Brands and Boycotts in the Middle East

A relatively modern phenomena that has been taking place in the Middle East and North Africa has been the rise of boycotts of some brand names. Boycotts are often a form of economic protest against brands, which are perceived to represent an enemy or its economy.
Probably the most enduring boycott has been of brands which are closely linked with Israel and the perceived threat of Zionism. Various institutional boycotts of Israel have been reinforced by Arab nations since 1922, and with a more comprehensive boycott by the Arab League in 1945.
However, since the last 30 years these government imposed boycotts have weakened in many countries and are even disappearing all together in some countries. Additional pressure has been put by the US government after passing its anti-boycott laws in 1977, an action especially spearheaded by the American Jewish Committee.
And yet even today boycotts of Israeli affiliated brands remain largely popular. Today, the Arab streets do not necessarily need political or legal measures to maintain boycotts, as it has now become a popular form of consumer activism. This has become even more widespread through the use of modern communication systems, especially through internet and social medias.

Boycotts often impact brands which have a strong perceived identification with political entities and countries, which are considered to be enemies. Besides having in the Arab world an anti-zionism connotation it has also an arab nationalist dimension, as well as a cultural-religious dimension to it. For example, after the infamous caricatures of Prophet Muhammad (peace be upon him) in Danish newspapers, several Danish brands and products faced boycott throughout the region and the Islamic world.
The impact of such boycotts is quite apparent. It means important loss in trade and economic benefits for corporations as well as to countries boycotting. Yet many people boycotting products are well aware of some loss in economic benefits or other material benefits, but they are willing to make such sacrifices for the sake of their principles.
Affected companies and nations react very differently to such boycott measures. For me, one wrong approach is to put legal and political pressure against popular institutional boycotts, such as measures taken by the USA against the anti-israeli boycott. Yet until today the situation has not improved a lot, on the contrary these boycotts are now been managed by the people in the Arab streets themselves. Furthermore with the changes taking place in Arab countries since the spring uprising, such boycott measures might even find new strength, especially in Egypt.
Other countries, such as in the above mentioned case of Denmark, the Danish government had been more proactive in many Arab countries with a PR campaign aimed at clarifying more clearly its position and the neutrality of Danish companies. Although Danish products were affected by the boycott, it has been far more limited than expected.
Affected companies themselves often react passively to such boycotts. This I believe is one the biggest mistakes. It is important to consider and study more clearly what brand perception one wants to communicate in the Middle East and North Africa. This should take into account the specific political and religious-cultural nature of the environment. Furthermore, there is a necessity to reconsider whether one is truly dedicated to realigning its brand image or not (i.e. Cost vs Benefit analysis). I believe that many companies that are active on the international market with their brands need to consider what impact their political affiliations would have on their business. It is especially important for companies which have consumer oriented brands to be perceived as being politically neutral.
Moreover, many companies can positively improve their image by committing themselves towards being more socially responsible within local communities and the region. It is important to have a corporate governance policy that genuinely displays a sense of social responsibility awareness and engagement.

Useful references:

• Website: Arab shoppers are abandoning western brands for local alternatives (The Economist, 31.10.2002), this is a very interesting article from The Economist, which illustrates well the huge impact of boycotts on brands.
• Book: "Brand Valued: How socially valued brands hold the key to a sustainable future and business success", a valuable book from Guy Champniss, that illustrates the point I made in my article about the importance of social value and responsibility of brands.  

Creative Souqs

A few years ago I went to a shopping center in Jeddah, which actually looked more like a small shopping mall with about 25 to 30 stores. The aspect that struck me the most (as someone coming from Europe) was that all these stores carried only one type of item: Gold jewelry. This is of course not unique to Jeddah. You will find that in practically every city in the Middle East and North Africa. And of course this is not just limited to gold jewelry. Often Souqs and bazaars are divided up into sections, each specific to a particular category of products, such as jewelry, clothing, leather goods, toys, fresh foods, spices, crafts, furnitures, ...

