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Cameron The Brand Slayer

January 25, 2013

BorgIf it weren’t for the fact David Cameron watches so little television, I would be forced to conclude he has been modelling his recent behaviour on Borg, the Viking Himbo now fronting Tesco’s advertising.

How else explain his assault on multinational brands in recent days – which has all the subtlety of Thor laying about him with his hammer after a particularly drunken binge?

Last week, it was Coca-Cola that got stomped all over, when Cameron told the House of Commons that he regarded it as his solemn paternal duty to prevent his children consuming “excessive” amounts of the sugary beverage.

This week he was at it again, telling the World Economic Forum in Davos that brands which avoided paying their fair share of corporation tax needed “to wake up and smell the coffee” – an unvarnished reference to Starbucks and those other egregious “tax dodgers” Amazon, eBay, Facebook, Google (and, er, Coca-Cola). And the tirade didn’t end there: so sick and tired is the British public of the multinationals’ fiscal chicanery that Cameron has decided to make clamping down on corporate tax-avoidance a central plank of our G8 Group presidency later this year.

Whoa, Dave. Is this your idea of a soft close? Britain shut for business before you oblige us to pull out of the EU?

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Witch-hunt against corporate tax dodgers can damage jobs, as well as brands

December 3, 2012

StarbucksThere’s a grave danger that the witch-hunt against global brands who fail to pay their “fair share” of UK corporation tax will boomerang on the political class that has instigated it.

Google, Amazon and Starbucks have been chief whipping boys in an excoriating grilling by the powerful parliamentary Public Accounts Committee, headed by former Labour government minister Margaret Hodge. They are but the frontline of a phalanx of household multinational names – eBay, Facebook and Ikea prominent in the second rank – which are being prepped for humiliation in the court of public opinion. And behind the PAC’s bullying is a fully complicit Treasury – its head, George Osborne, desperately aware that falling corporation tax is contributing to the ruin of his re-election strategy.

Of course, what these brands are up to is hardly ethically defensible. To quote but a few examples, and bearing in mind that UK corporation tax on larger companies is currently levied at 24% of profits: Google claims to have a global profit margin of 33%, but its UK unit paid only £3.4m in tax last year; Starbucks paid just £8.6m on 13-year UK turnover of £3.1bn; Amazon’s UK tax bill last year was £1.8m on reported sales of £207m; and in 2010 eBay paid £1.2m in tax on UK sales of £800m.

Not the stuff of sincere corporate citizenry, and – consumer brands being peculiarly vulnerable to criticism – these companies are deservedly squirming as the rock is lifted from their unedifying activities.

But because we don’t like their behaviour that doesn’t make it illegal. Tax avoidance is something we would all get up to, if we had an army of tax accountants at our disposal. And maximising profits is one of the fundamental tenets of capitalism, as germane to the micro-entrepreneur as the multinational corporation. What hurts is the unfairness of it all. We small folk must contend with HMRC harassment, escalating fines and a brutal bailiff when we don’t pay our tax bills; big corporations, by contrast, merely cut a highly advantageous deal with the UK tax authorities who, to all appearances, are sycophantically grateful for anything they are given.

Margaret HodgeSo, what politicians are doing here is stoking the politics of envy: pitting the grievance of the many against the privilege of the few. It’s an easy populist game to play and amounts to a form of blackmail. You, Amazon, Starbucks et al, pay up or we will whip up a consumer boycott against you. Already, Osborne’s deputy, Danny Alexander, is “abstaining” from Starbucks coffee (although, in fact, admitting to only drinking tea) and Hodge (above) has knocked Amazon off her Christmas shopping list. How they’re going to hit Google in the googlies I’m not too sure, but the elements of a national campaign are there. Starbucks, for one, is already buckling and (in the words of the inevitable headline) waking up and smelling the coffee.

But wait. Enormously satisfying though this condign corporate punishment may be, could it not become a little, well, counter-productive if the trend really takes wing? Corporation tax, even if levied at the notional statutory level, makes – or would make – a fairly small contribution to the Exchequer when weighed against the other, less high-profile, benefits these companies bring to the national economy. Profitable companies create jobs, and the people who occupy these jobs pay income tax and national insurance contributions, which are of vastly greater importance as tax receipts. Though no economist, I’m tolerably certain that anyone who did the modelling would find that  “zero-tolerance” enforcement of higher-level corporation tax is inversely related to job creation.

