DALIAN, CHINA—MNCs from the BRIC markets struggle to earn trust in Western countries, according to a new emerging market supplement to Edelman's Trust Barometer.
Companies from the Brazil, Russia, India and China face a serious 'trust deficiency' in such countries as the US, UK, France and Germany, the survey reveals, thanks to concerns over state ownership and control.
Just over one-quarter (27 percent) of respondents in the key developed markets of the US, UK, Germany and France say they trust BRIC-based MNCs, with Chinese companies rating particularly low among German (19 percent), French (22 percent) and US (26 percent) respondents.
Nearly two-thirds of respondents in developed markets would reject any type of domestic investment from a BRIC-based MNC. Only one-third of developed market respondents say they would trust a China-based business to “buy a company in your country” (34 percent), “buy a minority share in a company in your country” (36 percent) or “make a major investment in a new plant or office in your country” (38 percent).
“Brands are built over a long period of time and most BRIC-based companies are new to developed markets,” said Richard Edelman, president and CEO, Edelman. “People aren’t familiar with these brands or their CEOs. And many suffer from a negative perception around governance, supply chain management and treatment of employees. People no longer just buy products; they buy the corporation behind the products.”
State ownership emerges as the main concern, among emerging market respondents as well as those from more developed nations. A majority of respondents in China (51 percent) and India (60 percent), for example, say there is “too much” state control in their own national companies. BRIC-based state-owned businesses are the least trusted enterprises among developed markets, with less than four in ten (37 percent) of developed market respondents saying they trust them.
“Many in developed markets do not trust BRIC market governments and this greatly impacts trust on any organization closely tied to them,” said David Brain, president and CEO, Edelman Asia Pacific, Middle East & Africa. “Businesses closely linked with their national governments must be radically transparent about their organization’s history, values, structure and decision-making processes.”
In addition, the study suggests other factors that could be responsible for the gap in trust. These include a lack of international familiarity and the perception of poor performance against key trust drivers such as being ethical, treating employees well and listening to customers.
Significantly, respondents within the emerging markets of India, China, South Africa, Indonesia and Mexico, also have greater trust for BRIC-headquartered companies than their counterparts in developed markets (56 percent versus 27 percent).
The report also uncovers some eye-catching findings regarding familiarity levels with major companies from the BRIC markets. Awareness levels for a number of large BRIC-based companies such as Haier (China), Tata (India), Vale (Brazil) and Lukoil (Russia) never climb above 45 percent (Haier) and drop as low as 9 percent (Vale) in the US.
Consumer-facing corporations based in China are making better progress. Companies such as Lenovo (72 percent), Air China (63 percent) and Bank of China (54 percent) have respectable familiarity levels in the US, although BRIC businesses in key growth industries such as pharmaceuticals, media, financial services and food and beverage, face significant hurdles.
According to Edelman global practices CEO Alan VanderMolen, BRIC companies can improve trust levels by respecting employee rights and improving supply chain management. "This will require a focus on executing effectively against trust building attributes such as being transparent and ethical, treating employees fairly and putting customers before profits."
Produced by Edelman Berland, the emerging market supplement to the firm's annual Trust Barometer polled 5,400 general respondents in nine markets and 600 wealthy, well-educated and well-informed respondents.