By: Ameena Al-Emadi, Muna Al-Ansari, Maha Mohammed,Aysha Khameeri , Asia Shafiqulruhman
Community Tool Box, (2014) defines boycott as “an effort to convince a large number of consumers not to do business with a particular person or business”, while Ethical Consumer, (2014) defines boycotts as “essentially moral acts: expressions of disapproval and attempts to disassociate from the object of complaint.”
There are two main objectives of boycott. First, it creates a lot of negative publicity against organization being boycotted. Second, as a result of this negative publicity, threatens to the organization’s bottom line (organization profits). It is used to force individual or business to change the organization policies and practices. As it is an economic tool it used against those who are accustomed to holding the economic cards. In addition, it encourages civic responsibility for community members by letting people put their money where their values are. Finally, other business will learn that negotiation is preferable to risking a boycott. Therefore, boycott is used for different reasons such as:
- As an end in itself: It is organized by a group of people without really expecting the organization being boycotted to make any changes In this case, the group members only want to make their point and express their disapproval with the company. In addition to that it can also be used to stop purchasing a certain product.
- To destroy an individual or corporation: Used to force the corporation or individual out of business.
- As a bargaining chip: Which is the most common use. A group uses a boycott to convince an individual, company, or country to change certain practices they disagree with. It is used as a tool to force policy changes. For example, to force them to treat employees better, and develop more environmentally friendly containers for their products.
One of these boycotts is Quraysh entered into a confederacy against Banu Hashim, that they would not marry their women, nor give their own in marriage to them; that they would sell nothing to them, nor buy from them; and that dealings with them of every kind should stop. The boycott lasted for two or three years but eventually collapsed mainly because it was not achieving its purpose; the boycott had caused extreme privation and the sympathizers within Quraysh and finally united to terminate the agreement.
|Primary Boycott||Secondary Boycott|
|Is a decision not to buy goods or services produced by a certain company, that you refused their policies and practices. Or to put pressure on their government to change their direction. For example in the case of Israel, the boycott calls upon citizens of the Arab League from engaging into any transaction with Israeli corporations, government, and/or citizens.||Is directed at a third-party, Indicates that stop purchasing goods or services from someone who sells products made by the company you are boycotting (Community Tool Box, 2014). That is, it extends beyond the primary boycott to include more participants across the globe. For example in the case of Caterpillar. Consumers have been calling for boycott on the company’s act of selling bulldozers to Israeli; though the company understands that the bulldozers will be used to fight Palestinians on the own land.|
Generally speaking boycott has critical economic, political and cultural threat to companies, corporations, citizens and nations. This is apparently witnessed in the case of international call to boycott Israeli companies and other foreign companies supporting them or have economic links with them. For instance, Caterpillar is an apparent victim of the threat related to modern international call to boycott on Israeli companies and their associates. There was a call to boycott Caterpillar products; due to its acts of selling bulldozers to Israeli and that the bulldozers will be used to fight against Palestinian’s on their occupied land.
Caterpillar is not the only individual business experiencing the threat. The company (G4S) has been criticized for illegally offering support services to Israeli, whereby the offered services encourage enduring oppression of Palestinians’. A website by Consumer Ethical (2014), clearly reported “G4S has provided a range of security equipment and services to Israeli checkpoints, police, illegal Israeli settlements and prisons within the occupied territories and Israel”. Additionally, the company has also witnessed criticisms from human rights organizations for interacting with prisons that execute inhumane activities against the inmates.
Different reporters such as Haaretz predicted a possibility of an “economic tsunami” (Eesa, 2014) also reported a great economic threat associated to the boycott. On the other hand, it can be as opportunity for individual like Palestinian to provide a legally and morally appropriate means to carry on the struggle for Palestinian’s rights. Such soft-power tactics give Israel the opportunity to reconsider its approach to relations with the Palestinian people.
Boycott is both economically and politically an effective tool. The article entitled “The Israeli patriot’s final refuge: boycott” by Gideon Levy who pioneered the divestment and sanctions (BDS) reported that “a boycott is the least of all evils, and it could produce historic benefits” (Levy, 2014).
