In the current volatile situation in mainland China and Hong Kong, brands have had to calculate their messaging and responses carefully, lest they get caught in a web of crisis comms. We’ve learnt in the last week that things could implode in a matter of minutes, and backlash can make or break a brand faster that one can say ‘tear gas’.
David Wolf, managing director, Allison Advisory at Allison+Partners, tells PRWeek Asia that this is simply the price to pay for doing business in China.
"A simple way to think of it is that you don’t get the right to operate a business in China, but rather the opportunity to earn that right and to re-earn it every day," he says.
"So all of us who run businesses in China are under that constant pressure. We have to prove that we deserve the chance to work in China, and whether it’s right or just is a whole other discussion. That’s simply the way it is. We’re rule-takers as businesspeople in China."
Western brands can’t play by Western rulebooks
Western brands no longer wear a proverbial halo in China for simply being foreign. This means that China is no longer a hothouse for imported business models and cultures. "If you’re going to compete in China, you have to build a business that is appropriate to the local culture. You can’t be a corporate imperialist," says Wolf.
One reason is that the complex Chinese legal system that brands are forced to comply with. When businesses are given licenses to operate there, it’s not a license to operate in perpetuity without any givebacks.
"Your ability to operate a business there is provisional – it’s based upon the continued favour of the government," says Wolf. "There are shades of grey more than it’s black and white but the way that it’s judged is ‘Is your business operating in China a positive influence on the overall economy? Are you offering something that a local firm couldn’t do? Are you a good citizen? Are you setting an example?’"
This is not to say that international brands have to "like" the country’s governance go out of their way to support it. It just means that brands are obliged to understand these conditions beforehand and constantly re-evaluate them as they go. If at any point, they are not willing to compromise or co-operate with the legal system, they will have to decide whether China is a place they want to continue operating in.
Is silence the best way forward for brands?
Hong Kong’s pro-democracy movement is no doubt an extraordinarily moment in history for international brands operating there as well as in mainland China, and it seems that so far, a common tactic for brands is to do a whole lot of nothing. In this deafening silence, should brands be encouraged to speak up?
"Silent they must be," says Wolf. "At the end of the day, our clients are businesspeople, not politicians. There’s nothing to be gained with stepping out in this for the most part. That being said, I have no doubt that at some point in this process, there will be companies who will step out and make statements and recognise that they’re going to alienate one group or the other. But that will be calculated."
He adds that there’s no easy answer to this crisis, and that comms strategy should vary brand-to-brand. "What I would tell Boeing to do versus what I would tell Adidas to do are two different things," he says.
It’s not just international brands caught in the muddle. Cathay Pacific – a brand that many Hong Kong-ers wear with pride – was under fire last week for warning staff not to participate in the protests and subsequently suspending two pilots allegedly involved in demonstrations.
"People are still flying United Airlines and they’re arresting United pilots every now and again. That to me is a far more disturbing picture than what’s been coming out of Cathay," says Wolf.
"But at the same time, the people of Hong Kong are probably going to be most affected by this, it’s their home airline. Longer term, people will remember the people of the airline who stood up and risked their jobs in order to make a statement in which they believed. But that won’t win them as many customers as they chase away."
Why do luxury brands screw up so often?
China-Hong Kong tensions have also shed light on ‘mistakes’ by luxury brands. In the last week, Versace, Coach and Swarovski were among brands that were under fire for their geographical mishaps.
About why this seems to happen so often with luxury brands, Wolf says that they are "easy targets" because it’s politically easier for a government to go after a luxury brand that popularly speaking, most people would never have the opportunity to own or patronise. "There’s a populist element to it," he says.
"And on the other side of it, luxury brands walk a very fine tightrope. They are pressed to be edgy, a little bit controversial. That’s the essence of fashion and style. At the same time, here they are operating in China and this is a market that is politically and socially quite conservative – although this would count for most of the markets in Asia. When you walk that line, you’re going to step across once in a while."
On top of that, he adds that it’s difficult for brands to educate everyone in the organisations of some of these political, social and cultural sensitivities, particularly when the brand is operating in various markets around the world.
"This is the hidden challenge of globalisation – we must create and cultivate culturally adept people in every aspect of marketing and PR. And at the same time, make sure they’re good with their core skillsets. That’s tough," he says.
"When you go to a luxury brand, it’s difficult to get everybody up and down the line aware of what these sensitivities are. Having everybody in the supply chain aware of those sensitivities is a tremendous challenge. So even with companies with the best of intentions and the most careful systems are going to step their toes. This is why they have to turn around very quickly and say ‘Oops we’re sorry, we messed up’."
Perhaps learning from the Dolce & Gabbana episode last year, Versace swiftly apologised and took the matter very seriously. This, according to Wolf, is vital.
"Most of these brands are owned by very large publicly traded companies and have institutional investors and boards of directors who can look at the numbers and say, ‘this is 60% of our global addressable market," he says.
"It’s also about being prepared before these things happen because [this type of crisis is] hard to navigate on the go. You just have to recognise that you are going to screw up, that something down the line is going to happen. And what are you going to say to your audiences in China, and also in the UK and US, and elsewhere? It’s about making sure that all your messages are properly balanced so that you’re not coming off as weak-kneed or alienating anybody."
He adds that his staff has had to continually advice clients that regardless of how they perceive Hong Kong, Taiwan, Macau and their current legal status, they have to comply to what is perceived as the norm in China. "It’s simple political correctness," he says.
But some mistakes are just "inconceivable" and a result of poor research, he says, citing the Mercedes-Benz screw-up where it used a Dalai Lama quote in an Instagram post.
He says: "What was that? What were they thinking?"
Treading the precarious grounds of the Sino-US trade war
In the midst of the China-US trade war, Wolf’s advice to American brands operating in China is to be vigilant and be ready for "anything that could happen".
"You have to build your brand in a way that recognises the possibility that sentiment between China and the US may go sour. So today it’s a trade war but what is it tomorrow? Maybe it’s some sort of currency battle or a legal hassle. There’s going to be friction in that relationship – we simply have to be able to operate in that environment," he says.
"There’s a great challenge for companies that have built huge operations in China during a time where we were driven by a globalist point of view. That’s going away. We’re moving to a more nationalist period of time. These gigantic operations in China are now having to say ‘Gosh what do we do? What do we have to change?’"
On the other hand, Chinese brands operating in international markets have to bear the burden of proving their ‘innocence’ – in what we’ll call the post-Huawei effect.
"It’s difficult to prove a negative, it’s hard to prove that you’re not doing something or that there’s no back doors. It’s an impossible situation in that regard," says Wolf.
"Xiaomi has made some very interesting strides; they have managed to build and sustain trust despite the trade war. Alibaba too has managed to remain above it. But the danger for Baidu is rather greater because they’re based in Beijing and there’s an assumption in certain quarters that it makes them a de facto extension of the government."