24 Jul 2018
Jim on Bloomberg
In a conversation with Bloomberg, Global CEO, Jim Prior, shares his view on How Brands Can Navigate Global Trade Tensions.
In this morning’s interview with Bloomberg’s Yvonne Man and Kathleen Hays on ‘Bloomberg Daybreak: Asia’, our Global CEO, Jim Prior, shared his views on How Brands Can Navigate Global Trade Tensions. Jim advises global businesses to focus on differentiating their products, services or brands that are competitive in the eyes of their audiences, and to build a position that is unique and differentiated to withstand a test of turbulent times.
Below is a transcript of his interview:
What is the biggest question you get from clients about the US-China trade tensions and how seriously should we take the President’s latest development about plans for additional tariffs on $500bn of Chinese goods?
The biggest questions we get from our clients today are how we become more competitive and how do we get an advantage. I think if you look at that in the context of trade tariffs, it is exactly the question that businesses should be asking themselves right now and looking for answers to. The question is how do we put ourselves in a position where a 10% or so hike in cost prices isn’t the issue that we’re facing because of the strength of our brand, products and services, which are sufficiently differentiated and strong so we can absorb that and still be something that consumers want to buy. So that is the big question – how do you differentiate and how do you get an advantage in the world, regardless of fluctuations in cost prices through tariffs or through any other factor.
We were talking this week about what we have been seeing when it comes to smaller companies, but also for the larger global companies. They are able to withstand the 10% tariffs as you mentioned, but have we seen any change of behaviour, whether it is hesitation for investment, CAPEX and could that actually impact brands in the long term as well?
Well it could do because any fluctuation in pricing of course is a big issue. Whether or not big companies are in a better position to absorb changes in their product margin is a question in itself. Big companies in some ways are governed by other factors that affect stock price. That small change in margin can have a big impact on enterprise value.
I’m not sure it’s necessarily the case that big companies can just absorb it, but of course big companies have got room for manoeuvre in how they might be react to that, which smaller companies may not have. I think this is part of the general discourse and general debate that businesses need to have now. Again, this is about how do I establish myself as a differentiated product, service or brand that is competitive in the eyes of consumers or in a B2B environment, therefore in the eyes of all audiences, but also how do I build a position that is unique and differentiated and how do I stop myself from being subject to these variations.
If you’re in the automotive or airline industry for example and oil prices are fluxing all the time, that is the same kind of changes that we are seeing here - in costs of goods that happen for all sorts of reasons. It is not just about tariffs, so I don’t know that the dialogue is any different now than it was, but of course at this point it does create an impetus for that to take place.
You help global brands, and this is a global economy, we buy things from all over the world, but in a trade war will people look at Chinese brands the same? I know you’re working with GAC Motor, tell us about them and how you apply your model to what seems to be like an extra layer of challenge for a Chinese company trying to establish itself in the US now.
I don’t know that there is trade war really, the “trade war” itself feels like a brand that has been created around this. I’m not sure that trade wars are necessarily even a thing, this is a point in time where there is a political debate that is happening and of course there is an impact on business.
However, I don’t think it changes the fundamentals about what it takes for businesses such as GAC or Huawei to be competitive in an international landscape. To be competitive you’ve got to have a strongly differentiated proposition and got to understand the markets you’re looking at to build your business in. You have to adapt and manage the way your brand delivers itself through products and services, through people, through all the experiences, through the marketing and through the branding you create, and you’ve got to do that in a way that’s appropriate to the audiences and to the markets. Therefore, I don’t think it’s a different conversation than before, but I think it certainly gives it a nuance.
What do you do when, let’s say, Huawei is trying to premiumise its brand, what specifically do you do for a big rich company like that, please give us an example of how you work?
First it starts with understanding what are the business goals that need to be achieved, who are the audiences that you want to target and what are the strengths and qualities within the organisation that would be best deployed to hit that. We will work with organisations to set strategy around how their brand shapes itself, how that might influence product strategy and how that might influence the way that the brand markets itself across branding, advertising, press, PR etc.
We set out a strategy, then we help that organisation to organise itself, so it can best deliver that. It will then manifest itself in various types of experiences, it could be online experiences, it could be the brand identity, or it could be advertising. It is a very broad and wide set of consulting services that help to drive competitiveness for an organisation to best align the audiences and the organisation with each other. Principally what we create is a bridge between organisation capabilities and audience needs.
For brands operating in China, we have seen Beijing before boycott goods from certain countries over different issues – how real is that threat this time around?
I think there is threat around that. You have to separate the mechanics of how consumers behave to how governments behave. Consumers don’t necessarily share the views of governments when it comes to decisions that are made around what gets boycotted and what doesn’t get boycotted.
It seems tougher now to convince Chinese consumers to boycott US brands.
Because the world is global, brands are global, and the consumer demand is becoming increasingly global. This is because consumers have access, largely though digital channels, to the information they need in order to make choices for themselves. Consumerism at its best where demand is driven by what people want and they are increasingly able to find that information for themselves; that then influences policy to some extent too, so I think governments need to be aware of what consumers want and what drives their decisions. However, it still comes back to creating strong brands; China is Apple’s third biggest market, it is the case already that brands can operate in China with great success if they understand the market and get it right.
Who is going to be the easiest target in a US-China trade war and is there any industry or company that is actually safe?
I would say that the vulnerable companies are the B2B commodity type businesses, where you’re supplying a product that has no differentiation other than its price. That of course is going to be very challenging. If you’re an industry that buys raw materials that are commodity raw materials and then the impact of tariffs is not something you can transfer into a quality-based conversation, then you’re vulnerable. Will there be winners? I don’t know. Politicians will look for victory in this, I don’t know if consumers win out of this necessarily and I don’t know that business really wins out of this, but it does force organisations to be competitive.