Capital investment

Capital investment

Abstract

The paper talks about a project on capital investment; specific management should invest in helping achieve the balanced scorecard perspectives. The capital investment chosen for this paper is branding because most businesses require this investment since it is a long term project whose benefits can be ripped off later. Strategic movement and growth of any investment in branding can help gauge the brand’s performance, which is a measure of the return on brand investment. It is often quite challenging to determine the return on investment for branding since organizational culture, information technology, or just looking at the target people cannot provide any quantitative evidence one may need. Branding can help achieve the company’s scorecard through ensuring its strategic planning and systems of management are used to communicate the message the organization is trying to reach the audience.

Introduction

Organizations often use management system and strategic planning tools to; say what they are trying to achieve, put in order every day’s work every person is doing with strategy, precedence projects, products or services, as well as measuring and monitoring advances towards targets as the four perspectives of the balanced scorecard. The management system and strategic planning tools are what are known as the balanced scorecard. With a balanced scorecard, organizations are able to connect the dots between management and specific aspects of strategic planning. Investing in branding will help the management monitor and measure progress in terms of competitive factors of the organization like customer satisfaction, market share, and loyalty of customers. Besides, it will also help measure performance based on the quality of product development as well as the rate of improvement of the products.

Objectives of branding

How employees, customers, competition from competing firms, and practically everybody else perceives one’s company is influenced by branding. Branding sums up all the bids to create a specific picture of one’s business, and even though it isn’t tangible, its effect is immense. The visibility of the company can be boosted through the branding as well as inspiring credibility and loyalty in the customers. Investing in branding is very important for any business, be it large enterprises or startups businesses. Branding should be at the top of every business’ priority list even if their products are selling like hotcakes because it is a lifelong investment that pays of the big time. The specific significant branding objectives include to; create identification and awareness of the brands, guarantee a particular level of a product or service quality, quantity, and satisfaction, and help in the product or service promotion.

Cost of investing in branding

Branding shapes the company’s product development cycle and corporate culture as well as communicating its purpose and values to consumers. The question, therefore, is how much does it cost? This paper will give a general idea of how the cost of branding is where, in most cases, the numbers to be used in this article may not apply in every single case as one may likely find exceptions. At this stage, most startups may only require a website, logo, and essential positioning of the brand.

Brand positioning: firms need to understand who they are, how their products or services fit the marketplace, and how they communicate their values to consumers. The essential piece of branding puzzle starts with strategy and positioning, where the firm’s original strategy will lay a foundation for conveying its identity to professionals to take the process further. Designers often recommend for positioning and design brand identity. The approximate cost for this first process for pre-seed startups is usually the company’s time and effort. For early-stage funded startups, the estimated cost is between $5000-$20000 for small firms and $30000-$80000 for large firms.

Logo: occasionally, branding has to do with how the company relates to its audience; hence, the need to make sure the message is well communicated in each interaction with them. Organizations often need to hire designers to make ethical and eye-catching designs to the likening of the customer. It is a good move for companies to hire experienced professional designers to get better results since they can create more polished logo designs and with a simple usage guide. The approximate cost is estimated to be $100-$3000 for pre-seed startups, and for early-stage funded startups ranges from $5000-$15000 for small firms and ranging from $15000-$75000 for large firms.

Website: the complexity of engineering requirements and iterations’ number a company wants to go through is dependent upon pricing. The approximated cost for pre-seed startups ranges from $10-30 per month, plus an additional $20 per year per each domain. For early-stage funded startups, their approximated cost is estimated to be between $5000-$15000 for small firms and $15000-$75000 for large firms.

Quantifiable/nonquantifiable results anticipated from branding

Strategic movement and growth of any investment in branding can help gauge the brand’s performance, which is a measure of the return on brand investment. It is often quite challenging to determine the return on investment for branding since organizational culture, information technology, or just looking at the target people cannot provide any quantitative evidence one may need. It is also quite difficult to gauge an outcome of branding as either quantifiable or nonquantifiable since most of the results obtained from branding can either be measured or not. Branding can have an impact on both the customer and the organization coming up with the brand.

From the customers’ perspective, branding reduces the perceived risk associated with the purchase. This outcome is regarded as nonquantifiable since it is the amount of something that cannot be quantified, that is, the risk. When purchasing a product, consumers often have various dimensions whether the product; will perform to their expectations, is worth the charged price, is safe to use, there will be cost opportunity in the event the product fails, it poses any threat to the environment or human health, or it fits customer values and personality.

From the company’s perspective, branding can be associated with the following results which in most cases are all regarded as quantifiable;

Premium pricing: since supply and demand dictate goods in higher need to be charged at a higher price, branding provides a way out of commoditization and its consequent erosion of profit. Most often, branded goods sell for far more than their original value. An average increase in product price by 1% generates an increase in operating profits of 8% that is according to income statements of 1500 standard and weak firms.

Company value increases the main reason why a company’s market capitalization often exceeds its book value in licensing, acquisitions, joint ventures, mergers, and other financing negotiations is brand value. A large proportion of a company’s value, as demonstrated by an examination of stock exchanges, is derived from the value of their brand. For instance, on the New York Stock Exchange and NASDAQ’s market capitalization, intangible assets are known to account for 50-75% or even higher.

Performance of stock market: on several financial dimensions after adjusting for risk, firms with strong brands often outperform the market. For example, an average return of more than 1% yields higher than a benchmark selection of firms from significant stock exchanges can be attributed to companies’ investment portfolios with strong brands. Also, strong brand portfolios have lower measures of risk determined by volatility and vulnerability of cash flows, making them outperform the market with less risk.

Improvement of financial ratios: brand performance also significantly impacts financial ratios. Ratios that measure a company’s capacity to meet cash needs as they arise, such as liquidity, current, and quick ratios, are often better with strong brands. Benchmark groups are also outperformed by a strong brand portfolio in leverage ratios like time interest earned. Ratios on profitability like net profit margin, operating profit margin, return on equity, and gross profit margin all indicate overall performance to be higher and efficiency in managing assets and liabilities to be more significant.

Conclusion

It is, therefore, clear that the visibility of the business can be boosted through the branding as well as inspiring credibility and loyalty in the customers. Branding should be at the top of every business’ priority list even if their products are selling like hotcakes because it is a lifelong investment that pays of the big time. Also, the cost of investing in branding may vary depending on the available funds a company may have for branding and also the size of the institution the firm is. Large firms will always invest highly as compared to small firms. Strategic movement and growth of any investment in branding can help gauge the brand’s performance, which is a measure of the return on brand investment.