Lippincott research finds that strategic missteps are still main driver of shareholder value decline
New York, November 07, 2008
Despite a non-stop parade of financial crises and natural catastrophes over the past five years, a recent study by leading brand strategy and design consultancy Lippincott reveals that strategic business missteps are still the main driver of shareholder value decline.
In a study looking at Fortune 1000 companies from 2004-2008, 10% of the Fortune 1000 lost 30% or more of their shareholder value within a one-month period. Approximately half of these companies could attribute these significant losses to strategy-related issues--predominantly demand shortfall due to customer losses and competitive activity.
Value loss due to financial matters such as the sub-prime mortgage collapse, foreign macroeconomic and interest rate issues or the rising cost of raw materials and input costs were the source of decline for 32% of the companies. While this represents a dramatic increase from 7% in the 1998-2003 period, it still falls short of the 49% attributed to basic strategic missteps such as demand shortfall and loss of key customers. Hazardous events such as non-accounting lawsuits and natural disasters were the cause of the drop for just 8% of the companies, down from 11% in a previous study, while operational issues drove the remaining 11%.
"The media attention surrounding the sub-prime mortgage collapse and other financial trials has taken the focus away from the more prevalent drivers of value decline which continue to be of key importance," said Suzanne Hogan, chief operating officer at Lippincott. "The greatest among these is losing touch with your marketplace, being caught unaware of competitive moves and ignoring customer and industry trends. There will always be industry-related drivers of value collapse, but the bottom line is that the strongest risk is taking your eye off the customer and failing to maintain a strong brand through all economic environments."
The study suggests that if corporations are to recover and rebuild what has been lost, they must recognize the relevance of the basic marketing lessons that form the core of sound brand strategy.
Recommendations include:
* Staying in touch with the marketplace--frequently monitoring industry, competitive and customer attitude and behavioral shifts
* Understanding the drivers of brand value that create demand for products, develop customer loyalty and create a positive customer experience?
* Acquiring new customer segments while retaining existing customers and continuing to grow those relationships to increase share of wallet
* Developing and maintaining a strong competitive positioning to compete on differentiation and thereby avoid the pitfalls of downward price adjustments for short term revenue gains
* Analyzing the extendibility of the brand to new sources of revenue
* Rationalizing the brand portfolio for greater efficiency opportunities The companies studied were from the 2004-2008 Fortune 1000. For each company, value loss causation was determined by reviewing media coverage and analyst reports from the period of decline.
Lippincott provides planning, design and implementation services in a number of branding disciplines, including brand strategy, brand creation, brand environments, packaging and brand management.
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ABOUT LIPPINCOTT
Lippincott is a leading brand strategy and design consultancy. The firm was founded in 1943 as Lippincott & Margulies and pioneered the discipline of corporate identity. Lippincott operates globally from its offices in the United States, Europe, Asia and the Middle East. Recent clients include American Express, Citigroup, Delta Air Lines, ExxonMobil, IBM, Mashreq, McDonald’s, Nissan, Samsung, Sprint, Vale and Walmart. For more information, visit www.lippincott.com.
Contact:
Kathleen Hatfield, Lippincott,
212-521-0052, kathleen.hatfield@lippincott.com