Country Risk by Norbert Gaillard

Author:Norbert Gaillard
Language: eng
Format: epub
ISBN: 9783030457884
Publisher: Springer International Publishing

3.5.2.2 Boycotts

Boycotts stem from ideological roots and are usually a response to perceived ethical lapses of the targeted company.

A striking illustration is the Arab League’s boycott of Israeli companies, Israeli-made goods, non-Arab companies that do business with Israeli companies, and Arab entities that do business with blacklisted companies. This boycott, driven by an anti-Zionist agenda, upsets the strategies of some Western MNCs. Shortly after opening a bottling franchise in Israel in 1966, Coca-Cola was expelled from Egypt—where it had been operating for decades (Labelle 2014).

Some boycotts are initiated by human rights groups. During 1996–2001, NGOs (e.g., Oxfam) worked with consumer and labor groups (e.g., the Clean Clothes Campaign) to organize boycotts of Nike goods after media revealed that the firm’s production processes involved underpaid workers in Indonesia, child labor in Cambodia and Pakistan, and poor working conditions in China and Vietnam (Locke 2002). These boycotts damaged Nike’s image and severely depressed its profitability: The firm’s pretax income fell 36% in the United States and 98% abroad during fiscal year 1997–1998 (Nike 1998, p. 47). In May 1998, Nike’s Chief Executive Officer announced a series of measures to improve factory working conditions (Nike 1998, p. 56).

Business circles have developed new tools to help reduce microeconomic risks. For example, more firms have begun to provide public statements discussing corporate social responsibility (CSR) and to codify business ethics (see Kitzmueller and Shimshack 2012). Present-day CSR principles aim not only to prevent social wrongdoing but also to reduce negative environmental effects.

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