building and communicating with a compelling identity (Karaosmanoglu & ctg, 2006). Therefore, a company's brand can be understood in terms of the way the company communicates with its customers through its identity.
In summary, brands are defined in three approaches: from the marketing perspective, from the accounting perspective, and from the economic perspective. Brands in this thesis will be based on the economic perspective. Through this approach, brands are intangible assets including both recognizable intangible assets (in the form of trademarks, copyrighted) and unrecognizable intangible assets (customer perceptions of the brand).
2.1.2 Measuring brand value
There are many perspectives on measuring brand value and Lassa & ctg (1995) divided it into two main approaches: brand value based on financial data (Finance-Based Brand Equity - FBBE) (Brasco, 1988; Mahajan & ctg, 1990; Shocker & ctg, 1988; Simon & ctg, 1993) and brand equity based on customer evaluation (Customer-Based Brand Equity - CBBE) (Aaker, 1991; Kamakura & ctg, 1993; Keller, 1993; Kim & ctg, 1990; Rangaswamy & ctg, 1993).
Financial brand equity (FBBE) focuses on the financial value of a brand using approaches such as the cost approach, the market approach, and the income approach. FBBE brand equity is a specific financial figure at a given point in time, contributing to the valuation of a company's assets. Meanwhile, customer-based brand equity (CBBE) provides information for a strategic view of customer behavior, helping managers to allocate resources appropriately and develop appropriate brand strategies in terms of marketing.
2.1.3 Commercial bank brand
Overview of commercial banking operations
Commercial banks are financial institutions that intermediary between individuals, businesses and economic sectors, through the activity of "money trading", seeking profits.
of the bank to contribute to regulating capital sources, promoting economic development. Commercial banks play an important role in the economy of a country as well as the global economy. With the current trend of international integration, commercial banks are constantly developing, not only with a wide network of branches around the world, but also with online services performed anywhere, anytime, with strong support from information technology. Banking activities are increasingly systematic, an important capital circulation channel, with rich and diverse financial services, the relationship between banks and customers is increasingly close and long-term.
Thus, commercial banks are business organizations in a special field of the economy, performing the functions of credit intermediary, financial intermediary and payment intermediary. In addition, commercial banks are also an important tool contributing to the implementation of the Government's economic and monetary policies, aiming to stabilize and develop the economy sustainably. Commercial banks' business activities have a direct impact on all industries, all activities, all subjects in the economy, so business risks are systematic and subject to chain effects.
The basic products of commercial banks include: (1) Deposit products designed to mobilize capital from individual and corporate customers; (2) Credit products include: business loans for production and business purposes and personal loans for consumption purposes (loans for buying houses, cars, living facilities, credit cards, etc.); discounting of valuable documents, financial leasing, bank guarantees, factoring, overdrafts and other credit products (3) Products serving customers' payment needs such as: checks, payment orders, payment authorizations, collection authorizations, payment cards (ATM and debit credit cards), letters of credit and other payment services through customers' accounts. (4) Investment management and financial consulting services: are services that develop along with the development of retail banking. (5) Other financial products: securities brokerage, insurance, treasury services, trust agency, collection and payment services...
In summary, the above are the main products and services of commercial banks today. Nowadays, with the development of information technology, social networks... the relationship between banks and customers has developed both in breadth and depth. Understanding customers' finances and business activities, grasping customer needs, and having timely support forms are competitive advantages of banks. Deposit products and payment services are increasingly diverse and convenient. Credit products are not only "credit granting" but also moving towards a "credit supply chain", in which banks participate in providing appropriate capital for the entire production and business process of customers, understanding both customers' partners and which production and business stages customers need support from the bank. For individual customers, banks understand the needs of target customers, provide financial advice and manage savings, consumption and investment portfolios for customers.
