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CorporateBrand_EmpiricalFindingsArticle__FINAL3_0606191MM.docxEmpirical Findings Article Cover Page
Empirical Findings: The Corporate Brand
Tagline
Traditional research into brand contribution typically has focused on product brands. Instead, we focus on corporate brand contribution, which is the contribution of the brand of the company to value creation.
Keywords
Brand Value, Corporate Brand, Brand Measurement, Design Science, Financial Competitiveness
Executive Summary
While the value of a product’s brand has been studied quantitatively, the power of a corporate brand on a company’s success has not been studied to the same extent. A quantitative methodology is important for managers to measure the impact of a corporate brand and the ensuing business results. Using design science research, the authors developed a new model to study the relationship between corporate brand, revenue growth and business valuation. Specifically, the authors designed an artifact to provide a unique perspective for quantifying and measuring core brand value at the company level. Selecting 119 companies from a consumer sector data, the authors used the cyclical approach of design science research to examine the level of BrandPower of the companies and correlated it to revenue growth. In the process, the authors divided the 119 companies into five tiers according to BrandPower. At the end of the process, it was revealed the real opportunity for corporate growth to drive revenue exists in the middle tier of brands; this tier of emerging companies has room to grow brand strength and increase revenue. Therefore, emerging brand companies likely would benefit the most from increased investment in corporate communications. Then, the authors used the analytical and descriptive design evaluation methods to demonstrate that their model and artifacts addressed key standards of validity, utility, quality and efficacy. As a result, the authors presented an alternative framework for capturing corporate brand value on financial statements. The results of this research can be used to advance the core principles of value investing.
Empirical Findings Article
Empirical Findings: The Corporate Brand
Introduction
For decades, understanding how brands contribute to a company’s value has been a research topic. Though ample scholarship has been written about how a product’s brand can contribute to its sales, the corporate brand has been far less measured. While it is intuitive that a corporate brand contributes to value creation, the quantitative data to measure its impact has not been available on a large scale. Having the data and models for measuring the corporate brand and its impact are important to understand and quantify how much financial competitiveness is being exerted by the corporate brand as well as how to value it. Gehani states, “Brand value as a corporate asset is one of the primary measures of competitive advantage of an enterprise that is useful to gain customers’ brand preference over rivals” (2016, p. 11). Gaining a measured, quantitative understanding of corporate brand impact will help companies manage and implement their corporate branding strategy.
The objective of our paper is to extend existing research on the corporate brand by providing a framework for answering questions that have perplexed value investors for decades. The primary questions are: 1) What is the nature of the relationship between the corporate brand and revenue growth? 2) Can brand be captured on the financial statements and valuation structure of a company? 3) What can the business sell for, including its corporate brand value?.
Specifically, the purpose of this study is to identify a linkage between corporate brand and revenue generation as well as the impact of corporate brand on the valuation structure of a business. Understanding how the corporate brand impacts these functions will help companies understand their value and how to allocate resources. Goranova notes, “Brands are elements of companies’ property and the good reputation of a brand is literally part of a company’s capital” (2015, p. 6).
Using a design science research (DSR) approach, we established the following research objectives:
RO1: To design and build an innovative artifact (model/framework) to link corporate brand, revenue growth and business valuation
RO2: To evaluate such an artifact and its component parts
For this study, the quantitative measure of the corporate brand is evaluated in the context of public fundamental financial data. One hundred and nineteen companies were analyzed from 2011 – 2016; we examined the measures of brand strength and sales growth rates over that period. A correlation matrix of the relationship between brand growth and revenue growth is evaluated and a quintile analysis to understand how these companies perform at various strata within the consumer sectors.
Using the BrandPower data from the CoreBrand Index® (CBI) database, we developed a new model for financial analysis, investment decision making and security analysis. The new model is grounded in the value investing literature from the 1930s and the textbook Security Analysis by Graham and Dodd.
This grounding builds upon the existing knowledge in the field and allows us to look at our model with a unique perspective based on the corporate brand as another datapoint to aid decision making. We extend existing research by examining the companies in the CBI database’s consumer sectors, consumer staples and consumer cyclicals to determine if we can identify those relationships.
Review of Research
To be able to measure the impact of a corporate brand, one must first understand what we mean by corporate brand (or corporate image). Gregory and Wiechmann conclude that “corporate image begins with the public’s perception of a company – the preconceived ideas and prejudices that have formed in the minds of customers” (1991, pg.2).
