Would you like an AK47 espresso or a liberal latte?

On 27 January 2017 then US President Donald Trump brought in a temporary travel ban which blocked people from seven Muslim countries from entering America. While many prominent US companies publicly decried the executive decree, none took as pronounced a stand on the controversy as Starbucks CEO Howard Schultz, who vowed to hire 10,000 refugees over the next five years.

In response, Black Rifle Coffee Company CEO Evan Hafer vowed to hire 10,000 US service veterans. By presenting the company, which employed 50 people at the time, as the “not-Starbucks” – or, as a New York Times reporter called it, “the Starbucks of the Right” – Hafer was engaging in a clear case of corporate social counterpositioning.

As the authors of Corporate social counterpositioning: How attributes of social issues influence competitive response point out, in recent years there’s been a marked increase in firms taking stances on controversial sociopolitical issues.

Co-author Aharon Cohen-Mohliver, Assistant Professor of Strategy and Entrepreneurship at London Business School, says, “Disney’s stance against Florida’s ‘Don’t Say Gay’ bill and the backlash from the state is a notable case in point, as was Elon Musk’s takeover of Twitter to ‘free it from liberal censorship and cancel culture’, as he put it.”

In some cases, a public stance is followed by a firm’s competitors. In other cases, they stay silent – but in some cases competitors choose to take the opposite stance. So, when should firms choose to support, ignore or oppose their competitors’ positioning? That is the question the authors sought to explore in their paper.

Differentiation along social issues

Whilst existing research tends to assume that corporate social responsibility is universally positive, the idea of corporate social counterpositioning relaxes this assumption. Of course, first-mover firms will most likely take a majority position on social issues that stakeholders care about. But what is the optimal response by their rivals?

When an issue is universally positive the answer is simple: they will support the issue or remain silent. But when an issue is polarising and there are stakeholders who hold opposing opinions, a profit-maximising second mover can benefit more from taking a position opposite that of the first mover; for example, by signalling alignment with an ideological position.

If a first mover opposes the travel ban, for example, a second mover may court consumers who hold views in support of the ban. After all, why compete for the same customer base if you can serve a large-enough population who disagrees with that stance? Issues such as gun control, LBGTQ+ rights and abortion are often unrelated to the firm’s value-chain activities. They are highly polarising and, as a result, allow different firms to differentiate from their rivals inexpensively. Alienating stakeholders who already value the competitor’s social position is a small price to pay if they have already taken their business elsewhere.

A gap in the literature

The literature seemed to be silent on the phenomenon of counterpositioning; believing that this was a significant gap, and that it was important to recognise that not all CSR efforts are universally lauded, the researchers – Aharon Cohen-Mohliver, Donal Crilly of London Business School and Aseem Kaul of the Carlson School of Management, University of Minnesota – decided to model when firms may try to exploit a lack of social agreement about what is “right” in order to differentiate themselves from their rivals by adopting opposing stances on a social issue.

The paper argues that, when firms take a stance on a polarising issue, it creates opportunities for their competitors to counter their ideological positioning, increasing the profits of both the focal firm and its rivals.

If this sounds like a potential winner-takes-all or zero-sum game, depending on the commercial outcome, it turns out that, in a competitive market, taking a clear stance on a polarising, salient issue can segment the market, enhancing both firm’s profits.

It’s key to note that the model also predicts that counterpositioning is more likely when salience is high but agreement is low – but salience can be driven by small groups on either side of the ideological divide. “There’s an interesting trade-off here,” says Aharon. “It could be that a few people care a lot about an issue, or many people care, but only moderately. What’s surprising is that it’s enough to have a small group that really cares to get the effect we observe. Even if there’s a very large silent majority, if you have very passionate groups who care about an issue on both sides of the ideological divide, firms that align themselves for and against the issue would both profit.”

Why it pays to pick a side

So, does that mean that a commercially viable strategy for responding to other firms’ positioning and counterpositioning could be to remain neutral and stay out of the fray? “No!” replies Aharon emphatically. “If people care about an issue, the last thing you want to do is nothing. Take the example of McDonald’s and Chick-fil-A in the US, which we refer to in the paper. When McDonald’s became a member of the National Gay & Lesbian Chamber of Commerce in 2008, the American Family Association called for people to boycott it and at least one competitor – the fast-food chain Chick-fil-A – counterpositioned itself against supporting LBGTQ+ rights by aligning itself with organisations opposed to them.

Chick-fil-A’s stance was attacked by some activist groups, but at the same time it received strong support from right-wing activists as a result. For example, when Fox News host Mike Huckabee launched a Facebook page in support of its stance, it resulted in 400,000 followers and over 630,000 RSVPs to ‘Chick-Fil-A Appreciation Day’, increasing their sales in some locations dramatically.”

Chick-fil-A’s clear positioning against gay marriage was followed by consistent sales growth. (For example, from 2012 to 2020 its revenues increased from $4.5 billion to over $13 billion, making it the third-largest fast-food chain in the US.) Aharon says, “Of course, we do not show that you can attribute this growth directly and exclusively to the company’s positioning on LBGTQ+ rights, but it seems evident that, at the minimum, Chick-fil-A has not suffered for its counterpositioning.”

Monopoly rule

Such positioning can have little to do with the firm’s value-chain activities. BRCC and Starbucks are prime examples, says Aharon. “They both make coffee, right? How can coffee be for or against ideological issues like gun laws or the Trump travel ban? Probably most people who feel strongly one way or the other on the issue couldn’t tell BRCC coffee from Starbucks coffee, but that is where it makes commercial sense for a company to align itself with one side or another.

“Assume a market scenario where there are only two coffee companies, Starbucks and BRCC – if some Americans are strongly in favour of a travel ban on immigrants and some are strongly opposed to it, by positioning themselves either for or against the ban, each of the two dominant players is effectively creating a monopoly of its customers, because they will boycott the firm’s rival. And, if people care enough about the issue, both firms can charge higher prices for their product, knowing their customers will not purchase from the rival firm on account of their strongly-held beliefs.”

Second-mover advantage

The paper also makes a novel contribution to strategy in terms of analysing the optimal second-mover response. “The really new part of the story is that, if the issues are polarising enough, the optimal second-mover move is to do the opposite thing to the first mover,” Aharon says. “Look at Chick fil-A and Black Rifle Coffee Company – their responses to McDonald’s’ and Starbucks’ positioning maximised their profits. It shows that visibly aligning around polarising issues is better for profits than doing so around non-polarising issues. But it’s important to emphasise that the process is sequential – it’s the competitive response that’s key. If no firm were to take a position, no one would have an economic incentive to take a position opposing that of the first mover. If no coffee company was against the travel ban, BRCC would have little incentive to come out strongly in support of it.”

Theoretically, this could make for a scenario in which companies vie to out-compete rivals by stirring up emotions on the most controversial issues of the day. Could the paper then be used as a Machiavellian handbook to CEOs, advising them how to cynically exploit consumers’ moral convictions to sell them more product? Again, it is a suggestion that Dr Mohliver is quick to refute: “No, because we don’t prescribe actions – we just provide a model that describes what we already observe. For better or worse, we live in a world that rewards firms for taking a clear stance when issues are polarising.

“Karl Marx said the philosophers have only interpreted the world in various ways, but the point is to change it. I would reverse that and say the world is changing – very fast and in ways that are often hard to understand – and, at this time, our main effort should be to interpret it.”