Paddy's writing on Business, Brand and Reputation

This blog contains some of my writing on Brand and Reputation, including those on Shell - the corporation that I worked for for 37 years. Some of the articles have previously been published - others are seen here for the first time. The purpose of the website is to contribute to discussions on the role of brand and reputation management in today's business world. Please also see: Comments welcome to me at:

Wednesday, August 03, 2016

Political parties as brands - Labour is failing

A brand is a combination of characteristics possessed by a product or service that identifies it and distinguishes it from its competitors. Identity is part of this (the brand name, colour scheme, symbols etc.) but the key elements are product quality, performance and value. It is not sufficient to have an attractive brand image. That image must stand for something that the consumer values when they experience it. The reverse also applies. If you have a good product but fail to communicate its benefits then you will fail or underperform compared with a competitor with an equally good product who does communicate effectively.

Political parties and politicians are brands. They conform to all the brand realities in the paragraph above. Brand loyalty (the propensity to favour a brand through good times and bad) is probably stronger with parties than it is with consumer products or services. In Britain the Conservatives and Labour can usually rely on around 30% of loyal support - how they add to this determines whether they achieve office, or not. And that process is all about Brand Management. 

The idea that political parties and politicians are brands stretches back a long way. In Britain certainly to Gladstone and Disraeli, if not earlier. The Liberals and the Conservatives in Victorian times were arguably not that different. But Gladstone and Disraeli were chalk and cheese! Even without mass communications the voter made his choice based on his perception of these two very different brand offers.

In modern times the first truly marketed brand was that of John Kennedy in 1960. In "The Making of the President" Theodore White describes how all the newly modern techniques of brand marketing (think "Mad Men" !) were used to promote JFK. There is no doubt that better brand management won the day (very narrowly) against the better known Vice President Richard Nixon. 

In Britain the most successful brand relaunch was that of the Labour Party in the run up to the 1997 General Election. This ticked all the boxes. The core product was changed. The Left Wing baggage that had made Labour unelectable was jettisoned - especially Clause 4 that Achilles Heel that committed Labour to seek the common ownership of assets. The visual identity was also changed to position Lablour as more classless rather than (just) being the choice of the C2DE social classes. A conscious attempt was made to position Labour as pro Business. The name was changed and it was "New Labour" that was promoted as the brand name overtly signifying change. And above all a Leader was chosen who visually stood for these changes. Tony Blair was the most important combinations strength of New Labour. Young, good looking, articulate he commanded the media who lapped it all up. Even Rupert Murdoch backe Blair and Labour in 1997 - the grey man John Major stood no chance. It was a landslide.

Everything that goes up must come down and so it was with New Labour. But Blair won three General   Elections and only a combination of a far weaker brand presence in 2010 (Brown was no Blair),  a recovered Conservative Party and what Harold Macmilan called "events" lost Labour power. Since then Labour's position as a credible brand has gone from bad to worse. In 2015 it looked for a long time that the Coaliiton would lose office and that it would be a Labour Government with a majority rather than a Conservative one which would replace it. In fact the opposite happened. The Labour brand was not strong enough, Ed Miliband as its principal communicator lacked sufficient credibility and the media was mostly hostile. And some new entrants (the SNP, UKIP, the Greens) stymied the chance of Labour regaining power.

Post 2015 the political scene in Britain has become toxic. The principal reason for the this was the EU referendum where the brand which best reflected the public mood, "Brexit", won the day. That public mood was anti-politics - a plague on all their houses. The Brexit case was (a) That all is not well in the KIngdom of Britain and that (b) The reason for our malaise was the EU, our not controlling our own governance, and the fact that we let too many foreigners into our country. Marketers know that you can sell snake oil once and "Brexit" was all snake oil. But the sale was made and we are stuck with it.

