Value creation and global chains: new business mod...

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In order to foreshadow new global value chains, companies are therefore evolving their business model. Value creation can be optimized in three segments.

Value creation in the product offer

Irrespective of the high-end or luxury sectors (German carmakers, French or Italian haute couture, etc.), a number of companies have realized in recent years, the benefit they can withdraw from a brand positioning. Georges Lewi, trademarks specialist, determined that an unbranded product sold for €100, could be sold for €115 to €130 with a normal brand and €1,000 with a luxury brand.

Whether or not they are in a logic of sourcing and procurement, companies of the medium or upper-medium range have therefore invested in the brand to capture value. According to the ECIPE, brand-intensive sectors represent 34% of GDP and 20% of employment in Europe. The brand has a strong power of attraction among middle classes in the world. It is also an intangible asset and foreign economies seek to understand its drivers and process of formation.

Because it has little control over strong brands, China fall into this model. At the Milan Universal Exposition (2015), the Chinese tried to present little known businesses (Tanlon, Prolivon) as design manufacturers or original brands, not just manufacturers of original equipment. The exercise doesn’t seem convincing (not yet, at least).

For now, buying Western or Japanese brands seems more effective. In the clothing/fashion industry, the Shandong Ruyi industrial group has acquired the GSPC group, keeping the brands that form part of it (Sandro, Maje and Claudie Pierlot). In electronics, Taiwanese companies acquired strong Japanese brands: the Chinese group Haier has reached an agreement with Panasonic in 2011 that gave them the right to use the Sanyo brand on Southeast Asia markets. The Taiwanese brand Foxconn was forced to divest Sharp’s TV branch. Finally, trademark license agreements are signed between Taiwanese brands and strong manufacturers such as Toshiba (lighting branch). In the model built by Toshiba, the Taiwanese buyer gains market shares in Europe by applying the Toshiba trademark on LED bulbs they produce and package themselves; meanwhile, the Japanese group validates each product, ensures the preservation of the brand and receives royalties.

The brand effect is also closely linked to the origin; this latter factor can be a powerful source of value creation. Origin, just like the brand itself, can often be linked to a historical legacy that allows a great storytelling. In France, the segment of tableware, and more recently, that of furnishing, have understood the value of this intangible capital value without entering into a logic of labels. The origin could even convey a stronger value than the slightly more industrial concept of “made in”.

The premium positioning of a product is bound to the brand. This development is clearly seen in the automotive sector, with actors such as Renault attempting to escape from the medium range pitfall in order to sell vehicles with a higher added value. In the automotive equipment industry, Plastic Omnium has acquired the bumper branch of Faurecia to be closer to high-end automaker clients. Another particularly emblematic sector of this exit by the top: appliances. The positioning of US companies such as Ariston or of British firms such as Dyson encouraged Samsung to impose itself in the upscale segment (refrigerators).

Subsequently, at the present day, products should have a content in R&D (product innovation) and knowledge (knowledged-based goods), both powerful drivers in a global economy based on innovation. This is evidenced by the market of smartphones or connected devices (IoT), always struggling to win acceptance as soon as they don’t have any breakthrough innovation or new features to offer.

However, we deal with a world where products are increasingly less an object of value. R&D is necessary but not enough. Companies that target innovation and design with their business model must, at the same time, provide connectivity to equipment and consumer goods. Beautiful or good products are no longer an end in itself. Good products are those that deliver the best digital services and applications for data management and analysis. This is the meaning of alliances between global corporations and digital actors. A Renault vehicle such as the Koleos is equipped with Apple’s Car Play system, a smarter and safer way to use an iPhone in the car.

Thus, the value of a product (or service) is now based on its connectivity and relationship with the customer.

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