„Global” vs „ n ational ” MNCs

1. 4 Robert Uberman, Multinational Corporations (MNCs)

2. „Global” vs „national” MNCs • „Big MNCs, despite all modern trends, maintain a strong national identity independently from their ownership form and governance” Maciej Olex-Szczytowski, partner in Ernst & Young, Rzeczpospolita, 15th of May 2008 , pp B11 • Jeffrey Immelt, General Electric: „We’re an American company but in order to be successful we’ve got to win in every corner of the world”, FT, August 16, 2007, page 7 • „Italy needs a big state company or a big multinational” along the lines of Germany’s Siemens to serve as an anchor for commercial and investors dialogue between China and Italy - undisclosed Chinese high rank officials told Giulio Tremonti, the Italian Economy Minister„Italy plans state investment fund to repel invaders”, The Wall Street Journal, April 4, 2011, p. 4. Robert Uberman, Multinational Corporations (MNCs)

3. „Global” vs „national” MNCs – Allianz case • „As a global financial services provider, our business is heavily affected by a variety of global, long-term issues”. „Allianz operates as an international insurer on almost every continent” excerpts from the Allianz official webside. • „An insurer must not differentiatecustomers according to criteria not linked to technical or financial parameters.” par. 2 „Ethical rules in insuring activities„, which Allianz is proud to follow according to announcement on it’s Polish webside. • Excerpts of promotion as stated on 15th of November, 2013. (German cars owners will pay 15 % less!!!)

4. „European” vs „national” MNCs • Inquiry into the most „open” European countries show, that ¾th of managers come from a MNC’s country of origin • Countries defined to be „open” are: Denmark, Finnland, The Netherlands, Norway, Sweden, Switzerland and United Kingdom • The research covered 7 000 positions in MBs of non-financial companies between 2000-2005 • Foreigners’ share grew from 21 % up to 24 % over 5 years analysed • Ruigrok Winfried & Greve Peter, „Does nationallity still matters?”, European Business Forum, Spring 2008, p. 19 Robert Uberman, Multinational Corporations (MNCs)

5. Will globalisation level out cultural differences? • „[..] the promotion and maintenance of cultures rooted in their own traditions may be a sine qua non of continuing development of globalisation”. Alfredo G.A. Valladao, „The twenty-first century will be American”, Verso, London-New York 1996, pp. 64 • Globalisation is based on universalisation of something existing (eg. products, culture), but everything existing must have been individually created somewhere and then expanded, even globally. Robert Uberman, Multinational Corporations (MNCs)

6. Cultural foundations of MNCs • Among the biggest MNC only cultures of two originated from more than one country: Royal Dutch Shell i Unilever • In many industries a success results from a combination of corporate traditions and national features Moore Kevin, Amar David, „Does nationallity still matters?”, European Business Forum, Spring 2008, str. 15-16 • Cultural differences are based analysed if two extremes are considered: USA and Japan Robert Uberman, Multinational Corporations (MNCs)

7. Various models of cultural dimensions of MNCs • Trompenaars and Hampden-Turner's: “7 Cultures of Capitalism” published in 1993 (the subsequent part of the lecture is based on this work) and restated in 1997 in a book: “Riding the Waves of Culture” • Hofstede's 5 Cultural Dimensions • Hall’s 3 Cultural Dimensions Robert Uberman, Multinational Corporations (MNCs)

8. Some warning before starting • For each dimension that Trompenaars and Hampden-Turner identified they quoted certain national cultures as having a preference at each extreme of that particular dimension. One has to remember tough that people are individuals, and their behavior is shaped not only by their respective nationality. • Models examining national cultures are par excellancebased on generalizations and do not take into account differences between sub-cultures, social statuses or generations within the country. This is especially relevant in today's global environment, where people can be influenced by many different incentives of various origins. Robert Uberman, Multinational Corporations (MNCs)

9. Various national business cultures - Two ways of describing a company (MNC) Robert Uberman, Multinational Corporations (MNCs)

10. American vision of a corporation • P. Drucker commented on the Alfred P. Sloan’s book, (Sloan had served for many years as GM CEO and was considered to be a founder of it’s strength): • to be probably the most inhuman memoir ever written. • to be exactly as intended , showing GM as a perfect mechanism to create profit , • neglecting even existence of such perspectives like power game, life at work, relations to society” (Peter F. Drucker, „Concept of the Corporation, John Day,New York, 1972, str. 305) Robert Uberman, Korporacje międzynarodowe

11. National business cultures – case of Toyota vs an American Automotive • A request to supplier: price decrease by 20 % • The supplier’s response: we can not make it • Reply of the American Automotive: we are changing a supplier • Toyota’s reply: we will help you to review your processes in order to improve efficiency and eventually gain the 20% costs decrease • Risks of both approaches (Halbe, Artur, „Professional supply management”, own materials) Robert Uberman, Multinational Corporations (MNCs)

