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Published by Thunderbird.edu

Is Brand America broken?
U.S. foreign policy can affect sales of American companies abroad, and it may have already. What can be done now?

By I.J. Schecter and D.J. Burrough, Thunderbird Magazine
Spring 2005

  • A tarnished image
  • U.S. companies affected
  • U.S. products vs. policy
  • Identify with local culture
  • Adapting the image

    Times seem somewhat better FOR America on the global stage these days. The nation has patched up some of the strained relationships it had with key allies, displayed humanitarian goodwill in the wake of the Indian Ocean tsunami and, most dramatically, garnered considerable credit for a swing towards freedom and democracy in the Middle East to help assuage complaints from around the world in the wake of the Iraq invasion.

    What began as President George W. Bushs secondary motive for invading Iraq has evolved into a swelling pro-democracy trend, starting with Januarys successful elections in Iraq, continuing with stability in Afghanistan, street protests in Lebanon calling for Syria to end its occupation, the orderly and civil elections for a new leader of the PLO, local elections in Saudi Arabia, and Egyptian President Hosni Mubaraks decision to allow some opposition candidates to run in the next presidential election.

    Just months ago, the picture was much bleaker. Americas image, Brand America, had lost much of its luster throughout the world in recent years. It was measured in the torrent of vitriolic editorials in foreign papers denouncing the United States, in the steady stream of street protests by angry students and in downbeat poll after downbeat poll.

    There are signs that the tarnishing of Brand America spilled over onto American products and companies, smearing them with an unflattering patina. The halo effect that American products and companies had been used to getting from association with a cool and free America has been damaged, and in some circumstances it has been replaced with negative kickback. For some companies and products, being labelled Made in the U.S.A. can now be a marketing liability in international markets. There are signs that the erosion of Brand America has made it more difficult for U.S. multinationals to hold their own, let alone expand, in the global marketplace.

    But President Bush has made some positive moves early in his second term to correct the problem, perhaps partly in response to concern from important global business constituencies within his own party. First, he named Condoleezza Rice, his most important confidant, as secretary of state, the chief instrument of his new diplomacy, and she immediately visited more foreign peers in major markets than any previous secretary of state in that same period of time. He also named his pivotal communications czar and close friend, Karen Hughes, as assistant secretary of state for public diplomacy, a position that gives her the task of ensuring a strong and positive international recognition of Brand America.

    In March, Bush made a bridge-building trip to Europe, not to meet with his most staunch ally during the Iraq war, Tony Blair, but to break bread with French President Jacques Chirac and German Chancellor Gerhard Schroeder, two of his biggest critics in his rush to oust Saddam Hussein. Both happily posed with him following their successful discussions and made friendly comments about working together.

    As the U.S. administration looks out at the world, it appears to be taking stock of the complexity of issues around the globe and of the potential long-term danger in pursuing the go-it-alone policies it adhered to during Bushs first term. Even if it had success in some spheres, unforeseen negative fallout in others needs fixing. The signs are that the administration is moving in the right direction, but will those efforts be enough to restore a reputation that has been significantly damaged in the eyes of millions around the world? Even more grave, has the tarnishing of Brand America endangered the nations dominant position in the global marketplace?


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    A tarnished image

    While some world leaders seem ready to embrace a kinder and gentler U.S. government, many of their citizens arent so sure they want to hug America back. Those people, who may once have regarded America as a well-meaning bull in a china shop, now see it as a schoolyard bully who refuses to listen to its friends and indiscriminately throws its weight around.

    A poll taken at the end of 2004 by the Associated Press found that just over half of the people in France and Germany said they viewed Americans unfavorably, and nearly half in Spain felt the same way. Even in England, the United States only steadfast ally in its war in Iraq, a banner headline in Londons Daily Mirror following the November re-election of President George Bush reflected a diminished attitude of the English: How can 59,054,087 people be so DUMB?

    The fundamental problem with Americas image in the world today has been the perception, right or wrong, that we have chosen a unilateral, go-it-alone path of action, that we disregard the opinion of other peoples, that we disrespect international institutions, says Keith Reinhard, chairman of the marketing services for DDB Worldwide and founder of Business for Diplomatic Action, a private group that aims to improve the United States image. We, the quintessential world nation, are perceived to have turned our backs on the rest of the world.