As for stirring up a consumer boycott, it’s merely killing the goose that lays the golden egg. Politicians, have a care.


WikiLeaks proxy war takes its toll on brands’ integrity

December 9, 2010

It hasn’t taken long for the proxy cyber war being waged between WikiLeaks, the whistleblowing site, and the US state department to spill over into the world of brands.

Yesterday, Operation Payback – manned by a bunch of freelance cyber hackers who have taken up the cudgels on WikiLeaks’ behalf – managed to shut down the website operations of Mastercard: not only http://www.mastercard.com but some of its SecureCode operations as well. It was a serious piece of hacking that felled the international credit card operator at a highly vulnerable time – on one of the key shopping days before Christmas.

Other household names are likely to experience similar trauma. Visa has fought off a guerilla attack, but more may follow. Amazon is in the firing line. Paypal is already experiencing grief. And Twitter will probably follow.

Their offence? According to Anonymous, the nom de guerre of the aforementioned cyber warriors, they have stepped out of commerce and into politics by colluding with a politically inspired campaign to close down the WikiLeaks site and must be prepared to take the consequences. In the rougher language of the hackers: “We will fire at anything, or anyone, that tries to censor WikiLeaks, including multi-billion dollar companies such as PayPal…Twitter, you’re next for censoring WikiLeaks discussion. The major shitstorm has begun.” Twitter’s offence, which it denies, is to have pushed the WikiLeaks affair down the “trending” algorithm, effectively denying it the oxygen of publicity.

Whether these cyber attacks will in themselves do lasting damage is to be doubted. Far more corrosive is the bad publicity for the brands involved. They are seen to have taken sides, and acted not on behalf of the consumer but on behalf of the US state department. Under pressure, they are forced to admit that they have suspended operations with WikiLeaks because these operations are now deemed illegal. By whom? By the US state department, invoking not the jurisdiction of international law, but its own. In other words, the brands involved are yielding to a form of blackmail, for fear of reprisals in their single biggest market.

It is no surprise to find the US administration acting vindictively. No state likes to lose face in public – and WikiLeaks founder Julian Assange has certainly made a mockery of the USA’s much vaunted cyber-protection systems (or at least, the Pentagon version of them). Moreover, we’ve seen this sort of behaviour in the past. Philip Agee, the renegade CIA agent, was hounded for many years by a vengeful state department. More recently the US has pursued with a vigour bordering on persecution an extradition order against UK citizen Gary McKinnon, who is accused of hacking into Pentagon secrets (why is it always Pentagon systems that are so insecure?). UFO-fancier McKinnon faces up to 70 years imprisonment if the order eventually succeeds.

In the case of brands, however, the damage is subtler and collateral. For all their pretensions to globalism, they have found themselves manipulated by a national government – which just happens to be the most powerful in the world. If all this had taken place in China – as it did when the Chinese state began to shut down Google’s operations – the outrage would be international. But when the USA does the same thing, reaction is muted. The implied impediment to free e-trade is taking time to sink in.


Laugh now, pay later if Murdoch gets his hands on the rest of BSkyB

November 2, 2010

At last, hard news from the impenetrable walled garden girdling The Times and Sunday Times these last four months. The Murdochs’s paywall strategy has harvested an astonishing 105,000 online subscribers – says News International, owner of the titles.

Well, not “subscribers” exactly, because that 105,000 includes quite a few birds of passage who have paid a couple of quid to visit the sites and then come no more. Lots of them, in fact. So the true number of subscribers? About 50,000 according to the Guardian – admittedly not the most objective of sources on the subject of paywall strategy, but probably near the truth on this occasion. Did I mention the iPad and Kindle subscribers? No, I thought not. They’re about 15,000 of this 50,000 figure. Which sounds heartening for Apple and Amazon, but less so for News International when you realise that they got an introductory two months of online access free.

I could go on, but I won’t. The figures are pretty meaningless in themselves, and muddied still further by the fact that there are another 100,000 print subscribers who receive the online version free. Even on the most optimistic viewing – that is to say 205,000 dedicated online visitors – the revenue would not amount to much by comparison with advertising lost after shutting down free access.

So what though? Never let it be said Rupert Murdoch bought The Times to make money – if he did, he’s been sadly disillusioned these past 30 years. In truth it has always been a loss leader in experimentation under his stewardship. First he tried dumbing it down, to take on The Telegraph. Now he is, perforce, reverting to a still loss-making but more elitist publication that happens to serve as an invaluable guinea pig in the post-print era.

