Managing Around Sovereign Capitalism

Business Professional_American Sentinel University_MBAApple, darling of the tech world, was looking a lot less charming in its treatment by the Chinese press. China Central Television (CCTV) ran a piece highly critical of the consumer electronics giant’s warranty policies in China. “The company offers shorter warranty periods in China compared with other countries and uses refurbished parts when repairing broken devices, according to CCTV,” the organization said on the website. Then the People’s Daily state newspaper accused Apple of making an “empty and self-praising” statement in response. Even some Chinese celebrities took part on China’s equivalent of Twitter.

Apple CEO Tim Cook apologized to the country, even though an analyst by Fortune Magazine showed that Apple’s policies in China and the U.S. were the same. It’s a lesson not only for Apple, but for anyone in business who has an MBA. When capitalism goes global, it can also take on a sovereign cast. It’s just another factor that managers will have to keep in mind when working on a global stage.

Some China watchers say that the attack on Apple was far more than a normal expression of consumer journalism, as Business Insider reported:

“The signs are clear that regulators and establishment media would both be happy for foreign mobile phone handsets and operating systems to lose market share,” says [Chinese media analyst Jeremy Goldkorn], “This should be remembered by anyone betting on Apple as a China play, including CEO Tim Cook who earlier this year told Xinhua News Agency that he believes China will become Appleā€™s largest market.”

Other companies have run into problems in China. Yum Brands, owner of the KFC, Taco Bell, and Pizza Hut brands, and McDonald’s saw Chinese media claims last fall that its chicken was dosed with drugs and growth hormones.

But China is hardly the only country that has responded to protect its markets or native industries. The U.S. has said that a planned European Union data protection overhaul could launch a trade war. The EU standards would affect many American high tech interests. A few years ago, there was talk of another U.S./EU trade war in over a ban on American beef and a planned counter against many imported European foodstuffs. There has been a potential solar industry trade war between China and the EU.

For centuries, countries have used tariffs, bans, regulations, and other means — both overt and covert — to keep pet industries (and their lobbies) happy. In an ever more global market, managers must learn to read geopolitics, and not just economics and market trends, to set viable strategies and keep their companies competitive.

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