300 The Marketing Book
Brands, intangible assets and the
firm
In today’s firm, it is intangible rather than
tangible assets that create value. For many
firms, brands are their most important assets,
even though these brands rarely appear in
published balance sheets (see Table 11.2). The
role of brands and intangible assets can be seen
in the resource-based theory of the firm (Grant,
2000). Starting from the top of Figure 11.3, the
objective of business strategy is to create share-
holder value, as measured by rising share
prices or dividends. The key to creating share-
holder value in competitive markets is possess-
ing a differential advantage – giving customers
superior value through offers or relationships
that are either higher in quality or lower in cost.
Achieving this differential advantage, in turn,
depends upon the effectiveness of the firm’s
business processes. As shown, the core business
processes can be grouped into three: (1) the
brand development process, which enables a
firm to create innovative solutions to custom-
ers’ problems; (2) the supply chain manage-
ment process, which acquires inputs and
efficiently transforms them into desirable
brands; and (3) the customer relationship man-
agement process, which identifies customers,
understands their needs, builds relationships
and shapes consumer perceptions of the organi-
zation and its brands.
These core business processes are the
drivers of the firm’s differential advantage and
its ability to create shareholder value. However,
these processes themselves are founded on the
firm’s core capabilities, which derive from the
resources or assets it possesses. A firm cannot
build superior business processes unless it has
access to the right resources and the ability to
co-ordinate them effectively. In the past, tan-
gible assets – the firm’s factories, raw materials
and financial resources – were seen as its key
strength. But today it is the intangibles that
investors view most highly – its technological
skills, the quality of the staff, the business
culture and, of course, the strength of its
brands. In 2002, tangible assets accounted for
less than 20 per cent of the value of the world’s
top companies. Finally, maintaining an up-to-
date resource base, upon which everything else
is founded, depends upon continued
investment.How brands enhance business
processes
Brands create value by leveraging the firm’s
business processes – its new product brand
development, its supply chain, and especially
in building long-term relationships with its
customers. An effective brand (B) can be con-
sidered as consisting of three components: a
good product (P), strong differentiation (D) and
added values (AV), or:B=P×D×AV (11.6)Building a successful brand starts with devel-
oping an effective product or service. Unfortu-
nately, today, with the speed with which
technology travels, it is increasingly difficult to
build brands, and certainly to maintain them,
on the basis of demonstrable, superior func-
tional benefits. Comparably priced washing
powders, cars, computers or auditing firms are
usually much alike in the performance they
deliver. Consequently, firms must find other
ways to differentiate themselves, to create
awareness and recall among customers. Hence
they turn to design, colour, logos, packaging,
advertising and additional services.
But while differentiation creates recogni-
tion it does not necessarily create preference.
Woolworth’s, the Post Office, British Rail and
the NHS are well-known brands but they are
scarcely admired. To create preference a brand
also has to possess positive added values.
Added values give customers confidence in the
choices they make. Choice today is difficult for
customers because of the myriad of competitors
seeking patronage, the barrage of communica-
tions, and the rapid changes in social mores
and technology. Brands aim to simplify the