The negative relations between the two countries experienced a crescendo in September and October 2012 with widespread public protests in China and Japan (Figure 1). This wave of negative sentiment was evident not only from the expected diplomatic saber-rattling, but much more visibly in the business sector. Toyota reported that its September sales in China dropped a staggering 40% and Mazda’s dropped 33% as the dispute became more heated. Nissan and Honda also indicated a drop in expected sales revenue from China, and all four Japanese manufacturers had to cut back on auto production. Were Chinese consumers simply not buying automobiles? Hardly, because sales of BMW jumped 55%, Volkswagen grew 20% and Korea’s Hyundai increased by 15% in the same month. And the economic effects weren’t limited only to cars; Japan-based All Nippon Airways saw massive cancellations of tickets on the Japan-China routes and Rohm Semiconductors had to reduce production because they supply parts to many Japanese auto manufacturers. Obviously this effect ripples onward from the affected companies to the affected workers and merchants relying on the workers’ wages and spending habits.
Economic backlash is indeed one of the new forms of retribution in today’s globalized business community. Some speculate that in the Senkaku/Diaoyu case, the Chinese response was carefully orchestrated from the central government in Beijing, and that may have been the case, but regardless of the driving factor, the end result remains the same.
Most typically, the responses to both geopolitical and cultural disputes are not so overt and extreme. For companies developing products and content for markets embroiled in such disputed issues, the challenge to remain as neutral as possible is clear. If one represents a company based in a country that is party to the dispute (such as a Japanese company), there’s little you can do to avoid potential retribution because the crowd’s activism won’t discriminate against a “good” or “bad” company — it’s purely about nationalism. . .