BRAND OF THE STATE AND THE NECESSITY OF ITS FORMATION IN THE REPUBLIC OF ARMENIA

01.10.2009

BRAND OF THE STATE AND THE NECESSITY OF ITS FORMATION IN THE REPUBLIC OF ARMENIA

Vardan Atoian, Karen Babajanyan

In the article the essence of the brand is presented, the main problems which come forward during the formation of the brand are discussed, as well as the complex of the measures, which implementation allows raising the rate of the country, are presented. Those measures and proposals are based on the best international practice and they can be very useful in the elaboration of the strategy of the position of the Republic of Armenia. The article also touches upon such vital for the RA issues as the state authority, the investment attractiveness, the development of tourism industry, the quality of the exported goods and measures directed to the demand increase.

The formation of the state brand is the process of strategic importance for any state. The foreign economic policy and the dynamic development of the economic growth are mostly connected with the authority of the given country on the external market. Firstly, let us try to mention what is brand and how it differs from common name.

Let us mention that any name can be a brand, e.g. «FedEx», «Porsche», «Marlboro», “New York”, “Japan”, “Mozart” and etc. Thus, it is any name, title, trademark, which is associated in a certain audience with a number of positive characteristics. In other words, brand can be formulated as a complex of emotions and feelings.

If we try to differentiate between brand and trademark, it is necessary to mention that the trademark is legal category and brand is the so called intellectual side of the product. It only exists in the subconscious of the consumers. It is remarkable that in some countries the cost of the brand is included in the accounting reports of the company as a tangible asset (e.g. Great Britain), and often it is evaluated even more than all the production facilities put together. Thus, «Phillip Morris» bought “Kraft Food” trademark for $13 billion, which is 600% higher than its book cost, “Grand Metropolitan” company bought “Pillsbury” trademark which is $5.5 billion more expensive than the cost of the owner company [1].

In our opinion, while elaborating the policy which will promote to the formation of the state’s brand several factors should be taken into consideration. Let us bring several examples. Thus while saying Paris, first of all, we understand fashion, romance, in case with New York – business, energy, Washington – power, might, Tokyo – modern, progressive technology, Egypt – old culture, Rome – wonderful classical architecture, Rio-de-Janeiro – carnival, Germany – solidity, punctuality and etc.

Amid the current worldwide globalization process various states, cities, companies very often obviously and sometimes tacitly compete with each other in order to attract the attention of tourists, local and foreign investors, consumers and to obtain additional funds to their economy. In this competition, in our opinion, win those who can position themselves at the world market, among this carrying out efficient regional marketing policy. From this point view the studies by British scientist Simon Anholt and American «Global Market Insite» (GMI) company dealing with the processing of the results of marketing studies are very valuable. They tried to estimate the ratings of 35 developing and developed states and to present the rate of their brand in figures. Thus, e.g., the brand of Russia, according to this estimation, costs about $663 billion [2].

To estimate the ratings they used 6 main factors:

attractiveness from the point of view of tourism,
human capital,
the quality of exported goods,
attractiveness from the cultural point of view,
the rate of the fairness of the governments policy,
the attractiveness of the state as a place to live in general.

25 thousand people took part in the inquiry and basing on its result the researchers formed the rate of the national brand. Then, «Brand Finance» (BF) company presented each brand in figures. It should be mentioned that the cost of the brand of any country constitute 2-10% from GDP of the given state and the difference in the percentage is explained by the common level of the development of the country, but the final value is formed by the five years’ sum of the GDP, which is calculated by the current cost of funds.

Despite the fact that there is a number of methods to evaluate the brand, this process is, nevertheless, rather laborious and time-consuming and, as a result, some deflections are possible. Those methods are mainly used to evaluate the trademarks, the brand and sum evaluation of the state is innovation and it should become the object of special study, but, however, it should be mentioned that according to our observations the total cost of the brand of the companies, organizations, enterprises working on the territory of the given state also influences the cost of the country’s brand.

In the table below the top 10 of the state’s brands for the third quarter of 2006 is presented [3].