Notably, Warren Buffet has been successful investing in companies with a strong brand. Lowenstein explains, “What was not so apparent was that Buffett was also beginning to think differently-that is, to think in qualitative terms, as well as in the merely numerical terms that had appealed to Graham. When Buffett looked at a stock, he was beginning to see not just a frozen snapshot of assets, but a live, ongoing business with a unique set of dynamics and potential. Indeed, its most valuable commodity was its name” (1995, p. 43).
For example, one of Buffet’s first investments was American Express. Lowenstein states, “Buffett also learned the details of reading a financial statement, and how to spot a fraud. In essence, Graham taught him how to get from a company’s published material to a fair value for its securities” (1995, p. 43).
According to Gehani, “brand value as a corporate asset is one of the primary measures of competitive advantage of an enterprise that is useful to gain customers’ brand preference over rivals” (2016, p. 11). There has been increased understanding of brands as an important component of intangible capital. Goranova states, “brands are elements of companies’ property and the good reputation of a brand is literally part of a company’s capital” (2015, pg. 6). (See the appendix for a full overview of the literature review findings).
The Core Brand Index
Tenet Partners developed the CoreBrand Index® (CBI) to address the lack of quantitative data available on corporate brands. For the last two decades, this data has been the basis of models that measure how the brand contributes to stock performance and market cap.
The CBI is a telephone interview conducted among an audience of impartial observers. These respondents are business leaders and affluent consumers. They are Vice President (VP), Director and Manager level executives in the top 20% of U.S. businesses, based on revenue. Each respondent is asked to rate 40 companies. First, respondents are asked to rate their familiarity with each company. For companies the respondent rates as being more familiar than simply knowing the name of the company, the respondent is asked to rate the company’s favorability, which is the combination of three attributes: overall reputation, perception of management and investment potential. Once familiarity and favorability have been calculated, they are equally weighted and combined to create a measure called BrandPower. It is a single measure that represents the corporate brand’s size and quality among respondents. Each of the above measures is reported on a 100-point scale. Each company is rated by 400 respondents per year; approximately 1,000 companies are tracked, some dating back to 1990.
The Protocol
Though the literature is rich on the topic of corporate brand and brand life cycles, the design science research framework primarily has focused on information systems. We offer an alternative view of the dimensions of brand using a DSR approach.
We use the design science research method for the fundamental framework of our research. Hevner states, “design science offers an effective means of addressing the relevancy gap that has plagued academic research” (2004, p. 13). Hevner further contends, “Natural science research methods are appropriate for the study of existing and emergent phenomena: however, they are insufficient for the study of wicked organizational problems, the type of problems that require creative, novel, and innovative solutions. Such problems are more effectively addressed using the type of paradigm shift offered by design science” (2004, p. 13).
We believe identifying the linkages between corporate brand, revenue generation and the valuation structure of a company is a wicked problem that is best defined, diagnosed and evaluated using a series of design cycles. Furthermore, we believe our artifacts offer a unique perspective to solve the problem of quantifying and measuring core brand value at the company level, which is our unit of analysis.
Our DSR model offers insight to different stakeholders, from Chief Executive Officers to Chief Financial Officers to Board of Directors to the financial analyst community. It can be used to evaluate a company’s brand value fundamentals and the dollar value impact on quarterly financial statements.
The BrandPower data collected were analyzed in conjunction with publicly available financial data and paid media advertising spend acquired from Kantar Media Intelligence. Tenet Partners model for brand valuation was used and statistical analysis was used to examine the data further. We used a unique non-GAAP compliant analysis of the financial statements and income statements to estimate the value of the impact of the corporate brand on business results.
The design cycle for our research activities consists of several iterations of construction of our models, artifact, and evaluation then improving and changing based on discussion and feedback. Chatterjee and Hevner state, “This cycle of research activities iterates more rapidly between the construction of an artifact, its evaluation, and subsequent feedback to refine the design further: Simon (1996) describes the nature of this cycle as generating design alternatives and evaluating the alternatives against requirements until a satisfactory design is achieved.” (2010, p. 18).
Findings
The process depicted below was used to understand the relationships we attempted to uncover through design science research. The process is one of analyses and data utilization to determine how the corporate brand can contribute to company performance (see Fig.1).
Figure 1. The analytical process steps
In step 1, we created a correlation matrix based on the 119 companies in our consumer sector data. We examined the level of BrandPower, its percentage growth into 2016 in 1-, 3- and 5-year increments and correlated it to revenue percentage growth into 2016 in 1-, 3- and 5-year increments. As evidenced in the table below, the correlations found, while positive for the most part, were not particularly encouraging (See Table 1).