Whatever the present cost of these lessons, it will be amply repaid should NewsCorp ever get its hands on the 61% of BSkyB it does not already own. BSkyB has total revenues of about £6bn a year; News International, the European subsidiary of NewsCorp, about £2.7bn. Forget enhanced earnings. The torrent of cash surging through the organisation alone would give the Murdochs all the flexibility they need  to experiment much more boldly with an online newspaper bundling programme for 10 million Sky subscribers. And the beauty of it would be that these self-same subscribers would have underwritten the experiment as well.

No wonder the competition are desperate to stop Murdoch’s bid in its tracks. In any forthcoming price war, he would be able to outspend the lot of them combined.


Kindle’s bright idea incenses Apple iPad fans

September 20, 2010

Kindle’s latest pitch to a UK audience is very weak. Two people sitting on a beach, marvelling at how easy it is to use the Amazon-inspired e-reader in bright sunlight: who in their right minds would be doing such a thing anywhere near sand?

Berlin Cameron is capable of much better work, and the stuff currently airing in the US is a good case in point. The USP is similiar to that of the UK ad, but what a world of difference in execution.

‘Poolside Girl’ has, in just a few days, created a sensation on YouTube – with closing on 2 million hits – and managed to stir up tribal hatred among the many adherents of the rival Apple iPad in the process. Which can have done Kindle sales no harm at all.

How so? Let’s set the scene a little. The scripting is economy itself. Two holiday-makers are lying side by side next to a ritzy swimming pool. The bloke, so quaintly clean-cut he must have been remaindered from the Mad Men cast, is struggling with his cumbersome e-reader (it’s clearly an iPad, though no one says that) in the bright sunlight. He leans over to the bikini-clad girl next door – effortlessly devouring her book with a gizmo less than half the iPad’s size held in one hand – and asks her what it is. “A Kindle” comes the smug reply as she lifts her fashionista sunglasses and gives him a pitying smile. “$139. I actually paid more for these sunglasses.” Sub-text: ’What a schmuck. Fancy spending $500 on that piece of overrated junk.’

That’s it really. All the salient product advantages put across in just a few pithy words. The Kindle works in bright sunlight, unlike the iPad. It’s light to handle: you can hold it with just one hand. Oh yes, and it’s about a quarter of the price.

We could, of course, unpack all this quite easily by asking what else the Kindle can do for its $139. Not a lot compared with the iPad and its multitudinous apps. It doesn’t offer colour. Nor, for that matter, are we likely to do much reading by the poolside. I don’t know about you, but I do most of my reading indoors – where the iPad suffers no such disadvantage.

But that would be picky. Hats off to an audacious knocking ad – which appears to have been the personal inspiration of Amazon founder Jeff Bezos – especially when the target is as iconic as Apple. For more on this topic, look up Jim Edwards at BNET.


Holy Moses and the patience of Jobs

February 2, 2010

Last week, I imagine Apple supremo Steve Jobs must have felt a bit like Moses when he descended Mount Sinai armed with a top-secret new rule book for life in the Promised Land only to discover that the idolotrous Israelites were going to have none of it.

Jobs’ own version of the Mosaic Tablets, iPad, seems to have been greeted with irreverent scepticism. When so much hype, based on so little verifiable fact, has preceded a launch – even an Apple launch – disappointment is the inevitable result. Nerds carped about the lack of a camera and a less-than-revolutionary departure from the technology of the iPhone. Analysts, noting the high price points and the low number of announced deals with content owners, quickly marked down the Apple share price.

What a difference the perspective of a few days can make, however. With the iPad not yet rolled out, Apple has already won a famous victory against the world’s greatest e-tailer Amazon in the field of virtual books.

Briefly, Amazon has been attempting to establish primacy for its own Kindle product in the growing land-grab for ebook readers by heavily discounting book downloads, much to the consternation of publishers and authors alike. Once there was some credible competition in the field, things changed almost overnight. Macmillan, publisher of among other things Hilary Mantel’s bestselling Wolf Hall, has said it will have no truck with Amazon’s bargain $9.99 and has gone for Apple’s recommended $12.99 upwards per download instead. Presumably other book publishers also signed up with Apple – Penguin, HarperCollins, Simon & Schuster and Hachette – have been adopting the same kind of brinksmanship. Whatever, it’s been enough pressure to make the mighty Amazon climb down with humiliating alacrity.

