Shocks & Stares » UK economy http://blogs.hillandknowlton.com/shocksandstares H&K\'s Financial & Professional Services Team Blog Tue, 19 Mar 2013 08:00:56 +0000 http://wordpress.org/?v=2.9.2 en hourly 1 Developing a Mittel-brand http://blogs.hillandknowlton.com/shocksandstares/2012/06/developing-a-mittel-brand/ http://blogs.hillandknowlton.com/shocksandstares/2012/06/developing-a-mittel-brand/#comments Mon, 25 Jun 2012 10:56:17 +0000 Matt Battersby http://blogs.hillandknowlton.com/shocksandstares/?p=692 GE Capital (one of our clients) recently hosted a very successful event about midmarket businesses in the UK called ‘Leading From The Middle: The Untold Story of British Business’. The speeches (including one from Vince Cable) and panel discussions focused on how we can strengthen the UK’s mid-sized businesses that are currently providing much of the UK’s economic growth but still not performing to their full potential.

One interesting point raised was the impact of having no clear label or brand for mid-sized companies in the UK. This is unlike Germany where Mittelstand has become a globally recognised term for more than three million firms known for their family ownership, market niches and high-quality products. 

In the UK the closest term we have is SMEs (Small and Medium Enterprises) but this is much more associated with small or even micro businesses rather than the €20m-€1bn turnover companies in the midmarket.  We also have much clearer terms for larger businesses such as ‘multinational’ which again most of the population would recognise and be able to describe the characteristics of such a business.

Why do we not have a commonly accepted term for midmarket companies and does it matter?

One reason for the lack of a term may be that the whole notion of being ‘middle’ has little instantly apparent positive attributes. Whilst small may be beautiful and might is right, being middle is just, well, distinctly average. Add to this the slightly pejorative use of the term ‘Middle Britain’ and it’s perhaps unlikely that any use of the ‘middle’ label will catch on.

Another reason for the lack of a brand may be that midmarket firms themselves have a bit of an identity crisis. They seem much more likely to identify with their sector than their peers. A midmarket engineering firm, for example, is much more likely to think of itself as manufacturing business than a midmarket one.  The owner of a hairdresser, however, will likely readily identify him or herself as a running a small businesses. This may be one reason why there is a Federation of Small Businesses in the UK but not a Federation of Medium Businesses.

But these explanations assume that for a brand or label to successfully apply to a group of individual entities, the entities themselves need to at least recognise the label as applying to them and also want to identify themselves as such. This is clearly not the case as there are numerous examples of labels being applied to people or organisations that would not necessarily recognise the label as applying to them.

What I believe is clearer, is that a lack of a brand does make a difference for midmarket firms and creating one could bring benefits.

What’s your BRIC strategy?

Perhaps the most successful label to have been created in recent years has been BRIC, which was coined by Jim O’Neill from Goldman Sachs. In little over 10 years, the acronym for Brazil, Russia, India and China has not just defined a group of countries but a whole outlook on the global economy and politics. As Gillian Tett wrote in an article about origins and influence of the BRIC label, it “has become a near ubiquitous financial term, shaping how a generation of investors, financiers and policymakers view the emerging markets.”

Labels may often be too simplistic and downplay the differences between individual entities but they can be very powerful in focusing attention on the importance of the similarities. They not only reflect a current reality but can influence the future as well. How many companies have decided they needed a ‘BRIC strategy’ since the label was created?

Without a midmarket brand name, talking to or about companies as ‘midmarket businesses’ is unlikely to resonate as strongly as it could.  If companies do not think of themselves as a midmarket business, then providing midmarket initiatives, strategy or insights is unlikely to affect the change that is needed for them to compete even more effectively on the international stage.

 Creating a label

So what label or brand name might work for midmarket businesses? The CBI has clearly recognised the importance of creating one and have used terms such as ‘future champions’ and ‘Gazelles’. The advantage of these terms is they focus on common attributes of the midmarket firms rather than just their size. They are also positive labels which means firms themselves may be more willing to classify themselves as such.

Neither seems likely to become the universally recognised label though as most people would find it hard to identify what makes a ‘future champion’ or ‘Gazelle’ let alone apply it to companies they’ve heard of.

Made in Britain?

One thought is that more should be made of the ‘British’ brand. Many at the GE Capital event believed the ‘Made in Britain’ stamp still has significant value, particularly in developing markets and that perhaps UK businesses are too reticent in exploiting this. There may be a lot of truth in this but the term ‘British’ is unlikely to lead us to our midmarket brand name, not least because many firms, even in the midmarket, are foreign owned. Being British should likely form a key part of some business’s messaging but it is not the unifying label.

Given the increasing focus on midmarket business from the Government, CBI and the media, what is clear is that whoever can successfully coin a term for UK midmarket businesses is likely to make a name for themselves.

I’m afraid I am not that person (although I’m still trying). But perhaps there is a reason for that. Perhaps we aren’t ready for a midmarket brand name yet. As the term BRIC showed, labels only work when they group together common attributes and characteristics- when they define a pattern that people had not necessarily seen before but instantly recognise once they are made aware of it.

Perhaps the biggest problem is that too few midmarket firms are well known enough for there to be common attributes that the public would recognise. Labels work best when they group a certain type of person, country or companies that you know. Even midmarket companies themselves do not know many of their midmarket peers.

So yes let’s work towards creating Mittel-brand. But in the meantime, let’s also focus on creating the right environment for a name to be created organically. We can do this by better publicising midmarket firm success stories and building greater awareness amongst the public. Creating more opportunities for midmarket firms to network with their peers will also be important so they start to recognise how they are similar and share common interests. Who knows, once we can name more midmarket companies and they better know themselves, we may find that a label develops naturally and begins to change the way everyone thinks about this vital element of the British economy.

