In the BMW case profiled at the beginning of this chapter, the global company had decided as a matter of corporate strategy that it would instate a Thai CEO for its Thai subsidiary as soon as an appropriate individual had been groomed for that position. Another example of a global company that subscribes to the perspective of employing country managers from the local culture is P & G. Quelch (1998) has documented the career of Susana Elespuru at P & G, where during the course of an 18-year period she became a country manager.
Susana Elespuru was an ideal country manager from P & G's point of view. She was Peruvian and had worked for P & G Peru for 16 years . She understood the Peruvian environment well, and had managed P & G's business efficiently . In addition, she had the necessary international exposure and experience to fit into a global corporation. She had studied at a US college, and during her course had also studied for a semester in France. While with P & G Peru, she had been sent for a two-year assignment at the P & G headquarters in the United States.
The challenges she faced at P & G Peru were characteristic of that culture. One of the first challenges she faced was hyperinflation of up to 100 per cent per month. Prices of all commodities soared. P & G under Elespuru responded by increasing the salaries of their employees by 100 per cent. As a Peruvian, Elespuru was not thrown out of gear by the hyperinflation that could reach almost 7000 per cent in the worst years. Meanwhile, her managerial abilities enabled her to deal with the situation. And five years after becoming country manager, she succeeded in doubling P & G's sales volume.
An alternative to having country managers is using a transnational model, such as that advanced by Bartlett and Ghoshal (1989). Instead of country managers who direct entire business operations for a branch, this model advocates centralizing strategic decision making at corporate headquarters. It holds that in the wake of globalization, customer preferences are becoming more similar, and hence companies need not engage in product development separately and independently for every branch. Instead global companies are advised to leverage their capabilities across borders, and transplant best practices from one country to another. Additionally, the transnational model recommends that:
Senior intercultural managers should think in terms of three dimensions: product, geography and function.
Costs should be rationalized and control over all branches, near and far, increased.
Well-entrenched country managers should be uprooted, especially if they behave like king-emperors with considerable authority over their branch.
Headquarters should try to encourage standardization to the extent possible.
This model is an alternative to the country manager model, and is therefore not inherently better or worse . IBM is an example of a transnational corporation that has followed the transnational model to a large extent.
Quelch and Bloom (1996) have advanced a few reasons why, in their view, the country manager model is the superior one. The first is that for success in local business, it is necessary to have good relations with local governments . Country managers will build up an extensive network of useful government contacts over the years they work for a particular global company. In Quelch's case study about Susana Elespuru, the advantage of opting for a local country manager was that she was Peruvian and understood how things worked within the Peruvian culture. Further, local customers want personal attention in the form of product adaptation to local cultures. Susana Elespuru succeeded in selling Pert Plus, Pantene and Head & Shoulders, the three leading brands of shampoo marketed by P & G, in the form of individual sachets. This was a reflection of the reality in Peru at that time: people could afford sachets but not bottles of shampoo.
Country managers are also well suited to taking on local competition, which consists of other global companies as well as local companies. While in Barcelona in 2001, the author of this book noticed that the Spanish fast food company Pans was giving the US fast food multinational McDonald's a run for its money. Local companies are often well placed to notice and take advantage of local trends. Pans did this when they introduced Spanish specialities like the long sandwich and other forms of tapas as part of their fast food offering with success. Naturally Pans had the necessary market knowledge and experience of Spanish culture to supplement standard fast food fare with typical Spanish items. If a multinational is to compete successfully against local heavyweights, country managers who have the required knowledge of the market and local culture serve them best.
There are other reasons the country manager model has its advocates. Global brands gain local appeal because of their brand image as qualitatively superior products with a worldwide following. By the same token, they lose ground when local brands are upgraded and are sold at lower prices. Culturally sensitive country managers can take stock of the situation. They know how to adapt global brands to local conditions, so that the best of both worlds is made available to consumers. This is borne out in Quelch's case study of Susana Elespuru. When Peru experienced a phase of relative economic stability two years after Elespuru became country manager, Elespuru had this to say, 'Peru's 23 million consumers represent an increasingly attractive target. We anticipate more multinational brands trying to enter this market. But we intend to capitalize on the fact that P & G has been here all along, through thick and thin, relentlessly building our brand equities.'
A multicultural corporation likes to churn out innovations and best practices. It likes to encourage new ideas to emanate from all their branches, irrespective of whether those ideas can be replicated else-where. Quelch and Bloom go so far as to opine that 'new product ideas and marketing best practices - the competitive lifeblood of any multinational - are usually generated in the field by people who observe and listen attentively to customers, not by company-culture-bound executives at global HQ'. Quelch's case study notes that while Susana Elespuru was country manager, P & G Peru's 400 employees were all local nationals. The expertise for responding to the market was entirely nurtured from the local culture. When Elespuru wanted to penetrate the market for Pepto-Bismol, she hired a Hispanic company to publicize the product, with telling effect. According to Quelch and Bloom, country managers succeed when they operate under conditions of organizational efficiency provided by local stalwarts.
The country manager model as a component of intercultural corporate strategy has much to offer. So does the transnational model. Hence, the issue is not of pitting the country model against the transnational model, but of finding a suitable middle ground. The middle ground is extensive enough to be enacted in a manner that suits an individual global company's requirements. The part of the middle ground that is selected for one culture need not be the part that is applied to another culture. The right balance between globalization and localization has to be worked out for each branch, depending on exigencies.
The country manager model suggests that good ideas and best practices can originate in emerging economies and be replicated in advanced economies. Quelch and Bloom (1996) have cited the example of the construction materials manufacturer Lafarge, which felt that cement plants could be built in the West using the stripped-down lines approach they incorporated in Turkey. They also quote the example of KFC, the food chain that operates primarily as a take-away in the United States and Europe. In Malaysia, KFC adopted the local practice of also operating as a restaurant. It is now considering introducing restaurants to its chains in the United States and Europe. However, this advantage of the country manager model, like so many of its other advantages, is not incompatible with the transnational model. The transnational model in fact advocates the replicating of best practices. Most of the companies profiled as chapter-opening case studies in this book employ a judicious mix of the transnational model and the country manager model.
HSBC uses the following full-page advertisements in leading international magazines. It is being reproduced here because it demonstrates the power of thinking global but adapting to local cultures.
Never underestimate the importance of local knowledge.
To truly understand a country and its culture, you have to be part of it.
That's why, at HSBC, all our offices around the world are staffed by local people. In fact you'll find we've got local people in more countries than any other bank.
It's their insight that allows us to recognize financial opportunities invisible to outsiders.
But those opportunities don't just benefit our local customers.
Innovations and ideas are shared throughout the HSBC network, so that everyone who banks with us can benefit.
Think of it as local knowledge that just happens to span the globe.