Asian companies need a brand new start

For a graphic snapshot of the realities of globalisation, it’s hard to beat Australian farming magazines with their colourful advertisements for tractors made by companies such as India’s Mahindra & Mahindra and China’s Great Wall.

Mahindra in particular is a serious competitor in the market for small tractors, with sales in the US and India alongside its foothold in Australia.

Yet the company is largely unknown in the rest of the world, making it a good illustration of a regional conundrum: for all its vast size, rapid growth and vibrant companies, the Asia Pacific region is almost bereft of big global brands.

There are just eight Asian names in the latest league table of the world’s top 100 brands, published by Interbrand, the US consultancy – Toyota, Honda, Canon, Nintendo, Panasonic and Sony from Japan; Samsung and Hyundai from South Korea.

Put another way, the continent that accounts for nearly 30 per cent of the world economy and 60 per cent of its population boasts fewer global brands than Germany, which has 10.

The Interbrand list is not holy writ. There are some surprising omissions, such as Korea’s LG and Japan’s Toshiba. The methodology, which requires substantial income from more than one continent, excludes some companies with very good brands but localised sales, such as Singapore International Airlines.

There are other oddities: the US computer manufacturer Dell makes the list at number 41, while Taiwan’s Acer, which has a slightly bigger global market share, is excluded. On the whole, though, the list makes a reasonable point: Asia’s booming economic growth is not being translated into world scale brands.

So what’s going on? For one thing, it’s noticeable that Asia’s established global brands are in its two most advanced large economies. That’s because the process takes time and it makes sense to focus on the easily accessible domestic market while the country is developing.

This was the route taken by Samsung and Hyundai. Companies in many other Asian countries have only just reached the point where it makes sense to look abroad for sales. In addition, young companies are generally focused mainly on getting the product right. Brand building follows as a way of raising margins.

Structural issues also constrain the process. Asia has a very high proportion of family owned companies, many of which are also conglomerates. Both these things tend to discourage the clear focus on objectives and strategy that is crucial to creating and sustaining good brands.

One way of shortening the timescale is to use the cash generated by fast-growing Asian operations to acquire companies that already have global brands. There are some bad precedents. Taiwan’s BenQ tried to make the leap by acquiring Siemens' mobile phone arm five years ago, but failed dismally to meld the businesses.

It looks much better for the latest batch of acquired brands – the takeover of Ford’s Jaguar and Land Rover subsidiaries by India’s Tata, which also bought the UK’s Tetley tea brand; the purchase of Sweden’s Volvo by China’s Geely, also from Ford; and the takeover of IBM’s ThinkPad PC brand by China’s Lenovo.

Tata has achieved considerable leverage in both China and India from the venerable Tetley’s brand, and has launched a well-received range of new models for Jaguar. Lenovo is now the world’s fourth-biggest PC vendor.

Many questions remain for Geely, which closed the $1.8bn acquisition of Volvo only six months ago. But the deal makes a lot of sense, giving a manufacturer of cheap cars a ready made – albeit unprofitable – premium brand. Whether Geely can turn round Volvo will speak volumes about the viability of acquiring brands in this way.

Other companies are on the verge of building global brands organically. Haier, the Chinese white goods maker that led an unsuccessful attempt to buy Maytag of the US in 2005, has subsequently built its presence in North America without resorting to acquisitions.

Acer will probably make the Interbrand top 100 sometime in the next few years, possibly accompanied by HTC, the Taiwanese mobile phone maker. Others close to becoming genuine global names include Kia, the South Korean carmaker, and Tsingtao, the Chinese beer producer.

The key for all these companies, though, will be to understand that brands add value only if they encapsulate values and unique selling points – Apple is a classic example, in spite of the grumbling from customers over aspects of the iPhone 4. Treating brands as if they were no more than logos is a recipe for remaining in the second division.

Kevin Brown is the FT’s Asia Regional Correspondent