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[Conor Sen] United Airlines feeling the sway of consumers in Asia

By Korea Herald

Published : April 17, 2017 - 17:48

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On day one of the fiasco over United Airlines’ forcible removal of a passenger from an overbooked flight, the stock of United Continental Holdings Inc. actually rallied.

Perhaps Americans were outraged by how the passenger was treated, but airlines operate in a consolidated industry where consumers don’t have much choice. Investors seemed to shrug and assume that customers would still fly United anyway.

But an interesting thing happened on the second day.

Overnight, there were reports that the social media storm against United had spread to China. Chinese users speculated that the passenger was mistreated because he was Asian. And United’s stock found itself down 4 percent in the morning. If it looks like a coincidence, keep watching -- because other global companies will also rise and fall with the perceptions of consumers in Asia.

As Adam Carstens of PQ Partners notes, over the next 15 years most global middle-class-spending growth will come from Asia. US-based multinational companies will make the Asian middle class their growth strategy. Starbucks just announced that it will provide Chinese workers with health insurance that extends coverage to the parents of workers as well, both to attract talent and in response to Chinese values. It’s also to establish Starbucks as a “Chinese brand” in the minds of Chinese consumers.

Hollywood has been catering, some would say “pandering,” to the Chinese audience for years. As DVD revenue has dwindled with the rise of streaming video, Hollywood studios have focused more on tentpole movie franchises with global appeal, hoping to offset the loss of DVD revenue with income from global ticket sales.

Making films that serve Chinese audiences or provide country-specific products to Asian consumers is one thing, but it’s when American consumers and institutions are forced to adapt in response to Asian values that larger tensions may arise. Silicon Valley is versed in that conflict.

Google has struggled with how to balance accessing the Chinese market with China’s demands that Google censor its content in the country. Facebook has been blocked in China since 2009, despite the company’s best efforts; the CEO, Mark Zuckerberg, studied Mandarin and courted Chinese officials. Countless tech firms ranging from eBay to Uber have tried and failed to win in the Chinese market.

The drama does not all play out abroad. My Bloomberg View colleague Justin Fox notes that the growing number of Chinese students in American colleges has helped some schools survive budget problems. As some schools in the Northeast and Midwest continue to struggle with demographic problems, some will probably accept more students from Asia. The ramifications are fascinating. Imagine future protests on college campuses, driven not by liberal American students representing liberal American values, but by students from Asia, speaking for their own cultural imperatives. When those two groups diverge, whose values will win out? Would the outcome be different when a campus’s population is 40 percent Chinese from when it is 80 percent Chinese?

This clash between values and the bottom line seems to be a growing trend in America. We’ve seen tech companies and sports leagues threaten states that take stances on gay rights unpopular with the companies’ and leagues’ constituents. Corporate CEOs have found themselves in trouble early in the Trump administration for meeting with the president or serving on one of his business councils. The values and demands of Asian consumers create another crucial constituency to satisfy.

The days when companies stayed out of values and politics may be history. But as consumers increasingly demand that the companies from which they buy their products reflect a certain set of values, the question becomes: Whose values should a company put first? A plurality of its consumers? Its employees? Its country of domicile? How these decisions end up being made will determine not just the brands that win in the marketplace, but the values that spread around the world.


By Conor Sen

Conor Sen is a Bloomberg View columnist. -- Ed.


(Bloomberg)