Table 1: Correlations between BrandPower and Sales Revenue (Source: Tenet Partners CoreBrand IndexTM Annual Survey and EDGAR-online.com)
|
|
Sales Revenue 1-yr. % growth |
Sales Revenue 3-yr. % growth |
Sales Revenue 5-yr. % growth |
|
BrandPower Level 2015 |
0.011 |
-0.136 |
-0.202 |
|
BrandPower 1-yr. % change |
0.046 |
-0.016 |
-0.012 |
|
BrandPower 3-yr. % growth |
0.012 |
0.024 |
0.029 |
|
Brand Power 5-yr. % growth |
0.004 |
0.045 |
0.070 |
The data appeared to have little relation to one another with no correlation between the variables. This result was surprising, so we asked what could be driving the lack of correlation. The three possibilities below presented themselves:
1) Is it possible the consumer sector is dominantly reliant upon product brands?
2) Is it possible the companies behave differently based on their level of BrandPower?
3) Is it possible no relationship exists between the corporate brand and sales revenue growth?
We decided to pursue the second question in step 2 as it seemed the most plausible explanation. We decided to divide the 119 companies in our dataset into five quintiles based on BrandPower 2015 score. Tiers 1, 2, 4 and 5 had 24 companies assigned each while the middle Tier (Tier 3) had 23 assigned. What resulted appeared to be a very compelling pattern (See Table 2).
Table 2. Percentage Growth Rates for BrandPower and Sales Revenue Growth Based on BrandPower Level (Source: Tenet Partners CoreBrand IndexTM Annual Survey and EDGAR-online.com)
|
|
BrandPower 2015 |
BrandPower 1-yr. % change |
BrandPower 3-yr. % change |
BrandPower 5-yr. % change |
Sales Revenue 1-yr. % change |
Sales Revenue 3-yr % change |
Sales Revenue 5-yr % change |
Sales Revenue 2016 $Bil. |
|
Tier 1 |
70.3 |
0.4 |
2.1 |
2.8 |
0.1 |
1.2 |
11.0 |
57.9 |
|
Tier 2 |
59.9 |
0.9 |
3.5 |
7.4 |
-0.6 |
2.0 |
5.1 |
44.2 |
|
Tier 3 |
43.9 |
1.9 |
7.4 |
16.0 |
8.3 |
8.5 |
18.3 |
11.5 |
|
Tier 4 |
18.2 |
5.4 |
20.1 |
25.6 |
-0.1 |
11.2 |
29.1 |
19.0 |
|
Tier 5 |
5.3 |
1.3 |
8.4 |
-11.4 |
14.0 |
14.0 |
38.5 |
10.7 |
When the data were evaluated using this criterion, a clear pattern emerged. The companies in Tiers 3 and 4, which are clearly smaller than those in Tiers 1 and 2, had the most growth. While Tier 1 and 2 companies have stronger brands by design, they are more mature, have become much larger and have less room for growth. The Tier 3 and 4 companies, which are somewhat smaller in revenue with weaker brands, have the opportunity to increase the strength of their brands and the ability to increase sales revenue. Meanwhile, the Tier 5 brands likely have not reached the critical mass to allow the brand to be a significant driver of revenue. The Tier 5 brands likely will either emerge, go out of business or be acquired.
Figure 2. Corporate brand lifecycle (Source: http://www.assignmentpoint.com/business/marketing-business/product-life-cycle.html)
As we reviewed the data in the tier analysis in Table 2, we recognized this information corresponded with previous work regarding brand life cycles (See Fig. 2). The companies in tier 3 were in the “Growth” region of the chart above. They had recognizable brands that had room to grow as brands and financially. These companies were ripe for brand and revenue growth.
For step 3, we chose to visualize the data in scatter plots. First, we wanted to examine the entire dataset (See Fig. 3). We did not expect to see a strong relationship between BandPower growth and sales revenue growth, so the lack of correlation was not surprising. Then, we looked at the BrandPower growth and sales revenue growth for the companies in Tier 3 (See Fig. 4).
Figure 3. BrandPower versus Revenue Growth (5-years, all companies) (Source: Tenet Partners CoreBrand IndexTM Annual Survey and EDGAR-online.com)
Figure 4. BrandPower versus Sales Revenue Growth (5-years, Tier 3 companies) (Source: Tenet Partners CoreBrand IndexTM Annual Survey and EDGAR-online.com)
The companies in Tier 3, which we identity as emerging brands, can expect almost twice the sales revenue growth for increases in BrandPower than the average of the full set of companies. The slope of the trend line in figure 2 is 0.0897 while in figure 3, it is 0.1728, indicating a higher rate of sales revenue return for an increase in BrandPower. It is important to note that we did not expect the corporate brand to be a main driver of sales revenue, but rather to give companies that are able to take advantage of it a premium impact on their sales revenue growth.
