Newswise — Toronto - Zachary Zhong was familiar with his grandparents' accounts of the Japanese onslaught in 1944 that targeted nearby districts within his birthplace in China. With the continuous progress of the Japanese military, innocent lives were lost or wounded, prompting some individuals to seek refuge within his ancestral abode while others sought safety elsewhere.

Etched firmly within the collective recollections of the community, the ramifications of a revived territorial dispute between Japan and China in 2012 intrigued Zhong. Now serving as an assistant professor of marketing at the Rotman School of Management, University of Toronto, he delved into the repercussions on automobile sales in Guangxi province during that period. Notably, Guangxi suffered the highest civilian casualty toll among all Chinese provinces during the war.

“Across generations, those historical memories get passed down to present-day consumers,” said Prof. Zhong.

Counties that fell victim to the invasion witnessed a decline of 6.8 percent in Japanese car sales, coupled with a 5.3 percent upturn in the demand for Chinese automobiles, in the aftermath of the 2012 territorial dispute. This contrasted with unaffected counties within Guangxi province. The impact was particularly pronounced for larger, pricier vehicles and in counties with a higher proportion of individuals born prior to 1936. Significantly, the consequences endured for over two years, indicating a lasting effect.

Professor Zhong and his research partner, Nan Chen from the National University of Singapore, conducted a comprehensive analysis using China's vehicle registration data for the top 100 bestselling car models. Additionally, they examined provincial archival records containing information on losses and casualties, categorized by county, during the Imperial Japanese Army's "Operation Ichi-Go." This military campaign occurred between late September 1944 and early January 1945, resulting in the occupation of approximately two-thirds of Guangxi province by the Imperial Japanese Army.

Following the normalization of China-Japan relations in 1972, a persistent disagreement persisted concerning the sovereignty of a cluster of islands situated in the East China Sea. Tensions escalated in August and September 2012 when the Japanese government decided to nationalize the primary islands, sparking extensive protests across numerous Chinese cities. This move reignited the long-standing dispute between the two countries and further exacerbated their strained relations.

Despite the fact that Japanese cars were manufactured in China through collaborative Chinese-Japanese ventures, the effects on car purchases were still evident. Interestingly, car models with names that were less distinctly Japanese did not experience as significant of an impact. This suggests that the perceived association with Japanese identity played a role in shaping consumer behavior and preferences during that period.

In contrast, the sales of a local independent brand, which emerged from a Japanese joint venture, remained unaffected by the "history effect." This observation offers valuable insights into how foreign brands can potentially mitigate the enduring impacts of past conflicts on consumer behavior. By establishing partnerships and collaborations with local entities, foreign brands can distance themselves from historical tensions, thereby minimizing the negative associations and preserving consumer trust and preference.

“Start a local brand,” said Prof. Zhong. “You can take advantage of the local association.”

Foreign companies can also try to play down the associations of their products with their country of origin. 

Amidst the prevailing geopolitical tensions and protectionist measures, Professor Zhong suggests that the most effective way to steer clear of the lingering business repercussions of history is to avoid invading other countries altogether. As highlighted in their research paper, the enduring grudges held by people against invaders serve as a reminder of the lasting negative impact such actions can have. By promoting peaceful and cooperative approaches, businesses can strive to build positive relationships and foster an environment conducive to long-term success and growth.

The paper was published in Marketing Science.

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Journal Link: Marketing Science