The regularities which underlie the competition between the companies and complex marketing measures can be used for the elaboration of the state marketing policy. In this very context, according to our observations, it is necessary to elaborate the long-term conception of the marketing policy of the Republic of Armenia and in that conception special section will be allotted to branding. The importance, topicality and the urgency in carrying out this problem are most vividly expressed in the countries with the transition economy where the institutions characteristic to the free market economy are in the process of the formation and establishment.

We think that the policy directed to the formation of the brand of the Republic of Armenia will have positive influence, first of all, on the raising of the investment prospects of the RA and the development of tourism. The topicality of the problem is also conditioned by the fact that clearly systematized, elaborated state policy directed to the formation of the state’s brand is extremely positive for the given state, especially for taking right position on the world market.

Today every country is presented through its audible and visible components, including National Emblem, flag, anthem, but, as Martin Lindstrom mentions, the brand is formed not only through the auditory or visual perceptions but also through taste, olfactory and tactile receptors.

Marketing specialists mainly work in two-dimensional world of branding and very often they ignore the importance of the five sense organs. We receive the information about the environment through our sense organs. Today with the help of advertisement you can influence only olfactory and visual sense organs, meanwhile other sense organs remain unused. Thus, all the specialized sales outlets in the big cities all over the world smell well. This same policy was adopted by companies specialized in other spheres, particularly such car-building titans as “BMW”, “Rolls-Royce”, “VW”, “Mercedes-Benz” have their special flavour which comes from the salons of their cars; “Singapore Airlines” company is the only air company which plans’ salons smell the same. This kind of measures conditions the success of the supranational brand. The usage of this and other marketing means can mostly influence the success of both Armenia and companies representing Armenia abroad.

The developed states are strong with their business entities. It is impossible to form the brand of the countries without the improvement of the latter. E.g., Swiss companies take leading positions on the high-quality watches, knives, cheese and chocolate markets. The reliability and the high quality services of the Swiss banking system are also well known all over the world. It should be mentioned here that the Swiss banks began the process of creation of their personal brands as early as middle of the 19th century and during that process they mostly used red colour. Today red and white colours became the symbol of Switzerland, and one may even say its synonym which comes to prove that this country has clearly elaborated marketing strategy.

Besides everything abovementioned there are also symbols, slogans of the states and cities which are widely known. Let us bring some examples of states’ slogans:

USA – American Dream,
Great Britain - Cool Britannia,
Italy - Dolce Vita – sweet life,
Germany - Vorsprung durch Technik – progress through the technology,
Switzerland - Keeping Privacy .

Big, economically mighty and developed countries have created the symbols, slogans characterizing their state for home and external consumption long time ago, meanwhile many, including the Republic of Armenia, are only trying to make the first steps in that sphere.

Today a number of countries, in order to prove the progress of the state, carries out advertising campaigns or uses non-traditional methods of advertising, ATL, BTL; they spend huge sums, which are usually distributed among advertising agencies, consulting companies and the specialists who are responsible for the public relations. Thus, Singapore annually spends about $60 million, Malaysia - $150 million, London in 2003-2004 spend for this purpose about $40 million [4]. In 2007 Russia spent $5 million from the state budget in order to improve its international image, and the USA spends annually $1 billion for the same purpose [5].

It is remarkable that the advertising expenses do not imply the formation of the state brand in the case if any of the advertisement efficiency assessment methods is absent. Today marketing studies tell us that the advertising is gradually giving the ground to PR – the public relations, meanwhile, though it becomes clear from the studies that the majority of the consumers does not trust advertisement, it continues to be one of the main marketing means for bringing the information to the consumers. Taking that reality a number of authoritative specialists thinks that in the modern economic world the brand is not formed with the help of advertisement; it is formed with the help of public relations, and the advertisement takes another function, i.e. the preservation of the brand that has already been formed.