This result informs us that the companies in the middle have a significant reason to do everything they can to manage and leverage their corporate brands to help create growth.
Figure 5. BrandPower and Paid Media Advertising for Example Company (Source: Tenet Partners CoreBrand IndexTM Annual Survey and Kantar Media Intelligence)
For our example company, we examined BrandPower and paid media advertising with a 1-year lag (See Fig. 5), which is the previous year’s ad spend coupled with the next year’s BrandPower. This approach revealed a positive relationship. Modeling this approach showed that as paid media increased, BrandPower was expected to increase. Essentially, an additional $1 million in paid media advertising would yield 0.1-points of BrandPower, which resulted in $2 million in brand equity valuation.
Artifact 2: Our Proposed Adjusted Valuation Structure Approach
Our proposed adjusted valuation structure approach describes the steps to incorporate corporate brand into the equation to determine the intrinsic value for a company (See Fig. 6). The two approaches to our new model are: 1) The income statement approach; 2) The balance sheet approach.
Figure 6. Koch’s Conceptual Valuation Model
DSR Model 1: The Income Statement Approach
Step 1: The first step is to review the company’s income statement, focusing on reported earnings per share (EPS).
Step 2: The second step is to take the Core Brand Index dollar value calculation and divide that number by the shares outstanding.
Step 3: The third step is to add the Core Brand Index per share dollar amount to reported EPS. This number provides the anchor point to our analysis. We call this the Adjusted Brand EPS Power.
Step 4: The fourth step is to divide the current stock price by the Brand EPS power. This last step provides the Price-to-Brand EPS Power ratio.
This 4-step income statement adjustment process provides the fundamental basis for valuing a company based on Brand that is not captured by current generally accepted accounting principles (GAAP). The benefits of this new model are when Core Brand Index per share value is added to earnings, it provides a more consistent measurement than EPS alone.
Table 3 features a real-world company example using the DSR framework applying our new model.
Table 3. Example Company Income Statement and Adjustments (Source: www.annualreports.com and www.edgard-online.com)
|
Financial Statements |
_2016 |
_2015 |
_2014 |
_2013 |
_2012 |
|
> Income Statement |
|
|
|
|
|
|
Sales ($M) |
15,149.70 |
14,268.70 |
12,574.30 |
10,962.80 |
10,003.60 |
|
Gross Income |
2,018.80 |
1,887.50 |
1,648.70 |
1,464.40 |
1,378.80 |
|
Operating Income |
1,009.90 |
969.30 |
797 |
701.40 |
666.90 |
|
Interest Expense |
36.40 |
24.50 |
30.8 |
32.40 |
33.70 |
|
Net Income |
623.40 |
597.40 |
492.6 |
434.30 |
413.60 |
|
EPS Basic |
3.07 |
2.77 |
2.20 |
1.90 |
1.82 |
|
> Adjustments |
|
|
|
|
|
|
Core Brand Index $ Value |
1485 |
1291 |
1599 |
1186 |
949 |
|
Shares Outstanding |
186 |
200 |
209 |
222 |
226 |
|
Core Brand Index $ per share |
7.98 |
6.46 |
7.66 |
5.35 |
4.20 |
|
EPS Basic |
3.07 |
2.77 |
2.20 |
1.90 |
1.82 |
|
Adjusted Brand EPS Power |
11.05 |
9.23 |
9.86 |
7.25 |
6.02 |
|
Market Price of Stock |
64.39 |
53.97 |
66.58 |
47.02 |
37.54 |
|
Traditional P/Earnings |
21.0 |
19.5 |
30.3 |
24.7 |
20.6 |
|
Adjusted P/Brand EPS Power |
5.83 |
5.85 |
6.76 |
6.49 |
6.24 |
|
|
|
|
|
|
|
5.3 DSR Model 2: The Balance Sheet Approach
Step 1: The first step is to review the company’s balance sheet, focusing on reported book equity or book value per share.
Step 2: The second step is to take the Core Brand Index dollar value calculation and divide that number by the shares outstanding.
Step 3: The third step is to add the Core Brand Index per share dollar amount to the book equity or book value per share. This number provides the anchor point to our analysis. We call this the Adjusted Brand Book Value.
Step 4: The fourth step is to divide the current stock price by the Brand Book Value. This last step provides the Price-to-Brand Book Value ratio.
