Corporate Management in Europe (1/4)

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How to get in Europe? Strategies

Diversity – economic, social and cultural – characterizes Europe as there is no homogeneous European culture. As a set of national cultures, Europe has different national management models, better defined when a country is economically developped.

Thus, a European management governance can’t be clearly defined.

The basic question is whether multinational companies will be able to handle the cultural diversity of Europe compared to the monolithic Chinese or American culture. 

It is therefore necessary to consider how other cultures perceive the European style. But this is still a very complex subject of study since this assessment can’t be uniform.

However, among the most common responses and more revealing culturally, it is clear that,

according to a perspective outside the European society based on the following characteristics: 

• stratified, 

• resistant to change, 

 • risk advertse and facing the past.

These different characteristics are thus influential factors on management practices.

The German success story    

Completely destroyed after World War II West Germany soon became one of the world's leading industrial countries. « Made in Germany » has become a « national brand image » based on excellent research and development, a qualified and motivated work-force, a responsible management, an excellent infrastructure, long lasting social peace and monetary stability. The German brand image – quality, reliability, adaptability, flexibility, technical know-how, ecological responsibility, good customers' service, search of best solution – allows high prices for excellent quality. Industry and the small and medium sized enterprises are important. The most important branches of industry are the automobile industry (Daimler Chrysler, Volkswagen, Audi, BMW, Opel…), the mechanical engineering and plant construction (Krupp-Thyssen, MAN, Linde, numerous SMEs), the electrical engineering and electronics industry (Siemens, Bosch, SAP…) and the chemical industry (BASF, Bayer, Henkel, Beiersdorf, Schering…) There are many world known brands in Germany (like: Adidas, AEG, Aspirin, Boss, Braun, Dr.Oetker, Fischer, Fissler, Grundig, Hansaplast, Haribo, Hipp, Hohner, Krups, Labello, Leica, Loewe, Märklin, Miele, Melitta, Montblanc, Nivea, Persil, Porsche, Puma, Ritter-Sport, Sennheiser, Tempo, Tipp-Ex, Vorwerk, Zeiss), but still there is a certain fear of foreign investors (example: Beiersdorf, Schering…)

Strategies

What are the strategies for Europe considering its cultural diversity?
Global companies must always deal with the cultures of the countries they operate in, it is interesting to examine national culture's impact on businesses. National culture is influenced within the company by its employees. Thus, companies are forced to focus on countries' respective cultures ans practices (such as motivational techniques, methods of career advancement, etc…) Before an international firm develops its strategy, the philosophy must be clear concerning immediate and long term implications in the field of HRM. According to Howard Perlmutter (1965,1969), strategies can lead to several patterns: Ethnocentric, Polycentric, Geocentric. International strategies are thus built as follows :
 

o Ethnocentric orientation – home country orientation

Ethnocentric Orientation, the foreign company transmits its culture to the foreign subsidiary. The local culture of the foreign subsidiary is thus removed

•  Identity : Home country identity is spread worldwide               

•  Staffing : Home country people are sent worldwide for key positions

•  Decision : Decisions remain in the hands of headquarter

•  Communication : Communication is organized by headquarter

o Polycentric Orientation – host country orientation

Subsidiaries have the right to develop their own corporate culture.

 • Identity : Host country identity prevails and differs from country to country

 • Staffing : Local nationals are hired for key positions

 • Decision : Decisions are made locally, headquarter’s authority doesn’t prevail

 • Communication : Communication goes from headquarter to subsidiaries as well as between subsidiaries

o Geocentric Orientation – whole world orientation

The corporate culture is uniform and results from an incorporation of each countries’ culture in which it operates.

•  Identity : Firm's corporate culture is deployed worldwide

•  Staffing : Worldwide profiles are hired for key positions

•  Decision : Collaboration of headquarter and subsidiaries everywhere in the world

•  Communication : Communication goes from headquarter to subsidiaries, as well as from subsidiaries to  headquarter and between subsidiaries

…To be continued 

References 

Goodbye “Made in Germany”?, Spiegel Online, October 26, 2004

European unity, the history of an idea, The Economist, December 30 2003

 

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