The winners take it all

Economic success encourages cultural dominance, and not the other way around

SHAKESPEARE WAS wrong about names. There is everything in them, or at least billions and billions of dollars. According to a new league table published by Interbrand, a consultancy specialising in brand names, Coca-Cola's is worth nearly $84 billion and accounts for three-fifths of the company's stock-market value. Or rather, that's what it was worth before the health scare over the drinks it was selling to Belgian customers. The company's mishandling of the episode has probably shaved at least a few hundred millions off its intangible worth.

Poor old Pepsi-Cola trails its competitor in the brand stakes as well as sales, coming in at number 32 in the league table. The top 10 in the list, including Microsoft, IBM, General Electric, Ford and Disney, are a roll-call of the giant corporations of the American economy. Some are obvious: McDonald's and Gap, focus of the wrath of the City of London rioters last week, are in there. Others are not: Pampers nappies and Marriott hotels hardly strike one as the evil epitomes of globalised capital. But what is no surprise at all is that just a handful of European and Japanese brands such as Louis Vuitton and Sony make it into the top 60.

The enormous value of American brands mirrors the economic supremacy of the US. The country dominates the planet more than ever not because of military power or financial conspiracies but because its business people have forged ahead in innovation and creativity, exploiting the possibilities opened up by new technologies. The technology revolution is making it more important than ever to have a good brand name and effective marketing, and America.com is way out in front.

Of course, the American challenge to the rest of the world's industry is nothing new. It troubled European competitors as early as the 1950s, when teenagers around the world wanted to hear Buddy Holly, buy Levi jeans, smoke Marlboro cigarettes, be James Dean. French technocrat Jean-Jacques Serban-Schreiber wrote a whole book about it, Le Defi Americain.

The French, wishing to stake their claim to pre-eminence in stylishness, have always been particularly sensitive to US success, with its implication of superiority, cultural or otherwise. Even so, the brands have shifted, the global market has grown, but for millions of people aspiration still means being more like an American. It's a rare teenager indeed whose image of cool involves Chanel and Gauloises.

Cool Britannia was a brave but doomed attempt to boost the appeal of the UK brand. However, British business could not deliver, and British style is more than ever bought up by American companies employing UK designers and video-game programmers. British Airways had a go at Cool Britannia, but has just given up and returned to its Union Jack tailfins.

For the long-standing chasm between the US and the rest has widened again, as the Interbrand league table demonstrates. Almost all the new entrants are hi-tech American businesses such as AOL, Apple and Amazon.com. The power and value of brands is the key to economic success.

The reason is not simply the size of the US market, which gives home- grown companies a head start in building up the global reach that creates a hugely valuable brand. Nor is it just the cultural imperialism of the US that makes the rest of the world desire Gap khakis and Nike trainers because they see movie stars wearing them - although the permeation of our lives by images of Americans using and wearing American brands certainly helps the country's corporations sell their goods.

Rather, it is the huge economies of scale, created in part by new technologies. The market for all kinds of products is more truly global than it has ever been before. Barriers to trade are few and far between. Big corporations can manufacture in different countries through subcontractors, advertising on a planetary scale, while remaining able - thanks to technology - to respond quick to information about shifts in local tastes and demand.

In this weightless economy, there is a vast advantage in being first and biggest. As the gap between Coca-Cola and Pepsi-Cola demonstrates, bigger is better by a long way. Look at Virgin - Richard Branson's brand success is crucial to the company's fortunes, but it is just too small to make an impact on the world stage.

This is especially true in the case of Internet companies. These face almost no physical obstacles to capturing a world market. Their repeat production costs are low - the cost to Microsoft of developing new software is almost all upfront, in the programming and development. But copying the software costs almost nothing, and it could even ship software for free online.

Winner takes all. And the winner will be whoever gets in first to create the best brand, because if customers all around the world have a world- wide menu to choose from, they will opt for a known and trusted name. There is a virtuous circle favouring the giants, too. Marketing is essential to create the brand, and it is the best brands that generate the income that makes globally effective marketing affordable.

Microsoft is therefore like a movie star who only needs to make the film once for it to be shown to the masses - masses who, on their night out at the pictures, want to see a top star rather than some unknown art-house talent. In so many of the new markets the Americans have already got there first. The importance of being first is why so many internet companies are prepared to run at a loss. They want to capture the market share now and milk it for profits later, because the eventual scale of those profits will be so much larger if the competition is way behind.

To an extent, the current US dominance of the league tables reflects the Wall Street bubble. Over-inflated share prices have exaggerated the success and financial muscle of some companies, especially in the online industry. When the stock market crashes and the American economy slows or goes into recession, the tide of transatlantic triumphs will ebb. Yet the underlying economic strength will remain: the brand valuations in this latest table do not depend on the companies' overvalued share prices.

There are some interesting lessons in seeing which European companies have successfully created valuable brands. Nokia and Mercedes are the highest-ranked. Europe can compete still on technical expertise and engineering excellence. Nestle is the next, showing that size matters. Unlike some of its competitors in food and drink, it uses its name on all its products rather than diluting the brand. And Europe still occupies those niches labelled "stylish luxury goods": Louis Vuitton, Chanel and Moet & Chandon all make the list.

Yet, for all its guns and ghettos, America has a resurgent spirit of entrepreneurship that finds only pale mimics elsewhere in the world. Its companies are alone on the frontier of the economy. Economic success encourages cultural dominance, and not the other way around.

For all their intangibility, the top brand names reflect this very real success. The rioters smashing the windows of McDonald's in the City last week did not pick on them on account of their symbolism as much as for the reality of their success in catering to the world.

In the same way, the real wealth that rests on the success of a brand name explains why Coca-Cola made such a mistake in under-reacting to the recent health scare. Of course, it would have to happen in Belgium. Just think of its crime and corruption scandals, poisoned chickens and Brussels bureaucrats. Now there's a country with a real brand image problem.