This 4-step balance sheet adjustment process provides the fundamental basis for valuing a company based on Brand that is not captured by current generally accepted accounting principles (GAAP). The benefits of this new model are when Core Brand Index per share value is added to book value, it provides a more effective asset measurement than reported book value alone.
Table 4 features a real-world company example using the DSR framework applying our new model.
Table 4. Example Company Balance Sheet and Adjustments (Source: www.annualreports.com and www.edgard-online.com)
|
|
|
|
|
|
|
|
Financial Statements |
_2016 |
_2015 |
_2014 |
_2013 |
_2012 |
|
> Balance Sheet |
|
|
|
|
|
|
Cash |
37.40 |
27.60 |
627.90 |
449.40 |
442.70 |
|
Accounts Receivable |
132.20 |
137.70 |
79.90 |
92.00 |
86.40 |
|
Inventory |
1,932.00 |
2,086.90 |
1,641 |
1,517.80 |
1,092.60 |
|
Other Current Assets |
370.20 |
346.90 |
294 |
251.00 |
231.80 |
|
Net PPE |
5,248.70 |
1,862.50 |
1653 |
1,429.00 |
1,278.70 |
|
Long-Term Investments |
9,536.90 |
8,435.50 |
7147.8 |
5,895.90 |
4,959.80 |
|
Other Long-Term Assets |
289.50 |
301.00 |
263 |
253.00 |
239.00 |
|
Goodwill/Intangibles |
0.00 |
0.00 |
0.0 |
0.00 |
0.00 |
|
Total Asset |
14,459.90 |
13,198.00 |
11707 |
9,888.00 |
8,331.00 |
|
Accounts Payable |
433.70 |
453.70 |
426.1 |
336.20 |
324.80 |
|
Short-Term Debt |
315.50 |
290.50 |
243 |
199.40 |
189.40 |
|
Other Current Liabilities |
256.00 |
252.90 |
206.4 |
148.60 |
132.10 |
|
Long-Term Debt |
10,320.70 |
8,818.80 |
7340.4 |
6,009.60 |
4,863.30 |
|
Other LT Liabilities |
229.30 |
225.50 |
174.2 |
175.60 |
148.80 |
|
Total Liabilities |
11,555.10 |
10,041.40 |
8390.2 |
6,869.40 |
5,658.40 |
|
Retained Earnings |
1,746.80 |
1,994.20 |
2214.2 |
1,993.80 |
1,744.50 |
|
Book Common Stock Equity |
2,904.80 |
3,156.80 |
3317 |
3,019.20 |
2,673.10 |
|
Total Liabilities & Equity |
14,459.90 |
13,198.20 |
11707.20 |
9,888.60 |
8,331.50 |
|
> Adjustments |
|
|
|
|
|
|
Core Brand Index $ Value |
1485 |
1291 |
1599 |
1186 |
949 |
|
Shares Outstanding |
186 |
200 |
209 |
222 |
226 |
|
Core Brand Index per share |
7.98 |
6.46 |
7.66 |
5.35 |
4.20 |
|
Book Equity Per Share |
15.62 |
15.78 |
15.88 |
13.62 |
11.83 |
|
Adjusted Brand EPS Book Value |
23.60 |
22.24 |
23.54 |
18.97 |
16.03 |
|
Market Price of Stock |
64.39 |
53.97 |
66.58 |
47.02 |
37.54 |
|
Traditional P/Book Value |
4.12 |
3.42 |
4.19 |
3.45 |
3.17 |
|
Adjusted P/Brand Book Value |
2.73 |
2.43 |
2.83 |
2.48 |
2.34 |
|
|
|
|
|
|
|
Discussion
McLaren and Chan state, “evaluating new IS artifacts involves answers to the question “How well does it work?” (2011, p. 920). Our DSR process was a series of cycles used to evaluate individual companies based on their core brand value, sales growth and valuation structure.
Furthermore, the design science literature describes five design evaluation methods (observational, analytical, experimental, testing and descriptive). In our research, we used two of these evaluation methods, analytical and descriptive, to demonstrate that our model and artifacts addressed key standards of validity, utility, quality and efficacy.
We reviewed raw survey data to draw conclusions based on Core Brand strength. We described what we see in the data and how to apply it at the company level. We found a weak but positive relationship between brand power percentage change and revenue percentage change. Furthermore, we were able to identity a unique valuation method that includes core brand as a significant factor.
An Alternative Framework
We believe our valuation framework (Artifact 2) provides an alternative way of representing how brand can be captured in accounting numbers. We attempt to provide a range of values that can be used to identify brand on the income statement and balance sheet. This information can be used to advance the core principles of value investing. Warren Buffett has experienced success investing in brands, and we encourage other investment managers to apply and use our alternative framework in their investment strategy.
