SEOUL, KOREA - Brand value is increasingly becoming the source for gaining a competitive edge in the global market. This intangible asset of the brand itself can allow a company to reap profit in the market. South Korea is a country best known for its multiple top global brands in the various areas of electronics, shipbuilding, and automobile, with the total amount of the top 30 brands surpassing USD 86 billion in asset value. Yet, thousands of Korea’s small and medium sized companies still experience difficulties despite having world-class technologies and quality, as their brands are undervalued in the global market. A poll conducted by Samsung Economic Research Institute (SERI) showed that 83% of Korean exporters were placed at a disadvantage because of their low profile and by the same token companies on average receive only 64.2%of the right price in the market. Against this backdrop, Korea Trade-Investment Promotion Agency (KOTRA), a government-affiliated organization, initiated the Original Brand Manufacturing (OBM) project. The goal of this project is to back exporters to raise their brand values as well as attain the fair pricing of their products in the overseas market.
Selection for OBM project
To begin with, KOTRA selects small and medium sized companies willing to conduct a long-term investment in raising their brand awareness among companies listed on the “World-Class Korean Products”. The World-Class Products of Korea, designated by the government, are comprised of selected products ranked among the top 5 in terms of global market share or products with high potential of advancing into the global market within 5 years.
The selection process of the OBM project is more rigorous. Tenders first undergo the assessment of financial soundness by corporate ratings, and their export performance and growth potential is reviewed with documentation. The selection committee then thoroughly investigates various factors such as expected outcomes from brand marketing, current brand-related activities, as well as top management’s interests in raising brand awareness. Once selected, with the government’s 50% matching fund, companies can make an annual investment up to 100 million won (USD 92,000). Since 2011, a total of 14 companies have been selected for the project, and 2 to 4 more companies are expected to join this year.
The OBM Project Process for Selected Companies
Throughout the first year of the OBM project, companies receive a Brand Power Index (BPI) assessment from professional consulting agencies to design a clear goal for their brand marketing. In the process, the agencies carry out a survey into the companies’ target countries or existing export countries – composed of clients, dealers, and buyers – to assess their current brand assets. Each company receives their own brand asset index with factors including brand awareness, perceived quality, brand association, and brand loyalty. Based on the index, the consulting agencies present what the companies need in order to attain their sustainable brand management and map out clear goals for brand marketing strategies.
Alongside the BPI, companies also undergo three processes throughout the three years: improving overseas marketing, upgrading their brand, and developing content. First, to increase their profile in the global market, various packages are provided including advertisement placements, opportunities for participating in international exhibitions, as well as overseas buyers meetings. For upgrading their brand, consulting firms draw up Brand Identity Strategy (BIS) as well as brand architecture. Company identity and brand identity are also built in this stage. In terms of content development, various contents including package design, websites, films, and advertisements are developed with the help of specialized consulting companies.
OBM Creates High Added-Value
“Original Brand Manufacturing (OBM), a relative term to Original Equipment Manufacturing (OEM), refers to producing and selling products with companies’ own brands. According to a report, companies that transition themselves from OEM to OBM see their export price increase by 9.8% on average. We are hoping to establish a foothold to expand exports by creating high added-value,” said Song Jee-young, manager of Design & Brand Team at KOTRA.
At present, Korea is in a difficult situation as their technology gap with China is narrowing, and many of the nation’s technologies haven’t yet surpassed advanced countries’. As its rivals’ can easily replace price and quality, Korean companies are still vulnerable to exchange fluctuations and must offer price reduction in order to compete. Song stated that, “Technologies can easily be imitated, but brands cannot. To be an advanced economy, it is vital to possess a multitude of original brands that consumers are willing to buy even at a premium. We hope this OBM project helps more companies to make valuable goods and establish a fair pricing value in the market through effective brand marketing.”