IP, Nation Branding and Economic Development

Prochile (an agency under the Foreign Ministry’s Directorate General for International Economic Relations), together with public and private trade-related organisations, is developing a new strategy to strengthen Chile’s image. The goal is to develop and broadcast common messages to position the country’s products and services, attract foreign investment, and increase the inflow of tourists.

This article is based on a paper contributed by Mr. Simon Anholt at the WIPO International Seminar on Intellectual Property, Geneva, May 2 and 3, 2005. Mr Anholt is an advisor on Public Diplomacy to the British Government, as well as to a number of other governments and UN agencies. His latest book, Brand America (Cyan Communications, 2004), will be followed by Brand China in late 2005. He is also Editor of the journal Place Branding and Public Diplomacy .

Impeccable quality, performance and reliability are simply the cost of entry to most modern marketplaces – thus the brand has become a critical factor. Whether the product being sold is tangible or intangible, intellectual capital plays a vital role by adding value to the product: without a distinctive and attractive brand, few of today’s leading companies could have achieved, still less maintained, their profitability, their market share, or the loyalty of their consumers and employees. The same basic principle applies to countries. Without a powerful and positive reputation or “nation-brand,” no country can consistently compete for consumers, tourists, investors, immigrants and the respect and attention of other countries and the world’s media.

‘Brand’ is a useful summation of the intangible competitive assets of an organization or a country: its vision, its genius, its distinctive character, its people, its promise to the marketplace. These are the factors which, when aligned around a clear strategy, give it sustainable competitive advantage, the right and the ability to charge a consistent premium, and customer ‘permission’ to constantly innovate and extend the range of products and services on offer. The market capitalization of many companies often puts a value on their brands which is many times greater than their tangible assets. For example, without brand value, the market capitalization of Xerox would be a mere US$481 million rather than US$6.5 billion. If it were possible to measure the brand value of countries, it would probably exceed their physical resources by an equally large factor.

There may be many reasons why the intangible assets of poorer countries have not been ‘set to work’ for the economic growth and prosperity of the country, but brand theory suggests a highly significant one: the lack of a powerful strategy for deploying them in a productive and harmonized way.

"Simply announcing one's existence will not attract tourism or investment; people need to be given motivating reasons for choosing to do business with a country… Small states in particular find themselves competing with one another for attention from audiences that are not always well-informed about them." –  Estonia Style produced by the Brand Estonia project, which successfully changed the country’s brand image.

Nation Branding

The idea of country of origin (COO) effect – the power of an explicit or implicit Geographical Indication to add appeal to products and services, to create a price premium for them, and to stimulate customer loyalty towards them – is well known. If Sony, Nintendo, Toyota and Yamaha were not first and foremost Japanese brands, it’s hard to imagine that they would enjoy the same prestige, and the same applies to French luxury brands like Chanel and Moët & Chandon, and to German engineering brands like Mercedes, Bosch, Siemens and Audi.

The concept of nation-branding rests on the observation that COO actually affects far more than a country’s exported goods and services – it makes a significant difference to perceptions of the country’s

• people (whether as employees, investors, immigrants, politicians or media stars),
• sporting and cultural endeavors,
• political and diplomatic relations with other countries,
• tourism and heritage attractions,
• investment offerings,
• media and other intellectual and creative productions.

A country’s brand impacts virtually every aspect of its international engagement, and thus plays a critical role in its economic, social, political and cultural progress. When, as a result of clear leadership from central government, all of these stakeholders share a common vision of the country’s identity, and achieve some degree of harmonization between their actions and communications, there is a far greater chance of the country’s image fairly and positively reflecting its present reality. This is because the international ‘audience’ is only likely to form a coherent and positive opinion of the country if the majority of the messages they receive from it are broadly aligned.

Tourism - Often the most visible aspect of a country’s brand, tourism is usually also the most competent marketing force. The tourist’s ‘idea’ of the nation creates a visual image of the country which can impact many other areas of the nation’s performance. Foreign investors, for example, may well be influenced in their choice of country by tourism images, so this particular aspect of the nation’s IP needs to be seen as rather more than a simple sales channel.

Exports - In developing countries, products and services are all too often exported as unbranded commodities. This represents a failure to capitalize on the significant potential for enhanced market value through the IP of brand. A powerful, distinctive, broad-based and appealing national brand is the most valuable gift a government can give to its exporters. Today, branded exports are one of the most potent ways of building and sustaining national image.

