Creating Brand Equity - Brand Valuation

Creating Brand Equity - Brand Valuation

Thesis

The purpose of this paper is to assess the financial valuation metrics in account for all the brand valuation. Moreover, the concept of having a strong brand presence in relation with incremental value to the company beyond tangible assets of the firm will also be explored.

Introduction

The value of the brand name associated with a business destined for liquidation is less a function of the value of the underlying business than the relative number of potential acquirers and their motivation and wherewithal to acquire. The purpose of this paper is to assess the financial valuation metrics in account for all the brand valuation. Moreover, the concept of having a strong brand presence in relation with incremental value to the company beyond tangible assets of the firm will also be explored. This paper will make the reader aware about the significance of finances and brand valuation. The company selected for the purpose of evaluation is Toyota.

Purpose

The purpose of this paper is to assess the financial valuation metrics in account for all the brand valuation. Moreover, the concept of having a strong brand presence in relation with incremental value to the company beyond tangible assets of the firm will also be explored. This paper will make the reader aware about the significance of finances and brand valuation. Given the inactive market and the intangible nature of the asset, the valuation of brand names associated with distressed and bankrupt companies is challenging and difficult. Further, the interrelationship of brand value with the value of other assets of the business, such as inventory and property, plant, and equipment, makes it difficult to value in isolation (Johnson, 2011). For example, it is often impossible to determine what, if any, value was attached to a brand name in a transaction involving a troubled company, since other assets are typically acquired with the name-usually at a substantial discount. Recent case histories illustrate the variety of possible outcomes and issues to consider in valuing the brands associated with distressed and bankrupt companies (Shah, 2009).

Arguments

The stock price of Toyota is $95.6 as of eighteenth January, 2013 (www.marketwatch.com). This price can be interpreted from the viewpoint of brand equity and brand valuation. Toyota is assumed to be one of the most important brands within the motor vehicle industry. There are various methods for the brand valuation. Valuation methods include: 1. the cost approach, which is based on an estimate of the cost to a potential acquirer of re-creating a brand with the same amount of customer recognition and awareness, 2. the market approach, which is based on comparing the subject brand to other brands that have been bought or sold, and 3. the income approach, which follows either the excess income method or the royalty income method. Valuations in the excess income method are based on the profit differential between branded and non-branded products (Pinto, Henry & Stowe, 2008). The royalty income method defines the value of the brand ...