1970’s, and 1980’s, and still does to this day. A strong China Nation Brand transfers enormous equity to its company Brands and vice versa.

secondly, a common fatal mistake is to not look beyond the mantras and concepts of quality and innovation but, rather, to simply stop consideration at these two points (“Brands live and die by these two aspects only.”). As Peter Drucker pointed out four decades ago, “business is based on two fundamental things only, innovation and marketing.. .to focus on only one means you are not in business.” Indeed, to focus on only innovation or quality (operations) is dangerous and misses half of the equation, as Canada’s Nortel clearly proved with its disastrous collapse. Chinese as well as all Nation and Company Brands must focus on gaining, refining, applying, and evolving world-caliber Brand building skills, the key of which are strategic ideation and planning capability. The massive time, people, and resource investment that will have to be made by China to build a positive Nation Brand Effect will be wasted if it fails to invest equally on its Nation’s and Companies’ Brand skill toolkit. In fact, any resulting rise in China’s Brand equity will be directly undermined by any lack of Brand skill, and the resulting ability to grow, navigate, defend, and evolve its nation and company Brands. Development of Brand building skills, and mechanisms to develop/generate new applicable skills and models, is vital for China’s future success and must not be overlooked.

Finally, like any successful Brand, China and its companies must have a strong, proactive, and wellplanned “path of evolution.” Such a path will take into consideration numerous, vital factors including: relationships, goals and specified targets, Nation Brand Effect (NBE) over decades, political and geographic factors (past, current, projected), socioeconomic and demographic trends, and the cumulative effect of Asian culture on the global conscience and vice versa. China and its companies must also be able to correctly discover their continuous Brand impact on the consumer, market, and society psyche-both macro and micro wise (global, continental/regional, national, and local). The mechanisms and models for such vital insight are also a key success factor for China.

Like Japan in the 1970’s, China-with its innovation and quality levels increasing at rapid rates-is poised to open new markets and expose the world to an entirely new Brand phenomena. But, to be successful, it must generate worldclass, far-reaching Brand building skills, while avoiding the U.S.-style advertising/marketing communications trap. At this critical point in its Brand history, China needs to take active control of its Brands (Nation and Corporate) by defining, focusing, differentiating, and uniformly promoting its Brand assets and interests. And, it must do so skillfully. If China is wise, it will realize that both its Nation and Corporate Brands must work in unison, as there is direct correlation between such a working philosophy and global Brand success.

THE AMERICA NATION BRAND EFFECT

Before and during the 2003 Iraq war, we have seen a very good example of the power and effects of the Nation Brand Effect regarding “Super Nation Brand” America.

The America Nation Brand, the strongest of all for decades, is now facing its greatest challengeespecially since the last Gulf War and with even greater escalation since 9/ 11. From Muslim nations to those in the heart of Europe, the U.S. Nation Brand is not a positive one in many respects. In a typical reaction to the long-time U.S. Brand juggernaut, an entirely predicted response is occurring: USA Brand overload leading to resentment and even rejection. Combine this with recent U.S. political and military actions and the combination is volatile. However, let us realize that anti-U.S. sentiment is not necessarily the same thing as “Brand burn out,” because one can still be pro U.S. yet still suffer from U.S. Brand overload.

For instance, Canada is still very pro-America yet the onslaught of U.S. Brand messages, culture, and Brand identity from its next-door neighbor has, over decades, created widespread backlash. Canadians sometimes feel overwhelmed by the ever-present USA Nation Brand dominating everything from the airwaves to print media and cultural events. How have Canadians dealt with this invasion? The same way France, England, and others the world over have: by a natural wave of nationalism. For many in Canada-a nation with a weak Nation Brand Identity-there has been a recent desire for discovery of what exactly defines Canada (a searching for the national soul) combined with a subtle but strong rejection of what is American. In France and parts of Europe, we are seeing a strong return to specific Nation Brand roots with a much less subtle rejection of things American. The America Nation Brand is seeing a backlash on a scale not seen since the Vietnam War-or at least an insulated attempt within the nations it does business with.

