Managing cultural adversity: as anti-American sentiment mounts in Europe, what can U. S. companies do?

With American consumers boycotting French wine and cheese and Europeans shunning American cola and cigarettes, the Iraqi war is spilling into the High Streets of Western Europe and the Main Streets of America. One German Web site (consumers-against-war.de) carries a blacklist of 25 U.S. companies, including General Electric, General Motors and Dell Computer.

American companies operating in Europe and their executives suddenly find themselves on the front line. "Whether I want to or not, I am consistently put into a position of confronting the issue of the United States versus France and the rest of the world," says Michael Cooper, an American film executive and long-term resident of Paris. "The State Department should find some way of compensating me for being a 24/7 goodwill ambassador."

The commercial stakes are high. Trade between the United States and the European Union totals about $1 billion a day--nearly double what it was a decade ago. In 2002, U.S. exports to Western Europe totalled $157 billion while imports reached $246 billion. According to the U.S. International Trade Commission, France is America's ninth-largest trading partner.

Despite the increasing interconnectedness, tension between the U.S. and Europe threatens to escalate. In May, the EU issued a September deadline to America to repeal so-called foreign sales corporations--tax-avoidance vehicles that encourage American exports. That followed an earlier ruling by the World Trade Organization giving the EU the right to impose tariffs on $4 billion of U.S. goods to compensate for unfair U.S. business practices. Washington countered by challenging the EU's moratorium on genetically modified food arguing that blocking imports of American crops has no scientific basis. Other fights loom.

If the squabbling continues, and anti-American sentiment in Europe hardens, the economic consequences could be severe. Cultural adversity is becoming reality.

The issue for American executives doing business in Europe is judging an appropriate response--without over-or underreacting. There are four possible strategies.

The first is to carry on with business as usual. Doing nothing is an option, but assumes that anti-American sentiment will wane. Not many experts are buying that assumption. American companies would be making a "fatal error" if they choose to ignore the current situation or "try to tiptoe through the tulips on this one," argues Paul A. Argenti, a professor at the Tuck School of Business at Dartmouth.

Don Spetner, who specializes in worldwide branding for headhunter Korn/Ferry International, works closely with the firm's European offices and believes U.S. companies face serious long-term public relations challenges. "Anti-American feeling will recede, but the issues are here to stay, especially for very visible U.S. brands such as McDonald's," Spetner says.

Secondly, companies may choose to distance themselves from their American roots. At a tactical level, there are small and immediate things that can be done. Companies can, for example, de-Americanize their brands by changing American messaging or the use of American icons. Some advertising agencies are advising U.S. clients to play down their American heritage. This can mean paying attention to seemingly unimportant issues such as the physical appearance of executives themselves. One American executive who regularly travels to Europe quips that she now leaves her Stars and Stripes earrings at home.

Argenti, an expert on crisis communications, says companies need to develop an image and communication strategy, country by country, to determine the best course of action. A dangerous response for U.S. CEOs, he says, would be to try to hide their American identity. "No matter where you do business in the world, people will appreciate a more honest approach to the problem, and the possibility of being 'found out' if you choose to hide your American heritage is just too great a reputational risk," he says.

The problem for many leading U.S. companies, such as Levi Strauss and Philip Morris, maker of Marlboro cigarettes, is that their products are inextricably linked with the American identity. If this becomes is a negative, then some companies have to re-think their entire brand strategies.

Branding expert John Quelch, a former dean of London Business School now based at Harvard, notes that American high-tech brands are not wrapped in the flag but rather succeed on the basis of functional superiority. He advises that producers of American icon brands should not overreact because "many consumers buy them for the value they give, and plenty more won't let politics shape their buying behavior. But at the margin, these brands should reexamine their commitment as good local citizens in each of the markets they serve."

Much the same, in reverse, applies to French brands. In the U.S. some French companies have chosen to distance themselves from their origins. Outside the Sofitel Hotel in Manhattan, for example, French flags were replaced by American flags. This temporary move by the French hotel group Accor, which also owns the Motel 6 and Red Roof Inn chains, was a peace offering to American guests.