In this toxic world Labour has imploded. The choice of Jeremy Corbyn as Leader could not have been more damaging to the brand. One of the interesting elements of brand management is the niche brand proposition. In this a marketer decides to launch a product which is aimed at a very specific niche target group. Mercedes has such a product with their "Smart" car. The endorsement of the Mercedes brand helps (as does that of BMW in the case of the Mini) but in no way is the Smart car the new Mercedes! Jeremy Corbyn is the same. His (very) Old Labour positioning has brought people to the Party as his rallies show. But this is a niche group. Not everyone in Labour was happy with New Labour or with Tony Blair but the New Labour brand was sufficiently strong to marginalise this internal opposition. Corbyn was part of this opposition and now he and those like him have taken over the party. The support for Labour under this regime seems to be less than the core 30% from which you start to build a credible case for power. There is no chance whatsoever of Corbyn and co reaching out to the floating voter as New Labour did. In other words there is no chance of Labour gaining power under his leadership.

Brands flourish when they meet the needs of consumers and wither when their offer is no longer offering benefits which match these needs. Labour today is a niche brand which like all niche brands has loyal and enthusiastic support. But it it needs to be a brand with extensive popular appeal across class, gender, locale and many other demographics. Unless and until it realises this it has no chance of power.

Friday, April 01, 2016

What is "dumping" - and are the Chinese doing it ?

Economists, businessmen and politicians would probably see the whole question of what "dumping" is slightly differently. Are the Chinese dumping excess Steel production at below cost? Let's try and analyse what "dumping" is.

Any manufacturer incurs fixed and variable costs in producing products. The fixed costs include labour (usually), rent, other asset related costs (e.g. Business rates), maintenance and repair, licence fees and so on. These fixed costs are not production level dependent. The variable costs include consumables, raw materials, energy, transport etc. Essentially the higher your production the higher your variable costs.

In China the  Steel production is around 820m tonnes (49% of world total) and Steel consumption around 710m tonnes (46% of world total). In other words China is a net exporter of steel - the largest in the world by far - as well as being the largest consumer and producer. 

Let's say that "China Inc." covers all of its inland demand and allocates all of its fixed costs to this demand. A reasonable thing to do. Then, within its capacity capability, it produces further steel which it exports in order to make a further positive contribution to its operations. The key point here is "positive contribution". Obviously the income stream from the exports must exceed the variable costs of that production. Otherwise every exported tonne would lose money. That would certainly be "dumping". But it is, in my view, not dumping to allocate only variable costs to that part of your production you export (less than 10% in the case of China). Others may disagree ! 

The enormous scale of China's steel industry (70 times that of the U.K.), its modernity and its comparatively low fixed costs (especially labour) gives it a huge competitive advantage in world markets. It is not primarily focused on exports at all though and can therefore afford to sell at prices which only as a minimum cover the variable costs of production. As I say my contention is that the Chinese could only be accused of "dumping" if they sell at prices below these variable costs. 

Thursday, October 29, 2015

There is no case for keeping steel production open in Redcar

Steel is a commodity. This means that producers must mainly compete on price. As with all commodities there are opportunities to add value on the margin with enhanced products or services for special applications. But the vast majority of steel use is of materials that meet a common specification and are undifferentiated. So any buyer of steel issues tenders and chooses a supplier who offers delivered materials meeting an agreed specification at the lowest price.

In the modern world the trading of commodities is international and even bulky items like steel can be transported over large distances economically. This means that the global market will be dominated by the suppliers with the lowest production costs who can as a result offer the lowest prices. 'Twas ever thus. The decline in textile manufacturing in the UK (for example) was because others in lower labour cost countries could offer lower costs. And with free trade and the removal of tariff barriers there is nothing we could do about it, and didn't.

So is steel production in Redcar (etc.) a lost cause? Almost certainly. Should the British government subsidise British steel to keep plants open? The only instance where this might be justifiable would be if the present steel market conditions were temporary and some sort of bridging arrangement was necessary. The does not appear to be the case.

The closure of the mines in the 1980s was crassly and insensitively handled, but the strategy was right. The UK could not compete with lower cost coal producers and the energy sector was moving away from coal anyway. There is a parallel with the current state of affairs in steel. The U.K. can be a niche producer of added value steel products, but not a competitive producer of commodity steel. So Government's task is not to shore up unviable plants but to find a way of softening the blow for those thrown out of work. It's a tough conclusion but there is no other one.

