Marketing Management, Fall 2012
The size and scope of global corporations in the 21st century is enormous. Global corporations have vast reach and economic power, almost akin to creators and financiers like the banking dynasty of the Fugger family in the 16th century or the trade dominating East India Company of the 18th century. For example, the Coca-Cola Company sells it branded products in more than 200 countries, and Procter & Gamble estimates that 4 billion of the world’s 7 billion people buy P&G brands in 180 countries every year. A recent Georgetown University study showed that if one were to equate the annual revenues of the largest global corporations with the size of the world’s leading economies, many firms would rank among the top economic powers. Wal-Mart Stores, with 2010 revenues of approximately $422 billion, would rank as the 23rd largest economy in the world—ahead of countries such as Norway and Venezuela. Royal Dutch Shell would rank 26th ahead of Austria, Saudi Arabia, Argentina, and South Africa. Exxon Mobil would rank 31st ahead of Iran, Thailand, and Denmark. BP would rank 35th ahead of Greece.
This analysis also revealed that 45 companies would be listed among the top 100 economies. Of course, the balance of power within a national territory tends to come out on the side of the government: In a neck-and-neck contest, national sovereignty typically wins. This is mainly the case when it comes to the “big picture” of whether or not a country should recognize Cuba and if certain merchandise should be subject to embargoes or sanctions. The small issues, such as whether our products should be adapted to a new market abroad and at what price, tend to be overwhelmingly decided by corporations. Therefore, at this micro level, companies exert major power. Greater economic power brings “noblesse oblige,” which refers to greater responsibilities and obligations regarding corporate governance, responsibility, and ethics. Many stakeholders want to know more detail on those countries with which they are spending their money. Small groups, and even individuals, track corporate behavior through the press, social media, and even webcams. Therefore, companies do not have impunity in the global economy.
They can be held accountable by customers, peers, or their host governments based on rules that can unilaterally be set in territories where their firms operate. Society determines its own level of trust in believing whether business will perform for a greater good. In cases of dissent, brand equity that has been built up laboriously over decades can be substantially damaged or even erased when corporate actions lead to significant erosion in consumer confidence. To forestall such decay, international marketers should voluntarily develop and adhere to a corporate social responsibility that demonstrates their leadership for societal needs and interests. For example, since the financial crisis and recession of 2008 to 2009, governments and public audiences have resented and even been angered by risky activities and insufficiently justified compensation levels in the financial services industry—particularly when the subsequent outcome has been very detrimental for firms and individuals caught as bystanders in the crossfire. The consequences for the industry have been major.
The Edelman Trust Barometer 2012 Annual Global Study ranked banks and financial services companies at the bottom of industries likely to “do what is right.” Such negative perceptions and attitudes can easily become instrumental in the shaping of more onerous tax burdens, greater supervision by governments, and harsher penalties for the violation of rules. By contrast, at the time of the reputational descent of the financial sector, consumers around the world place a great deal of trust in technology companies, as well as companies in the automotive, food and beverages, consumer packaged goods, and telecommunications industries. Due to their substantial consideration of the consumer, and their careful considerations of collateral implications of their actions, firms in these industries tend to enjoy more freedom of action, leeway for innovation and support for expansion by both governments and consumers. Much of the preferential flexibility offered to these firms appears to be the result of being more trusted by consumers. Yet marketing-oriented companies are also subject to public scrutiny of their practices, even in areas such as production processes and labor conditions.
Resting on one’s laurels typically would not work, since trust levels have to be earned anew every day. Even though one can draw from a storehouse of goodwill that has been filled over time, new actions lead to new expectations—which, in turn, may well lead to newly structured rules of the game. Just as the cells of our bodies change over time, so do the cells of business activities and outcomes. So even the responses to well-established research findings may have to be revisited and re-validated over time. It is therefore quite possible that different variables lead to varying evaluations of firms, with tracking them leading to bifurcated results based on different priorities. Take Apple as an example. The firm is admired by consumers worldwide for its consumer friendly products, its innovative ideas, its stylish approach, and its management as portrayed to the outside. In international marketing, Apple has achieved iconic status with its powerful brand. In 2011, when Apple Chairman Steve Jobs died, the firm became, according to the price of its shares, the most valuable publicly held company in the world.
In 2012, Millward Brown’s BrandZ Top 100 Most Valuable Global Brands report ranked Apple the highest. Interbrand’s Best Global Brands 2011 report ranked Apple in eighth place. Yet in spite of, or perhaps even because of, all these strengths and successes, Apple is being attacked for its production processes—particularly when it comes to its international sourcing. The company has been widely criticized for its treatment of workers in its Chinese production facilities, even though most of these facilities are owned by suppliers outside the company. The attacks against Apple can be labeled “relentless,” and The New York Times reported in January 2012 that, “Problems are as varied as onerous work environments and serious–—sometimes deadly—safety problems. Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms. Some say they stand so long that their legs swell until they can hardly walk.” Among the choir of such accusations, there have been a number of charges that turned out not to be true.
When confronted with the disparity between facts and claims of wrongful treatment, the accusers helpfully pointed out that it had been their intention all along to simply highlight what “probably is done wrong,” not to deliver a catalog of actual shortcomings. Such public debates, delivered with widely differing ground rules, can result in the obfuscation—rather than the clarification—of actual conditions and the need for change. We will therefore, in the next issue of Marketing Management, develop a very specific focus on the relationship between Apple and its key independent supplier in China, named Foxconn. We will evaluate how this relationship with more than one-million Foxconn workers is managed and guided by Apple. We also will look at what steps might be needed so consumers not only enjoy the fine products they purchase from Apple, but can also feel at ease about the quality of work environment and social responsibility shaping the lives of workers.