Firms that withdrew from Russia following Ukraine invasion earn higher consumer sentiment

(Press-News.org) Following Russia’s 2022 invasion of Ukraine, many companies with operations in Russia withdrew from or severely curtailed their Russian operations. For example, Dell and McDonald’s ceased all operations in Russia after the invasion.

Many experts have argued that the corporate response to the Ukraine war is a striking example of stakeholder capitalism, a model where corporations are responsible for considering the interests of various stakeholders — including employees, customers, communities, governments and the environment — and not just their shareholders. In contrast, opponents of the stakeholder view argue that firms should focus on the principal shareholders.

New research from the University of Notre Dame explores the impact of such corporate actions on consumer mindset metrics.

Decisions to withdraw from Russia since its invasion of Ukraine positively impacted consumer sentiment, especially for companies with strong environmental, social and governance (ESG) reputations, according to lead author Shankar Ganesan, the Raymond W. and Kenneth G. Herrick Collegiate Professor of Marketing at Notre Dame’s Mendoza College of Business, along with Girish Mallapragada from Indiana University.

Ganesan’s research, “Navigating Geopolitical Turmoil: Corporate Responses to the War in Ukraine and Its Impact on Consumer Mindset,” is forthcoming in the Journal of Public Policy and Marketing.

The Ukraine conflict serves as an important backdrop for the examination of corporate sociopolitical activism, where companies take public stances on controversial social and political issues.

Recent expansion in Russia by SLB (a global technology company formerly named Schlumberger) provides a stark contrast to the companies that withdrew from Russia following the invasion of Ukraine.

“This ongoing situation directly relates to our research,” said Ganesan, who studies interorganizational relationships and customer relationship management. “While many companies that withdrew from Russia saw a boost in consumer sentiment, SLB’s actions may test the limits of corporate reputation and consumer mindset in geopolitical crises.

“SLB’s decision to continue and even expand operations in Russia, despite being labeled an international sponsor of war by Ukraine, presents a real-world case study of the potential long-term effects on brand reputation and consumer mindset metrics that our paper explores,” he said. “It also highlights the complex interplay between corporate decisions, geopolitical pressures and consumer expectations in today’s global business environment.”

The study looked at the impact of these decisions on three critical consumer mindset metrics: net brand buzz, brand consideration set (group of products a buyer evaluates when making a purchase decision) and purchase intent. It also analyzed how these effects are moderated by factors such as a company’s ESG reputation, the timing of its decision relative to industry peers and whether the firm operates in a business-to-business (B2B) or business-to-consumer (B2C) context.

Companies that withdrew from Russian operations experienced a notable increase in net brand buzz, reflecting positive consumer sentiment over an eight-week period following the announcement, suggesting consumers generally favor companies that take a stand against geopolitical aggression.

The positive consumer sentiment was even stronger for companies with a robust ESG reputation. These firms saw enhanced brand consideration and purchase intent, indicating that a strong ESG profile can magnify the benefits of socially responsible actions during geopolitical crises.

“Interestingly, companies that delayed their withdrawal until after their industry peers saw a greater boost in net buzz,” Ganesan said. “This indicates that while early action is valued, there are strategic advantages to carefully timing such decisions in complex geopolitical environments.”

The research also uncovered variations in consumer reactions based on whether a company operates in a B2B or B2C context, providing nuanced insights for businesses on how different markets might perceive their actions during geopolitical crises.

This study contributes to understanding the relationship between such corporate actions and consumer mindset metrics in a novel geopolitical context, providing valuable insights for managerial decision-making and public policy.

When operating in politically sensitive regions, companies should account for the diverse interests of stakeholders, invest in ESG as a form of reputational insurance, carefully time major decisions, monitor consumer metrics and tailor strategies to industry context.

Ganesan challenges policymakers to understand the complex pressures businesses face during geopolitical crises and provide clear guidance that considers the varying impacts on B2B and B2C sectors.

He said, “By understanding the intricate relationship between corporate actions, geopolitical events and consumer perceptions, businesses can navigate these challenging waters more effectively, balancing ethical imperatives with business objectives.”

Contact: Shankar Ganesan, 574-631-5925, sganesan@nd.edu

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