We
know risk is the potential of losing something of value. Values (such
as physical health, social status, emotional well being or financial wealth)
can be gained or lost when taking risk resulting from a given
action, activity and/or inaction, foreseen or unforeseen.
We can
assess risk by:
- Right balance between risk and reward
- Focus on decisions not process
- Make employees the first line of defense
What is
brand risk?
We can define
brand risk as threats to the brand equity or threats to the brand
differentiators that make consumers choose one product or service over the
other. Thus brand risk can be defined as anything that threatens:
1. The
sustainability of current and future demand for a company’s product or service.
2. The
company’s commercial freedom.
Customer
Eccentricity:
Ø Fortune
500 firms like Intel , IBM & American Express have focused their structures
on customer segments rather than products.
Ø CEOS
should look carefully at the competitive landscape before embarking on a
customer-centric restructuring & make sure everyone understands that
performance will sag before it rises.
Ø Sometimes
the gains never materialize ; this happens when customers' needs or when customers
are indifferent to greater customization & responsiveness.
Ø Eg
; Firms that went for this approach saw an average increase of 11% after 3
years , average drop during restructuring 39%
Ø Amazon
, Tesco , UPS , USAA ,Traders Joe , Apple are all customer-centric firms.
Compensation:
Strong
Brands and weak pay:
CEOS are typically the most prominent members of their
organizations , so for them the self enhancement from brand association is
particularly robust. If top executives are prepared to accept lower pay for
the privilege of running firms with strong brands, pay levels can be grounded
to some extent. E.g.: According to S&P’s Execucomp database : CEOs’ pay
dropped by 12% for each standard deviation increase in brand strength, saving
their companies an average of $ 1.3 M a year.
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