Most Admire Companies

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Ladies and gentlemen, entrepreneurs and managers, girls and boys, we know, from when we are born they give us votes and there are rankings for everything in life, but especially in the measurement of company performance that there are so many.
In this article we look at one of these charts, which helps us to understand how these rankings affect the value of the brand.
In this particular, it is the ranking of “most admired companies”. Developed up by the Fortune magazine.
Premise, the richest companies are not the most admired and nor those where you work better, although sometimes the results are the same, sometimes not.
Attention then, we speak of companies, non-brand, some may also be brands, but in this special list compiled annually it talks of Companies.
So let’s say that there are the most valuable brands, the richest companies, the most admired, the ones where you work better, the ones more technological, the ones more environmentally friendly etc… A company can be a brand or not to be, a brand can be a company or not to be, what interests us in this article is to explain when and how the company’s results help the enhancement of the brand or penalize it.
Parenthesis fast: the brands are never rich or poor, but they are of value (if any), which is then estimated in money.
After these preliminary clarifications, let’s go back to our table and we wonder what makes a company among the most admired? We understand this by reading the caption next to the ranking, in which a sentence reads: What Becomes a reputation most? Healthy financials and stock performance, for starters.
We understand now three things:
1_ is assumed that the most admired companies are those with the best reputation,
2_ reputation depends on the financial and commercial performances
3_ the audience to which it refers to determine who is most admired is the one of the experts.
We explain. The most admired companies are generally those who are having the best financial performance in their industry. The reputation of which we speak, is not that of the public, that one of the audience, but that one that has on the financial markets, because the opinion of the mass is not generally aware and therefore not based on these data.
The reputation of the audience directly affects the brand perception and on the purchases, that of the sector not, or only indirectly and in any case takes longer to be able to shift the sales values.
Let’s take an easy example: a company could have at a given moment of its history the maximum of its brand perception from the part of the audience and do large sales volumes, but at the same time being economically devastated by factors not directly related to the commercialization of its products /service. The causes could be a bad management of operating costs, a currency devaluation, bad investments, failed fusions etc…
Similarly, a company may be almost unknown to the public, doesn’t generate large sales values, but be financially solid. This could be the case of companies and brands newborn, but that have behind cordate of entrepreneurs, financial or industrial groups that make it solid in front to investors, to suppliers and to various industry insiders, who are confident that this one will be for sure a dominant subject in the market in the near future also for what it will be its reputation on the consumer side, which leads sales equally safe.
It’s the same thing that can happen in the difference between an income statement and an ebitda.
In the assessment there could be a profit thanks to financial operations, sales of properties, rental incomes etc … that have no direct influence on the work for which the company was born.
A company, for the cost-revenue, dictated only by the system “supply-processing-sale” could also be at a loss but in fact has a profit thanks to other sources of income.
Or it could happen the opposite, have a return of profit from its production system and instead be in loss due to other types of investments failed.
For this there is the EBITDA, ie Earnings Before Interest, Taxes, Depreciation and Amortization. That is, only what has caused by the actions dictated by your system productive work.
We can say that the income statement is directly proportional to the company’s reputation in the financial markets. It means that in spite of what is the brand reputation or the brand value, the sector operators know if the company is solid, because in spite of deficiencies in sales it has excellent results in terms of investments.
The EBIDTA is instead as if it were the consideration for the reputation in the global market directed to the audience. It means that in spite of changes in finance, brand value depends exclusively on the value that the audience gives it through a direct relationship with its products and its campaigns, which results, unless exceptions, in best or worst data sales of products/services branded.
At this point it seems that the purely business issues have not direct influence on the value of the brands, but is not entirely so, indeed. Let’s go to understand which relationships there are between these kind of company rankings and not of brand with the value of the latter.
Imagine the system “company-brand” as an inverted iceberg, where the small tip underwater that is what you do not see the outside, namely at the public, which is the part that supports all that instead is out of the water, visible to the public.
The visible part is the one that affects the audience and gives the most value to the brand, while what is under water is invisible to the public, but is monitored by a small group of people that has a strong influence on the policies of market .
Indeed their opinion is vehiculated on the media of sector and in a time determined by the level of education of the mass audience can positively or negatively affect the perception of the public opinion and later the mass opinion.
It means that if the underlying part the sea line stops supporting the iceberg, the iceberg is likely to disappear unless of effective interventions.
It is as if instead of being the sun that heats the iceberg (the counterpart of the public and mass opinions) and dissolve it, it was the water that warms and melts the iceberg starting from its invisible part.
For this despite the brand and its value on the public is not directly determined by what happens financially, for better or for worse, his life, however, it is closely linked.
Tall and very expanded icebergs can fall because the little part underneath no longer works. One of the most egregious cases of recent years have been the collapse of the automotive giants in Detroit. Brands known around the world have collapsed in a few months. Not only the companies, but also the value of their brands is totally down and will take time to be recreated.
Of the financial and economic problems, the brands had suffered so infinitesimal compared to the financial problems, until it is come the complete collapse.
To recap: the most admired companies are those with the best economic and financial situation, this thing does not affect in a substantial, immediate and direct way the value of the brand, but it does it in a longer time, in a less marked, but in the end decisive for its very survival.
As expressed above, the speed of this mechanism is directly proportional to the degree of education of the audience who have an interest in the brand, because as more the people is educated, more is informed and more does it through the specialistic media, so is first aware of possible problems or good financial results of the companies, which influence their perception of the brands, their value and consequently their sales.
We close by saying that there are rankings such as the degree of environmental sustainability or those on labor policies that give an immediate boost to the perceived value of the brand because they are the ones most interested by the mass opinion, but that does not matter much financially and do not determine the life or death of the company that owns the brand, while there are a few like this that we talked about in the article which does not directly affect the value of the brand, but it is in time, in most cases, a conditio sine qua non of its existence.
It can indeed happen that the brand is bought by another company, in which case it is as if the part of the iceberg above water was cut and moved on another base.

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