The limited power of brands

In his new book, Three Billion New Capitalists, Clyde Prestowitz tells the following amusing story about the limited power of brands:

At a Harvard Business School symposium in 1983, I heard then RCA chairman Thornton Bradshaw explain that the RCA brand was so powerful that RCA could sell VCRs made by Hitachi more profitably than Hitachi. Three years later RCA ceased to exist as an independent company. The RCA brand, however, is still being kept alive by its latest owner, Thomson SA of France.

That reminds me of the story told about the economic rivalry between Great Britain and Germany at the turn of the last century. British manufacturers were concerned about the flood of cheap German goods into their market. They pressured Parliament to pass a country-of-origin labeling law so that all of these cheap goods would be marked “Made in Germany.” The idea was that British consumers would see from the markings that these were cheap (read “shoddy”) foreign goods and reject them. Unfortunately, the German goods may have been cheap, but they were not shoddy. Soon, British consumers were deliberately looking for the “Made in Germany” label as a sign of value.
In our own day, we have seen the same transformation of the “Made in Japan” label from cheap to quality.
Like most intangible assets, brands are of changeable value. Without the underlying reason for the customer’s support behind them, their value and power can crumble and dissipate like a sandcastle on the beach.
(P.S. – more on the excellent Prestowitz book later.)

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