The Business of America is Business: Middle-Eastern Students Speak about the Danish Boycott

As is well known to regular readers of this blog, I left the US last summer to begin teaching at the American University of Sharjah in the United Arab Emirates. This semester I teach three sections of strategic management courses. Each student in those classes is required to maintain his or her own blog.

There are no restrictions on subject matter provided they follow one rule: they link the topic to one or more of the four strategic management theories and analytical frameworks that comprise the core of this course. Those theories are Michael Porter's "Five Forces", Gary Hamel's "Business Conception Innovation"; Jay Barney's "Resource-Based View of the Firm", and David Baron's "Four I's".

Each week I recommend up th three articles that the students may blog about. They are free, however, to choose any article or any topic beside those. This past week, one of the articles I recommended was one entitled "Effect of Danish Boycott Patchy" that appeared in the Saudi English daily, Arab News, on January 29th. As one might imagine, several students decided to write on this topic.

It is my privilege to present in "carnival" or "round-up" format their thoughts on this pressing matter. In no particular order I have summarized the post of my two undergraudate sections. A brief summary of my impressions of the posts can be found at the very end of the post. We all welcome thoughtful comments on these posts.

If you read just one of these posts in its entirety, it should be this one, "Trying to Work the Unworkable Boycott of Danish Products" by one of my Saudi students, Sultan Sindi. In my opinion he does an excellent job of integrating the strategic management theories with personal and local knowledge. Here are some excerpts:

It is much easier for a customer to walk into a supermarket and start yelling because he sees Danish products on the shelves, than it is for a Saudi importer for example to go to Denmark and yell at the news paper that first published the cartoon, which let’s not forget is what this boycott is all about!

Having spoken to members of my family and close friends of mine, they all seem to think that the issue is being turned into something that is a lot bigger than it should be. In fact, a person I know said she “switches channels” whenever she sees this issue on TV. Let’s face it; there are many other ways to resolve this issue, more diplomatic ways of going about it. What ever happened to diplomatic dialogue? If we insist on boycotting Danish products, then they will just have to find other areas to generate revenues, we’ll be left with nonexistent relations with Western Europe, and the cartoon issue would have not be solved either.

If you read a second of these posts, it should the one by Furqan. Though less overtly linked to the theories in the course, his unsparing criticism of the Danish press, in particular, and of the Europeans more generally, as well as his thoughts on the underlying motivation for the boycott, are compellingly expressed. Here are a few excerpts:

The boycott has not been imposed by any government but it’s been done voluntarily by the people. Don’t they have the freedom to choose what they want to boycott? ...

Basically due to a few in Danes the entire Danish economy is going to suffer the consequences. They have lost their Muslim customers. The Danish companies will have to strive very hard to come back. Muslims have boycotted any company that it associated with Denmark. If a company owns any strategic assets with any link to Denmark it is facing a bad time.

In a post entitled "Democracy", Hassan makes clear that he sees a role for both Danish companies and the Danish government in handling this crisis and that he places the "religion concept" above the "democracy issue":

On the other hand, for the Danish base companies, they have to satisfy their Muslim customers by refusing and denying the cartoons because these cartoons may affect the economy in these countries as a whole. In my opinion, the Danish and Norwegian governments should have an instant act toward this issue because it is not a democracy issue when touching the religion concept.

Mohammed A notes that Danish businesses and the Danish economy more generally are being hurt by the boycott of goods in several Muslim countries. His advice:

In order for the Danish manufacturer to stay in business they should support their customer. They should send an official apology to the Muslims and donate some money to promote their religion. For example, building couples of Mosques in Denmark and Muslim’s countries. This reaction will cost less than one million dollars which is better than keep losing thousands of millions. The Muslims will see the good faith of the manufacturers and obviously will stop the boycott.

In discussing the boycott of Danish goods by the Saudi's, Abdul Aziz recalls that there was a time when American products were supposed to be boycotted and how that worked out:

The boycott however, will only be proven to be beneficial or “real” as time goes by, I recall a time when American products were to be boycotted, and that didn’t last for long. Share prices have fallen for Saudi dairy, in a country were share prices are governed more by rumors than they are by financial statements, no one knows what will happen next. One thing is for certain though, people in Saudi Arabia are thinking twice before buying anything “Danish”.