In order to present the necessity of the state’s brand formation more vividly let us simply remember why people want to buy German cars, Japanese technologies, French fashionable cloths, Czech beer, Swiss watches and etc. In this context let us mention some positive processes regarding Armenia, particularly:

a) The trailer about Armenia on CNN broadcasted all over the world and aimed at the development of tourism in Armenia and which, naturally, contributed to making Armenia recognizable and to formation of the state’s brand.

b) The cultural events, such as the Days of Armenia, the Year of Armenia and etc, arranged abroad in recent years, mainly in Russia, France, and which also have their positive effect on the formation of “Armenia” brand.

d) The modernization of “Zvartnots” international airport in recent years, particularly, bringing of the arrival hall to the international standards. It is also very important because the tourist gets the first impression of the country in the airport.

Today the Republic of Armenia needs to be presented to the world and in this context it is necessary to discuss what our republic is famous abroad with and how and through what it should be presented to the world to find its place on the world market most efficiently and become attractive for the consumers and the investors. Let us mention that even without deep studies we can state that Armenia and Armenians are mostly known all over the world as the state which suffered Genocide, disastrous earthquake in 1988 and which has conflict with neighbouring Azerbaijan. In this context the events arranged in Armenia in 2001, which were devoted to the 1700 anniversary of the adoption of the Christianity as a state religion in Armenia and which, undoubtedly, had positive effect on the rate of our state.

The rating of any country is to a considerable degree conditioned by the level of the development of the tourism, for which, naturally, appropriate infrastructures are necessary. In this context our top priority is to cover the requirements of the tourists visiting Armenia, because even one satisfied tourist, after returning to his country, takes his positive impressions with him and this influences the general rating of our state and the further development of the tourism. The success in sport, culture, economy, science and other spheres also contributes to the formation of the positive rating.

On the other hand, it should be mentioned that the formation of the positive rating directly reflects at the attractiveness of the products produced in that country, which give competitive advantage to the companies of that country.

According to our observations the branding policy carried out at the state level will have positive effect first of all on the increase of the amount of the foreign investments, tourism and products produced and exported from Armenia. For this purpose we think it is important to have a body within the structure of, e.g. Ministry of Trade and Economic Development of the RA, which would deal with the branding policy of the state, which would elaborate its strategy as a component of state’s marketing policy for long and short periods collaborating and taking the advantage of the owner’s possibilities. That strategy must include modern methods of communication with the consumer, investors, particularly:

a) Regional branding – for the promotion of the Armenia, its regions (marzes), separate communities it is necessary to study its historical, cultural, economic resource, potential, on which background it would be possible to build the general programme of the development of the republic;

b) The usage of the educational resource;

c) The usage of the modern electronic means, mainly the potential of Internet;

d) The publishing and distribution of the books about Armenia, road maps for tourists;

e) The implementation of the event-marketing, which will allow pointing out the target group more distinctly, drawing its attention to Armenia and products produced in Armenia.

In our opinion in this work both foreign specialists, companies (in order to use their experience and professionalism) and Armenian specialists (who are aware of the Armenia’s peculiarities) should be involved. We are sure, that this very cooperation, the combination of possibilities should have positive result.

Sources and Literature

Голова А., Что нам стоит бренд построить. Создание и строительство бренда, http://4p.net.ua.
www.bestbrand.by, www.nationbrandindex.com.
www.admarket.ru
Фуколова Ю., www.sostav.ru.
Коробков Дм., Ведомости, № 107 (1881), 14.06.2007, տե՛ս նաև www.bestbrand.by, www.nationbrandindex.com:
www.stasmarketing.com
Пашутин С.Б., Как создать национальный бренд, Москва, 2007.
Райс Эл и Лора, Расцвет пиара и упадок рекламы, Ст. Петербург, 2007.
Райс Джек Траут-Эл, Позиционирование: битва за умы. Юбилейное издание, Ст. Петербург, 2007.
Портер Майкл Е., Конкурентная стратегия, Методика анализа отраслей и конкурентов, Москва, 2006.
Линдстром Мартин, Чувство БРЕНДА. Роль пяти органов чувств в создании выдающихся брендов, М, 2006.
Питерс Том,Человек-Бренд, Москва, 2006.

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