Conclusions
Our innovative research and analysis should be useful to individuals who are custodians of a company’s brand. It will help them to evaluate where their company resides relative to competitors and whether they are well positioned for financial returns. These companies can benefit greatly by knowing if they should be more aggressive or passive with their communications.
In addition, our innovative research should be useful to value investors who estimate the intrinsic value of a company. Graham and Dodd explain, “Intrinsic value emphasizes the role of facts: the value of which is justified by assets, earnings, dividends, definite prospects, and the factor of management” (1988, p. 40). Corporate brand value can be added to the list and quantified on a per share basis using our alternative income statement and balance sheet framework for publically traded companies.
Our process was designed to evaluate how corporate brand contributes to revenue as well as its impact on the valuation structure of the business using a cyclical approach. The initial cycles were completed using an observational approach.
In step 1, we were surprised by the results of our correlation analysis. We expected to see stronger results. However, after a DSR research cycle, we were led to conclude that the relationship may have been obscured by the number of companies we were viewing and the various stages of brand development.
Next, we performed a quintile analysis, and the relationships became more clear. The quintile analysis revealed that at different stages of brand development and BrandPower strength, the companies had different stages of brand and revenue growth.
We concluded that among the strongest brands, there is not much BrandPower growth; therefore, there is not as much correlated revenue. The real opportunity for corporate growth to drive revenue exists in the middle tier of brands. These emerging companies have room to grow brand strength and increase their revenue.
We show those companies to expect twice the level of revenue growth for increases in BrandPower than the leading brands in the category. These emerging brand companies likely would benefit the most for increased investment in corproate communications.
Furthermore, we presented an alternative framework on how to capture corprate brand value on the finanical statements. From our example, the variance between the basic EPS of $3.07 and the adjusted Brand EPS Power of $11.05 was fairly large. Also, the adjusted Brand EPS power should provide a more stable way to value a company because earnings can be volatile and erratic over time. Furthermore, we provided a unique perspective on the balance sheet adjustment. For our example, this company had zero goodwill or intangible assets stated on the balance sheet. The book value was $15.62 versus the adjusted Brand book value of $23.60. The price-to-adjusted brand book value declines by two times, which improves and explains the valuation of this emerging brand company.
In conclusion, Kirk states, “brand equity is linked to the brand’s name and symbol and provides value to both the customers and to the firm. It can both enhance and detract from the value of a product or service, and thus consists of both brand assets and liabilities” (2012, p. 488).
Our study has showed the linkages of corporate brand to sales growth and identified emerging brands as an opportunity of further study. Hevner contends, “The final objective of a design science research methodology is to provide a mental model for the characteristics of research outputs” (2010, p.28). We have provided a new mental model to demonstrate the impact of the corporate brand on the financial statements, which generally accepted accounting principles do not capture. This outcome provides an opportunity for further empirical study.
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Table 5: Literature Review Findings
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Findings: |
Author: |
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Pg. 13. Design science offers an effective means of addressing the relevancy gap that has plagued academic research. Pg. 13. Natural science research methods are appropriate for the study of existing and emergent phenomena; however, they are insufficient for the study of wicked organizational problems, the type of problems that require creative, novel, and innovative solutions. Such problems are more effectively address using type of paradigm shift offered by design science. |
Hevner (2004) |
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Pgs. 4 – 5 The engineer, and more generally the designer, is concerned with how things ought to be – how they ought to be in order to attain goals, and to function. Hence a science of the artificial will be closely akin to a science of engineering. |
Simon (1996) |
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Pg. 43. What was not so apparent was that Buffett was also beginning to think differently-that is, to think in qualitative terms, as well as in the merely numerical terms that had appealed to Graham. When Buffett looked at a stock, he was beginning to see not just a frozen snapshot of assets, but a live, ongoing business with a unique set of dynamics and potential. Indeed, its most valuable commodity was its name. Pg. 43. Buffett also learned the details of reading a financial statement and how to spot a fraud. In essence, Graham taught him how to get from a company’s published material to a fair value for its securities. |
Lowenstein (1995) |
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Pg. 920. Evaluating new IS artifacts involves answers the question “How well does it work?” |
McLaren, Yuan & Chan (2011) |
Reviewer Appendix
The EFA Question
The EFA question was developed to address an unanswered question in the business space. Many studies have been conducted to understand product brand’s contribution to revenue generation and corporate brand’s contribution to market cap. However, until now, the impact of the corporate brand on revenue generation and value generation largely has been ignored in the existing literature. Our research was designed to measure this impact and determine how to evaluate it.
