Economic Warfare: The Boycotting Movement Implications on Business and Corporates

“Power that controls the economy should be in the hands of elected representatives of the people instead of an industrial oligarchy” _ William O. Douglas.

William O. Douglas once advocated for the empowerment of elected representatives over industrial oligarchies in controlling economies, highlighting the perennial struggle between economic power and democratic governance. Despite the theories of the 'invisible hand' and laissez-faire capitalism touted by Adam Smith and others, the rise of oligarchies has often eclipsed the supposed equilibrium of free markets. These oligarchs, wielding immense wealth, have wielded substantial influence, thus shaping political landscapes. Nowhere is this more evident than in the MENA region, where economic colonialism and power dynamics have become intertwined. In response to the conflict in Gaza, a groundswell of Arab, Muslim, and pro-Palestinian movements has initiated boycotts against Western brands, particularly those perceived to support the Zionist state, including Nestle, Starbucks, KFC, McDonald's, Coca-Cola, Pepsi, Zara, and others. However, as these boycotts reverberate across the MENA region, their impacts on international economies are increasingly felt, reshaping the global economic landscape. This silent protest challenges the established order, presenting an alternative Arab invisible hand that questions the allegiance and principles of global commerce.

McDonald's witnessed a staggering $6 billion loss in market value amidst the repercussions of a widespread boycott affecting Western fast-food giants like McDonald's, Starbucks, and KFC across Lebanon, Egypt, Jordan, Kuwait, and Morocco, originating primarily in Egypt, Jordan, Kuwait, and Morocco and gradually extending to other Arab nations, with Saudi Arabia and the UAE experiencing comparatively limited effects (Reuters, 2023; CNBC, 2024). The boycott, encompassing a broad spectrum of brands including Nestle, Starbucks, KFC, McDonald's, Coca-Cola, Pepsi, Zara, and others, has spurred a surge in consumer activism, prompting a shift towards local alternatives (Reuters, 2023). Protests in Jordan at McDonald's and Starbucks underscore the social and political momentum urging support for local brands (Reuters, 2023). McDonald's expressed regret over the situation and emphasized their inclusive stance, pledging support for Gaza, while Starbucks refuted claims of taking sides regarding the conflict (Reuters, 2023). The economic impact is palpable, with reports of decreased sales and financial struggles for McDonald's in Egypt, alongside supply chain disruptions affecting companies supporting these brands (Reuters, 2023). Varied impacts are observed across regions; while some, like Malaysia, witness a significant decline in patronage to McDonald's, others such as Saudi Arabia, the UAE, and Tunisia remain less affected due to differing perceptions regarding the efficacy of boycotts in aiding Palestinians (Reuters, 2023). Furthermore, Lebanon, already grappling with challenges, faces exacerbated issues following regional conflicts (CNBC, 2024). Intriguingly, Middle Eastern competitors like Starbucks and Coke thrive amidst Western brands' struggles, as demonstrated by Bloomberg reports (Bloomberg, 2024). The repercussions extend beyond sales, with job losses evident, such as Americana for F&B laying off 100 employees (Megaphone, 2024). Even Starbucks in the USA experiences adverse effects, underscoring the global reach and impact of this movement (Raseef, 2024).

Furthermore, to assess the financial impact of the Arab boycott movement, it was necessary to monitor the market value of certain stock shares, as a main variable that should be looked into. Thus, we have chosen 11 stocks targeted by the boycott to monitor, which are Papa John’s Inc. (PZZA), Nestle (NSRGY), Airbnb (ABNB), Coca-Cola (KO), PepsiCo (PEP), Caterpillar (CAT), Intel (INTC), McDonalds (MCD), HP (HPQ), Puma (PBYI), and KFC Ltd. (3420.T). These stock shares were monitored over two periods, 27 weeks each: between 10/9/2023 and 4/8/2024 (after boycott), and between 10/10/2022 and 4/10/2023 (control period). The dataset was collected from Yahoo Finance’s historical data of the relevant corporations. Thus, two analyses where concluded:

After collecting the market value of stock shares from the sample we chose, we calculated the average change in percent between each week and another, then, we calculated the average change of the 11 stock shares over the sample periods. Hence, we were left with the same variable over two different periods: the average change of the market value of stock shares of the 11 corporations over a 27-week interval before the boycotting movement and 27 weeks after.

The data clearly shows that the boycotting movement have impacted the stock market of targeted corporations during the first three weeks. However, the fluctuations in the stock market remained normal after three weeks from the start of the conflict, which might be explained by a decreased motivation and incentive for boycotting by the pro-Palestinians worldwide. Yet, this is not enough to prove that the boycotting movements were not efficient, for the restoration of normal market transaction might be explained in various other ways.

However, if we analyze the total revenue, as known as market share, we can clearly observe that the firms have accumulated massive losses from the BDS. This contradiction between findings can be explained simply by the fact that the firms targeted by BDS have decreased their supply of stocks to create a false image of a profitable company.

Furthermore, the average market share of firms targeted by BDS decreased to -311% in Q1-2024, from 202% in Q4-2023.

To sum up, the MENA boycotts, initially sparked by geopolitical tensions, are proving to be a transformative force, challenging established economic paradigms, and paving the way for a recalibration of global commerce dynamics. As the movement continues to unfold, the true extent of its impact on international economies remains to be seen.