Where nations and business collide: what happens to brands when countries fall out

National politics often spills over into popular consciousness, which can manifest itself in boycotts, or worse. Last year, the Senkaku islands’ dispute between China and Japan resulted in the shunning of Japanese products in China and South Korea, prompting a number of Japanese corporates to cut their production and profit forecasts. Some polls suggest two thirds of the Chinese population were involved in boycotts of Japanese products ranging from cars to fashion. Toyota reported the highest drop in output in a decade. Nissan underwent the largest decline in sales since 2009. Heiwado - a major department store - had to close stores for a month, which cost the company nearly £3 million. Inevitably, such conflicts involve trade-offs, but in the long-run which is more valuable to Japan –symbolic rocks in the ocean, or a billion consumers for the output of its factories?

 

In other cases, the failings of a business can turn a national or city brand toxic - consider the effect of the Nakheel debt crisis of 2009 on Dubai’s reputation. In a matter of weeks, Dubai went from being perceived as a boom town to the latest victim of the global financial crisis, with investment drying up, and expats leaving the territory at an astonishing rate. More recently, a botulism scare in Fonterra’s dairy products dented New Zealand’s international image, undercutting more than a decade of work to create the perception of "100% pure New Zealand".

 

From a corporate perspective this incident has been particularly damaging in China, where the national origin of a brand is viewed as a peculiarly powerful influencer of brand characteristics by consumers. Just a few years ago, foreign milk brand sales went through the roof as the melamine-milk contamination scandal destroyed trust in a large number of domestic Chinese milk powder brands. So how can diplomats get more involved in the branding of their country abroad?

 

Brands have always been used to champion national interests through their involvement in broader cultural conversations. The British Council has for years acted as the soft power arm of UK PLC, funding English-language learning and cultural exchange. However, in an increasingly interconnected world, brands are doing more and more of the heavy lifting. The symbolic opening of McDonald’s in Moscow in the twilight of the Cold War was a portent of a wave of change to come. The Samsung brand is better known in many countries than South Korea – suggesting that associations with the former are increasingly likely to colour the latter than vice versa.