Loulwah sees the boycott as "absolutely a reasonable reaction" and thinks that Danish companies " as customers of the newspapers and magazines, (should) force the magazine to apologize."

The title of Mohammed M's post, "Freedom of expression doesn’t contradict the fact that Religions should be respected" pretty much sums up his point of view on the legitimacy of the boycott. As for its economic impacts, he sees little loss of benefit to consumers due to the low switching costs and generic nature of the products being removed:

The Danish products boycott has been escalated throughout the Muslim nations. As for the buyer power, it is evident that the Saudi market (buyer group) is powerful since it faces few switching costs. Not buying Danish products such as cheese and milk are not obstacles for them. They could easily switch to other alternative products of a non-Danish origin without facing high switching cost.

While recognizing why Saudi grocers are responding to consumer demand to see Danish products removed from the shelves, Tofol is a little skeptical of the stores behavior:

I am skeptical as to the true intent of these stores to "boycott" Danish products. It may be a powerful marketing strategy to unshelve the products, however I assume that these stores may have plans to sell their inventory to other stores that are carrying the products (possibly outside of Saudi). My assumption may be incorrect, however, I will be the devil's advocate for the purpose of linking Saudi stores to Hamel's theory.
If, indeed, the Saudi stores are only taking part in boycotting Danish products on the surface, and are in fact selling Danish products in other regions, that would fall under Hamel's "core strategy", more specifically, under the element of "product/market scope". That would entail that Saudi stores are strategically aware of their product segments in different geographical areas, and they sell different products according to the different segment. That means that the stores would unshelve Danish products in areas where boycotting is demanded by customers, however, Danish products would be available in geographical areas where customers were accepting of them.

In an interesting contrast to Tofol's "devil's advocacy", Nailya makes clear that for her this issue is personal and political, economic and emotional:

Being a Muslim myself, I have also felt emotional attachment to the issue. Firstly, i suppose that right actions should be definitely taken by Muslims not only from the political perspective but also from the ethical point of view. I believe that if one issue like this will be left without notice, it means that we agree to be assaulted and do not mind to be further assaulted in the future.
Every religion should be respected in this world since it is the only way to sustain at least some means of morality in the society. This case evidences absolute ignorance and misunderstanding of some European people about important issues in life. We must not touch sacred things such as prophets because once people overcome this red line there are no barriers further left for society which leads to total demoralization of it.

Like Tofol, Lubna also thinks that Saudi store managers may be playing this controversy to their advantage:

It seems that supermarkets were pulling out Danish products to establish a political and ideological stance that corresponds with that of their customers. One retail manager says “We have stopped promoting Danish products since early last week. This is a very important issue for us out of principle”. Indeed, the decision could have been a reflection of genuine principle, but ask yourself this… Would they have been so quick to stand by their principles if their customers were all Danish? Most likely not. Pulling out Danish products from the shelves and “leaving the shelves empty for the people to notice” are obvious efforts to establish an emotional affiliation with the customers and even to invoke a sense of loyalty to the store.

Using Porter's discussion of the relative power of buyers and suppliers, Mohanad concludes that Danish dairy producers as having less of it than Saudi and other Muslim consumers:

According to the conflict that happened between Saudi customers and Danish products that caused the boycott of Danish products because of the depicting of profit Mohammad (peace upon him), we can easily see the buying power of Saudi customers. First of all, such dairy products are not differentiated, which means that buyers of Danish products can find other suppliers of dairy products. Secondly, there are no switching costs if customers decided to switch to other dairy products.

While recognizing that Danish companies neither published nor advocated the publication of the controversial cartoons, Bandar does think a boycott against them is legitimate because with their power, they can force the government and the paper to apologize:

Yes, some may argue that publishing cartoons in the newspapers was not the Danish companies’ mistakes, but as known that businesses usually have strong influences on government or newspapers since they pay taxes to the government and use the newspapers to advertise their activities. As a result, I think businesses would be able to stop that publishing or at least force the government to apologize.

