9.5 Implementing marketing programme in CEE

Designing a business and marketing strategy for CEE operations is not only about choosing the right structure (in terms of formal definition of responsibilities and lines of reporting), but also about managing the decision-making and implementation process. This includes decisions about the composition of local management boards (locals versus expatriates ) and the degree of autonomy headquarters should grant to local managers.

Different Western firms organize their CEE marketing efforts in different ways. Some choose to run the operations from headquarters or the home office. This is typical for the early stage of market entry when products are sold through local distributors or a company-owned sales office. In large firms the international division or the European group is made responsible for the operations, which ensures that the CEE strategy is integrated into the overall international or European strategy and pooled know-how is available during the preparations for market entry. One problem with this approach is that large international divisions tend not to pay sufficient attention to small CEE markets and therefore MNCs can easily forfeit opportunities to competitors who recognize the strategic importance of the region.

Another option is to assign a regional management mandate to an established subsidiary located close to the region. For example, companies like Henkel, Philips Electronics and Beiersdorf made use of the business relationships of their Austrian subsidiaries with firms and trade organizations in the neighbouring countries of CEE that existed already before 1989. Thus, the knowledge about the business in the region and the contacts of the Austrian management provided a pioneering advantage for these Western companies after the fall of the Iron Curtain. The advantage of this approach lies in the faster response to rapidly new sales opportunities in CEE (often the Austrian management initiated the entry into those markets) and form a coherent strategy for the region. Such shifts of responsibility from the international division to the regional management centre frequently run parallel to a changeover from opportunistic to strategic behaviour in the region, with the regional management centre taking charge of the development and implementation of a regional strategy. This makes sense when there is a certain degree of homogeneity among the countries of the region in terms of culture and economic and market development, and when a common regional strategy can be expected to produce synergies and economies of scale. Typical tasks include the coordination of production and logistics; making key decisions about the brand portfolio (the mix of global, regional and local brands), product introductions , the development of regional brands and advertising campaigns ; the setting up of operations; the selection and training of local managers; and the provision of on-the-spot support to local teams marketing activities.

When planning to enter a CEE country it is common practice to set up a team to select a target country, make the preparations for entry and find suitable local partners (distributors, dealers, suppliers). Local partners are important in countries where the market structures and institutions are not yet fully developed and numerous local peculiarities exist as they can act as interpreters of local business customs and facilitate access to the relevant authorities, established businesses and customer bases.

When it is decided to invest directly in a subsidiary or acquire a local firm, in the initial stages the presence of expatriates is required to take care of the transfer and implantation of the corporate culture, management style and management processes (planning, budgeting, reporting, remuneration, information dissemination , quality standards, the selection and training of staff and so on) and to maintain control over the local operations. In the case of the acquisition of a former state-owned company, the management team has to initiate and quickly implement a change and integration programme, with particular attention being paid to the timely integration of the local unit into the corporate group. The management s task is to instil a market and profit orientation, improve overall productivity, trim down the product portfolio, revitalize sales and develop brand management. Cooperation between subsidiaries is also very common in this start-up phase. Nestl uses a ˜ patronage model , whereby a West European subsidiary provides operational assistance to a CEE sister company. For instance, Nestl Austria has supported and advised the Hungarian subsidiary in areas such as market research and packaging design, as well as providing managerial assistance for a short period. This is an efficient and flexible way of distributing know-how and resources within a corporate group.

When the expatriate managers have completed their tasks they are gradually replaced by local managers (Lawrence and Vlachoutsicos, 1993). Just after the fall of the Iron Curtain there was a shortage of local managerial talent, and this was the main reason for the considerable transfer of Western managers to CEE operations. Since then, however, the provision of Western management training has boomed in the region, and colleges, universities and management training institutions are producing an abundant supply of junior managers and are updating and improving the skills of more senior managers ( Economist , 5 January 2002, p. 27). An added bonus for MNCs is that these young managers are less expensive than non-locals, with their generous ˜expatriate packages . While the transfer of Western managers to CEE is declining there has been a growth of managerial exchange within the region. It is difficult to find managers in the West for assignments exceeding a few weeks in East European countries such as Belarus, the Ukraine or other ex-Soviet republics in Central Asia. Harsh living conditions and a poor command of the local language are barriers for the transfer. However, it is more likely to come across a candidate with close cultural ties to the Ukraine or Belarus among the managers of the Polish subsidiary or to find someone among the local management in the Hungarian subsidiary for an assignment in Romania. This intraregional managers exchange also fosters a stronger regional identity among MNC subsidiaries.

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