Commercial bank brand
Banks have differences compared to other economic units in the economy in that they operate in the financial-monetary sector. The business activities of banks depend on the trust and creditworthiness of customers, so the brand plays an important role and directly affects the ability to mobilize capital of commercial banks. Unlike the brand of a specific product, customers' recognition and evaluation of a bank's brand focus more on overall assessments of that bank, rather than on one or several products and services of the bank. The overall image of a bank is made up of many factors related to the structure and operations, reputation and personnel, and building and promoting the bank's brand. According to Hardwick (1997), the weakness of financial brands mainly stems from the elusiveness of the services they provide. In fact, goods are also chosen by consumers when accompanied by intangible services and benefits (Lovelock et al., 2004; Vargo et al., 2004), but for banks, making decisions about choosing a bank related to the brand is elusive (Brady et al., 2005). In the banking sector, the elements that make up the impression of the bank's image change over time (Bosque et al., 1992). Gro¨nroos
(1988) and Lapierre (1998) asserted that reputation and trustworthiness are two main components measuring a bank's image.
Most studies on bank brand image analyze variables related to the types of services that banks provide (interest rates, service diversity); service accessibility (processes, execution time); transaction space layout (beautiful, stylish equipment); personnel and reputation of the bank (Evans, 1979; Heerden and Puth, 1995; LeBlanc and Nguyen, 1996).
In addition, in the context of the current development of the Internet, the importance of ensuring security for banking transactions is increasing (Flavian et al., 2004). Corporate Social Responsibility Index
-CSR) becomes useful when assessing the difference between the impression of the overall image of the bank and the impression of a place to just deposit regular savings (Souiden et al., 2006).
Thus, a bank brand is a unified and comprehensive image of a bank with its unique and distinctive elements expressed through the attitudes and feelings of customers (Bravo, 2012). Nowadays, when bank products and services are quite popular, standardized and not too difficult to copy, the difference, uniqueness, and positioning of the bank brand in the minds of customers are the key factors in building and managing a brand (Kotler, 2011).
2.2 Theoretical basis and empirical studies on brand valuation of Vietnamese commercial banks
According to Cohen (2009) and Reilly & ctg (1999, 2013), there are three approaches when conducting valuation of intangible assets, including brands, including: cost approach, market approach, and income approach.
Cost approach: (Aaker, 1991), (Keller, 1998), (Salinas, 2009):
This approach is based on the principle of replacement. It means that the value of an asset will not be greater than the cost of replacing all its component parts. There are three methods
The methods based on this approach are: based on reproduction cost, based on replacement cost and based on historical cost.
The costs related to branding are often mentioned as: market research costs, advertising and communication costs, sales commission costs, human resource costs, market development costs, distribution costs, promotion costs, product development costs, costs for testing, research, registration, business, sanctions, litigation... related to trademarks, logos...
This approach is considered easy to implement and quite straightforward to calculate because brand value is measured by the total cost required to create or replace a brand that is similar to the prototype of the brand to be valued. Aaker (1991) added the factor of “probability of success” to ensure the feasibility of the method of calculating brand value. Reilly et al. (1999) inherited this method but adjusted the calculated brand value according to the inflation rate to get the annual variable value of the brand.
However, the cost-based approach is only suitable for evaluating newly established brands. The limitation of this approach is that it does not assess the future development potential of the brand, and it is also not suitable for evaluating famous brands that have existed for a long time. On the other hand, not all costs create value, so the historical value for brand building activities is not entirely the economic value of the brand, and the higher the financial cost for the brand, the more the brand value increases. In addition, it is difficult to determine the depreciation principle for this asset when calculating the depreciation value of the brand.
Market approach:
This is an approach based on available information in the brand trading market. The market value of the brand to be valued is determined by analyzing the successful transaction prices of similar brands (through purchases, mergers, royalties, etc.). This price will be adjusted by comparing the brand
The brand to be valued is compared with similar brands to determine the value of the brand to be valued. There are two methods to value a brand using the market-based approach.
Sales comparison method (Reilly et al., 1999):
Based on the amount of money that the brand can be bought and sold, by comparing the selling prices of similar brands on the market, the value of the brand to be appraised is estimated. The advantage of this method is that the brand value is determined based on transaction evidence from the market, with an easy basis for determining the price. However, it is difficult to choose assets to compare in terms of similarity, the basis and principles for selecting comparison factors are not specific, the method of adjustment is not clear, etc. In reality, brand assets are highly abstract, each brand has its own unique characteristics, so direct comparison of brands is difficult to perform.
