AFTER THE COLLAPSE of the Berlin Wall, free markets, free trade, and freedom conquered the world. Russians got their first taste of Big Mac and the ballot box; After opening its market via economic liberalization, Indians watched MTV and drank Coca Cola. US President Bill Clinton welcomed China’s entry into the global trading system at the end of his tenure. In the past few years, liberty has sequestered.
First was the presidency of Donald Trump. His trade wars cost $1.7 trillion owing to increased US tariffs against imports according to the economists in Federal Reserve Bank of New York. His protectionist turn provoked ominous warnings. Next came the unprecedented worldwide pandemic in which cross-border flows of capital, goods, and people almost came to a halt. In rapid succession, the Russian invasion of Ukraine and subsequent armed conflict in Europe’s breadbasket is the third blow to globalization. Business owners and customers wrestle with fragile supply chains: wheat prices catapulted by 40%, Europe faces gas shortages, and there is crunch with other raw materials used by manufacturing industries.
Most global brands have suspended their operations or abandoned Russia. What took thirty years for British Petroleum to build its presence, took merely three days to shut it down completely. The Russian invasion of Ukraine has prompted a reckoning for many global brands: an exodus of around three-hundred brands, according to a tally by Jeffrey Sonnenfeld, a professor at Yale University.
Does brand perception hurt if it were to conduct normal economic exchanges with closed and autocratic societies, that either abuse human rights or endanger security? Many perception concerns arise. Death toll in Ukraine grows and millions of refugees flee. Brand custodians and business owners cannot stay silent. Russia presents a host of risks, from damage in reputation to disruption in logistics. For most brands it is a moral issue; the peril of violating economic sanctions. In many cases, domestic consumers field explicit demands for brands to boycott Russia.
Despite the obvious temptation to pivot with military allies, a retreat to cold-war spheres of self-reliance would not only be a mistake, but prove costly also. Globalization needs to be reconfigured. Firms need to diversify their supplies with alternative vendors from other liberal and democratic regimes to enhance brand perception. Where high demand power exists, it may be judicious to leverage competition among suppliers to the advantage of the brand. Variations of this strategy consist of further fueling competition through appropriate measures on the supplier market, or influencing supplier pricing through analytical tools.
Brands need to diversify and invest on development around their architecture. Venerable acoustic guitar maker, Martin Guitars began making violin parts; repurposed waste to make wooden jewelry to thrive gloom times.
Instead of throttling down advertising efforts to cut costs, brands should actively pursue newer marketing avenues. Procter & Gamble’s survival during the Great Depression was to sponsor daily radio serials aimed at homemakers, the company’s core market. P&G debuted with Oxydol’s “Own Ma Perkins” in 1933. By the end of the 30s, the company was producing a staggering twenty-one radio shows–pioneered “soap opera.”
Mr. Putin has handed out an asperous lesson. The golden age of globalization has
abruptly turned sour, after plummeting through slowbalization most of the past decade.
To end on a sliver of good news: American innovation has led to many victories–
including the latest vaccines against Covid-19 that saved many lives. If brands change
posture, they can reinvent themselves.
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