Bilal relates the boycott in Porterian terms, seeing buyers (Muslim customers) as having more power than suppliers (Danish dairies) because the goods are largely undifferentiated, the switching costs are negligible, and the local producers can easily increase production to meet demand previously met by Danish companies. His conclusion:

Since the relation between the supplier and the customer has become quite sour, Danish companies will have to work on their relationship dynamics in their customer interface to re-establish and enforce the trust that it had before. But, to do that, the Saudi Government and other Islamic countries have demanded the Danish government, media and companies for an apology.

Faisal notes one of the obvious, yet rarely discussed, implications of the boycott- some firms, most likely local ones, stand to gain marketshare as a result of the removal of Danish dairy products from the store shelves:

Boycotting Danish products will increase the sales of its substitutes. For example, instead of using Lurpak butter for a specific kind of food, now the people will turn to Arabic gee instead. Therefore, in the coming days we will notice a huge increase in the sales of substitute products.

He also observes the efforts Saudia dairy company, SADAFCO, to avoid being harmed the fact that it was once hald Danish-owned:

he article also mentions the SADAFCO Company which was originally half Danish and Half Saudi. Although the company is now 100% Saudi, people still associate it with the Denmark. The company had to place an announcement in a newspaper to clarify this matter after it noticed a decline in its sales and stocks price. SADAFCO claims that it has no relations with the Denmark and produces their products locally.

Yousef notes that the "switching costs" for Muslims are not predicated soley on price and product quality:

As government officials refused to apologize and humiliation by other newspapers continued to emerge, switching costs became so low due to the Islamic ideology to their God and Prophet (peace be upon him). ... Moreover as more and more Muslims are looking forward to defend their prophet, Danish products became unimportant compared to the quality and services pertained by the manufacturers in Denmark and other countries all over the world.

Siddharth is one of the few students that thinks the whole issue is being overblown and that boycott wont work. His post is fairly short and I quote in here in full:

Well according to me the whole issue has been blown out of proportion. Yes I agree that a particular religion should noit be branded with wrongful adjectives that spark emotional outburst's amongst its sollowers. clearly they were wrong in publishing the photos but first amendment rights and freedom of press and free speech should not be compromised to keep people not even living the country the article was published happy. so overall the danish newspaper was wrong in doing what they did but equal blame should go on the fanatical muslims which is by the way a very small population in the world for over-reacting with violence as their key.
What ever happened to peaceful demonstrations? You dont see violent demonstrations when hindu gods or christ is printed on shoe soles and other obscene places.. i think a boycott of this nature will not work as most people in the world have gotten used to luxury danish goods and i belive when this controversy cools down, the same very people that are [protesting will be the first to use them again, i heard the same calls for boycott of american goods when they invaded iraq. What happened? everyone still drinks coke and pepsi. i think we should not get involved in this mess and take a back seat and wait for it to cool down.

Like Lubna, Lina sees a message in the empty store shelves where Danish goods once sat:

In addition, I think that leaving the shelves empty for the customers to see falls also under "information and insight". They are providing customers with the necessary information: "Hey! We are with you! We do not sell things you do not like and you can see that from the empty shelves!" In fact, I liked that strategy.

Using Hamel's discussion on "Relationship Dynamics" as a starting point, Ghadeer concludes that the Danish paper should have thought twice before publishing the cartoons:

"Relationship dynamics" refers to the nature of interaction between the producer and the customer. Companies in general use this element to create good relationships with their customers to gain their loyalty. The cartoons the Danish newspaper published were very offensive to the Muslim public, and this created a distorted image of the newspaper. These consequences of publishing these cartoons did not only affect the newspaper, but people decided to boycott everything that is Danish; thus, affecting the Danish economy as a whole. The newspaper should have made more research before publishing such cartoons. They should have collected much more information about how they expect the public to react. This might have given them a better idea on the consequences they were going to encounter.

Summary

My students wrote nearly fifty posts about this controversy. Based on my understanding of what they have written, I can say that, on the whole, they believe that:

1) The Danish government and the paper that published the controversial cartoons should apologize to Muslims.

