Saturday, November 6, 2021

Why It's Important to Invest in Brands

Last week Volvo Cars had a successful IPO on the Nasdaq Stockholm exchange and was valued at $23 billion. That is more than 10x what China's Geely bought it for in 2010 from Ford for $1.8 billion. Personally I think Volvo cars look so much better since Geely took over. They are no longer boxy-looking, safe "tanks" on the road. The product lineup looks quite stylish these days and is better positioned as a luxury brand. It just goes to show that Volvo was mismanaged under Ford and how a brand can be turned around with proper investment and strategic focus. 

A similar outcome can be seen from another Ford divestiture. In 2008, Tata Motors, an Indian automotive manufacturer based in Mumbai, bought Jaguar and Land Rover for $2.3 billion. They had cost Ford $5.3 billion! Today, both brands and their product lineup looks so much better. I personally love the look of the understated Jaguar XF sedan, F-Pace SUV, and the flashier F-Type. 

Jaguar F-Type

Outside the automotive sector, look at ThinkPad. IBM sold ThinkPad to China's Lenovo in 2005 when it was going through one of its many restructurings in the 2000's. ThinkPads were highly regarded by executive road warriors back in my days. I was recently shopping for a new work laptop. And guess what? I ended up getting a Lenovo ThinkPad after researching a few options. I was glad to see Lenovo maintained the high quality of the product, the red mouse nub 😊, and the brand.  

Here's the deal. Very few Chinese and Indian companies own global brands, so the acquirers above really valued a chance to own these 3 global well-known, high-end brands. They nurtured them because they were viewed as strategic brands within their portfolio, invested in their product development where their prior parents didn't, and let them run mostly autonomously, especially from a brand perspective. They did a fantastic job not alienating their brand loyalists and I would argue did a good job expanding the brand audience. 

Bottom line: troubled storied brands starved for attention within large enterprises can be turned around with proper product innovation and brand support. 


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