Governance - Places are also judged by the part their leaders play in foreign and domestic affairs. “Political IP” is, for various reasons, one of the hardest elements of the nation’s intellectual capital to control, but it has a particularly strong impact.

The brand image of good governance seems to exist independently of any detailed knowledge about it. In the first edition of the Anholt-GMI Nation Brands Index, for example, Sweden ranked highest in the world for stable and responsible governance despite the fact that only a tiny percentage of the international panel polled had any knowledge of the country’s politics, which party was in power, or who was its head of government.

People - When each ordinary citizen – not just diplomats, media stars and politicians – becomes a passionate ambassador for his or her home country or city, positive change can really happen. The human capital of the nation is the country’s main source of intangible value: the skills, abilities, values and behavior of the people are its primary resource.

Investment and Immigration - Many of the best examples of rapid growth during the last century occurred because certain places became magnets for talent, investment and business ventures. A reputation for plentiful intellectual capital invariably attracts more of the same, creating a virtual circle of accelerating quality and innovation. A powerful and consistent place brand can help get places on the right shortlists.

Culture and Heritage - The intellectual capital of the nation’s heritage, history, culture and geography is well known but often inefficiently channeled into ‘added value’ for sellable assets. Places which treat growth as a purely economic issue run the risk of developing a two-dimensional brand image, of interest only to investors, tax exiles and currency speculators. Culture, heritage and sport provide the third dimension, giving places richness, dignity, trust and respect abroad, and quality of life at home.

Reality and perception: the benefits of nation branding

The brand images of countries, whether good or bad, are seldom an entirely accurate reflection of the reality of the country. In the case of developing countries, the most common reason for this is time: the country may change quite quickly, but its image lags behind by years or decades and sometimes even centuries.

Many ‘transition economies’ suffer from an image which was forged during an earlier and very different political era, and which now obstructs their political, economic, cultural and social aspirations. Slovenia is one example of a state which has succeeded admirably in recasting perceptions through successful promotion of branded exports (Elan skis, Gorenje appliances, Laško Pivo beer and others), comprehensive and well-funded tourism campaigns, and NATO and then European Union membership.

It is widely believed that little can be done to correct a country’s image. But there are enough examples of ‘best practice’ – such as Slovenia, Chile, New Zealand, South Africa, South Korea, Ireland, Spain and Australia – to prove that a country’s international reputation can be managed and changed to better represent the current reality and future aspirations of the place, as long as there is a clear strategy for doing so, leadership, and proper coordination between government, the public and private sector, and the population in general.

This message is of critical importance to developing nations, which simply do not have the time to wait until their image catches up with the rapid pace of their development. Place branding is a way of ensuring that their fundamental human qualities, their efforts, achievements and ambitions are seen, acknowledged, and properly interpreted in their own region and beyond2.

In short, nation branding ensures a faster and surer return on the investment which countries, their donors and foreign investors are making in their development. In a deeper sense, place branding also provides a way for newer, smaller and poorer countries to establish and broadcast their true cultural, social and historical identity, and carve out a ‘perceptual niche’ for themselves in the global community.

In a world dominated by the capitalist system, it is easy to conclude that real competitive advantage can only come from economic, political or military strength. However, as in any busy marketplace, there is room on the global stage for brands which play by slightly different rules; there is room for niche brands, and room for brands which compete primarily on cultural excellence, rather than on economic muscle. Haiti may have difficulty attracting tourists, but its primary source of foreign income is the export of naïve art, an industry which has found access to global markets through the Internet. Haiti is still the poorest country in the Americas, but a niche market may prove the beginning of a specialist cluster.

In this sense, national brand is national identity made tangible, robust, communicable and useful. A good brand represents a real competitive edge, and is the single most valuable item of IP which any nation possesses. Knowing how to protect, develop and exploit this asset is the key for translating the intangible wealth of developing countries into economic growth.

Physical products need physical distribution if they are going to generate income. Ideas need branding and marketing. In the knowledge economy, branding is both the strategic discipline and the distribution channel that can build success for smaller countries and turn ideas into wealth.

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1. See Brand New Justice – How Branding Places and Products Can Help the Developing World by Simon Anholt (Elsevier, Oxford, 2003/5).