BRIC-based multinationals face trust issues in West

Multinational companies based in Brazil, Russia, India, and China (BRIC) continue to suffer from trust issues in developed markets, according to research by Edelman.

Trust for China-based companies was particularly low
Trust for China-based companies was particularly low

The Edelman Trust Barometer: Emerging Markets Supplement examined trust in the developed world in companies headquartered in emerging markets, based on 5,400 interviews with informed members of the public in nine countries.

Just over one-third of respondents in the developed markets surveyed -- the US, UK, Germany, and France -- said they trust BRIC-based multinational companies.

Trust for China-based companies was particularly low among respondents in developed countries. It found 19% of respondents in Germany trusted them, followed by 22% in France, and 26% in the US.

Respondents in the emerging markets surveyed (India, China, South Africa, Indonesia, and Mexico) have a great level of trust for BRIC-based companies -- just more than double that of those in developed markets -- at 56% compared with 27%.

The study shows that this ‘trust deficit’ has business consequences for BRIC-headquartered corporations. Nearly two-thirds of respondents in developed markets would reject domestic investment from companies based in the BRIC markets.

One-third of respondents in the developed markets (34%) would trust a China-based business to buy a company in their respective country, while 38% would trust a Chinese company to make a major investment in a new plant or office.

‘BRIC-based companies are not living up to the transparency and governance expectations of Western stakeholders – they won't grant trust to these companies until they meet these expectations,’ said Alan VanderMolen, president and CEO of global practices at Edelman and vice chairman of DJE Holdings.

The study examined awareness levels for specific companies in the BRICs, such as India's Tata and China's Haier. It also identified poor familiarity with them among respondents in developed markets, particularly in the US.

‘If stakeholders are not familiar with one of these companies, they will base their opinions on the country its headquarters are in,’ added VanderMolen.

BRIC markets have a different view of their multinational companies than developed markets.

The study found that the level of trust Chinese nationals have in China-based multinational companies is three times higher (83%) than the trust respondents from developed markets have in them.

Indian nationals also have a higher level of trust for home-grown corporations than outsiders, with 83% trusting Indian companies, compared with 28% of respondents in developed markets.

The main reason for a lack of trust in BRIC-based companies is the belief that their relationship is too close to their respective governments. This is particularly the case for Chinese companies, with half of respondents saying it is a reason not to trust them.

Respondents in both China (51%) and India (60%) agree there is too much state control of their own national companies.

Fewer than four-in-ten (37%) of developed market respondents say they trust state-owned BRIC-based companies.

‘It is incumbent on companies headquartered in these countries [BRICs] to realize there is an issue with state involvement,’ said VanderMolen.

He said as BRIC-based multinationals look to expand in development markets, they will also have to be ‘honest and transparent’ about their supply chain, management structure, employee welfare, and quality control, while adhering to internationally accepted accounting standards.

This article first appeared on PRWeek US.

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