False economies

In the searing aftermath of the Lehman collapse, it was inevitable that corporates would become more risk averse, and that finance and procurement, rather than marketing departments, would have the upper hand.

Caution rules and, in this environment, finance has greater influence. In fact, half of the FTSE 100’s current chief executives are former chief financial officers (including me!).

We’re biased, of course, but the only way in the long run for companies to survive and prosper is by growing the top line rather than focusing exclusively on costs – and that means investing in marketing.

Investment in brand is all the more essential as consumer goods manufacturers come under ever-greater price pressure from retailers. Walmart, Tesco and Carrefour amongst others continue to focus on leveraging their buying power on a global level. Although, they now face pressure from online retailers, who will give manufacturers a new opportunity to build direct relationships with consumers.

There are few manufacturers who do not feel pressed to reduce prices and commodify their brands. Equally, there is continued overproduction in many industries. True, Detroit makes fewer cars and trucks, but any shortfall has been taken up by Tata, Hyundai, Kia and Geely.

There is only one solution in a crowded, stressed market suffering from overcapacity: differentiation – from continuous product innovation (tangible) and stronger branding through marketing communications (intangible).

The world’s 30 largest companies*

Rank Company Market cap $m Country

Source: CorporateInformation.com

* Market values as at 21 March 2014.

1 Apple Inc. 475,314 US
2 Exxon Mobil Corporation 407,536 US
3 Google Inc. 397,562 US
4 Microsoft Corporation 333,328 US
5 Berkshire Hathaway Inc. 308,826 US
6 Johnson & Johnson 271,321 US
7 Wells Fargo & Company 258,462 US
8 Roche Holding Aktiengesellschaft 254,997 Switzerland
9 General Electric Company 254,635 US
10 Wal-Mart Stores, Inc. 246,716 US
11 Nestlé S.A. 234,461 Switzerland
12 Royal Dutch/Shell Group 228,423 Netherlands
13 JPMorgan Chase & Co. 226,005 US
14 PetroChina Co Ltd 225,502 China
15 Chevron Corporation 220,753 US
16 Procter & Gamble Company (The) 211,164 US
17 Pfizer Inc. 205,744 US
18 Industrial And Commercial Bank Of China Ltd 200,104 China
19 Novartis AG 199,561 Switzerland
20 International Business Machines Corporation 194,387 US
21 Verizon Communications Inc 194,056 US
22 HSBC Holdings plc 188,207 UK
23 Bank of America Corporation 185,576 US
24 AT&T Inc. 178,595 US
25 Visa Inc. 173,306 US
26 BHP Billiton Limited 172,004 Australia
27 Facebook Inc. 171,445 US
28 Coca-Cola Company (The) 169,363 US
29 Oracle Corporation 168,975 US
30 Toyota Motor Corporation 168,154 Japan

Chapter 7 of 13