Crisis Management: Global Crisis Management – Know the Culture!: Co-authored by Prof. Ram Baliga
By Ram Baliga and Rick Amme
Coke and Pepsi’s struggle to stop a pesticide scare in India in 2006 was a window into an issue critical to all who do business with other countries, to those who plan to do so and frankly to the rest of us: the need for cultural immersion in all countries we deal with.
India’s Centre for Science and Environment (CSE) claimed that 57 bottles of the soft drinks in 12 Indian states contained unsafe levels of pesticide. Sales plummeted and Kerala, a southern state governed by a democratically elected communist government, imposed a sales and production ban on both. Coke and Pepsi chiefly used domestic and international experts and studies to prove the drinks were safe. That usually effective crisis strategy didn’t work and the companies labor to restore pre-scandal business.
Those who really know India understand that CSE and the government of Kerala were actually using Coke and Pepsi as straw men. Remembering Coke’s trouble in Belgium with benzene contamination, CSE played the pesticide card against the cola companies: 1) to inflame public concern about India’s economic reforms, reforms that it attributes to multinational corporations in general and American in particular, and 2) to play on the widespread belief that these reforms and globalization are re-colonizing India and widening the gap between haves and have-nots. If Coke and Pepsi had better understood this, their strategy should not have been a sound-bite battle over whether their drinks are safe, but rather a mobilization of employees, business, governmental and institutional allies to speak for them. Many Indians benefit from the Coke/Pepsi presence and their passionate voices would carry more weight with the Centre for Science and Environment and the Kerala government than arguments over parts per million.
Sun Tsu’s The Art of War says “Know thine enemy as thyself.” The aphorism for global interaction should be, “Know the cultures, histories and politics of your foreign partners as thine own.”
American managers often don’t. They prefer living in “golden ghettos” – enclaves isolated and insulated from the host country. Therefore they fail to see cultural, historical and political potholes. True cultural immersion can help managers better deal with a crisis and perhaps forestall one and, significantly, grow business. Consider KFC.
Indians accused KFC of undermining local agriculture with high-tech chicken breeding methods and selling chicken containing carcinogens. KFC’s response emphasized its “Indian heart”. Aware that the cow is sacred to Hindus, the menu had many vegetarian dishes. The restaurants even avoided rennet, a part of a calf’s stomach often used to speed the curdling of milk for cheese. The outcome? KFC successfully re-launched its chain in India in 2003.
Government policymakers also need awareness of cultural and political sensitivities. Take China. Research shows that most Chinese believe the U.S. government is trying to tell their country what to do. They don’t like it. China’s leaders believe the U.S. wants to keep them poor and weak. China-bashing that sells here is counterproductive there. Despite U-S pressure, China’s leaders have refused to revalue their currency to avoid the perception of caving to American demands. New U.S. Treasury Secretary Henry Paulson, a China veteran, is taking a different tack. He is making progress by persuading China how everyone benefits from revaluation. He’s trying to persuade the Asian giant there would be further benefits if it opened itself to more global business. Paulson does not demand. He knows the culture, appreciates what works. He negotiates, he cajoles, but most of all he understands who he’s dealing with.
Not just China believes the U.S. tries to muscle its goals on the globe. Those ridiculing U-N speeches in September by the leaders of Iran and Venezuela that inappropriately insulted President Bush, nevertheless also accused the U.S. of acting as though it ran the world. Significantly, many at the conference applauded.
Yes, there are enormously difficult issues with China, Iran, Venezuela, and other nations that are not of our making. Even so, whether in business or diplomacy, we believe that a deeper understanding of the histories, cultures, and politics of our overseas partners and potential adversaries combined with regular dialogue would be more constructive and more profitable.
Ram Baliga is the John B. McKinnon Professor of Management in the Babcock Graduate School of Management at Wake Forest University. Dr.Baliga teaches in the areas of strategy and international management.