Tuesday, December 28, 2004

US Brands Face Trouble in European Markets

Interesting article from today's Washington Times on the backlash I've also feared American companies will face in the global marketplace. I anticipate that the ability/inability of US companies to do business abroad will be an important business story in 2005. US brands are facing international market rejection, compounded by loss of market share when their competitors take advantage of this low in America's standing to court consumers in precarious markets. My commentary and background on Tradewind Strategies appear in the last several paragraphs.

http://www.washtimes.com/upi-breaking/20041227-062212-4711r.htm

Europeans costing American companiesBy Donna Borak
UNITED PRESS INTERNATIONAL

Washington, DC, Dec. 27 (UPI) -- The Bush administration's foreign policy may jeopardize the economic health of American multinational companies abroad, an international consumer survey released Monday said.

According to an international survey of 8,000 consumers taken by Global Marketing Insite World Poll on Dec. 10 through 12, fifty percent of foreign consumers distrust American companies as a result of the U.S. decision to invade Iraq and the war on terror. Additionally, 79 percent said they distrusted the American government, while 39 percent said they distrusted Americans.

"American companies' livelihoods depend on trust. It's extremely important. You almost never get a second chance once that trust is lost," said Allyson Stewart-Allen, co-author of "Working with Americans."

International consumers surveyed from G8 countries like China, the United Kingdom, France, Germany and others described U.S. brand companies like AOL, Exxon Mobile and Starbucks as "arrogant, intrusive and self-centered" making them the top companies likely to be boycotted.
However, analysts explained that consumers were more inclined to boycott a product because they believed it closely resembled the attributes of the United States, rather than brand loyalty.
For example, 64 percent of consumers surveyed thought of American Express as "extremely American," while only 17 percent considered Visa to fall into the same category.
According to Mitchell Eggers, COO and chief pollster at GMI, Visa has been an exception to the rule because it has been able to detach itself from the image of being an American company - a problem that may cost other companies loses in revenue.

"Some American brands become closely connected to their country of origin and are quintessentially American," Eggers said in a released statement. "They represent the American lifestyle, innovation, power, leadership consumers as a significant negative, when it used to be a positive."

According to the poll, the negative international perception of the United States matched the unenthusiastic views of American multinational businesses. Based on their findings, 61 percent of French consumers and 58 percent of German consumers had negative feelings toward American multinational companies. While an additional 47 percent of European and Canadian consumers viewed how Americans conducted business negatively.

"American companies are accused of aggressiveness and arrogance because they insist on imposing the American way of doing this on their international markets; they are inflexible. They show limited respect or concern for non-U.S. cultures," said Stewart-Allen.
For the last three months, GMI tracked the consumption of American products by Europeans and found that as many as 20 percent consistently said they would deliberately avoid purchasing American products.

The survey, which is based entirely on consumer perception, has already seen some affect in the current market with the recent mass layoff of 9,000 GM Europe employees in Germany. Additionally, products like Barbie Doll made by Mattel have seen a 13 percent drop in sales worldwide.

"It could play out in a year...or it just might be a couple months thing and then all of sudden it dies away," said Kenneth Pick of GMI.

However, even if a boycott does occur, some analysts explained that any consumer-lead boycott would not greatly affect American companies abroad.

"Sanctions and boycotts don't work unless they very directly hit the bottom line," said Usha Haley, professor of management and international business at the University of New Haven in Connecticut.

"They don't seem to affect (much) because companies can resort to various mechanism to sell their products."

Haley who has written a book based on a seven-year study on the effect of sanctions and boycotts on multinational American companies in South Africa explained that the best run multinationals are those who are perceived as local brands, so they don't have to face the full force of anti-sentiment.

Though she agrees that there has been a great deal of ant-American sentiment abroad, stemmed from the U.S. polices in Iraq, she does not believe it will significantly affect American multinationals in Europe.

However, other analysts fear the current neglect by American multinational companies to take a closer look at the effects of the current U.S. anti-sentiment, might open further doors to Asian companies who are looking to expand further into Europe.

"They're competitors are going to swoop into those markets," said Josef Blumenfeld, a global PR and communications consultant, and founder of Tradewind Strategies.

"If Whirlpool can't sell, Samson will. The Asians are prime and ready to swoop right in. You can expect them to move aggressively and forcefully to seize market share," said Blumenfeld.

Through his company Tradewind Strategies, Blumenfeld helps American global companies to develop strategies to counter the backlash of anti-U.S. sentiment. He recommends to his clients to promote their companies as "global brands, not American brands" and to localize the company wherever possible.

He cautions that companies should remain flexible in its global marketing plan under the constructs of the current geopolitical situation, which can be unpredictable and ever changing.
However he added, "If they continue a unilateralist approach with complete disregard for the European governments, American businesses will suffer as a result of that."

###

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