The third route is to try to develop greater cultural awareness and sensitivity; in other words, to fit in. This requires investment in training and may involve more Europeans running European subsidiaries. According to Korn/Ferry's Spetner, the root issue for many companies is how to "inculcate their management with a true feeling of internationalism" and ensure that their senior management team includes non-Americans.

The cultural divide should not be under-estimated. In the mid-1990s, Monsanto tried to build a market in Europe for soybeans and corn that were genetically modified to tolerate a herbicide manufactured by the company. The company was perplexed by European protests about "Frankenstein food." What was a non-issue for most Americans became a source of intense hostility in Europe. Having misjudged the strength of opposition, Monsanto handled the public relations poorly and eventually was forced to retreat.

Winning in Europe is all about cultural savvy. "Throwing money at a problem in Europe is not necessarily going to fix it," observes Allyson Stewart-Allen, a London-based American consultant and co-author of Working with Americans. "Companies need to focus on building relationships with people rather than simply transacting with them. Also, they need to remember that status in Europe is not based on material assets but on who you know. Your network is your power base. Americans need to learn to read the subtle, unspoken messages of high-context European cultures where as much is unsaid as is said."

Some American corporations are unquestionably making an effort. Starbucks has 1,400 stores in 30 countries outside North America. Its international strategy is to form joint ventures or license other companies to run Starbucks stores. This is very different from how it operates in the U.S. where most stores are company-owned. Peter Maslen, president of Starbucks Coffee International, has said the idea is to involve a local partner to help identify locations, navigate local tax issues and make the brand more appealing to local communities.

But European trade isn't solely the preserve of large multinationals. Take the 500-employee Tipton, Pa.-based New Pig Corp., a private company that sells industrial absorbents and cleaners. It has European subsidiaries in Britain and the Netherlands. "From Day One, we didn't want to be the typical myopic American business. We thought that our products were universal-every factory has leaks and spills," says Chairman Ben Stapelfeld, whose early forays into Europe set the tone. Rather than crossing the Atlantic for a meeting and then returning immediately, he spent time getting to know the countries he was doing business with. Also, instead of exporting its own managers to run subsidiaries, New Pig has emphasized the need for local management with local contacts and knowledge.

Robert Van Langeveld, joint managing director of New Pig in the Netherlands, says the tone and expression of the company's products in Europe take on individual, national characteristics. "The way we conduct business in such a diversity of cultures is the root of our success, "he says. "We retain a major portion of our American identity but present our products in the character of the countries we serve."

It's a question of blending identities. "I don't think it's in good taste to wrap yourself in the Stars and Stripes, but I don't think it's smart to capitulate, either," observes one U.S. executive living in France who would not be identified. "It pays to defend the American point of view. There's no reason to crow, to be loud, to be defensive or self-justifying. We've got to be open and sensitive to other cultures and their approach. But you lose your credibility immediately if you abandon what you believe in just to make the deal."

Indeed, some see the crucible of doubt as a means of clarifying what you actually stand for. "My advice is for the CEO or board to ask: 'What are our core values and culture as a corporation?' and then to stick by them as a sign of integrity," says Jonathan Story, a professor of international political economy at the French business school INSEAD. "In dealing with anti-Americanism or anti-Europeanism, we should realize that we are dealing with prejudice--be sensitive, but don't give in to it. Corporations which have global or international spread have a pedagogical duty to themselves, their clients and suppliers to be citizens of the world."

The Dutch cultural diversity expert Fons Trompenaars suggests that mutual criticism is a cul-de-sac and that the only possible route forward is reconciliation. "Culture is the way in which people reconcile dilemmas emerging from universal problems," he says.

Some executives may not yet be ready for reconciliation. The fourth and final strategy is for U.5. companies to wrap themselves in the American flag and brazen it out. This may be tempting, but would simply confirm the American stereotype. The f-word--French--may no longer be on the menu in some U.S restaurants, but American CEOs who pursue an in-your-face strategy in Europe could end up choking on their renamed freedom fries.

Michael Cooper's advice to U.S. CEOs is simple: "Talk less, listen more."

Today, it pays to be a quiet American.

Four Possible Responses to Cultural Adversity:

[] Carry on with business as usual.

[] Try to pretend your company is not American.

[check] Develop greater cultural sensitivity and blend your product into the local marketplace.

[] Wrap yourself in the American flag and brazen it out.