Global Branding: We Must Get Going

Address by Tan Sri Dato’ Dr Lim Kok Wing at a seminar organised by Branding Association of Malaysia, Kuala Lumpur Hilton
9 December 2009

Ladies and Gentlemen,

Let me begin by thanking the Branding Association of Malaysia for their kind invitation, and I must thank you for giving me this opportunity.

As we all know, successful brands are key drivers of wealth creation in every success-ful economy.

I don’t really know how best to address an audience like this, knowing that sitting here are some of our brightest brains and most innovative thinkers in the country. On top of that, speaking after a heavy dinner!

From here I can see many familiar faces, people I know who have created some of Malaysia’s best known brands.

But what is true is that we need many more entrepreneurs who are prepared to look at the world and not just the region as their market place.

This dialogue could not have come at a better time as the world is still struggling to overcome the aftermath of an economic melt-down of catastrophic propositions. Its knock-on effects have slowed practically every economy down and created hardship to businesses across the world. Malaysia has not been spared.

Yes, I have said dialogue because I don’t intend to make a long speech so we could have a conversation on what matters the most to us after I am done talking.

With the time I have, I shall focus on a few points that are relevant to being global and being global competitor.

Because this is an event organised by the Branding Association of Malaysia, my presentation for obvious reasons will be skewed towards branding.

But one cannot really separate brand development from creativity and innovation and the use and influence of new media technology.

So I shall include these elements as I go along.

Ladies and Gentlemen,

Going forward, let me start with the role of SMEs in the branding of a country.

The contributions of SMEs can never be overemphasized. In every economy, it is the backbone that drives industrial develop-ment. Globally, SMEs account for 99% of business numbers and contribute to 50% of GDP. In EU, SMEs comprise 99% of an estimated 19.3 million enterprises, providing around 65 million jobs. That represents two-thirds of all employment.

In Japan, some 80% of all employment is in SMEs where the average enterprise employs nine staff as opposed to four in EU.

In Malaysia, SMEs represent 99.2% or 518,996 of total business establishments, and these are mainly in manufacturing, services and agriculture sectors. SMEs are the growth engine in the new economic model that is aimed at transforming the country from a middle-income economy to a high-income one. The government’s vision is for SMEs to contribute more towards GDP, from 32% in 2005 to 37% in 2010. SMEs are expected to increase exports from 19% to 22% and employment to 57% in 2010.

As it is today, SMEs in Malaysia are domestically oriented, but we have to be farsighted to remain in business in the future. Next year, for instance, will be especially challenging, with the full implementation of the ASEAN Free Trade Agreement bringing about an influx of new competition.

To move forward, companies would have to look for new markets and new opportuni-ties. The logical step towards growth is to continually improve one’s business model in enhancing one’s position and in order to become more competitive. Again, we are talking about branding.

Unfortunately, one of the biggest challenges confronting Malaysian SMEs is the mindset of the people in the industry. A report from the Department of Statistics shows that only 13% of SMEs in Malaysia promote their products and the medium commonly used is media promotion, followed by local trade expos. Little focus is placed on creative marketing and certainly there is little technological dynamism displayed.

How are we to compete in a worldwide market if we are stuck with this mindset? There must be a global vision before we can even think about building world class brands, and that vision must involve an effective global marketing strategy that helps us connect with our consumers and inspire them. We must be able to engage our customers in an emotional way – and on the global stage, this need is even more pressing.

The Samsung success story is a good example. In 1998, Samsung entered into various marketing alliances with companies worldwide and sponsored events such as the Seoul Olympics, in line with its global to become a global brand. It wanted to be the next Sony – and had in 2001, openly declared it would beat Sony in the consumer electronics market by 2005.

But its drive towards globalization had begun much earlier: in 1993, when it acquired a new corporate identity and a new brand strategy, and began to change the perceptions of consumers who had earlier associated its products with low technology. Back then, consumers in developed markets would opt for Samsung when they could not afford brands such as Sony and Panasonic.

Where is Samsung today? It is ranked 19th in Business Week’s 100 Best Global Brands, ahead of other powerful global names such as Apple, Amazon and Ford. Samsung’s brand value of US$17.52 billion is now well above Sony at US$11.90 billion. While Sony dropped from 25th place in 2008 to 29th place, Samsung climbed up two spots in the ranking.

If Samsung was a country, it would have been ranked 34thlargest economy in the world.

Samsung is a fine example of an iconic brand that has managed to successfully use branding and innovation to remain relevant and exciting to its consumers.