Boycott is an effective alternative for encouraging companies to consider ethical and legal activities, which honor human, environmental and animal rights. Similarly, Friedman (2002) reported that many business leaders prefer it as an effective technique. Boycott facilitates social justice in the society and has been widely used throughout the American history to advocate for equality compared to any other technique. The Palestinian campaign has moved from popular support to formal endorsement stage, where Spain, for example, decided to freeze military contracts with Israel after the recent war on Gaza, and the seven countries of Latin American withdrew their ambassadors, as states in Al-Jazera website.
One of the effective results from the boycott is that, as it is stating in Reuters October 2014 “The Swedish government officially recognized the state of Palestine on Thursday and said there were signs other European Union states would follow its lead.”. in order to calm the dispute between the two parties, which infuriating Israel saying that the move will hurt prospects for future negotiations. France is expected to follow Sweden Government, depending on voting result expected in December 2014.
Consumer boycott campaigns had become popular nowadays in the marketplace and used as a strong weapon against some companies. Consumer boycott are unpredictable and has strong power to affect the reputation and sales of the companies, a framework was developed by (Al-Shammar, Al Shebil & Rasheed, 2011) which will help managers to analyze the boycott and develop a coping strategy based on the situation. The framework is based on two dimensions brand-country association and boycott intensity.
The first dimension is brand-country association: it is the extent to which products and brands are associated to their country of origin in consumer minds. The second dimension is boycott intensity: it includes size, aggressiveness and duration of the boycott. Size refers to the number of people involved in boycotting the product or the brand. Duration refers to the time period in which the boycott is happening and it could be evaluated on the basis of identifying the reasons of the boycott. Aggressiveness reflects if the boycott is happening along with some violent acts against the brands or product’s offices and outlets.
The firm can take one of the four strategic responses based on how low or high the firm finds itself along with each dimension as shown in figure 1. The framework suggests four strategies, which are: blend in strategy, monitor and blend in strategy, lower profile strategy and status qua strategy.
Figure 1: A framework of four strategies to cope with boycott
When the brand is highly associated with its country of origin and has high boycott intensity the framework suggest blend in strategy. This approach demonstrates on the local character of the brand and reduction of the foreign identity, this can be done by several ways such as sponsoring sports events, advertising, public relation and charity events. The firm should adopt such a strategy proactively before the boycott happens rather than reactively after the boycott happens as changing consumer’s perception is difficult after the boycott happens.
When the brand is highly associated with its country of origin and has low boycott intensity the framework suggest the firm following monitor and blend in strategy. Although the brand has low intense but it is highly associated with the country of origin so the firm should monitor the environment carefully and detect the possibility of boycott occurrence and proactively blend in strategies. Even though the boycott intensity may be low but in many situations there is high risk of increasing the intensity especially with modern technological communication.
In case the brand is not highly associated with the country of origin and has high boycott intensity it is better for the firm to lower its profile by reducing brand- country association in consumers’ minds.
This approach is good when the association with country of origin is low and the boycott intensity is low as well, the firm does not need to take any action except monitoring the environment.
McDonald’s is highly associated with its country of origin the US, and it faced boycotts in many countries. As a result, McDonald’s always try to present a local face (shows the local culture) in many parts of the world. It follows the “blend in strategy” by demonstrating a local character by several ways including advertising and making charitable contribution and other ways, which will be discussed in tactics section. From the study it is found that they also follow the expansion strategy by opening more stores globally to minimize the effect of Boycott on the company global sales.
There was no official acknowledgement from McDonalds Company that it’s facing losses due to boycott specifically. Thus deep revenue and GCSG were analyzed, the analysis revealed that, in order to cope with boycott effect McDonalds is opening new stores to cover the losses as shown in figure (2) and figure (3). The total revenue is increasing while the GCSG is decreasing and this attributed to new store openings instead of actual store’s productivity. This could be one of the strategies followed by McDonalds to increase its revenue. GCSG decline is steep starting 2010 and reached the max in 2013 as Bolivian Boycott occurred in addition to other factors such as China meat supply issue.
