Lessons from Marriott: How to avoid political risk in China
The reaction to Marriott International’s listing of Tibet, Hong Kong, Macau and Taiwan as separate countries on a rewards club survey demonstrates the double-edged nature of visibility and success in China.
Marriott has built a tidy business in China and it’s speedy and wholesome apologies may have dampened the furore a little. However, legitimate questions remain as to how the company allowed such a basic error to happen in the first place (it was apparently a supplier fault).
Nikkei Asian Review asked for my thoughts on how foreign organisations operating in China should prepare for the risks that come with the territory – some of which have been tackled previously on this blog.
And below is my full response to the journalist, whose questions have been edited for clarity.
Do you think foreign companies are becoming more vulnerable to political mistakes in China with the popularity of social media and rising nationalist sentiment?
Foreign companies operating in China have long been exposed to rumour-mongering and allegations of various types, from poor product safety and customer service to unfair pricing, corruption, sexual misconduct and threats to security.
Social media certainly fans the flames faster and makes these kinds of accusations inherently more emotive.
Yet most of these accusations have been – and remain – tacitly encouraged or directly started by Beijing, often through the mainstream media, which gives them a high level of credibility, not least at a time when the nationalist pot is being actively stirred.
Do you think these companies are aware of the political sensitivity of certain topics in China? What most common mistakes they made besides categorising Taiwan, Hong Kong and Macau as countries? Can you give an example?
Most companies are aware of the many challenges of doing business in China and do their best not to cross political red lines such as Tibet, or to leave themselves open to accusations of discrimination against the Chinese people.
However, mistakes continue to be made.
Over-pricing and under-investment in customer service are common errors, leading foreign firms open to accusations of profiteering, ineptitude or arrogance.
And not instilling in foreign employees working in the country high standards of professional and personal behaviour can be a recipe for disaster – as Daimler discovered in 2016 when a senior executive was caught delivering a racist tirade against locals in a Beijing car park.
How can foreign companies doing business in China avoid political risks?
The huge size of China’s market, the unpredictability or Chinese consumers, and the opaque nature of much decision-making in the country means it is essential that companies operating in the country develop a close understanding of the local political, socio-economic, cultural and media context.
They must also proactively build relationships with the authorities and opinion-formers of different kinds.
China’s newfound significance on the world stage also poses risks. Like it or not, foreign companies need to appreciate that all their business activities – and not just those in China – are now more likely to be seen in a Chinese context, and that their foreignness will play out in any resultant incident or crisis in the country.
Accordingly, corporate governance at all levels must be increasingly sensitive to this new reality, and companies able to react quickly and appropriately when trouble happens.