What future course should the America Nation Brand take bearing the new realities? With such a valuable Nation Brand, diffused globally and even entrenched into many cultures, what strategy does Brand USA take? Obviously, with such widespread acceptance globally, the America Brand has something behind its appeal: Core Values separated from politics. Indeed, we hear the words the world over: “It’s not America we dislike (we love it), but it’s America’s politics we hate.” Also, perceived insensitivity to other Nation Brands and their Core Values gets Nation Brand USA into trouble. With such perceptions, it is easy to see how the America Brand (along with its corporate Brands) comes across in many countries as a take-over artist or “Brand Bully.”

In the next decade or so we will see Brand America having to do one thing: keep its unique Core Value base strong. It must carefully orient the America Nation Brand to the unique ways of each market it enters. In other words, keep the parts of America its Brand identity has been built upon (which the world loves), while being insightful to fine tune (or “tweak”) the Nation Brand to the sensitivities and needs of local markets. Literally, we must see a Core Value-based Nation Brand America tailored to each market. We are not suggesting a “wimping out” by changing America willy-nilly for every naysayer on the globe-no self-respecting or successful Brand does this. Simply, keep Nation Brand America Core Values strong and consistent; yet, make them relevant to the many markets America enters. This is especially important for American Corporate Brands, such as Coca-Cola, Budweiser, Energizer, etc. In fact, many of these Brands have already found this reality through trial and error (and usually at great cost) : keep the America Core Values that the world loves, but orient them to local markets.

No doubt, the Nation Brand America Core Values are universal: liberty, freedom, know-how, quality, self-expression, creativity, innovation, splash, and all things “big.” But, to avoid backlash and negativity, the USA Nation Brand must apply these Core Values in concert with, and in appreciation for, local Core Values and cultural realities. For instance, as Budweiser learned the hard way in England, don’t march into a bastion of high quality beer with centuries-old tradition brandishing an “America is biggest and best (therefore our beer is better)” attitude. American Brands must research specific foreign markets looking for what Nation Brand Core Values exist, how the America Nation Brand is perceived, and what positive perceptions they can work off of. Hence, Budweiser eventually learned it had to uncover the Core Values of England, its desire for discovery and trying new American goods, the respect for American innovation and “know how,” its appreciation for American nostalgia (especially Hollywood), the still existing resentment for “big, rich America” (from WW2), and the fact that Bud is no match for their heavy hand-poured brews (that are enjoyed warm). And, in particular, the USA Nation Brand and its Corporate Brands must distance themselves from politics whenever possible (both local and international).

Over the next decade, points for the America Nation and its Corporate Brands to remember include: respect the local markets and culture they enter; when dominating a market, “put as much a local face on themselves as possible” without diluting Core Values; keep as far away from politics as possible; all Brands (both Nation and Corporate) have Brand strategy as the basis of their success.

THE “INTERNAL” NATION BRAND EFFECT (INBE)

Until this point, we have discussed how Nation Brands are effected by-and in turn effect-the world around them. But, what is the internal effect of the Nation Brand on its people, culture, and consumers? For centuries Germany has been a stronghold of skill, craftsmanship, and hard work perpetuated largely in part by the strong influence of craft guilds. Through the reinforcement of time, these Core Values of hard work, quality, skill, efficiency, and innovation (especially in engineering) have become a large part of the literal Nation Brand identity of Germany. This Nation Brand identity (known the world over via German Brands like BMW, Mercedes, and Daimler) had a big boost from the Nation Brand Effect which, in turn, is sustained by the Core Values that give rise to the German Brand identity. In essence, a nation’s people, beliefs and history give rise to a Nation’s Brand identity (Core Values), which gives rise to a Nation’s Brand Effect (NBE), which in turn sustains and reinforces botha literal full cycle of Brand building. There is no doubt that the rise and success of German companies globally (often setting standards for quality and innovation) was and is assisted by the NBE. The NBE flowing back into Germany and reinforcing the ingredients (people, culture, and history) and Core Values that gave rise to it in the first place, make them stronger which, in turn, further reinforces the German NBE.. .and so on. This is literally one big reinforcement cycle!

