Tuesday, March 23, 2010

40% - 75% market share: Does it mean Branding is not crucial to success?

A recent article in the February 16 Financial Times entitled “Corporate Japan needs to reignite the value in its faltering brands” referred to Japan’s excessive emphasis on production at the expense of the brand.

But it drew a response that I read on my recent trip through Asia.  The writer claims the article “fails to mention that many Japanese companies, whose brands are largely unknown to the public, are global leaders in the high-tech components that account for a significant share of total value added in the end products that contain them.”

In his letter to the editor, Mr. Martin Beresford offered a few examples – including Nidec (with a 75% global market share of the micromotors for hard disk drives), Murata (40% of capacitors), Covalent (70% of carbon brushes in electric motors), Mabuchi (50% of DC micromotors used in cars, audio-video equipment and so on) or Shimano (65% of bicycle gears and brake systems). Few consumers of the end-products that contain such components are aware of these brands.

Mr. Beresford writes, “Branding is, of course, important in marketing end-products. But for component makers – who account for a very large share of Japanese manufacturing – the substantive value of their proprietary technology, market dominance in their respective sectors, and their major share of total value added in the end-products that contain them, largely explain such companies’ ability to sustain high margins, despite their relative lack of branding or brand awareness.”

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