As a marketeer coming from Europe, you often wonder how can every one succeed in such a competitive environment? In most countries of Europe and North America, the usual marketing approach is to locate your business in an area with high demand and low competition. Therefore, stores offering similar products are more spread out.
However, there are clear benefit to be close to your competition. Besides the obvious benefit to customers which have better selection and bargaining power, the shop keeper also benefits. As customers do not need to run around the city for all their shopping needs, Souqs attract huge masses of customers.
But there is according to me a far more important benefit. In such a strong competitive environment, shop keepers need to find ways in differentiating themselves from their neighbors. This need is often translated into becoming more innovative and creative. For example, a gold jeweler would through the feedback from his customers request from his goldsmith to elaborate a newer and/or better design. That's why when I visited a jewelry store in that market in Jeddah I would rarely find a duplicate jewelry design in another neighboring store. The result is that you have literally tens of thousand of different designs in gold Souqs of the Middle East. Far more than you would find in New York or London. The same applies to many other products which are locally produced, especially by local craftsmen, which maintain this close and personalized relationship with store owners. This is probably the main reason why historically the Middle East and North Africa exhibit such a rich creativity in traditional crafts products.
Unfortunately, with the rise of standardized industrial products from local factories, from Europe, and mainly now from China, this close relationship between customer, shop seller and manufacturer has weakened a lot, but it hasn't disappeared altogether either.
I think there are important lessons to learn from the creative environments that Souqs have engendered. The fact that competitive environment fosters creativity and innovation is of course well known. But often the close relationship between end customers and manufacturers is somewhat overlooked and needs to be nurtured. This also means to create a more Souq-like environment, where new innovative products and services can develop.

The Baksheesh Factor

Baksheesh is a popular term used through out the Middle East, of persian origin it means "lavish remuneration and bribes". Despite the fact that corruption is widespread in many countries of the Middle East and in North Africa, it is still a very sensitive issue and it is very difficult for individuals and companies to discuss it in a frank and open manner. Yet one of the main issues that arab spring revolutionaries have been decrying over and over again has been about the wide spread corruption in their countries. Indeed corruption has stifled the economic welfare and growth of many developing countries. The general population is nearly always confronted with additional "tips" that public servants require of them to get any bureaucratic job done. But beyond individuals, practically all corporations are victims or are complicit in the Baksheesh dilemma.

In some developing countries, several key public and administrative positions, which have a high economic value are highly sought after. Sometimes these positions are often bid over or bought. An example of such positions would be customs duty officers or at a higher level those dealing with public tenders. Corruption can be highly organized, they are often built up as complex parallel hierarchical structures.
For many non-local corporations and individuals this Baksheesh culture is initially not easily visible. Often those involved in it would out of shame and some sense of honor not openly make a display of such "lavish remuneration". But corporations often need to take account of the Baksheesh factor. Companies that stoically try to resist paying the Baksheesh are often penalized and often have difficulty in being competitive in the "open" market. This is an important moral and ethical dilemma for many. Unfortunately it is an additional cost that needs to be taken account of, whether as a direct cost, such as "additional" custom duties or as an indirect cost, such as "gifts" or as "marketing & sales cost". The problem is that the Baksheesh factor knows no limit, an unscrupulous corporation with deep enough pockets can buy its way to a monopolistic situation.
There is also an important cultural aspect to Baksheesh or the general idea of remuneration. The concept of providing assistance and providing generous gift is an important social aspect of Islamic culture. Furthermore, business negotiations is very much an issue of deepening one's trust of one another and of building relationships, this is especially true in the Middle East and North Africa. The concept that "if you scratch my back and I scratch yours" is expected. But unfortunately, this usually beneficial aspect of Islamic business ethics can become morally blurred when it starts having a negative impact on the broader society and the economy.
Nonetheless, the situation is not as bleak as it seems. Many countries in the Middle East and North Africa are on a real "Crusade" or rather on a real "Jihad" against corruption. There has been a lot of progress, especially in GCC countries, where Qatar leads the pack as the 14th least corrupt nation in the world. But on the other end of the scale, Iraq is considered to be the world's 3rd most corrupt country. The fight against corruption has also found new strength as a key demand in many recent popular uprisings and protests of the region.

Useful references:

• Website: Transparency International (Corruption perception Index 2010 results)
• Book: Economic Performance in the Middle East and North Africa: Institutions, Corruption and Reform (Routledge Political Economy of the Middle East and North Africa)