    While Germanys Schroeder was happy to welcome Bush in March, his countrymen werent so open-armed. Plans for a townhall meeting in Mainz were cancelled when the German government couldnt guarantee friendly questions.

    A 2004 survey by Research International found that 80 percent of the residents in 10 Latin American countries agree that Americans only care about themselves and that just 13 percent believe Americans respect other cultures. Meanwhile, majorities in Bosnia, Korea, Russia and Norway believe that U.S. foreign policy has a negative effect on their countries, according to a Gallup International survey in 2002.

    Dealings with Spain have become particularly frosty since it pulled its troops out of Iraq. Italian citizens became even more enraged with the United States in March, when U.S. troops in Iraq killed an Italian intelligence agent and wounded an Italian journalist who had just been freed from insurgents. In Bulgaria, citizen opposition to the Iraq war boiled over after U.S. troops killed a Bulgarian soldier in a friendly fire incident. Whether or not to withdraw its troops has become a central issue in the run-up to June elections. Even Switzerland and Canada, countries whose feathers seldom get ruffled over anything, have taken exception to U.S. dealings, the former cutting back appreciably on imports and exports, the latter threatening to double tariffs in response to what Canada claims are unscrupulous trading practices.

    Evidence indicating that Brand America is damaged has been building for several years, but there also are signs that brand erosion has begun to impact U.S. multinationals who sell their products around the world, an even more ominous development that could signal the beginning of the end for U.S. brand dominance.

    In Hamburg, a group of restaurants have refused to sell Coca-Cola and Marlboros, both iconic American products, or accept American Express cards. In France, protesters marched in 2004 to the local McDonalds franchise and toppled Ronald McDonald. Thirty-six thousand people from around the world responded to a Boycott Brand America Web site put up in British Columbia.


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    U.S. companies affected

    In December, Global Market Insite, an independent Seattle polling group, surveyed 8,000 consumers in eight countries and found that 20 percent of Europeans and Canadians said their anger over United States foreign policy would deter them from buying American brands.

    A profound trust gap exists for American corporations in Europe, says Richard W. Edelman, president and chief executive officer of Edelman U.S.A., the largest independent public relations firm in the world, with 39 offices worldwide. It is brand players who are particularly affected by this trend, while technology companies seem to be immune, as they are perceived to be more global.

    The recent performance of U.S. firms with the most powerful global presence paints a troubling picture. A study by market research leader NOP World showed that consumer trust ratings in 30 countries for such emblematic behemoths as Coca-Cola, McDonalds, Nike and Microsoft had each dipped between three and six percent between 2003 and 2004. While its not unusual for consumers to say one thing to a pollster and do the opposite at the cash register, there are signs that all this animosity toward the United States and U.S. products has begun to influence not just what consumers say but what they do.

    Americans show that they are people who are afraid and distrustful of everything surrounding them, said a survey participant from Brazil, who was part of a 2003 study by Research International. Their products are already not unique. The national debt is increasing everyday. And all this has shaken even their self-esteem, which was strong as a rock. I think that today it must not be so comfortable being an American.

    According to another study by NOP World, the total number of consumers worldwide who used major U.S. brands in a recent two-year span fell from 30 percent to 27, while non-U.S. brands held their ground in the same period. And over the past year, sales of signature U.S. brandsMcDonalds, Coca-Cola, Marlboro, Wal-Mart, Disney and Gaphave been weak or have fallen.

    In Germany, whose population was decidedly opposed to the Iraq War (and who elected Chancellor Schroeder on a platform against the war), Coca-Cola was down 16 percent during the third quarter of 2004 compared to the previous year. Meanwhile, McDonalds blamed falling sales there for wiping out what would have otherwise been a growth year in Europe. Sales numbers for Altria (the new name for Philip Morris Companies), maker of Marlboro cigarettes, were down nearly 25 percent in France and 18.7 percent in Germany in the third quarter of 2004 compared to the previous year.