Tuesday, October 13, 2015

Drinking in Saudi Arabia


I was sitting in an expat residential compound in Riyadh on one of my many trips to Saudi Arabia some fifteen years ago. My host was the ex-pat head of Shell in that country and he was hospitably ensuring that I and the other guests had what we wanted to drink. Beer, spirits, wine were available without any restrictions. Inside the compound! The details of how it all got there I can’t remember but any ex-pat would know the sources and how to ensure that thirsts were always quenched.

I got quite close to one of the more urbane Saudis who worked with us in Riyadh. He invited me to his home and there I met his wife – a beautiful young woman who behind the walls of their house wore high fashion clothes and acted just as any woman in the West would act. The two of them were generous hosts and insisted that I tried a particular Malt Whisky – a Macallan as I recall. There was a seemingly unlimited choice of other spirits as well. This friend told me how it worked. “Did you know”, he said,  “that the Kingdom is the world’s largest consumer of Johnnie Walker Black Label?”. I’ve no idea if this was actually true but maybe it was. The supply route was explained to me. One of the members of the House of Saud, the ruling family, (there are a lot of them), had the Johnnie Walker “concession” and arranged both the (illegal) import and the (equally illegal) distribution to customers. This was matched for all of the rest of the high quantities of alcoholic drinks that the country consumed.

The home manufacture of alcohol by ex-pats in their compound homes was also common. They would brew beer, make wine from kits and some even had a still to make hooch. This was partly because the imported real thing, though available, was expensive. Mr Andree was apparently arrested for transporting a quantity of homemade alcohol. He was caught by the “religious police” – perhaps there was a particularly tough officer on the case. In general the Saudis turned a blind eye to what was going on so long as it was not “in-your-face” - and they rarely if ever went into an ex-pat compound.

Nothing is ever quite what it seems in this corrupt and bribery-ridden country. Maybe the arrest and imprisonment of Mr Andree has more to it than it seems? He has apparently lived in Saudi Arabia for the last 25 years, “developing and managing a number of locally owned oil companies” and that will have at times, no doubt, have  placed him in difficult personal positions in a sector where there are many rivalries. Has he fallen foul of somebody who wanted revenge – or at least for him to be out of the way? Who knows, but a man who has lived in the Kingdom for so long is unlikely not to know the rules and to have found subtle ways around them.    

Thursday, August 13, 2015

It is a black and white matter - the hideous use of reverse type.

This is the front page of today's "Jewish Chronicle". I'm not asking you to read it, or try to, because of its content. I'm showing it to comment on the still insidious and hideous practice of the use of "reverse type". "Reverse Type" is when a publication (including online) decides to print in white on black rather than black on white. The great AdMan David Ogilvy wisely said "If the New York Times could be made more readable by printing in reverse type they'd do it" - or words to that effect.

So why do some publications still do this decades after Ogilvy settled the matter? Ignorance mainly. A new generation of designers is around who think that they need to grab attention by being smart. Of course the "Jewish Chronicle" is not all white on black. But here they think they have a big story and big questions for Labour leadership candidate Jeremy Corbyn. Perhaps they do. How especially odd that they do this not by making the text more readable (by increasing the font size for example) but by making it less!

Another common use of reverse type is in theatre programmes. It's trendy - I assume. Even more bizarre! In a theatre you are often reading your programme in dim light. Combine that with trying to decifer text in reverse type! 

For once this is a black and white matter!

Saturday, April 11, 2015

BG acquisition offers Shell opportunity for major strategy change

As a Shell "lifer" - more than forty years if you include my time as a Director of the Pension  Fund - I cannot recall a bigger strategic shift than the acquisition of BG. It offers the Corporarion a unique opportunity to do what Tom Peters called "stick to its knitting" - to concentrate on what it's really good at.

BG is an "Upstream" company. It only does exploration and production of oil and gas. And that is what Royal Dutch Shell (RDS) is good at too. To the man or woman in the street it is the Shell emblem standing over a Shell petrol station for which it is best known. But over the years this part of the business - never, in truth, that important to the heavies at the top - has declined in importance. The "Downstream" - the refining and marketing of oil, gas and chemicals - is pretty much cast adrift from the Upstream. The engineers, geologists and accountants in the highest echelons of Shell never really understood it anyway! There are no longer any economies of scale from being involved in oil from wellhead to petrol pump, if there ever were. 