Financial approach (Simon & ctg, 1993):
This method uses the company's market value to estimate the brand's value through the added market share value due to the brand minus the costs related to the brand (market entry costs, advertising costs, promotions, etc.). This method has the advantage of being empirically based, easy to collect information and calculate. However, it must have the assumption of an efficient market, information is always symmetrical and can only be applied to companies with shares listed on the stock market and is only suitable for companies with one brand. For companies that own many brands, applying this method to determine brand value will be very difficult (Bodie & ctg, 1999).
Income Approach
This approach is used by many academic researchers and valuation organizations to determine the value of intangible assets based on financial data based on the future income stream generated by the ownership of intangible assets. This approach is used to value brands, technology patents, business secrets, etc.
(Damodaran, 1996; Keller, 1998; Reilly, 1999; Cravens, 1999; Jeffey, 2004; Joy, 2004; King, 2006)… The income approach holds that the value of an asset is determined by discounting the cash flows generated by the asset at the appropriate discount rate.
The assets of an enterprise that can be appraised using the income approach include four types: enterprises, machinery and equipment, real estate and intangible assets.
In the income approach, there are two main methods (also known as valuation techniques): the direct capitalization method (or capitalization from income method) and the discounted cash flow method (DCF).
The difference between the two methods is: the direct capitalization method is interested in the benefit stream as a cash flow received forever, so the discount rate is the capitalization rate. The DCF method has a benefit stream as a different cash flow each year, so the discount rate is different each year. In other words, the direct capitalization method is a special form of the DCF method.
Discounted cash flow (DCF) method: under this method, the brand value is estimated by discounting all net income generated by the brand to its present value at an appropriate discount rate. (See Appendix 1b)
The advantage of this method is that it is based on financial foundation and estimates the brand value based on future net income generated by the brand, so it is convincing and highly effective. The disadvantage is that it is very difficult to separate the income stream generated by the brand, depending heavily on the financial data entered to calculate the brand value in a specific model.
2.2.1 Model of commercial bank brand valuation based on income approach Currently, the three approaches mentioned above are recognized in international valuation standards and in Vietnam are stipulated in valuation standard No. 13 on intangible asset valuation according to Circular No. 06/2014/TT-BTC in 2014 of the Ministry of Finance.
Table 2.1 Comparison of approaches to brand valuation
Approach
Characteristic | Advantage | Limit | |
Cost approach | Brand value is based on the total cost of creating or replacing a brand. | It is an easy method to implement and the calculation is quite clear. | - Measuring by brand costs is not practical because costs do not always reflect value; Incorrect and incomplete summation of cost items. |
Market approach | Brand value is determined by analyzing the successful transaction prices of similar brands in the market and adjusted by comparing the brand to be valued with similar brands. | Brand value is determined by transaction evidence from the market, so it has high reliability and persuasiveness. | Information about brands in the market is always limited and asymmetric. It is difficult to find similar brands that have been traded to serve as a basis for valuation. |
Income Approach | Brand value is the present value of future earnings generated by the brand. | Based on the financial foundation to estimate brand value based on future net income should take into account the potential for future growth. | There needs to be a pricing model for different industries with specific metrics and measurement factors. |
Maybe you are interested!
-
Rao,s & Sharma, Dr(2010), Bank Selection Cretiria Employed By Mba Students In Delhi: An Empirical Analysis, Journal Of Business Studies Quarterly,vol.1(2), 56-59. -
Assessing the impact of brand equity on customer loyalty: an empirical study at BIDV Bank, Thua Thien Hue branch - 1 -
Theoretical Basis of Bank Credit Solutions for Coffee Producers -
Theoretical Basis of Mortgage Contract Between Commercial Bank and Customer -
Theoretical Basis for Developing Loan Activities to Create Employment at the Social Policy Bank.
Source: Author's synthesis
Among the three approaches to brand valuation, the income approach is more objective than the market approach or the cost approach, because it is based on the financial results of the enterprise, reflecting the effects of the brand on business results, as well as demonstrating the future potential of the brand and the brand values it brings to the owner. According to the author, the income approach is suitable for valuing commercial bank brands with the purpose of recording brand value in the total assets of the bank, and at the same time considering the brand value at