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First of all, we must note that there are serious disadvantages to sponsoring an Olympic Games that is held in a country with such a reputation. Sponsoring the Olympics could harm a firm’s brand equity. It would do this because many people in the US and other rich countries would feel that the firm was helping to support a repressive government.
That said, there are clearly benefits to be gained. We can see this from the fact that there was no shortage of American companies sponsoring the 2008 Summer Olympics in Beijing. There are at least two likely benefits. First, there will be benefits within the US. People watch the Olympics regardless of where they are held. The people will see the firm’s advertising, which is exactly what the firm wants. Since they are willing to watch the Olympics themselves, they are not that likely to feel that the firm is in some way doing wrong. Second, the firm will benefit by the fact that more people in the Games’ host country will see their advertising. This is clearly important when the host is as big a market as China. People may think well of a country that sponsors something like the Olympic Games, which is a major source of pride to the country.
In this way, the firm may gain enough from the fact that people will be exposed to its brand to outweigh any possible damage to its brand equity from doing business with a repressive government.
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