It is brands, Economist !
Typically, many economists have not always fully appreciated business disciplines of softer nature – marketing as a field quickly comes to one’s mind. Yet, it is enormous how significant is the value astute marketing people can create for the national economy. They not only help salespeople of companies penetrate markets home and far abroad but through strategic brand-building enormously enhance the economic value of production.
It is not rare that a branded product – a product which carries a recognized and reputed brand – can sell for a multiple of price of a generic product. This is typically a result of concerted brand-building efforts by and within a given organization. Consistent and attractive visuals and designs of products, thought-out media advertising, marketing events of many kinds, aligned organizational behavior – these all can come under a rubric of brand-building. Yes, brand-building also entails a cost but typically astute marketing people can create the brand where a brand price premium can exceed the incurred cost substantially.
When the national economy has many high-quality brands this might also have macroeconomic implications. It can mean that countries with the most astute marketing people can see their GDP enhanced by these strategic marketing efforts more than others. This is something not completely obvious when one thinks about the role and the effect of marketing in the economy (one would think perhaps, in a first cut, of mostly zero-sum game when analyzing marketing effects within a sector). Furthermore, branded products command a much higher degree of customer loyalty – this has implications for competitiveness of the national economies. Just think what a 20% appreciation of domestic currency does with the competitiveness/profit margins of commodities exporting countries vs. highly branded products exporting countries. The latter economy is clearly much more robust to currency value shocks.
When looking at this issue via the glasses of somebody born and living in a Central-Eastern European (CEE) country one has to appreciate the road traveled since the inception of transformation of these economies to a market model also in case of local marketing activities. The marketing area was extremely neglected during the socialism regime as very little advertising and brand-building took place. During the last 30 years enormous progress was achieved as demonstrated by springing up of many attractive brands in these economies, although most of them are only of local significance. Obviously, not all progress was domestically driven but rather the effect of inflow of FDI, which brought some marketing practices, and of other foreign influences cannot be underestimated.
Yet, while the marketing expertise in the CEE economies has advanced, further improvement could be achieved by bringing business education closer to business people in these countries. Offshoots of Western business schools could perhaps find this high growth terrain of converging economies of CEE a very lucrative base for spreading their influence. If establishing their branches in CEE, they could further nurture Western management practices and culture in these countries. Besides so important marketing field as noted above, other creative areas such as general/strategic management, leadership and people management or entrepreneurship could thus be supported in CEE too. By means of not only degree programs but of various executive and evening/weekend programs such schools could help local business people grow in expertise. Spearheading entrepreneurial and start-ups culture in countries where FDIs have been a typical engine of development to date should also be commended if such school(s) appeared in the region.
Given that human capital – also that entailing best business practices – seems one of the bottlenecks of further economic development in CEE, the government could also contribute by introducing tax incentives for the whole sector of lifelong learning, including business school education.
May 4, 2019