American companies were at the top of the list of most valuable brands recently compiled by Interbrand, a brand management and consulting firm. The top five brands on the list are collectively worth close to $300 billion.
IN PICTURES: Eight Ways To Survive A Market Downturn
Interbrand considers three factors when establishing its ranking. The company measures the financial performance of the firms utilizing an economic profit approach, or the return after the cost of capital is deducted. Interbrand considers the role of the brand in guiding a consumer's decision to buy, exclusive of price, feature or other considerations. They also incorporate the strength of the brand into the calculation based on the ability of the brand to "secure the delivery of expected future earnings." The firm uses these factors to come up with the top 100 global brands and assigns a monetary value to each brand.
Top 5 Brands
The Coca-Cola (NYSE:KO) brand is the most valuable in the world with a value of $70.4 billion. This makes sense since the brand has been around for more than 100 years and the company has an aggressive marketing strategy. Coca-Cola sells more than 3,000 products in 200 countries. The company spent $2.8 billion in advertising in fiscal 2009 to defend its title.
IBM (NYSE:IBM) came in second on the list with a brand valued at $64.7 billion. IBM has transformed itself over the last generation and moved from a hardware company to a service oriented company, keeping up as the world around it changed rapidly.
Microsoft (Nasdaq:MSFT) was third with a brand valued at $60.9 billion. This is an interesting one considering how much resentment there seems to be about the company's dominant share of the operating system market for PC's and the perceived robustness of that product in popular culture. The company's profitability and financial soundness must have made up for this. Microsoft reported net income of $18.7 billion in fiscal 2010.
Google (Nasdaq:GOOG) was the youngest brand on the list and came in fourth with a value of $43.5 billion. Google's placement also makes sense; despite the youth of the Google brand, the company's search engine has been integrated into the daily life of most Americans and worked its way into popular culture. The company reported a 65.4% search market share in Sept 2010.
General Electric (NYSE:GE) was number five with a brand valued at $42.8 billion. Although the General Electric brand is as old and storied as Coca-Cola, the stock was brutalized during the recent recession, and fell to below $6.00 per share in 2009. (To learn about industries that did not falter during the recession, see Industries That Thrive On Recession.)
The top five global brands were all American companies, although they all do considerable business around the globe. This brand strength should lead to even more profitability in the future.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!