In a recent op-ed piece for the Sunday London Times, Harvard Business School professor John Quelch warned that popular U.S. brands could be in for a rough ride overseas should anti-American sentiment grow over President Bush's handling of Iraq. In this e-mail interview, Quelch continues on that theme.
Silverthorne: In general, what effect will the war and the perceived unilateral tactics of the president have on the reception of American brands overseas?
Quelch: During the 1990s, American brands such as Coca-Cola, Marlboro, and McDonald's rode the wave of globalization. From Red Square to the upper Amazon, they brought people a taste of America, along with the promise of freedom and prosperity. The end of the Cold War signaled victory for Brand America. As closed economies opened up to foreign trade and investment, Brand America stood ready to sign up the best local business partners, to recruit the best distributors, and to capture market share from weaker, local competitors.
Selling the American dream has paid off handsomely. Eight of the ten most valuable brands in the world, according to the Interbrand consultancy, are American, and each derives more than half its sales from outside the United States.
The cost to the American economy could be far greater than the cost of war.
But now a deepening opposition to American foreign policy is threatening the long-term strength of these brands. And the cost to the American economy could be far greater than the cost of war.
We have reached the tipping point where Pax Americana now threatens Brand America. For some, the problem is the Bush administration's pattern of unilateral decision making. For others, especially in Europe, Bush's manner has stirred up latent anti-Americanism.
Q: Are there signs today of an overseas backlash against U.S. goods?
A: Long before the Iraq conflict, the triumphal tone of America's global march set off a backlash. Brands such as McDonald's, Starbucks, and The Gap have become targets for protesters in many parts of the world. But so far mainstream consumers have paid little attention to the anti-globalization movement. Brand America provided good products at good prices. Politics was one thing; smart shopping another.
Q: Which brands are most likely to feel the heat; what brands will continue to sell regardless?
A: Brand America includes two types of brands. The first is the technology brands such as Intel or Microsoft, which are likely to escape the new mood. The second group is the cultural icons such as Coca-Cola, Disney, Marlboro, and McDonald's. These brands depend on emotional attachment rather than the cold logic of the silicon chip. America's big, brash brands are on display on every street corner of the world. The very ubiquity that gives them their power makes them vulnerable.
Q: What will the results of boycotts be on American premium pricing overseas?
A: Some consumers will actively boycott these brands. More important, such boycotts will deter other consumers from buying these brands or using them in public for fear of criticism.
These brands used to extract a price premium over local products. Many consumers were willing to pay this premium to associate themselves with the aspirational American lifestyle. This price premium will disappear. In fact, because it is no longer cool to be American, the price premium may even turn into a deficit, squeezing Brand America's profit margins.
Q: What about the ability of U.S. companies to recruit talent and cultivate overseas partners?
A: As these brands lose their appeal and market share, fewer talented managers around the world will want to work for them. Fewer distributors will feel obliged to stock them. And new products that have been accustomed to gaining distribution on the back of their companies' global brands will find it harder to obtain shelf space.
Q: If anti-American brand campaigns are successful, what would be the effect on the already struggling American economy?
A: Never before have global concerns about American foreign policy so threatened to change consumer behavior. We are not speaking here of the frivolous grandstanding associated with temporary boycotts by a student minority. We are witnessing the emergence of a consumer lifestyle with broad international appeal that is grounded in a rejection of American capitalism, American foreign policy, and Brand America.