In the last period of my Shell career the start of a major centralisation of business occurred. The power of the national "Operating companies" (OpCos) was severely curtailed. Most of these were marketing companies and there was a presumption, based on profound ignorance, that they could be managed centrally in the way that the Upstream increasingly was.  Those arguing the indisputable truism that "All Markets Are Local" we're not listened to and numbers on the ground in the OpCos were drastically reduced and their autonomy was destroyed.

The Downstream was an uncomfortable mix of Refining - an asset rich highly technical business - and Marketing which if done well has to be customer driven. Once, perhaps, to market oil oil products you did need to refine them. That hasn't applied for a long time. Shell no longer has any refineries in the UK but still has a significant marketing business. The same applies to many Shell operations around the world.

Over the last decade or more Shell has pulled out of the Downstream in many countries - in some cases franchising the brand to a separate business Independently managed and neither Shell owned nor controlled. This reduces assets employed, whilst maintaining a visible brand presence. There is nothing wrong in principle with this model - MacDonalds and other fast food businesses do it - but it has to be tightly controlled. Especially the brand. I very much doubt that the Board of RDS spends any time on these matters - the huge Upstrean business occupies most of their time. And when it comes to investment the priorities are also overwhelmingly Upstream.

The purchase of BG merges a significant Upstream operation into RDS's already huge one. All of top management's attention in the next few years will be on making this work. In these circumstances the Downstream would be an uneccesarily distraction. There is an overwhelmingly strong case for splitting the Downstram away as a totally separate stand-alone company which would focus entirely on marketing the brand to customers around the world. Oil Trading and Chemicals would also be part of this new Shell company. It would be separately traded as a FTSE company and entirely disconnected from the Upstream of RDS. The new company would take the "Shell" brand while the Upstream would be renamed "Royal Dutch". Easy !

I would guess that there are a few people in BG who know all about demerger. Remember the old British Gas was a vertically integrated company, like Shell, doing everything from exploration to selling Gas to the end consumer. It was split into two back in 1997 when the brand name "British Gas" went to the UK marketing company (owned by Centrica) with the Upstream business being renamed BG. Shell has the opportunity to do the same now and there are sound reasons for doing so. 

Tuesday, February 03, 2015

You may not like it but tax avoidance is good business.

The tax Division in Shell was pretty big when I worked there. I suspect it's much bigger now. Multinationals by definition operate globally - in Shell's case in just about every country in the world. I have two Shell pensions. One relates to my UK service, the other to my years of service overseas. That latter pension is from a Pension Fund based in Bermuda - this location, which is perfectly legal of course, is purely for tax reasons. The Fund benefits from an advantageous tax regime in the British Overseas territory, and so indirectly do I. I pay tax on my overseas pension of course, but I get a small tax exemption to reflect the fact that the pension is in effect deferred salary from a time when my employment was not UK tax liable.

The Pension example is one of thousands illustrating that big Corporations have to be tax efficient, and have the ability to be so. That ability comes from that big Tax Division whose brief is, of course, to minimise Shell's tax obligations. Some profits are deliberately made in low tax locations rather than high tax. Some businesses are deliberately located in low tax countries rather than high tax. And so on. Sometimes it's much cheaper to do business in one place rather than another and Shell, and the rest, have an obligation to respond to this. Who is the obligation to? Well the owners of the Corporation of course - including institutional investors. Why pay tax if you don't have to?

Those that levy tax certainly have their work cut out to apply the law when in the big Companies there are top tax lawyers trying to beat the system! The search for tax loopholes which lead to the avoidance of tax liability is part art and part science. It's clever stuff, but there is nothing illegal about it. It's up to the authorities to close the loopholes not to businesses to pay taxes when they are not obliged to. Labour leader Ed Millibsnd said this about the Boos of Boots:

"I don't think people in Britain are going to take kindly to being lectured by someone who is avoiding his taxes..."

Aside from the personalisation (it's the Company not the individual) I'm afraid Ed just doesn't get it. Ever day thousands of British businesses and their advisers and lawyers are working hard to avoid paying taxes. They are not evading them (which would be unlawful) but avoiding them (which is good business). It is utterly naive to imply that companies should voluntarily pay taxes when they don't have to.