Corporate Management in Europe (3/4)

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How to get in Europe? Polycentric Orientation

Remember Polycentric orientation strategy can be built as follows :

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 : People for local nationality 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 Starbucks Case Study : Polycentric Orientation Success

Through a flat and flexible structure, Starbucks empowers employees to make decisions without management referral and are encouraged to consider themselves as a part of the business. This point is issued by company’s corporate culture and such work environment has positive ripples on employees’ motivation. This principle increases the involvement and the commitment of each employees from subsidiaries and makes them feel necessary for the company. This high level of autonomy allows workers to be more innovative and to take more initiatives.

Thanks to its structure and to the empowerment of its employees, the company has managed to facilitate the exchange and the transversal communication, which allows it to react rapidly to the customers’ needs or to cope with more effectively with problems.

The leader of Starbucks, Schultz, has a strong legitimacy since he was the founder of the business and he was a real visionary since he managed to make its company a real industry and a real reference in the very competitive beverage market. Thus, even if there is no formal hierarchical structure within the company and even if employees have a high level of autonomy, his leadership is fully respected.

Starbucks CEO and the board of directors wanted the mission statement to convey a strong sense of organizational purpose and to articulate the company’s fundamental beliefs and guiding principles.

They also pay attention to employees’ and customers’ concerns to make the mission statement evolve. Indeed, these mission statements are based on several principles that consider the interests of customers, communities, employees, shareholders, and ecological considerations in all aspects of their operations.

o Wal-Mart Case Study : Polycentric 0rientation Successes and Failures

Europe seems to be the main objective of strategic development for Wal-Mart. After its introduction in Germany in January 1997, then in the United Kingdom in July 1999, the company is studying the possibilities offered to expand to other European countries including France. The arrival of Wal-Mart is causing a lot of concern in Europe but the European regulatory environment is very different from that of the United States.

Adaptation to local culture is a prerequisite for this industry success in any market. For now, its location in the United Kingdom is a success, while in Germany, it failed badly. Its arrival has created in these two countries, a strong movement of pressure on prices and margins for companies already present in these countries. The losses in Germany are partly explained by the desire to implement all elements which have traditionally been its success, resulting in significant costs in the short term for small size companies.

In the United Kingdom, Wal-Mart by buying Asda was offered the position of third largest food retailer. The success has been rapid, maybe due to the fact that the English culture is closer to the American one. However, the arrival of Wal-Mart has led to falling prices and improving of the overall quality of products. The next logical development fo Wal-Mart would be France. The U.S. company would be the only food distribution group to be present on the three largest European markets.

…To be continued  

Reference

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

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