Figure 2: MacDonald’s total revenue from 2008 to 2013
Figure 3: McDonald’s Global comparable sales growth from 2008 to 2013
As illustrated in above charts McDonald’s revenue and GCSG (Global Comparable Sales Growth: which is a metric used to find out whether the new sales is generating from the actual sales growth or from opening new stores). The two rates have reverse relationship.
GCSG (Global Comparable Sales Growth: which is a metric used by the investors to find out whether the new sales is generated from the actual sales growth (operation) or from opening new stores) for several years (2008-2013) we found out that McDonalds is facing real losses due to boycott which was covered by expansion and opening new stores globally.
In light of the aforementioned strategies, the following tactics were identified to be followed by McDonald’s to battle global boycott. Those tactics are more of short term in nature, flexible for the condition of boycott.
- Distancing from Controversial Issues: By changing corporate policies, McDonald’s franchise policy is not to open a branch at any Israeli Settlement beyond the Green Line “1967 borders” (Halpern, 2013). This tactic is followed by many of international companies including McDonald’s in order to avoid negative responses by the consumers abroad (Israelhayom, 2013).
- Put Pressure on Israeli Government: Israeli government established mechanisms for compensating companies that were hurt by European boycott (Eldar, 2014). Concurrently Israeli Government issued the “Anti Boycott Law” approved by Knneset on 11th July 2011, to civilly sue individuals or organizations who call or promote for economic, cultural or academic boycott against entities that are under control of Israel (Wiki)
- Responding to rumors: a company addresses then responds to the false rumors in an appropriate manner before they turned to become true and accepted by customers. Companies need to send a clear message to their customers and communicate with the public in order to control the flow of information that their customers are getting. Similar to Amazon, when they announced that they don’t deal with Israel by any mean in Nov 2002. The Internet bookstore terminated its association with Jerusalem Post, which was donating part of its profit from partnership with Amazon.com to Israeli soldiers.
- Emphasizing on the impact on domestic economy: After Israel attack to Gaza and Malaysians boycotted McDonald’s, The company stated that Malaysians boycott hurt livelihood of 12,000 citizens and 85% of them are Muslims (Perweek, 2014)
- Revising Marketing Mix: Price reduction is another tactic usually followed by boycotted companies, in order to increase attractiveness of their products.
- Making Charitable Contributions: Corporate Social Responsibility through contribution to charity.
- McDonald’s franchisees in the Middle East made contributions to local charities. Raises in Saudi Arabia and Jordan in recent years, where a proportion of sales in a given period were donated to charity (Saleh AlShebil and et al, 2012).
- Launch Counter-Campaign: McDonald’s launched a campaign to donate 26 Cent from each burger purchased during Ramadan in Saudi Arabia to kids hospital in Palestine to stop people boycotting their products (BBC News, 2000). This is against the message on list of blacklisted products stated, “Each dollar spent buying an American product is transformed into a bullet to kill our brothers in Palestine” (BBC News, 2000).
- Changing Consumers Perception: This tactic is achieved by several strategic movements:
- Emphasize on Local Connections: McDonald’s stress on the fact that fast food chain is owned by local franchisees, and it’s providing employment opportunities for locals. Boycott will have negative impact on the economy and people lives (Perweek, 2014).
- Mass media advertisement campaigns in alignment with cultural events: It’s observed that McDonald’s started to launch well-produced TV commercials in last five years targeting young generation and family segments. Those commercials are aligned with respectful religious and cultural events such as Ramadan, Eid, and mid night of Ramadan, which is commonly known as “Gerggean” in the GCC.
- Re-Branding and Brand Repositioning: After global boycott to McDonald’s, more emphasis is given on the franchisee in the mass communication. The name of franchisee is displayed under McDonald’s logo. In Egypt on the other hand McDonald’s re-named to Man Foods, to cover up it’s connections to Israel. MnFoods is a joint stock company, which represents Egypt’s sole agent for the McDonald’s franchise (IslamWeb, 2002).
Despite of above followed tactics by McDonald’s, our finding revealed that McDonald’s started to recognize boycott effect financially in year 2013, where they faced significant drop in their Global Comparable Sales Growth to 0.2% only (McDonald’s Annual Report, 2013). Compared to 3.1%, 5.6%, 5%, 3.9%, and 6.8% during years 2012, 2011, 2010, and 2009 respectively (McDonald;s Annual Reports, 2012-2009). This dramatic drop didn’t happen during the financial crisis in 2008 where the Global Comparable Sales Growth rate reached 6.9% (McDonald’s Annual Report, 2008).