Here we come to the nub of the matter with Apple’s product launch. In itself, the iPad is not all that remarkable. For sure, it’s likely to do its job well, looks beautiful and is easy to use; but technically superior e-readers-cum-netbook-computers are no doubt in the offing. And yet, in this respect iPad is no different to other recent turn-key Apple launches. Neither the iPhone nor the iPod which preceded it were technically cutting edge. What made them truly disruptive products is their relationship with iTunes, the software platform that, in various ways, underpins them. Pulling the focus back a little, one way of looking at Apple over the past decade is as a brand that has metamorphosed from computer-maker into provider of mobile entertainment – the bridge being a software platform.

iBooks, the e-book reading software that dovetails into that platform, is streets ahead of Kindle and Sony’s Reader technology (or so the experts say). Thus the debate about the iPad being no more than a glorified iPod Touch is ultimately sterile since what really matters is whether Apple, through this device or its successors, will come to dominate the burgeoning market in electronic books and newspapers.

And we’re not going to know that until consumers have had a chance to sample it. For some time to come we’re also going to be in the dark about just how much of an appetite exists for the e-reading phenomenon. There are many more boulders strewing the way to market success than inadequate e-reader battery power and unsatisfactory legibility. Here’s Richard Wray of The Guardian on why iPad won’t be iPod II:

“The book industry has a couple of advantages over businesses in other areas which have seen the internet wipe out their profits. The companies trying to sell ebook hardware need the involvement of publishers. When Apple launched the iPod, buyers could take their existing CD library and digitise it. Downloading music from the web came later – the iTunes store was launched two years after the first iPod appeared.

But readers cannot easily digitise their books for a Kindle or iPad. To sell their devices, the likes of Apple and Amazon need publishing firms to agree to make digital versions of bestselling titles available on the same day as the printed work is published. The technology firms recognise that demand for ebook readers will be limited if readers have to wait months to get the latest books.”

This is going to be a longer haul for Steve Jobs. I hope he’s got the patience for it.


The greening of chief executives

June 1, 2009

Sir Terry LeahyIt was to have been Sir Tel’s big week. Ahead of a ground-breaking speech at the London School of Economics advertising Tesco’s wholehearted commitment to green innovation, its chief executive had lined up a couple of showcase initiatives.

First up is the trial of electric-car charging facilities, and shortly afterwards Tesco will announce that it is building ‘the world’s first zero-carbon store’ in Cambridgeshire.

Then along comes Greenpeace and pours acid rain on Leahy’s parade with a report insinuating that Tesco, and numerous other famous brands, have been encouraging illegal destruction of the Amazon rainforest by sourcing their meat from unscrupulous ranchers who have systematically climate-raped the region.

Leahy’s predicament is typical of that facing many chief executives of major brands. How do you reconcile the provision of value for money with the broader communitarian needs of your customers – and not find yourself in the dock accused of hypocrisy?

The answer, if you are a progressive business leader, is that sometimes you cannot. But many judge the risk well worth taking; indeed they believe they have no real alternative but to embrace sustainability as an integral part of their corporate social responsibility programme. Despite the fact that it may consume a considerable part of their management time; and sometimes turn them, reluctantly, into figures of controversy.

That’s why a number of leading UK businessmen – among them James Murdoch, Justin King of Sainsbury, Ian Cheshire of Kingfisher, and Carphone Warehouse’s Charles Dunstone – recently wrote a letter to The Times openly proclaiming their opposition to Government plans for a third runway at Heathrow. Even though the project might, in the short term, create new jobs; even though their opposition also brought them into conflict with their natural constituencies at the Confederation of British Industry and the British Chambers of Commerce.

Mostly, however, espousing the cause of sustainability is a lot less controversial. Last week, for example, Cheshire helped to launch Eat Seasonably, an initiative aimed at persuading people to eat fruit and vegetables at their “seasonal best”. It’s the first leg of a two-year programme masterminded by himself and National Trust director-general Dame Fiona Reynolds which, with the backing of both Government and non-governmental organisations, will focus not simply on the food we eat, but the way we run our homes, what we throw away, what we buy and how we use transport.

I asked Cheshire why he was prepared to make such a commitment to the cause. And how he found the time to do it, on top of running a FTSE 100 company.

More in the column this week.


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