Chapter 7: Case Study: Beiersdorf-Lechia SA, Poznan

Susanne Blazejewski, Frank Claassen, Wolfgang Dorow and Heinz-J ¼rgen St ¼ting

7.1 Introduction

7.1.1 The context: FDI in transition economies

Foreign direct investment has been a major driving force behind the economic transformation of Central and Eastern European (CEE) countries since the early 1990s, although it has followed different paths in different countries , often due to heterogeneous privatization schemes. The economic relationship between Germany and Poland “ two of the most populated states in Europe, with 81.2 million and 38.7 million inhabitants respectively and correspondingly high market potentials “ has been particularly close (see Chapter 1 on the development of the close political, economic and cultural links between Germany and Poland). With Poland s anticipated accession to the EU in 2004 these two neighbouring countries will account for more than one quarter (approximately 122 million) of the total EU population after the first round of eastern enlargement .

Germany is not only Poland s most important trading partner, but since the early 1990s it has also been one of the top three providers of foreign direct investment (FDI) to the region, with consistent growth rates (see Chapters 2 and 3). Its large market potential makes Poland especially attractive to international consumer goods industries. The generally stable and increasingly favourable legal, political and economic situations since the mid 1990s have also reduced the risk of direct investment in Poland, be this a greenfield or an acquisition. The acquisition of a Polish, often state-owned, operation has frequently been followed by full-scale organizational change aimed at integrating the new affiliate into the investor s international corporate strategy and preparing the subsidiary s structures, systems and employees for the demands and challenges of Poland s increasingly competitive and dynamic market.

The story of Beiersdorf-Lechia in Poznan is an excellent example of successful cross-border direct investment and illustrates many important aspects of large-scale change management in transition economies. An in-depth description and analysis of its operations will reveal not only the dimensions of decision making and alternative management actions in such a dynamic environment but also the problems, traps and pitfalls of complex turnaround projects. This will provide a framework for future change management processes in this region and other parts of the world.

7.1.2 The case study

In 1997 the Beiersdorf group , producer of the world s top all-purpose skin-care cream, Nivea, reacquired its former subsidiary “ at that time named Fabryka Kosmetyk ³w Pollena-Lechia “ in Poznan, which had been expropriated by the Polish state in the wake of World War II. There followed a remarkably swift and successful turnaround of this state-dominated, production-oriented conglomerate into a lean, highly profitable, market-driven fast moving consumer goods company. This chapter traces the development of the organization during the years of fundamental change between 1997 and 2002. It focuses on the instruments of change management employed by the new management team and conducts an in-depth analysis of their consequences for the strategy, structure and culture of Beiersdorf-Lechia.

Section 7.2 outlines the history of the Beiersdorf group and Pollena-Lechia, and provides an overview of the developmental stages the latter went through between 1997 and 2002. The main part of the study (section 7.3) considers in turn the strategic, structural and cultural changes introduced by the new management team at Pollena-Lechia after its takeover by Beiersdorf. In the course of the case study the reader is referred to other chapters in this book that provide important insights into crucial features of the case study, such as the political and economic context, strategic issues, the development of human resource management systems, and problems of leadership and organizational identity in Polish corporations. These references are intended to provide a better understanding of certain aspects of the study and to put the specific strategic, structural and cultural issues at Beiersdorf-Lechia into a more general picture of management challenges in complex change processes.

7.1.3 Data collection

The data for the case study were collected from numerous sources in order to achieve triangulation and gain insights into the transformation process from various perspectives. Between December 2000 and May 2002 we conducted a series of interviews and had numerous opportunities to observe organizational processes at the company in Poznan. Structured and non-structured interviews were conducted with the general manager of Beiersdorf-Lechia (a German expatriate and the key agent of change), German and Polish members of the board, Polish middle managers, Beiersdorf-Lechia employees, former employees who had left during the change process and the CEO of Beiersdorf International, as well as an external consultant of Beiersdorf-Lechia to obtain an outside perspective on the change process. The atmosphere of trust and openness that prevailed from the start was invaluable during the interviews and observation phases. It also facilitated informal interactions that helped us to gain insights into the underlying processes of power and the interests and values of individuals, which in our view are crucial to the understanding of organizational change. Written material such as internal memos, reports , correspondence on the acquisition of the company and the negotiations with unions, and other archival material from before and after the acquisition was generously made available to us. All interviews were conducted and all written material analyzed by at least two researchers to ensure that the findings and interpretations were as objective as possible.