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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.


Stephen Elop’s fiery eloquence leaves Nokia looking a burnt-out case

February 10, 2011

I have no idea whether Nokia chief executive Stephen Elop’s announcement tomorrow of a pact with Microsoft will involve the ditching of Symbian mobile operating software in favour of Windows Phone 7.

But one thing I do predict is that nowhere will eloquent Elop’s now notorious staff memo make an appearance in Lucy Kellaway’s much feted annual FT corporate bullshit awards.

There was no elephant to be seen in any room, no going forward (that part presumably comes tomorrow), and no low-hanging fruit whatsoever.

Instead we had a terse, carefully constructed piece of prose that is a classic of its kind. It spared no illusion, but was rich in an almost poetic imagery that took in the Piper Alpha oil rig disaster and made a nod to ‘the boy on the burning deck’ along the way. Not the sort of thing you get from CEOs every day, is it? And, for that reason – and others  as well – I suspect Elop’s name will be hallowed in business schools for years to come even if what he does with the Nokia brand is not.

There are many things to be admired in “Burning Platform” (which appears in a literal sense to be an allusion to Symbian), but I would single out Elop’s searing indictment of Nokia’s faulty marketing strategy as the most notable. It’s the sort of detached corporate insight that only an outsider could bring – although most would have kept it to themselves and their boards:

We are still too often trying to approach each price range on a device-to-device basis.

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.

This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.

Elop’s image of a desperate man plunging 30 meters into icy waters to escape the burning oil rig may be unique, but it is not without parallel. The Wall Street Journal has helpfully assembled a clutch of similar memos from high profile CEOs attempting to ride out a corporate crisis. They were equally embattled, if not equally eloquent. There’s the  Microsoft “Internet Tidal Wave” memo in 1995, in which Bill Gates highlights the web-threat to PCs; the “Commoditization of the Starbucks Experience” call to arms by chairman Howard Schulz in 2007; the 2006 Yahoo Peanut Butter Manifesto, in which an executive pointed out the internet company was spreading itself too thinly to survive; and John Pluthero’s morale boosting memo to Cable & Wireless staff, roundly condemning “an underperforming business in a crappy industry.”

I’m not sure they’ve all had the fully desired effect. I wonder if Elop will be any more successful?

UPDATE 11/2/11: So, Elop is going for the Windows Phone 7 deal after all. He’s chucking Nokia’s upmarket MeeGo specification, but keeping the mid-market Symbian operating software – for now. Early traders on the Helsinki stock exchange seem to agree with the somewhat spiteful verdict of a Google executive, perhaps smarting from Android’s exclusion from the Nokia picture: two turkeys do not make an eagle. They marked down Nokia shares a savage 10%. But it’s early days. Both Microsoft and Nokia, though on the backfoot, have huge latent market power. And we should not underestimate the willingness of the mobile operators to embrace a wider spectrum of competition within the smartphone sector, which will have the desirable byproduct of buttressing their own market position against those impudent upstarts Apple and Google.



Sorry Costa – are you better than Caffe Nero too?

June 16, 2010

Practical experience has long told us that Costa coffee tastes better than the Starbucks brew. So Costa, owned by Whitbread, must have felt on a pretty safe wicket when it came up with a knocking campaign to prove the point. Do its research properly, and it would romp home.

So it turned out. Costa launched a poster and print campaign, via Kamarama, which rejoiced in such wounding straplines as: “Sorry Starbucks: the people have voted”; “Starbucks drinkers prefer Costa” and “Seven out of ten coffee lovers prefer Costa”. And it was a winner. Costa’s sales, on a like-for-like basis, rose 5.5% during the period (though how much of this was share stolen from the unfortunate Starbucks I do not know).

Most wounding of all, no one complained about the unfairness of it all. Well, almost no one. A single complaint was lodged with the appropriate watchdog, the Advertising Standards Authority. Guess who lodged it? A comprehensive inquiry investigating everything from Costa’s methodology to the size of its small print followed. And the result? Triumphant vindication for Costa and superheated milk-froth in the face for Starbucks, all five of whose grounds for complaint were rejected. Game, set and match to Costa.

In such circumstances, it might seem churlish to rain on Costa’s parade, but I do have a niggle. Well, more an enquiry really. The ASA seems more than happy with the professionalism of the market research on which these sensational Costa claims were based, so who am I to complain? Just for the record, though, the blind-taste tests in question also involved a Caffe Nero cappuccino, which alternated with Starbucks’ equivalent brew as the foil to the Costa product. Yet we hear nothing of what our sample thought of Caffe Nero vis-à-vis Costa. Common sense suggests it performed rather better than the Starbucks product, which has unkindly been compared to a warm adult milkshake. But the ASA adjudication document does not make this entirely clear. Supposedly, the full research results are published on http://www.costa.co.uk. See if you can find them. I can’t.

On a footnote, taste isn’t everything. If it were, Pepsi would long since have overtaken Coca-Cola in the UK, according – so I am told – to periodic blind-taste tests.

UPDATE: You will search in vain for the research findings on the Costa website: they have been removed. However, a kindly PR has provided me with a copy of the results and I can report the following:

“Preference for Costa’s cappuccino is remarkably strong in comparison to competitors among those who identified themselves as “Coffee lovers”, With 7 out of 10 preferring Costa (with 72% preferring Costa versus 28% Starbucks; and 69% preferring Costa versus 31% Nero). Significantly, coffee drinkers who prefer Caffè Nero and Starbucks as their main outlets preferred Costa cappuccino over their preferred retailer’s product.”


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