    Foreigners have a love-hate affair with American companies and products, says Michael Vanderkaden, current director of finance for a leading Canadian healthcare institution and former consultant for a U.S.-based global strategy firm. He has observed the issue from both sides. To some, U.S. firms are a great alternative to staid domestic ones, providing new technology, innovative products and capital funding. To others, American cultural insensitivity and overriding arrogance displace those benefits.

    The falling dollar may for now be masking the size of the problem, say experts, by inflating repatriated profits and lowering the cost in foreign countries of U.S. brands.

    How important is the global marketplace for U.S.-based companies? According to a recent survey by Interbrand, 64 of the most valuable 100 global brands belong to US-based companies. An increasing number of U.S.-based companies are relying on sales outside North America for growth. Coca-Cola does a whopping 80 percent of its business outside the United States, and nearly 25 percent of all U.S. multinational profits come from foreign subsidiaries.

    For decades, American brands have benefited from an unconsciousand sometimes not so unconsciousbrand association with the United States. When the dimensions that defined Brand America were fashionable, modern, freedom, democracy, tolerance, compassion and equality, U.S.-based companies flaunted their American heritage, riding the halo effect all the way to the bank. Marlboro had its iconic cowboy riding across the open West. Coke had U.S. citizens teaching the world to sing in perfect English harmony. And Ford pick-up trucks became synonymous with the United States free-spirit culture.

    But now much of the world perceives the United States to be abandoning the principals that defined Brand America. Like a 100 pound anchor tied to a canoe, a tarnished Brand America may risk dragging U.S. brands down with it.


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    U.S. products vs. policy

    But some corporate leaders say that any alleged soiling of Brand America has not translated into a corresponding hit on their foreign business activities. Consumers simply do not care where their new iPod or Levi jeans come from as long as the perceived value is high.

    At heart, most people know there is a difference between American firms and the American government, says professor Tim Leunig of the London School of Economics. Where the value proposition stacks up, people will still buy American.

    Globalization of the manufacturing process also has eroded the idea that any product is produced in one country. Made in the U.S.A. has less meaning when a products microchips were manufactured in Singapore, the assembly was done in China, the packaging in London and the customer service calls are answered in India.

    Corporate America may not be ready to admit that as Brand America goes, so goes American products. But corporations are expressing concern about the countrys image.

    Recently, a group of 150 of the most powerful and successful advertising and marketing experts in the United States came together to form Business for Diplomatic Action (BDA). The nonprofit group, headed by Keith Reinhard, aims to return some of the luster that has been lost from Brand America. Among its members are some of the biggest power brands in the United States, including Pepsi and McDonalds.

    Polishing Brand America has been tried before. In 2001, the U.S. government attempted to deal with its flagging image in the Middle East when it hired Charlotte Beers, former head of WPP ad agencies JWT and O&M, to head up a $15 million ad campaign. Most Middle East stations refused to air the spots, and it only garnered derision from the residents in that region. The Shared Values Initiative was soon shuttered and is widely considered to be an abysmal failure.

    Some question whether any commission regardless of credentials or corporate pedigreecan influence Americas global image when it has no control over the prime mover of that image: U.S. foreign policy. But BDAs Reinhard believes that U.S. multinationals have a much greater influence over the image of the United States around the world, that in fact their brands come in contact with people more than the government ever does. Consider that both Coca-Cola and McDonalds spend more money, approximately $1.2 billion each annually, in selling their brands.

    We believe we can start to regain respect and credibility for America with actions, projects and programs created, funded and implemented not by the U.S. government but by the U.S. business community, which in many ways is more qualified than the government andat this moment in history, we would argueis certainly a more credible messenger, Reinhard says.


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    Identify with local culture

    Strategies that U.S. multinationals should adopt in the face of a declining Brand America should be far more subtle than simply hiding their point of origin, say marketing and branding experts. The best response is to identify better with the local markets, in part by hiring more local managers and adopting policies that show cultural empathy.

    In 2004, Madison Avenue powerhouse McCann-Erickson advised its clients to play down their U.S. connections. Instead, they should highlight their strong local roots in each regional territory.