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FPS’ Friday Fiver http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-28/ http://blogs.hillandknowlton.com/shocksandstares/2011/11/fps-friday-fiver-28/#comments Fri, 25 Nov 2011 17:24:44 +0000 David Chambers http://blogs.hillandknowlton.com/shocksandstares/?p=436 Happy weekend all! It’s been an incredibly busy week in our financial and professional services team this week, handling everything from the forthcoming surge in Christmas shopping, to understanding the world’s expats just a little bit more. Speaking of Christmas, it’s now just one month away – something our resident Christmas Enthusiast, Karen, reminds us of thanks to this handy iPhone app every single day.

Sadly, there isn’t actually a whole amount of Christmas cheer around at the moment, particularly not if you live in Europe, or indeed the US, as Ross blogged on yesterday. With that in mind this week’s Friday Fiver covers off the continuing economic situation, as well as changes for UK bank customers, and two of the biggest video games of all time. Enjoy, and happy weekend.

BYE BYE FREE MONEY…..When is a free bank account not free? Pretty much always in the opinion of the Financial Services Authority. According to this morning’s Financial Times, the financial regulator is of the belief that free current bank accounts have “distorted the landscape and led to damaging decisions about what products are available”. In other words, the costs of providing free current accounts have been made up elsewhere by retail banks charging higher fees for other services (and by selling occasionally dubious products such as PPI).

The result of all this? The FSA believes that customers should be charged for their current account to negate this problem. It may appear a controversial idea, but the UK is something of an anomaly on bank accounts in the West – lots of other countries charge for this service, albeit at a low level, so we shouldn’t really be surprised that charging may happen here too. That would certainly make starting a retail bank far easier, something Metro and Virgin would probably welcome. Any move is likely to require concerted action though – as the FT also noted, if one bank were to unilaterally start charging, customers would simply get up and walk down the road to a ‘free’ competitor.

IS THE UK REALLY A SAFE HAVEN?…..This week, Germany failed to sell all €6 billion worth of ten year bonds, which came as a bit of a shock to many. Then again, it also provided evidence of what we perhaps should already know by now: even Germany may not prove immine from the unfolding Eurozone crisis. The lacklustre auction may be an indicator that investors and banks are spooked by Germany’s exposure to the Eurozone crisis and the fact they are intrinsically linked to the future success or failure of the Euro currency. Remember it is the bond markets that have wreaked havoc for many of the Eurozone’s failing economies, so this week’s bund auction which only raised €3.6 billion, little over half of the full allocation, is an ominous sign.

It may be Germany's turn to sweat next

Following the under-subscribed auction Germany may have lost some of its image as the safe haven of Europe. This was further compounded by the fact that charges for UK 10 year gilts dropped below the same cost of borrowing for 10 year German bunds – 2.18% and 2.26% respectively – which is the first time this has happened since 2009. This evidence points to the fact markets view the UK as a safer option than Germany right now, a point you can bet Chancellor George Osborne mentions in his Autumn Statement on Tuesday. As Osborne will inevitably say, the low gilt charges are evidence that the Coalition Government’s economic policy is working to the extent that it is repelling contagion from our numerous struggling European counterparts.

Does all this point to the fact the UK is now the European safe haven of choice? We’re not convinced. With youth unemployment now over 1 million and forecasted economic growth of no more than 1% in 2012, the UK is teetering on the edge of slipping back into recession. Whilst the Government should be applauded for appeasing the markets to date, we are no-where near out of the woods yet and certainly can’t consider ourselves a safe haven as suggested by Osborne earlier this year.

GRAPH OF THE WEEK – PROPERTY…..We always enjoy the Business Dashboard graphics created by The Times’ business team, and Tuesday’s was no exception, highlighting the internationalisation of the City’s commercial property.

The City's property by nationality of ownership (Image: The Times)

LOBBYING AND THE BANKS…..With all the threats of regulation and counter threats by financial services companies of ‘we’ll leave the country if you regulate us’, it was refreshing this week to see the mud-slinging continue, this time on the subject of lobbying. The mud in question came from Robert Jenkins, newly appointed to the Financial Policy Committee – the body responsible for spotting risks to financial stability and ways of containing them. Jenkins adopted an aggressive approach, arguing that “A profession which should stand for integrity and prudence now supports a lobbying strategy that exploits misunderstanding and fear”. Though the FT pointed out that the most interesting dynamic in this is whether this rhetoric translates into FPC recommendations, we can’t help but think we could do with less of the rhetoric and more, well,  stability, though the two aren’t apparently (we hope) mutually exclusive.

GOOD WEEK/BAD WEEK…..In the Good corner this week, it’s Infinity Ward. Never heard of them? They’re the guys behind the Call of Duty video game, which along with our client Bethesda’s Elder Scrolls V, is currently outselling Hollywood blockbusters at a rapid rate. Video games are big, big business these days, enjoying huge marketing campaigns and massive airtime. It’s all a far cry from Pong in the 70s that’s for sure. Call of Duty isn’t without its detractors though – a group of MPs this week started a petition against the game in Parliament. As The Independent noted though, support hasn’t exactly been overwhelming for the cause, while Murdoch-scourge Tom Watson MP appears to be something of a fan – probably no select committee hearing just yet then.

In a rare appearance in the Bad corner, it’s the usually all-conquering Sir Philip Green, owner of the Arcadia Group which counts Topshop and Miss Selfridge among its raft of retail businesses. Green was forced to announce a hefty plan to axe over 200 stores this week following a large drop in profits. Arcadia has been a strong retail pillar in recent times, with Topshop leading the way on the high street. With consumer spending tightening each day in the UK, it could be a bumpy ride for Green ahead.

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