Such funding is necessary because it provides companies with a competitive advantage. According to Doraszelski & Markovich, (2007)
"Practitioners know very well the value of advertising to achieving their long-term market share and profitability goals. A survey of senior executives in 1999 reveals that 82.9% somewhat or strongly agree that good advertising can provide their company with an edge over the competition in the marketplace. Furthermore, 86.8% somewhat or strongly agree that advertising is a long-term investment that contributes to the financial growth and stability of their company (American Advertising Federation, 1999; Doraszelski & Markovich, 2007)."
The authors also explain that firms believe that advertising has the capacity to give them a sustainable competitive advantage over other firms (Doraszelski & Markovich, 2007). Nevertheless, dynamic models of advertising competition, assert that the opposite is true. these models suggests there is a "globally stable symmetric steady state (Doraszelski & Markovich, 2007). " Accordingly, differences among firms are bound to fade away over the long-term (Doraszelski & Markovich, 2007). Additionally, little room exists for a lasting competitive advantage (Doraszelski & Markovich, 2007). Competitive advantage is not lasting even if firms were to come into the market individual and as such differ in their strategic positions from the very beginning (Doraszelski & Markovich, 2007).
Advertising is an important part of any firm because it makes the public aware of the products and services available to them. As such capital spent on advertising is a vital aspect of a company's overall business strategy. In addition, advertising expenses have an influence upon capital structure because it requires capital and without it marketing strategies will fail.
Brand Value
Lastly brand value is defined as "the amount that a brand is worth in terms of income, potential income, reputation, prestige, and market value. Brands with a high value are regarded as considerable assets to a company, so that when a company is sold a brand with a high value may be worth more than any other consideration ("Brand Value")." According to Madden et al. (2006), in recent years a great deal of attention has been given to the importance of branding. The authors explain that the work of Aaker (1991) concerning the power of branding has greatly increased interest in this particular facet of marketing (Madden et al., 2006). The article also asserts that even though many executives now have a greater understanding of brand value, marketing executive sill face challenges associate with defining brand value from a financial standpoint (Doyle 2000; Lehmann 2004; Madden et al., 2006). The authors assert that "The lack of financial accountability "has undermined marketing's credibility, threatened marketing's standing in the firm, and even threatened marketing's existence as a distinct capability within the firm" (Rust, Ambler, Carpenter, Kumar, and Srivastava 2004; Madden et al., 2006)."
The research also suggests that there is a substantial link between brand value and the financial performance of a company. For instance, in a study evaluating the most valued brands conducted in 1995 and 1996, researchers found a positive relationship between financial brand values and market to book ratios. Additional studies found that the "Interbrand values are significantly and positively related to stock prices and returns. Using their own metric for measuring brand equity, Simon and Sullivan (1993) demonstrated that brand equity comprises a large percentage (more than 151%) of the replacement value of many firms. As they noted, Conchar, Crask, and Zinkhan's (2005) comprehensive meta-analysis provides evidence of a significant positive relationship between a firm's advertising and promotion spending and the market value of the firm, thus supporting the linkage between a firm's brand-building activities and the financial performance of the firm (Madden et al., 2006)."
There are two extremely important levels associated with brand value; the micro level and the macro level. As it pertains to the macro level (also known as the enterprise level) brand value influences the perception of investors and financial analysts, and subsequently plays a role in determining the stock prices of firms (Chu & Keh, 2006). On the other hand, at the micro level (also known as the consumer level) brand value has a positive influence on behavioral outcomes, such as purchase intent (Chu & Keh, 2006).
Since this is the case, the development of a brand has garnered a great deal of attention within many companies. Brand development has also necessitated a significant amount of corporate resources (Keller, 2003; (Chu & Keh, 2006)). The article asserts that brand management strategies are vital and are usually inclusive of a firm placing some assets in advertising and different promotional...
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