In year 2013, McDonald’s highlighted boycott as a risk factor within the list of risk factors and cautionary statement in the annual financial report. Where they stated the following:
“The impact of campaigns by labor organizations and activists, including through the use of social media and other mobile communications and applications, to promote adverse perceptions of the quick-service category of the IEO segment or our brand, management, suppliers or franchisees, or to promote or threaten boycotts, strikes or other actions involving the industry, McDonald’s or our suppliers and franchisees.” (McDonald’s Annual Report, 2013)
“The impact of events such as boycotts or protests, labor strikes and supply chain interruptions (including due to lack of supply or price increases) that can adversely affect us or the suppliers, franchisees. ….” (McDonald’s Annual Report, 2013).
It is important for managers to have a good understanding of the impact of culture on international business decisions. Culture differs across the nations and countries, so do the management decisions and practices that would be acceptable in one culture and unacceptable in another. If managers ignored the cross-national culture difference which strongly determine how people think and behave, and determine their values, customs and traditions while working overseas, as a result, managers will be at the risk of losing significant opportunities or even worse to close down their business.
Global fast food industry had lots of debates and concern raised against how it impact the diets and eating habits of people around the world, and the health implications of consuming fast food. The manger of fast food companies, which are mostly American, had to take critical decision to change and adapt their management and marketing mix strategies, in order to successfully enter a foreign country and to sustain its growth.
McDonald’s and other fast food company adapt their menu in their foreign countries branches to match the local traditional food consumption habits, for example:
- McDonald’s-India: to comply with Hindus who consider cows as sacred and avoid beef, and with Muslims who consider pigs as unclean and avoid pork, non-halal beef and food items. McDonald’s serves 50% vegetarian of it its menu including the bestseller dish in the country the McAloo Tikki burger, which uses a spiced potato-based filling. McDonald’s also planned to open vegetarian-only restaurant.
- McDonald’s-Japan: the Japanese culture which it value the launch and dinner time, and sharing food as it brings the sense of community had a great impact on the organizational culture, it didn’t concede to the traditional American tastes.
The majorities of Japanese don’t like meat and don’t consider it as part of its tradition. In other hand, Japanese real meal should include rice, which is an important element of its national identity. So, in order to comply with the Japanese culture, McDonald’s made adjustments to its menu by introducing Teriyaki Burger, Rice Burger, and Green Tea ice cream.
- McDonald’s-Arab Countries: First, all Arab countries are Muslim countries and all the menu item in McDonald’s around the Arab countries must be Halal. In order for McDonald’s to increase sales in the Arab country, it added new items to its menu like:
- McDonald’s Egypt offers McFalafel burger, which is served on a pita bread pocket.
- McDonald’s Middle east offers McArabia, which are two grilled chicken patties with lettuce, tomatoes, onions and garlic sauce folded in Arabic bread.And McArabia Halloumi which is included in McDonald’s breakfast menu.
Not only changing and adapting the menu items, McDonald’s also redesign it restaurant by introducing local cultural elements into it. McDonald’s restaurant western design made to urge the customers to eat fast or take-away their order, with no design-sophistication, which contains simple sitting hard plastic chairs that might attract only kids and bored teens. But in China people love sitting experience, so McDonald’s offered comfortable dining areas. Kenneth Chan, CEO of McDonald’s China branch, “said that the design aims to help McDonald’s blend in the local market better”. On other hand, there are some cases of failure for McDonald’s in dealing with cross-national culture differences, for example:
- McDonald’s- Jamaica: McDonald’s didn’t do enough researches on the Jamaican food habit. As Jamaicans like large portion of food, full of meat and carbohydrates. They consider McDonald’s burgers as starter to warm up, and if the burgers is not big enough they are not interested. McDonald’s failed to impact the Jamaicans and eventually closed down all it restaurants and leaved Jamaica.