2) If necessary, Danish businesses should use their clout to get the government and the newspaper to do so. failing to do so, they stand little chance of regaining any of their lost market share in the Middle East and, most likely, elsewhere.

3) Despite well known brand names, very low switching costs, only moderately differentiated products, and sufficient excess capacity among local producers all combine to leave Danish dairy producers with relatively little of what Michael Porter calls "supplier power."

4) The actions of grocery stores lke the one mentioned in the article are admirable and correct. Still, they and other dairy manufacturers are motivated by principle and profit and will make the most of the situation economically if the opportunity arises.

5) The importance of the institution that the West calls "freedom of speech" is less important than the "right" of Muslims not to have their religion insulted, mocked, or disrespected. From that, it follows that

6) Freedom of speech and expression should have limits when it comes to religion and religious sensibilities.

As anyone who has read this far can see, I have a very interesting and informative semester ahead of me. And I wouldn't trade it for the world.

See also on this blog: Boycott of the Danes and Will the Boycott of Danish Goods Work?

Comments

I would like to correct one thing regarding:

The Danish government has no influence on what the paper prints.

The government does not have the power to take any legal actions against the newspaper.

The government is not responsible whatever the newspaper printes. The newspaper is independent.

It is possible to take legal actions against the newspaper. It is not beyond the law.

The logical thing to do was to boycott the newspaper. Not Arla. Arla does now own Jyllands Posten.

Posted by: erik | March 1, 2006 1:00 AM

I am very Happy to hear that most of our muslim students are commenting on this issue, that shows that we are strong muslims and that we will tolerate and anyone who critize our religion. its shows that each and every student is coming from different perspective and that is a good sign that shows how their religion is what they consider to be their first piority.

Posted by: samsam | March 1, 2006 12:01 AM

There was an interesting story in the news a week or two ago.

It was about the boycott and Arla food.

There was an interview of a Danish Arla manager in an Arab country.

They probably had to shut down, and all of the local employees had to fired.

I wonder how many places this is happening.

I wonder how many local employees are going to be without a job before the boycott ends.

A shame actually...

Posted by: ERik | February 25, 2006 3:26 AM

I simply say - peace in the middle east.

Posted by: Farah | February 23, 2006 6:18 PM

I think this article is a perfect example of what we talked about today in class - Baron's Framework. We could see how the nonmarket environment played and is probably still playing an important role in the lives of many Danish companies. For instance, we talked today about the five basic sources of nonmarket issues which were: a scientific discovery and technological advancement, a new understanding of something, and institutional change, an interest group acitivity, or a moral concern. In this article, there were moral concerns from the Muslims' side. They were worried that their religion is not being respected. Furthermore, there was the interest group activity, whereby people started getting emails and messages encouraging them to boycott Danish products. The funny thing is that, even though I read this article before I read Baron's framework, I still was not aware of and did not pay attention to the fact that the nonmarket environment also plays a role. For the past four years of my undergraduate studies, all we talked about was competition! Now that's a new thing we need to pay attention to. I think Baron taught me something new! His framework made me think a bit more than the other theories and frameworks. I liked it.

Posted by: Lina | February 19, 2006 9:30 PM

Allow me to criticize some of what came in your blog.
As for the first one, (it's obviously someone with no identity. I'd like to ask ... Did you ever see Muslims insulting Jesus?! Did you ever see Muslims insulting Moses?! It's because we believe in all those religions Islam, Christianity, Judaism. Even after they've insulted our prophet I bet you can't find a single cartoon insulting your prophets. (Peace be upon them ALL). Secondly did you even hear about the scandal that the same newspaper has refused to publish cartoons about what's so called the Jewish Holocaust?! Why did you western people react positively to Anti-Semitism! And negatively towards us!
By the way speaking of democracy, why did the US stand against Hamas in Palestine and the Muslim brotherhood in Egypt while they were elected under what's so called democratic rules? And is Democracy what's happening in Guantanamo? Or is it what happened in Abu Ghareeb (the famous prison in Iraq)? Or is it by operating surreptitious CIA offices in Europe?

