Chapter 4: Strategy and Intercultural Management

BMW and ' Glocalization ': Case Study in Intercultural Management

BMW is a European company of note that is making concerted efforts to address the issue of intercultural management. Its efforts have resulted from its multinational operations. This company has managed to carve out an enviable niche market for itself in the premium segment of the automobile industry through technological innovation. Through its R & D efforts, it has always striven to be at the cutting edge. In July 2001, it became the first automobile company to unveil a prototype version of a 7-Series saloon car with a hydrogen- powered engine. That BMW has done so is not at all surprising, given that the prestige of this company relies on the engine-making ability of its brilliant engineers . The demand for hydrogen-powered cars that can replace petroleum-based fuel vehicles is a real one, given the capacity for these cars to emit fewer toxins.

The company has had to manage a companion challenge to its success in the market. This challenge is that of evolving and applying a corporate strategy that facilitates its advancement as a global corporation. BMW has evolved a corporate strategy that reflects its global interests. This global strategy BMW has described as 'glocalization', 'where the aim is to find the right combination of global networking and local policy'.

BMW has developed a unique training system designed to take cognizance of 'glocalization'. At the apex of this system is the International Management Training Group. This Group first convened in 1990. The group , with a different membership every year, comprises 16 top managers from different countries who are candidates for promotion within the BMW Group. The objective of the International Management Training disseminated to each group annually is to ensure that BMW can, first, think and act globally but also, second, work within the framework of different cultures.

Intercultural management orientation for top managers

We looked recently at the International Management Training Group (IMTG) for 1997. This Group comprised seven senior managers from Germany, four from the United Kingdom, and one each from the United States, the Caribbean, Austria, Australia and Switzerland. These managers were formally presented with an opportunity to form a network, which has since stood them in good stead, as they have been able to draw on each other's resources. They also collectively analysed a live BMW case requiring intercultural management expertise to resolve successfully. This case centred on the consolidation and enlargement of BMW operations in Thailand. A member of this IMTG, Jesus Cordoba from BMW (Caribbean), was CEO- designate for BMW Thailand.

To better understand the situation on the ground, the IMTG went to Thailand for a week.

Actual problem-solving

Every morning, the group discussed and debated various issues pertaining to BMW operations in Thailand and formulated recommendations, which Cordoba subsequently adopted. BMW was at that time buying back the local licence to market its automobiles from a leading Thai-Chinese business family. IMTG 1997 thus obtained insights into managing intercultural problems in Thailand, a territory hitherto unknown to most of them. They were also members of a culturally diverse group, which in itself was a learning experience.

A year after IMTG 1997 had assembled in Bangkok the group convened again, this time in Geneva.

Information sharing by competitors

One of the highlights for the IMTG 1997 in 1998 was attending the Geneva Road Show. All non-Swiss members were astonished by the extent of information sharing among rival automobile companies in Switzerland. Data on orders received and sales achieved were in the public domain. By contrast, the German members of the group admitted that they would never be given comparable data by say Mercedes-Benz in Germany.

Open -mindedness

The rationale behind the International Management Training as imparted to IMTG 1997 is to foster open-mindedness among its global managers. Observations made at the Geneva Road Show reinforced their awareness that ways of transacting business can differ across cultures. Hence BMW managers did not commence their factory operations on the supposition that German management practices were the best in the world and should be imposed on the Thai.

What IMTG 1997 found out, according to one senior member of the group, was how difficult it is for a European to pursue entrepreneurial activities in Thailand. The local people tend to be extremely reserved, with the result that outsiders cannot fully gauge the reactions and responses of their Thai counterparts.

BMW adopted a three-step procedure for Thailand. This procedure was developed by IMTG 1997 after having examined the functioning of other German companies like Siemens in Thailand. The first step was to induct Thais into key positions in BMW. These were second-line management jobs reporting directly to the CEO. The Thai senior managers acted as gatekeepers, communicating to BMW what various Thai groups ( employees , customers, government) really wanted and expected.