- McDonald’s-Bolivia: Bolivians valuing the quality of what they eat, and they seek for well-prepared local meals, they don’t trust the time it takes for fast food to be prepared. Sixty percent of the Bolivians don’t find it worthy to risk their health and money on fast food. McDonald’s was rejected, and reported operation losses every year for a decade, eventually McDonald’s closed down all restaurants in Bolivia.
The rejecting or the indirect Boycotting for McDonalds in Jamaica and Bolivia was because of cultural differences, which made the manager to make a decision to close down and return home.
It is clear from all of McDonald’s experience in their international business, that culture has strong impact on taking business decisions. McDonald’s manager need to understand the cross-national culture differences as well, and to have enough knowledge about how to set strategies and tactics to deal with it, do avoid putting their companies and themselves in the risk of losing opportunities.
This paper discussed one of the actions that affect economic growth of any company or country, which is boycott. The paper started with identifying and analyzing global opportunities and threats of boycott. The main objectives of boycott such as negative publicity and decreased profits were discussed.
It has also been explained that there are many reasons for boycott such as the boycott being an end in itself, to destroy an individual or organization, or to be used as a bargaining chip.
Light was shed on the history of boycott, where it was found out that boycott started as early as the era of Prophet Mohammed “Peace be upon him”.
The research showed that there are two main types of boycott, primary boycott where the individual or organization is affected, and secondary boycott where a third party is affected by the boycott.
Boycott can be viewed as an opportunity and a threat at the same time. The example that was used is the boycott against Israeli companies and any company that has direct dealings with them. The boycott was a threat to “Caterpillar” and “G4S” who had some business linkage with Israel. Whereas it is an opportunity to Palestine and its people where it provided them with a legally and morally appropriate means to carry on the struggle for their rights.
With peace negotiation failure over decades, that caused lose of Palestinian fair rights for freedom and dignity, the only remained card in their hand was to approach civic institutions (Academic, Political, Cultural, Trade affairs) around the globe to put pressure on their governments and eventually Israel to withdraw from their lands and return back their stolen properties.
Throughout the history, it has been proven that boycott is actually an effective tool both economically and politically and leads to historic benefits. For example in support of the Palestine struggle, more and more countries are moving from support to formal endorsement stage. Moreover, many of the international companies over the world decided to boycott Israeli companies, which affected Israel’s reputation and revealed their forceful act towards Palestine.
On the other hand, as a response to boycott, companies can tackle one of the four main strategies; blend in strategy, monitor and blend in strategy, lower profile strategy and status qua strategy. Their choice should be based on how high or low their brand-country association, and boycott intensity dimensions.
Based on the chosen strategy, several tactics are available. In case of McDonald’s, tactics such as distancing from controversial issues, working with countries’ governments, responding to rumors, emphasizing on impact on local economy, revising marketing mix, making charitable contributions, changing consumers perception, emphasize on local connections, mass media advertisement campaigns in alignment with cultural events, and re-branding or brand repositioning were followed.
The impact of boycott on McDonald’s sales growth was clearest in 2013, as shown in their annual report. The boycott was listed as one of the risk factors to the business.
Another factor that played a role in boycott is the understanding of cultural factors when making decisions. Research showed that understanding a country’s culture when making any decision can play a huge role in making the business accepted or rejected/boycotted by locals. McDonald’s made good decisions in India, Japan and the Arab countries by customizing their menu offering to suit local needs. However, it was not as successful in Jamaica and Bolivia, as a result it closed down all its operations in both countries.
Therefore, the following are some of the recommendations to McDonald’s to face and cope with boycott.
- Avoid excessive media attention. Instead try to resolve the issue at hand by understanding the boycotters demand and if appropriate respond to them or find a common grounds with them.
- Continue to engage in local social responsibility initiatives to increase the acceptance by locals and earn their trust.
- Make sure to understand the perception of the company in the peoples’ minds to be able to choose the right action and strategy. That is linked to the brand-country association and boycott intensity.
- Try to keep neutral instead of siding with either party. Make sure the business is independent of any political matters.
- Social media really made, and makes boycott more effective. The media provides an effective and inexpensive platform for interaction irrespective of one’s geographical position. Many people have been using the media to criticize the government’s decision as violation of their religious practices.
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