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Is It Ever A Good Idea To Use Politics As A Business Strategy?

Getting involved in politics is sometimes unavoidable, so how do you deal with it?

9Feb

The past year has been one of the most polarizing and bruising for businesses and politics around the world. We have seen an aggressive and bitter election campaign run in the US, the threat of Brexit in the EU, and increasing uncertainty in all markets across the world.

Trying to create a strategy around this has been difficult, after all, with things changing so quickly and people who can significantly impact your company acting so unpredictably, things can change in an instant. For instance, Toyota lost $1.2 billion in value as a result of a single tweet from Donald Trump. No strategy in the world could have that built into a model.

However, there are several companies who have either deliberately or inadvertently taken a political strategic decision in the past year that has seen some shouting their praises and others scorning them. So is this a good idea or a bad idea?

A prime example of a perceived political strategy that has recently taken place is Nordstrom, who after considerable pressure from campaign groups including Grab Your Wallet, dropped Ivanka Trump’s clothing line, citing poor sales. Even if this were the case, which given the backlash against the Trump family following the election, it has been interpreted as deeply political. 

This led to Donald Trump tweeting:

However, unlike the huge Toyota share price drop, Nordstrom had an initial drop of 1% for 4 minutes after the tweet, before the share price ended 4.1% up at close. Given that it Nordstrom’s motives remain unclear, it is hard to gauge the success of this, although if share price is anything to go by, if it was a political move, it seems like it has been a success.

We have also seen some backlash against Kelloggs for what was certainly a political strategy of stopping its adverts appearing on right wing websites such as Breitbart news. This spawned a boycott against Kelloggs online among right wing supporters, which saw the company’s shares fall 3.6% over three days before getting back to the original price 12 days.

Going the other way, New Balance were caught in the crosshairs thanks to a statement from their Director of Public Affairs Matt LeBretton who tweeted his support for Donald Trump, saying: ‘The Obama administration turned a deaf ear to us, and frankly, with President-elect Trump, we feel things are going to move in the right direction.’ This message was picked up by white supremacist website The Daily Stormer who declared New Balance trainers as ‘the official shoes of the White race.’ This association sparked thousands on social media to post pictures of them burning and throwing away their New Balance trainers. This had a big impact on the company, with sales reportedly down by 25% following this incident.

So is taking a political stand as a strategic decision a good idea?

In general it is not a good idea to get involved in these kind of arguments, especially in our current polarized society. However, it is often seen as a necessity given the potential fallout that not acting can have, especially when there is considerable pressure from elsewhere. When it is clear that a strategic decision needs to be made that could have political ramifications, it is important to not only make a moral judgment, but also to take that decision at the correct time.

The examples of Toyota and Nordstrom share prices are indicative of this. Donald Trump, incorrectly, asserted that Toyota were moving jobs from the US to a new plant in Baja, Mexico (in reality they were moving them from Canada to Guanajuato, Mexico):

This was sent on January 5, 15 days before his inauguration, whilst his Nordstrom tweet was sent on February 8, 19 days after his inauguration. Since his inauguration his approval ratings have been declining and sat at a 46% disapproval rating according to Politico at the time the Nordstrom tweet was sent. This, combined with a lack of discussion on a specific policy that could impact them, may well explain the reason for the relatively small impact compared to Toyota. Also, that it appears, in many people’s eyes, to have been done for personal gain rather than the good of the country is likely to have dulled the impact of the outburst.

It is often a very difficult decision to make by companies who actively make a political statement, but a strategy that some have taken is to act against something in collaboration, meaning that no single company is vulnerable to ramifications. For instance we have seen Google, Apple, Microsoft, eBay, Netflix, Facebook, Twitter, and a group of 127 companies bring a lawsuit against the executive order banning travel from certain countries. This gives them a certain protection against backlash as no single company can be singled out and face a backlash and ironically most of the sentiment that may go against them will be expressed on their own platforms.

One of the key reasons for these companies making the decision to go to court and set a clear political strategy is clear - the will of their own employees. Taking Google as an example, over 2000 of their employees walked out in protest on January 30 over the ban and the hashtag #GooglersUnite gained considerable support as a result. In this instance the company had little choice but to adopt a very politically driven strategy as they would have continued to see anger from their own employees if they had not.

It often a difficult decision to take, but one that companies are forced to make and one that we are likely to see even more in the future. The difficulty that many companies will have is in trying to minimize damage and picking their battles wisely to be more of a Nordstrom than a Toyota. 

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