Ladies and Gentlemen,

Earlier this year, I presented a paper on the same topic. At that time, I raised a number of questions. As they are no less relevant today then they were, let me recall some of them here.

As business captains, how well placed are we to tap into the global market? As a trading nation, how well prepared are we to leverage the huge potential we have in ASEAN, commonwealth, OIC markets.

How well organized are we in building an eco-system that supports business innovation and brand development.

How well recognized are we globally as a country that produces quality products and successful brands?

How much more has to be done to bring us to the level where we are able to compete with the best in the world? And to compete with the best in the world we must as we drive our economy up the innovation chain.

We have come some distance, but has it been far enough?

We are supposed to have migrated the country from a low-cost production base to a country sought by investors for its highly skilled manpower, its well-developed infrastructure, its political stability and investor-friendly policies.

But again I ask the question, have we been doing enough?

Ladies and Gentlemen,

Not really.

Recently at the National Economic Outlook Conference 2010-2011, the 2nd Finance Minister disclosed that Malaysia had lost its competitive edge in many sectors of the economy, with private investments now half of what they were before the 1997/98 Asian financial crisis.

Malaysia, he said, is trapped in a low-value-added, low-wage and low-productivity structure.

Our economic growth over the past 3 years, he said, was the second-lowest among our Asian neighbours while private investment has been in a steady decline. He even went further to say that our economy has been stagnating in the last decade.

That to me speaks volumes about Brand Malaysia as it stands now.

The point is clear. We are losing out and we need to change course. Certainly, in the way we think.

Many people point to China and India as the 2 giant economies that we both want to woo and fear, but we forget that much closer to home, we have large emerging economies like Thailand and Indonesia which are more creative in their approach, more innovative in their production, more aggressive in their marketing and with big markets of their own.

There is also much to learn from Japan, South Korea and Taiwan. These countries are today places whose country brand is synonymous with high-tech, innovation and good design.

Today, Samsung is the world’s largest conglomerate and renowned today as the fastest growing brand in the world.

This they have achieved with cultural reengineering on a national scale – from education to industry – where innovation and inventiveness became second nature to their people.

South Korea also files the largest number of patents per GDP and has the highest expenditure in R&D in the world – which I hope will someday soon be replicated in Malaysia.

Our innovation ranking is low. Our patent and intellectual property ownership inside the country is even lower. Outside the country, it’s almost non-existent.

In 2002, only 6% of the 4,000 patent applications filed in this country were made by Malaysians.

94% belonged to foreigners. The situation has not changed much since then.

We are simply not innovating.

Unlike advancing Asian economies like South Korea, Taiwan, China and Singapore, Malaysia is not registered on the global innovation map at all. That means we have created virtually no innovation for the world market.

But innovation ultimately is not defined only by patents. Patents, copyrights and trademarks are the ‘tangible’ outcomes of innovation.

But innovation has its genesis in places where there is encouragement for new ideas.

It survives best when it becomes part of a country’s culture and is woven into its educational system, its industrial infra-structure and its political leadership.

Malaysia must be rebranded to stand for innovation if we are to remain a credible force in global competition.

Ladies and Gentlemen,

Let me recall here again some of what I said earlier this year at a similar get-together.

For our country to succeed in the long term, we must make our national competitiveness a Mission for the whole nation, involving every Malaysian and every strata of our society. We must make a concerted effort to take the country to where we aim to be – a country known to the world as an innovation nation by 2020.

To succeed, the whole nation must be on-board, from farmers to teachers, taxi drivers to bankers, business leaders to political leaders.

Everyone from every walk of life must feel ownership of the need for quality and embrace it every step of the way.

Everyone must be prepared, new systems must be built, out-dated mindsets must be changed.

Despite the financial meltdown developing economies are rushing to close the gap with the most advanced economies.

Despite the financial meltdown the developed world will face its challenges using innovation to rise to new levels and set new benchmarks.

Despite the financial meltdown new economies are attempting to make quantum leaps that are astonishing in their inventiveness and threatening in their competitiveness.

At this time when we are facing our greatest challenges we must work to close the divide between public and private sectors.

We must merge to speak with one voice, to work with one goal. After all, we are two sides of the same coin, we are inseparable. But working together is only a start. If it means facing each other across the table, the public and private sectors would end up each seeing the opposite, and this is often the case.

It is essential for the public and private sectors to not just work together, but also walk together. In so doing, we will see the same picture, we will be complementing each other, instead of complaining about each other.

