Brand Finance Nation Brands October 2017 3.Brand Finance Nation Brands October 20172. Foreword 3 Expert Insights: Attracting Green Field Investment 4 Expert Insights: Nation Brand Strength and M&A 5 Expert Insights: Opportunities for Asian Products 6 Expert Insights: Nations as Tourism Brands 7 Executive Summary 8 Expert Insights: Brand Power Matches FDI Power 13 Brand Finance Network Comments 14Full Results 16 Methodology 18 Our Approach 20 Our Clients 20 Expert Insights: National Quality Marks 21 About Brand Finance 22 Contact Details 22 The effect of a country’s national image on the brands based there and theeconomy as a whole is now widely acknowledged. In a global marketplace,it is one of the most important assets of any state, encouraging inwardinvestment, adding value to exports, and attracting tourists and skilledmigrants. The Brand Finance Nation Brands report shows the benefts that astrong nation brand can confer, but also the economic damage that can bewrought by global events and poor nation brand management.The most important trend to emerge in this year’s study is the gradual shift ofthe global centre of gravity from West to East. Asia is on the march, whileestablished Euro-Atlantic nation brands stagnate. Particularly striking is therise of China, which is narrowing the value gap with the United States atbreakneck speed.The beginning of the 21st century has witnessed the rise of China as aneconomic and political power. The country has become the world’s largestmanufacturer and exporter, and the largest economy by purchasing power.China’s economic growth has in turn bolstered its political standing. With theleaders of the United States and Europe pursuing inward-looking agendas,China is seizing the moment to take on a global leadership role it hasaspired to for a long time.However, in an increasingly multipolar world, Asia is not the only challengerof Western dominance. Many African and Latin American nation brands,although starting from a lower base, have made considerable gains, hintingto where the global balance of power is heading in the years to come.Nevertheless, not all of Europe is vegetating as those nation brands thatmany considered unable of making a full recovery, after the troubles that hadplagued them since the Great Recession and the Eurozone Crisis, are nowgrowing at double-digit rates. This is equally true of Southern Europeannations as of Ireland and Iceland – the fastest-growing nation brand of 2017. In this time marked by change, it is more important than ever thatgovernments, trade bodies, and businesses take steps to ensure that theirnation brand is strategically appropriate and well-managed. The team and I hope you enjoy this report and look forward to speaking toyou soon. Foreword David Haigh CEO Brand Finance plcContents Brand Finance Nation Brands October 2017 5.Brand Finance Nation Brands October 20174. Nation branding applies widely used marketing concepts to countries in theinterest of enhancing their reputation – principally among institutionalinvestors - and why not Corporate marketing has created immense valuethrough brands, based on a clear understanding of certain consumptionpatterns and how brands meet them. Much like consumers, investors arepredictable, and nation brand managers need to study their needs.Central to positioning a nation brand is a clear understanding of what drivesinvestor decision-making. Having had the opportunity in the past to helpdefne brand strategy for the investor relations arm of the Mexico countrybrand, what was critical to success in that project was an understanding ofwhat is most important to investors, and what drives their motivation to selectone nation over another.The results of ad-hoc research that was commissioned made it abundantlyclear that the frst and foremost reason for selecting a country to invest in,was political and economic stability. In fact, confdence and understanding ofMexico’s political and economic conditions, were of critical importance, andcame before any other choice driver was even considered. Almost of equalimportance to stability, were geographic location and market size. Mexico’sphysical proximity to the United States was a no-brainer, and when the sizeof the country’s population was added to the mix (130 million), a strongattraction to considering an investment decision was evident. Third came theavailability of skilled labour, and last but not least, the ‘ease of doingbusiness’ factormunicating the facts was in this case central to the strategy of attractingforeign direct investment. There exists a popular adage in the advertisingworld that states: “Nothing kills a bad product faster than good advertising”.By using fact-based marketing, related to the ease and speed of doingbusiness, Mexico literally put their money where their mouth was. BrandMexico’s messaging was developed around the idea of how long it takes tostart a business in the country. As a matter of fact, in Mexico it is 9 days,compared to 33 in China, and 119 in Brazil. Focusing on measurement and collecting the right data going forward is acompetitive advantage in itself, and knowing what not to measure can be asimportant as understanding what should be measured. Certainly the closer ametric is to income – or in this case, investment – the more seriously it will betaken by management. For instance: How many leads do we need in orderto hit our investment targets What is the average deal size Are we retainingour investors As nations compete for investment, nation branding becomes a morerecognised and a more familiar concept, and in this process, it is importantto note that the principles and basics for nation branding are not too distantfrom those applied to traditional brands. Attracting Green Field Investment Laurence Newell Managing Director Brand Finance MexicoWhen looking to invest in a country – unless you literally spot a gold mine –there is always going to be another choice. Deciding between such optionsinvolves both fnancial and emotional arguments – and it is where nationbrands come into play. The value-based rationale is obvious. Technically speaking, the brandvaluation methodology employs various risk rates, the same rates used bypotential investors when assessing the target country. However, perceptionsare equally powerful, and it was often demonstrated that investment and B2Bdecisions are far from being exclusively rational.On the ground, the diversity of Europe offers many cases illustrating thecorrelation between the strength of the nation brand and the fow of M&A. For instance, since the Brexit referendum, the pound has depreciated,making British brands attractive targets for foreign companies. If not for astrong Brand Britain, the country’s corporate brands would either be sold atless-than-competitive prices or for nothing at all, unable to attract investors.For private brands, this is a casebook argument for the importance ofmeasurement and valuation when managing a brand and proofng it forturbulent times like those brought about by Brexit. But stars in the European constellation do not all shine with the same light.For instance, Brand Romania, Brand Slovakia, Brand Bulgaria in the east ofthe continent, are much weaker than their western neighbours – and with along way to go before they could shoulder moments of economic distress.This was and is refected also in the M&A fow over the past decades. After the year 1989, with the former communist block stepping intocapitalism, the mixed privatisation record produced some notable results –see VW Group’s acquisition of Skoda in the Czech Republic or Renault’stakeover of Dacia. Dacia is a successful, recognisable Romanian brandwhich fourishes under foreign ownership whilst retaining its importance forthe home economy, and it is now the most valuable brand in Romania.However, once the gold rush was over, it was back to business as usual, andafter the Great Recession, the M&A fow picked up