    Visa International has taken that tact and has avoided the Brand America backlash, say company officials. Being seen as a local company is promoted, in part, because global customers get their card from local institutions. Were helped because were seen as local, says John Elkins, executive vice president for Visa International, U.S.A. In Korea, they say were as natural as rice. To maintain their local identify, Visa does not use a global advertising agency but only local agencies and local media buying, Elkins says.

    Some U.S. brands are so large or have been established for so long on foreign soil that generations of consumers no longer link them with the United States; they only know that theyve grown up eating Kelloggs Corn Flakes and drinking Coca-Cola.

    In spite of its problems in Germany, and a history of selling itself alongside Brand America, Coca-Cola has more recently done a better job of aligning itself with the local culture, say marketing experts. A survey of consumers in China, India, Korea, Indonesia and the Philippines by Leo Burnett found that 49 percent of the respondents viewed Coca-Cola as a global brand, while only 31 percent saw it as a U.S. brand. Fifteen percent even thought the brand was local.

    A solid lesson can be learned from a company that has slipped seamlessly into foreign markets despite the word American making up half of its name, says Dr. Richard Ettenson, associate professor and area coordinator of marketing at Thunderbird. Living near the Geneva border during G8 meetings, I found it enlightening to observe the pattern of various protests. Who are the protesters always targeting? McDonalds. Yet they march right by the American Express office. AmEx isnt perceived as an interloper like McDonalds because it provides excellent value and avoids making waves with local traditions.


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    Adapting the image

    The perennial targets have localized in various ways, however. McDonalds has adapted its menu, even adding Kosher and Halal versions of the chain in countries like Israel, Argentina and Malaysia. Nike has won over the world by developing localizing strategies, campaigns and messages. In Europe and Asia, the sports apparel giant concentrates on soccer, using famous stars from well-known teams like Real Madrid. In Australia, Nike created a campaign around Cathy Freeman, the countrys most famous Aboriginal athletics star.

    The best run U.S. multinational corporations started to deal with the declining Brand America years ago, say Harvard Business School faculty members John A. Quelch, senior associate dean, International Development, and Lincoln Filene, professor of Business Administration. They hired more local executives and put more resources toward local community relations, Quelch says.

    In my opinion these multinationals inoculated themselves from what would have taken place if they had not gone down the local adaptation route, he says.

    U.S.-based multinational corporations need to have an even sharper awareness of the cultures they are selling in and how Brand America is perceived there, say marketing experts. U.S. companies need to appreciate the growing sensitivity of consumers in local markets to all things American. Fail to do that, say experts, and it could translate into angry consumers who read cultural slights into every piece of adverting.

    The United States is in a position that even the ancient empires of Greece, Rome and Egypt have never experienced: a single country wielding enormous power due solely to its economy, says Tony van der Hoek 89, director of strategy and business solutions for Coca-Colas global Wal-Mart account team. When you have that power, you need to show extra sensitivity. Businesses need to tie into the fabric of the countries in which they operate. They need to develop a local presence by identifying with local sensibilities.

    Although its done very well in localizing its message, Nike Inc. recently tripped over its own fashionable feet in China with a campaign featuring National Basketball Association star Lebron James. The ads featured James going up against and beating a kung fu master and other Chinese cultural icons in a video-game style battle. Nikes intended message was lost on a population sensitive to American aggression.

    BDAs Reinhard believes that U.S. multinationals should poll their own international workforces to see whether their companies are exacerbating the decline of Brand America or doing something to reduce the problem.

    Once CEOs hear from their own people, we believe theyll become more engaged in the issue, he says.

    While American multinationals can do much to control their own image in the global marketplace and have considerable impact on how Brand America is perceived, the biggest player in creating an American image overseas is the United States government.

    If democracy, peace and economies are well established in Afghanistan and Iraq in a few years, if an independent Palestine and Israel are living in peaceful co-existence, if the United States can back up its stance as the worlds moral arbiter with less rhetoric and more policy changes, and if it can listen to its allies and avoid taking unpopular unilateral actions, then Brand America can once again become the shining beacon it once was.

    Source:
    www.thunderbird.edu/wwwfiles/publications/magazine/spring05/s05-brand-pg18.asp



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