The second step was to inculcate and disseminate BMW values among these newly appointed Thai managers - a good example of 'glocalization' in action. These individuals had been recruited meticulously and felt proud to work for an internationally reputed and top-rated corporation like BMW. They were keen to imbibe BMW values. It then became their responsibility to exert influence over the remainder of the Thai workforce, and bring them in line with BMW's organizational objectives. As Thais, they naturally understood the Thai mind-set as no expatriate could. A member of the IMTG 1997 observed that Thais just smile politely even when they disagree . This could cause a serious problem for non-Thai managers unacquainted with this trait.

The third step was for BMW to consolidate itself in Thailand, as a company that respects and values Thai culture. The commercial rationale is compelling. If BMW was viewed as a 'killer' company, it would be forever alienated from the local population. One example of this was to adopt the same environmental protection standards as in Germany, even though the legislation is not as stringent in Thailand. This sort of policy perhaps explains why BMW has topped the Dow Jones Sustainability Index.

Once the company becomes well established, it is expected that a Thai CEO will be appointed. This is already the practice of the company in countries where there is a large and well-grounded operation: Italy, France and Switzerland for example.

'Glocalization' is the key concept driving BMW's intercultural orientation. The company is operationalizing this concept in its own way. It has been pursuing a global approach to corporate strategy, which is then implemented in each country after being adapted to that country's cultural heritage. The managerial challenge lies in resolving the apparent contradictions involved. BMW prefers to develop and depend on the expertise of managers from the countries in which it has operations, rather than extensively use expatriates . Its management practices are also sufficiently permeable to allow the adoption of culture-specific approaches. Some of these approaches, when found successful and inherently sound, are then recommended for use worldwide.

Inferences

The following tentative inferences may be drawn from the BMW case:

• Global companies require managers possessing intercultural management skills. These skills can be learnt, just like other behavioural science skills like leadership or team spirit.

• BMW believes in fostering intercultural management expertise through education. The International Management Training Groups are part of this educational effort.

• Members of International Management Training Groups develop sensitivity to local cultures, and thereby formulate country-specific policies that reflect cultural tones and flavours.

• Divisions may be differentiated by the need to take cognizance of local cultures, but they are integrated by a common set of values, orientation and global strategy.

• Cultures however are not static. This truism applies with equal force to ethnic cultures and corporate cultures. Corporate cultures functioning in an intercultural context must be permeable enough to imbibe what is useful from ethnic cultures. They must also be sensitive enough to assess trends and changes in ethnic cultures. Ethnic cultures of emerging economies are more susceptible to change than those of mature economies.

• In the BMW case, intercultural management is characterized by the fact that operational decision making has been delegated to its various country divisions.

• Local talent who have internalized BMW values and then transferred these values to the local context manage these local divisions.

• BMW stresses learning about cultures through first-hand exposure. Issues about the management of country divisions are discussed by International Management Training Groups. These groups comprise top BMW managers from different countries. The groups often discuss and analyse issues pertaining to a country of which they have no first-hand knowledge. In order to make worthwhile recommendations, the group travels to the country in question for a short sojourn, to learn about it.

The company is now poised for further growth. Its plans for the future are based on assessments made at its various country divisions. In the United Kingdom, it has divested itself of both the Rover and Land Rover brands of automobile, having sold the former to Phoenix Corporation and the latter to General Motors. In Thailand, on the other hand, it acquired its operations in 1997, at a time when the baht had fallen to an all-time low and purchasing power was also low. The Thai economy has since recovered fairly well. BMW has panache for financial prowess combined with skills in intercultural management.

CASE STUDY DISCUSSION QUESTIONS

1. What are the elements of BMW's corporate strategy that have contributed to its success as a global corporation?

2. How did BMW enact its corporate strategy in Thailand keeping in mind the local culture?

3. In what ways would BMW enact its strategy differently for its operations in the United Kingdom?

4. Why does BMW encourage its top management echelon to be in a continuous learning mode vis-  -vis national culture?

5. How can BMW further refine its intercultural approach to strategy formulation and implementation?

6. Does BMW believe that formulating strategy that can adapt to local culture is an evolutionary process?