Research Design
This research used the Design Science process to methodically measure the strength of corporate brands, their impact on company revenue generation and ultimately, their value creation. This iterative process moved step-by-step through the process to identify impacts at each stage of the process and try to understand the cause and effect.
· We used archival data collected by Tenet Partners through telephone surveys because they represented the best possible quantitative representation of the strength of corporate brands across hundreds of companies and several decades with a consistently applied collection method
· In addition to Tenet Partners CoreBrand data, we gathered financial data from EDGARS Online and paid media advertising data that Tenet Partners acquired from Kantar Media Intelligence
· The survey instrument has been validated by its decades of use for business purposes as well as outside bodies such as the University of Cologne and The Marketing Accounting Standards Board (MASB)
· Data was analyzed using a combination of statistical analysis, valuation models created for client use by Tenet Partners and analysis of financial and income statements
Our research was designed to use standard financial analysis techniques then add quantitative data representing the corporate brand to better understand how it may contribute to value creation. These artifacts are meant as tools to help understand and manage the corporate brand’s impact on value at the operational level. They are non-GAAP compliant techniques, so they are intended to allow the practitioner to be better able to optimize brand performance and understand accountability.
Research Performance
· The research, which was was undertaken by Christian Koch and Brad Puckey, was designed using their executive operating experience. Mr. Koch was intrigued by the corporate brand topic when he attended a dissertation topic review by Jim Gregory. One day during a DBA course, Mr. Koch outlined a valuation model on the classroom board and the development of this project was born.
· When filtering public data on the companies used, we had to keep their names private due to restrictions with Brad Puckey’s current employer, Tenet Partners. We masked the financials due to this issue. However, the financial data was taken from historical *Footlocker* annual reports and 10K filing statements.
The Discussion and Conclusions
During the research process, discussion was ongoing between Christian Koch and Brad Puckey regarding the best approach to take and for fine tuning each Core Brand subsegment. Plenty of thought and discussion were put into focusing on emerging or rising brands versus established brands. From the lens of an investor, one is always looking to improve or rising trends not stable or established. We used this core principle when designing the research.
Core Brand
Index
Income Statement Adjustment
Balance Sheet Adjustment
Market Price
Price-To-Brand Book Value & Price-to-Brand EPS Power
Correlation Matrix
Quintile Analysis
Data Visualization
Emerging Brands Discovery
BrandPower Adjusted Valuatuation
5-Year BrandPower and Sales Revenue Growth - All Companies
-1.0704555052803837 0.76357809580323122 9.4933003692035829 6.2097812434272601 -2.0721437190866965 -1.145439874814389 5.7819775461841232 -0.44384674281072684 2.8680073882852444 -4.453809239415131 3.5679556332284723 5.8130272931046338 11.354903720629052 -2.8310659612637212 9.0002784845188959 -1.2137857788105979 1.0490486709586835 22.083021321092886 -0.40895448896796194 -1.2728012830209643 -0.5308428530800211 14.775486158662007 -1.1031658576295316 -8.4331006711547474 4.4107902612632257 -4.4231449786203436 3.2152911371121249 -1.1890384889238406 0.73541911130397641 -0.17516388562458846 -2.4575471788320025 5.7861937690226286 -5.2935991637704207 7.8635720365435198 10.836037356600176 24.710548721100384 8.8623181201089398 -6.8829606448539566 3.9035012724628717 7.0455448696487926 4.0550200710988538 -1.6391761226702823 24.220898057917189 68.025001835788785 15.892677298349087 11.788428478538155 -5.2096463316595409 2.9661043925864088 16.119779037068657 40.418112616087008 43.00133033026404 11.339546225632196 17.615871919950802 -8.1224106061671986 10.832302766934919 15.247387395283379 7.7881998796079186 27.83475608998323 29.677178465348664 9.6056592467530599 12.772974968421543 17.78866546590282 18.020254612279999 -4.3999326691301617 9.9817062113351263 34.802374083439062 28.215133341729313 15.719344510690513 -6.5608970478662831 45.861747190306204 -24.71975721913206 3.4253603271674566 39.224883555667731 9.0994456397320391 16.23982873504303 -4.8694844889752336 5.7740677552206545 39.319552164057292 -5.6811019263520386 82.018486475179358 70.169146687703488 8.19559256628615 -2.1662209151252059 6.7026888351950795 -35.522887030702712 18.951905436748682 114.23352996476291 -13.51935968420481 6.2214980444375625 80.499673649008102 16.67898976659724 13.052548124577939 98.01210611917854 -1.4022172155680319 50.841093693779669 -24.457706755525237 -45.136780815223702 -35.065585110698471 17.079146063942837 -19.839173569881254 45.398091321124859 -45.954507270767351 253.68061514164731 44.510831156492806 10.590136088354649 -1.735493795062637 -50.548420461520635 -41.813987581450341 -9.6142156369705773 -49.354979622920759 9.3697221203995991 -34.071090483790051 -34.460841895400449 0.83481755895773202 -15.635842717629906 -44.119713906949173 -49.639285933325361 -74.607565293481343 -78.253223898521966 -11.393220775873178 22.516774108669907 37.969823686205459 -7.1484421989654754 13.993636688819025 -0.74253674799211999 11.310483870967742 -8.0913111031433012 -8.7980448789157961 3.1351211296800101 82.171609264165468 2.2380638457154989 11.298617807778848 72.650933835239613 55.191256830601091 27.832009080590236 -43.612186500589125 10.514242018734468 -47.984161267098628 11.89442120067579 -10.628790296840089 8.9607338628481923 -6.8918628784083582 36.922981469225682 -20.906260976998269 28.863926067558953 11.419744026301885 33.67426663825556 5.0931335486975051 -40.774862219297525 28.948725776060808 -2.981266856184853 12.687599241919786 -25.26071842410197 8.2009103250019955 0.26230413474149239 15.446600136366454 2.4921024921024921 0.29780897681344393 23.812616708614108 39.644393927092636 -32.211414306619609 -22.098412385366334 -2.5752698352584735 33.519653601754484 9.5281231985506025 2.6950854324467146 12.201598417202504 38.449226391605904 49.051124468156956 55.817174515235457 130.19472768816286 0.53245679795474721 20.707780775417657 -17.212282621593474 -2.0993665253128109 40.816158962147945 -13.752766361049638 37.896541869105462 -12.78902427324187 69.240833973319695 60.68572570971611 16.825704202922552 -46.399788293598284 31.747801313018702 -7.7363896848137532 -14.509856510661123 -18.231884755056406 -41.095365760245116 2.5767928986525259 39.119953824737706 52.418766712584066 169.01740253818679 75.925925925925924 58.509253903990746 28.085344454899168 6.1613386944809401 47.299699127586337 9.8934550989345507 3.1353135313531353 -7.5557985120396767 41.883608567101746 48.109120711860434 21.198262062657211 27.653927813163481 -49.706953904641217 -1.1135117168023931 26.419102839312192 184.44410955807555 32.785059539107344 -15.198823000531286 -52.21606648199446 18.390006939625263 -5.3645452328700323 -20.670335663642224 31.736949918768097 8.5434173669467786 29.309738991102929 250.26085778169249 23.284372742595714 -36.857977570445769 -33.2415691672402 42.998878440169094 234.27738671359438 21.83502089870796 2.8614176173555266 4.3977554482578629 16.599338964377523 37.333252486053844 7.8147612156295221 23.37217272104181 76.469166243624159 21.398078975453576 8.4033613445378155 80.104608704233684 55.961372085954132 10.020003637024914 -23.603793466807165 31.617895805142069
BrandPower Growth %
Sales Revenue Growth %
5-Year BrandPower and Sales Revenue Growth - Tier 3
16.119779037068657 40.418112616087008 43.00133033026404 11.339546225632196 17.615871919950802 -8.1224106061671986 10.832302766934919 15.247387395283379 7.7881998796079186 27.83475608998323 29.677178465348664 9.6056592467530599 12.772974968421543 17.78866546590282 18.020254612279999 -4.3999326691301617 9.9817062113351263 34.802374083439062 28.215133341729313 15.719344510690513 -6.5608970478662831 45.861747190306204 -24.71975721913206 3.4253603271674566 38.449226391605904 49.051124468156956 55.817174515235457 130.19472768816286 0.53245679795474721 20.707780775417657 -17.212282621593474 -2.0993665253128109 40.816158962147945 -13.752766361049638 37.896541869105462 -12.78902427324187 69.240833973319695 60.68572570971611 16.825704202922552 -46.399788293598284 31.747801313018702 -7.7363896848137532 -14.509856510661123 -18.231884755056406 -41.095365760245116 2.5767928986525259 39.119953824737706 52.418766712584066
BrandPower Growth %
Sales Revenue Growth %
5-Year Paid Media ($000) vs. BrandPower 1-yr lag
12940.4 22625 25430.400000000001 21372.2 16094.9 50.4 52.8 53 54.5 55.4
Paid Media ($000)
BrandPower
