West’s instability pivots to Asia

The year has got off to a very unusual and in some ways spectacular start. Donald Trump has taken office and directly intervened in companies’ policies to—in his view—fulfil the mandate that he received to protect American jobs. Many of the US’s largest companies including Apple, Google, Facebook, Microsoft and Starbucks have publicly repudiated his signature immigration policy. And the cover of The Economist declares multinationals are “in retreat”. Against this backdrop, Japanese companies seek to build their global brands ahead of the 2020 Olympics. 

We can expect several things.

Firstly, we can expect the unexpected. The geopolitical landscape is not stable, and the risks are very high. Few would have expected the events that have occurred since Brexit, and it seems unlikely that the surprises are over. It is possible that populism will continue to grow, and full-scale trade wars break out; equally, it is not impossible that there is a reverse and countries such as the US return to their ‘traditional’ values. Clearly, as high-profile exporters to the US and other countries, major Japanese brands risk being caught up in this. 

Secondly, we can expect governments to play a more interventionist role in business life. They feel they are being elected to defend national interests and national companies. Therefore, the regulatory environment for global brands is cloudy, and companies need to build their global brands not only with consumers, but with politicians, regulators and policy-makers. 

Domestic agenda: The rise of ‘localism’ is posing fresh challenges for international brands looking to compete in multiple markets.

Thirdly, we can expect that both staff and consumers are more conscious both of the origins and values of the brands they interact with. As in previous times of economic stress, there will be pressure to ‘buy local’. That may make people feel that they are not supporting their own economies when they buy ‘foreign’ brands—even if those brands (such as Nissan and Toyota) have in fact moved much of their production to local bases for precisely that reason.

Lastly, since there is now a high polarisation in many big markets between ‘localists’ and ‘globalists’, buying a brand can easily become a political act. Brands may be forced to take sides on issues such as immigration, risking alienating one side or the other. In the US, Kellogg’s recently removed the right wing news website Breitbart from its list of approved media, provoking a loud if short-lived backlash from Trump supporters. 

Where does that leave Japanese brands as they look to move overseas? In all probability, the attractiveness of the US and Europe has decreased significantly in the last six months. Trump intends to reflate the US economy with infrastructure investment, but the demise of the TPP and possible pro-US bias from the administration makes trying to crack the market a less appealing prospect than it once was. Likewise, the uncertain future of the UK market and possible instability in the EU make big bets there hard to make.

Perhaps that makes a pivot to Asia an appealing prospect. The long-term scale of the opportunity is compelling, and Asia seems to have less populist or nationalist backlash. The trajectory of the region and the popular mood is fundamentally different.

There are, of course, political and territorial tension points, and there are politicians who seek to use the pride of a rising nation as a political tool, but this doesn’t necessarily translate to a consumer dislike of foreign brands. 

John Woodward is chief strategy officer of McCann Worldgroup Japan