Maria Sharapova vs. the Russian consulting market: Deuce?
Monday 19th Sep, 2016
By Alastair Cox.
As one would expect, the revelation of Maria Sharapova’s use of banned performance-enhancing substances provoked an extremely negative response from the tennis and sport-at-large community. As a result, Sharapova received a two-year ban from tennis. Meanwhile, and on a slightly more existentially-significant scale, Russia annexed Crimea and found itself on the receiving end of massive economic sanctions.
The responses to both events, however, led to a strangely similar situation. On one hand, Tag Heuer, one of Maria’s key sponsors, cut ties with immediate effect; Porsche, another key sponsor, suspended its sponsorship pending the outcome of her trial; while Nike and Head, in all likelihood her two largest sponsors, made it publicly clear they would stand by their tennis sweetheart. Meanwhile, some western consulting firms (mainly small or medium-sized one) started to pull out of Russia—partially, it must be said, due to the low oil price and stagnant economy, but also because of the sensitive political situation following the imposition of those sanctions—while others, mainly large firms, decided to battle on through thick and thin. To simplify this, I’ve drawn a little diagram:
Simple, right? The overarching, multimillion-dollar question in both cases is whether firms/sponsors are right to pull out, or whether there’s more reward down the line for those willing to stick it out. Looking into this question in more detail demonstrates the complex risk/reward scenario they’re faced with:
Let’s suppose, two years down the line, Maria does come back—in fact she doesn’t just come back, but she’s winning tournaments left, right and centre and is once more the darling of the global media. Do we think that she’d happily accept Tag Heuer back if they came knocking? Or would she turn to arch-rivals Rolex instead? Yes, Tag Heuer may say that it took a firm anti-doping stance and that this is what matters most, but I doubt it’d really be thinking this as Rolex reaps the spoils of her rediscovered success, flashing its watches to global audiences at award ceremony after award ceremony...
Major consulting firms find themselves in a very similar position as Maria’s sponsors: by leaving Russia they’re not only avoiding the current hard times—GDP contracted by 3.7% in 2015, primarily due to Russia’s structural issues linked to oil—with virtually non-existent discretionary consulting budgets for clients in many industries in the next few years, but they’re also echoing the western stance that simply annexing a country as and when you wish is not acceptable. But what happens when the Russian economy comes out of the current economic cycle in a few years (which one would expect at some point) and prospective clients start spending big money on consultants again: Will these organisations look to work with consultants who fled when times got tough, or stick with the people who stuck with them?
Granted; things aren’t that simple, but while firms do need to have one eye cast to the future, the present cannot be ignored and salient questions should be asked, including, but not limited to:
If you can answer a definitive yes to two or more of these questions, then perhaps you’re right to seriously question the benefits of staying in Russia for the time being.
Ultimately, though, the question seems to be whether you want to be the Nike, the Porsche, or the Tag Heuer of Maria’s world. While in the case of Nike you’re likely go through tougher times in the short-term–not to mention the inevitable question marks that will surround your moral positioning–there is the potential for massive financial reward in the future. In the case of Porsche, you put your work on hold and wait for tough times to blow over, keeping your cards close to your chest. In the Tag Heuer scenario, you’ve got a positive short-term PR stance, but there’s a chance this could backfire on you and benefit your competitors when things turn around in the future.
It’s all to play for, but what will you do?
1) World Bank, Country: Russian Federation, last visited on August 12, 2016. Available at: http://data.worldbank.org/country/russian-federation