As for Mr. David,
Why don't ask yourself what if we stopped exporting oil to your countries! Didn't we do it once? Aren't we capable of doing it again?! You've all seen how everyone reacted friendly with Iran just because they've threatened to stop pumping oil... and by the way Iran's export of oil makes only 5%, so what if we stopped!

In conclusion we believe in Moses, Jesus, and Mohammed.
So we hope any could show some respect... And here I'd like to urge my professor to tell Western societies about how we treat Christians and how he's welcomed in his second country United Arab Emirates.

Regards
Yousef

Posted by: Yousef... | February 16, 2006 12:52 AM

As sharp as your students seem to be, they still don't get it. If they could only see that, in effect, they trivialize their own religion by allowing themselves to be impugned and outraged by what a handful of political cartoonists in a far away non-Muslim country think.

And some of them also show a huge lack of understanding of western democracy when they believe that an entire nation owes an entire religion an explanation and an apology because of those same few cartoonists. Are you explaining this stuff to them in your class? At what level don't they get it?

The daunting aspect of all this to me is that your students are pretty smart folks, yet they don't really understand how the western democratic systems work when it comes to free expression. The first thing people in a truly FREE society have to do is to GROW A THICK SKIN!

I just watched on tv a crowd of burka-clad islamic women in Pakistan burning valentines card they had just looted from a shop describing them as another form of western decadence. What's next? Are our two cultures really so different? It really seems that way to me.

Posted by: Philippinephil | February 15, 2006 6:25 AM

(Already posted on http://blogs.wizbangblog.com/2006/02/my_muslim_students_blog_on_the.php - this blogbusiness is confusing.)

I have posted comments on Sultan's and Hassan's blogs, but I would like to make a few general observations, and suggest you read my blog (lhpblog.blogspot.com) if you are interested in my views on other aspects of this matter.

I disagree that freedom of expression should be restricted from criticizing religion. After all, isn't Islam in a way a critique - a reinterpretation - of previous religions, of which it could be rightly said, by christians and jews, that it is mocking their religion, for example by the way muslims regard Moses and Jesus? As an atheist, I don't care about any religion, I do however care a lot about my rights to freedom of expression. And noone shall succeed in telling me what I can say, whether it be about Santa Claus or Muhammed.

In any case "OregonMuse" [on the other comment page referred above] is absolutely right when he or she says that not considering the circumstances of the uproar, for example the manipulation done by Danish imams, and the agendas pushed by Syria and Iran, just to mention two things, means that all further discussion is unfounded. We need first and foremost to clear up all misunderstandings (deliberate or accidental) and then we can try to create real understanding. I doubt that we can reach any agreement, but we should be able to achieve an understanding of each others points of view, an understanding that is not skewed or undermined by disinformation, bad translations and unfounded rumours. In that spirit I would like to offer myself, my knowledge and my opinions, and try to answer any questions you might like to ask of a Dane.

Sincerely,
Lasse Hillerøe Petersen
Aarhus, Denmark

Posted by: Lasse Hillerøe Petersen | February 14, 2006 1:45 AM

I see no problem with people choosing to boycott anything, for any reason. I am more concerned with the out of control violence associated with these cartoons and the fact that certain Islamic Clerics have used the cartoons to purposely incite violence. That is troubling indeed, and it does nothing positive for the image of Muslims world wide.

Posted by: Brian Bonner | February 11, 2006 9:01 PM

Had you seen this discussion between Mahmood and a member of the Bahrain Chamber of Commerce. Regards

http://www.mahmood.tv/index.php/blog/2163

Posted by: ros | February 11, 2006 3:14 AM

Confess to economic illiteracy but proffer this comment from Silly Bahrainini Girl as an interesting summing up on the to boycott or not.

"And now we get the chance to get angry and angry are we, mostly at the Danish cows and cheese. Papers in France, Spain, Italy, Germany, New Zealand and even Jordan published the cartoons, but we still didn't have the stomach to ban Ferraris, Chanel, Dior, Mercedes, Zara, Armani and all the sheep which make their way to the Arab and Islamic world from New Zealand."

New Zealand's PM will be pleased, she was very quick to send surrender signals For local comsumption her were mainly about trade. Though Iran was her big worry.