This I say because I often see a disconnect between the private and public sector.

Often I am given the impression that the administration has no idea of the speed at which the private sector must move just to stay in competition.

Ladies and Gentlemen,

It has been said that the world’s top 500 brands account for 70% of worldwide trade;

that the world’s 10 best-selling brands generate more wealth than 50 poorest nations with a combined population of 700 million people;

that 51 of the world’s largest economies are companies and not countries.

It is easy to see why the most innovative countries in the world are also the most advanced and the most progressive.

All of them, with no exception, consider brand and design innovation a strategic propeller of their national competitiveness.

All of them, with no exception, own internationally known brands of products and services that are perceived to be the best in the world, everywhere in the world.

These are countries whose Governments and industries have aggressively invested in global marketing, brand-building and brand-franchising consistently for years and years.

Their Governments have built economic infrastructures and enabling systems that not only encourage but empower product and brand innovation as part and parcel of their strategy for wealth creation.

Their people are highly trained in global marketing and highly skilled in the use of technology. They are trained and encoura-ged to be innovative in whatever they do or produce – be it the music they compose, the shoes they design, the furniture they make, the cars they produce, the fast food chains they manage around the world.

These countries generate immense wealth from the products they have created, and the brands they have promoted right around the world.

Resulting from this, brands and products from these countries are able to gain worldwide acceptance quickly, and command premium pricing invariably.

And resulting from that, these countries themselves have become synonymous with quality, and enjoy the most positive image in the minds of people right around the world. And this, in turn, reinforces the perception that whatever they produce must be the world’s best.

Ladies and Gentlemen,

The Internet has been called the Centre of Gravity of the Digital World. And the future of success as a brand – be it a country or company or product or person – will be driven by the Internet and mobile applications. The sooner we realize this, the better we will do.

As web and mobile applications become more innovative and interactive and more easily available, they will increasingly replace expensive traditional show and tell media. The brand will be driven more by digital citizens and less by brand owners.

New media is perfectly-suited to connect with consumers and actively engage them with the brand – in fact, where previously the company would have the sole power to define the brand, now consumers are co-creators of a brand.

Much of that interaction will happen on the handphone because it penetrates to even the most rural areas and here I’d like to share some numbers.

In Asia, there are seven times more mobile phones than personal computers, nine times more mobile phone accounts than home or office PCs that are connected to the internet.

There are seven times more mobile phone accounts than fixed landline telephone connections, and five times more mobile phone users than total number of TV sets in use.

By every measure, mobile is the giant you must befriend and get intimate with if you want to communicate with prospective customers in the Developing World today.

Ladies and Gentlemen,

Let me now return to the basics in branding. It is always the quality of the product that makes a brand famous and it is never the other way around.

It was cars that made Toyota a global brand, and computer software that made Microsoft a worldwide best seller. It was shoes that made Nike famous. It never was the other way around.

Branding, in simple language, is just part and parcel of building a long-term business. You build your brand as you build your business. Your brand is a reflection of the person you are, of your philosophy and your value system.

In short, your brand is what you stand for.

Where there is integrity, there will be quality. Where there is quality, there will be brand equity. Where there is brand equity, there will be brand popularity. At the heart of successful branding there must be unfailing quality and unquestion-able integrity.

Ladies and Gentlemen,

Of late, much has been said about Branding Malaysia.

But the branding of Malaysia has started a long time back.

As I see it, Brand Malaysia is nothing more than being who we are as a people, and how progressive we are as a nation.

In the developed world, countries have moved from “knowledge economy” to “innovation economy” to further widen their lead over developing economies.

To succeed in the long term, Malaysia must be branded for innovation.

Here and now, corporate and enterprise Malaysia must work shoulder to shoulder with the government of Malaysia to build for the nation a big passion for innovation.

For the transformation to take place, clearly and urgently, we must now focus on creating transformational systems that will prepare the country for a quantum leap, from where we are to where we must be – an innovation economy – capable of competing with the best in the west.

To make that quantum leap successfully, we must make the development of innovative product and brand development a national agenda.

We must make that transformation happen quickly and successfully. Because if it does not take place, our longer term competitive-ness will erode.

The Prime Minister’s call for 2010 to be the year of creativity and innovation is therefore most timely.

Ladies and Gentlemen,

It has been a pleasure and I thank the Branding Association of Malaysia once again for the opportunity. And may I also take this opportunity to wish everyone of you every success in everything that you do.