It is the same with Japan. We can see that over the last decade, under tremendous pressure from U.S. and other car makers worldwide, the Japanese have not reached a plateau regarding the quality differential between their products and other makers-as would be expected. Indeed, the significant investment in time, capital, and dedication by U.S. and other major global car companies in “catching up to Japanese car quality” should have eroded any lead they had. For sure, we have seen a steady increase in quality of other automakers (especially U.S.), but the Japanese still continue to have a progressive lead that, in some cases, is increasing and shows no sign of slowing down. Such a reality alone tells us that there must be some form of internal reinforcement within the Japanese Nation Brand-a phenomenon whereby Japanese society and its companies feed off the identity and reinforcing successes of their Nation Brand. Simply put, Japanese Core Values of team/ cooperation, hard work, diligence, goal achievement, and learning give rise to a Nation Brand Identity, giving rise to a Nation Brand Effect, which directly gives rise to the success of its global Brands, whose success in turn reinforces the ingredients (people, culture, historic) and Core Values that started the process, (see Figure A) For a further confirmation of this thesis, one only has to look at the selfmade society of Singapore-one very large, successful Nation Brand Effect Cycle. Similarly, Canada is an example of a nation without a National Brand Effect, presently struggling for an identity.

(Please see the Singapore and Canada cases provided in the Appendix.)

FUTURE IMPLICATIONS FOR THE POWER OF THE NATION BRAND (INTERNAL & EXTERNAL)

Communications are increasingly speeding up. second and third world countries are rapidly developing-and many are becoming Brand savvy. Thus, the necessity of having the advantages of a powerful, well-managed Nation Brand will be exponentially more vital over the coming decades. Eventually, the Nation Brand Effect (NBE), both internally and externally, will be a “given” (basic) factor of Brand success, value, equity, and identity directly effecting Brand performance and results. As (1) the world market continues to deregulate, (2) Brand building skills diffuse across markets and societies, and (3) competitive levels increase, only nations with strong Brands (both internally and externally) will be able to achieve and sustain leadership positions. This reality is where skillfully designed second world nations (especially from Asia) will have an opportunity to overtake current first world nations or, at least, dominate desired niches.

As more sophisticated models of Brand management evolve, there is little doubt that the power of the Nation Brand Effect will be a strong basis for any new toolkit generation in every part of the globe. Possibly, one day, even a direct calculation for NBE will be part of the asset section of the corporate balance sheet (differing per country). Even the company capability to capitalize on the NBE may, itself, be part of Brand equity valuation. With upwards of 70 percent of a Brand’s value not being reflected in the company balance sheet at this point in time, such a factor on Brand value as NBE, when properly understood and quantified, could even increase this percentage to as much as 80 percent. The new reality for the next two decades:

Nations that focus on Brand strategy skill development (its incorporation into both the nation and corporate fabric) and that focus on skillfully developing Nation Brand Effect (internal and external), will be the key success stories and leaders of the true Brand based world order.

Stefan Paul Jaworski, Studio X Branding

Don Fosher, Studio X Branding

Stefan Paul Jaworski (Masters Graduate in Marketing) is a Partner and Chief Brand Officer for Studio X Branding-Temporal Brand Consulting, which is a leading multinational brand consultancy. he has worked on some of the world’s top brands, has generated frontier brand ideation-including multiple dimension brand contact point analysis-and is the author of two regarded brand strategy books. Jaworski has written numerous white papers, case studies and articles on brand strategy, and speaks globally on brand marketing.

Don Fosher is a Partner with Studio X Branding-Temporal Brand Consulting. His career has spanned five decades and has included work in every industry including b to b, b to c, consumer products, technology, pharma, and services. Don is widely known as a brand ideation expert, generating numerous frontier brand concepts and processes including Brand Links, Brand Locks, and Intramarketing.

Studio X Branding-Temporal Brand Consulting is one of the world’s top brand strategy consultancies, and the leading Asia-America firm, with offices in St. Louis (USA), Singapore, London, Beijing, Shanghai, Kuala Lampur, Bangkok, Jakarta, and Canada. Clients have included Apple Computers, Coca-Cola, Panasonic, Anheuser-Busch, John Deere, Motorola, Microsoft, Exxon/Esso, Planet Hollywood, Hewlett-Packard, Kraft, Burger King, Heineken, Carlsberg, and countries such as the U.K., Malaysia, Singapore, and Canada. The company is a leader in brand innovation and ideation generation from brand contact point analysis to brand architecture, and brand mapping to brand management science.

Copyright St. Louis University, John Cook School of Business, Boeing Institute of International Business Fall 2003

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