Posted by: ros | February 11, 2006 2:57 AM

Speaking of boycotts, there is a growing move, actually the beginnings of a rapidly expanding energy policy in the West, to boycott Gulf oil by developing bio-fuel, that wonderful fuel, easy to grow and grow again and again ( it's called renewable) and easy to manufacture at much cheaper costs and so much friendlier to the environment. Did I mention that engines running on bio-fuel last much longer and are more efficient and that cattle grow real fat on the byproduct and humans can consume the byproduct too? Wait! This wouldn't be a boycott, it would be a fundamental of market competition in which desert environments with little rain would have to sell another commodity, like maybe sand.

Posted by: Goesh | February 10, 2006 8:02 PM

Being a Dane I found this insight in to the discussion in the Middle East very interesting. A few comments:

The effect of the boycott is definitely felt by some Danish companies, especially Danish dairy giant Arla. (Who, by the way, had a very bad reputation in Denmark due to monopolising tendensies, but has recently received a lot of sympathy at home!) No other major firm seems to be seriously hurt by the boycott, either because the Middle Eastern market is of relatively little importance to them or because they are actively distancing themselves from the cartoons. This was done months ago by the shipping company Maersk-Sealine - as always discretely and they are not very talkative on the issue. A minor Danish company just landed a major contract in Malaysia after they more pronouncedly critisized the publication.

It has been reported that the countercampaign Buy Danish on the internet might actually even out the losses by the original boycott, but it is too soon to tell, and it would obviously not necessarily benefit the same companies.

The succes of the boycott in political terms is hard to asess. Even a complete boycott of indefinate endurance would not seriously hurt the Danish economy, which is very strong at the moment, and it would definitely not lead to a change in legislation limiting free speech in general or inserting a specific ban on portraying Muhammed. As a principle it's just too important to us, as well as politically unfeasable in the current situation.

That does not mean, however, that the boycott haven't had an effect. Some important interest groups have been mobilised with demands for an apology or at least an explanation from Jyllands-Posten, though no one has asked for a limitation of free speech to save exports. In general it helped put the question on top of the agenda, though focus swiftly moved to the various threats issued by extremists, the attacks on embassies and so forth. (It should be noted, that these developments have been rather counterproductive from the boycott's point of view, since they have strengthened the resolve to stand firm and face the economic consequences.)

The eventual consequences of the boycott are hard to predict. Don't expect any law changes or guarantees this won't happen again, because it might. Then again it might not.

I rembember taking part in the boycott against France after Jacques Chirac resumed nuclear testing. They never gave up on their formal right to do so, but they haven't blown up many bombs since then either.

Though I'm not thrilled with the boycott of Danish goods, I accept it as a form of protest, and it is very interesting that it seems to be relatively efficient. It is just another example that civil society is growing ever stronger in the Middle East.

Posted by: Henrik Madsen | February 10, 2006 7:45 PM

David,

I can appreciate the overall sentiment of your students, being all of the Muslim faith. But you might ask them what would happen if westerners had the ability to boycott oil, becuase of the religious intolerance of their countires.

It's coming, so they as future leaders need to understand the consequences. The west probably won't forget the atrocities we've endured.

Posted by: geoff goedde | February 10, 2006 7:36 PM

Your students' thoughts are well-expressed, and I laud them for thinking through this issue from their point of view (a point of view I respect more from having read it in their own words).

But sadly, I think their discussion shows that -- at least for those who insist religion should never be mocked -- our Western version of democracy and Islam are simply incompatible. It sounds like some of the students have come to a very nearly "Western" view, and could live with such things as the Danish cartoons. (And don't get me wrong, I do not advocate the mindless mocking of another's faith).

But it sounds like a majority of the students simply wouldn't tolerate the kind of denigration of religion that the Arab press daily afflicts on -- to take a random example -- Jews and Christians.

And that is too bad, really, because I see much to admire in what even the most "conservative" students write here.

(I was led to your excellent blog by reading your comments on The Belmont Club.)

Jamie Irons

Posted by: Jamie Irons | February 10, 2006 7:15 PM

Middle-Eastern Students Speak about the Danish Boycott

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