12. Various national business cultures – analytical vs holistic approach • Value creation in a MNC is built on a wide range of elements, which shall be analysed in depth (USA) • counter staff observation list in McDonalds • Value creation is based on relation building both within a MNC and with it’s stakeholders (Japan) • employee initiative box Robert Uberman, Multinational Corporations (MNCs)

13. The analytical approach – a management observation checklist used to evaluate performance of counter staff at Mc Donald’s Source: Hampden-Turner ..., "The seven cultures of capitalism", pp 42-43 Robert Uberman, Multinational Corporations (MNCs)

14. Various national business cultures – role of an individual Robert Uberman, Multinational Corporations (MNCs)

15. Various national business cultures – duration of a relationship between an employee and his organisation Robert Uberman, Multinational Corporations (MNCs)

16. Various national business cultures – contribution of a luck to an overall success Robert Uberman, Multinational Corporations (MNCs)

17. Contribution of a luck to an overall success – results of a statistical research Source: PIMS, unpublished research Robert Uberman, Multinational Corporations (MNCs)

18. Various national business cultures – contribution of a luck to an overall success • Recruiting based on individual capabilities (USA and Europe) vs. Based on shared traditions and values (Japan) • Limited-term (USA) vs. long-term (Japan) employees engagement • Competition (USA) vs. cooperation (Japan) as a key power for business development Robert Uberman, Multinational Corporations (MNCs)

19. Various national business cultures – who treats employees the most onerously? Źródło:Peggy Hollinger, „Evidence undermines Sarkozy’s populists’ mandate”, FT, May,14, 2009, Robert Uberman, Multinational Corporations (MNCs)

20. Various national business cultures – is the Japanese model really better than American one? • Many Japanese companies, even global ones, have suffered from an insularity and parochialism, and a hierarchical structure that discouraged innovation or input from others Devin Stewart, „Toyota and the end of Japan”, Newsweek,March,15, 2010 • Carl Ghossn became the first non-Japanese CEO of a MNC originating from Japan (Nissan) • Japanese economy has suffered a long lasting stagnation since mid-90s MichiyoNakamoto, Kate Burgess, „Dividends to reap”, FT,July,3, 2008 • In response to the 2008 crises Japanese MNCs cut their R&D spendings to the bone, while in the US even GM, already bankrupt, maintained their significant level Harding, Robin, „Warning on fall in Japan’s R&D”, FT, 16 Mar., 2009 Robert Uberman, Multinational Corporations (MNCs)

21. Various national business cultures – what’s really important for American and German managers? Opinions’ distribution on what’s more important out of two challanges Źródło:„Boards behaving badly. Germany’s flawed corporate governance”, The Economist, August 8th, 2009 Robert Uberman, Multinational Corporations (MNCs)

22. 5 Robert Uberman, Multinational Corporations (MNCs)

23. Foundations of MNCs strategy – corporate traditions • Myths about „good” MNCs • MNCs exist only to create wealth for shareholders (what about customers then?) • „Good” MNCs are run based on universally recognised excellent management concepts (then how they differ one from other?) • MNCs’ success is based on outstanding strategic planning (why so many achievements are driven by simple luck) • The only sure think in good MNCs is a change (good MNCs subscribe to their long lasting traditions, changing processes and products along certain core line) Robert Uberman, Multinational Corporations (MNCs)

24. Basics of visionary companies (Collins James C., Porras Jerry I.: Built to last. Harper Business, New York, 1994) • More than profits • Big hairy audacious goals • Preserve the core/stimulate progress • Cult like cultures and cultural fit • Try a lot but keep what really works • Home-grown management • Clock building, not time telling Robert Uberman, Multinational Corporations (MNCs)

25. More than profits – Merck case (river blindness case) Source: Andrew Jack, „European companies beat US’s on drugs for poor”, FT, June,16, 2008, p.15 Robert Uberman, Multinational Corporations (MNCs)

26. Corporate ideologies traditions (examples) • 3M: • Innovation • Absolute integrity • Respect for individual initiative and personal growth • Tolerance for honest mistakes • Product quality and reliability • „Our real business is solving problems” • Johnson&Johnson: • The company exists „to alleviate pain and disease” • „We have a hierarchy of responsibilities: customers first, employees second, society at large third and shareholders fourth” • Individual responsibility and rewards on merit • Decentralisation = Creativity = Productivity Robert Uberman, Multinational Corporations (MNCs)

27. Core ideologies - do not work everywhere • American Express: • Heroic customer service • Worldwide reliability of services • Encouregement of individual initiative • Works well in credid card business • Does not work in mortgage business Robert Uberman, Multinational Corporations (MNCs)

28. Corporate ideology - Walt Disney story (Rob De Witt, Ron Meyer: „Strategy synthesis. Resolving Strategy Paradoxes to Create Competitive Advantage”. Thomson Learning, London, 2005, pp. 19-23) • Walt and Roy Disney period (up to 1971) • animated sound movies • amusement parks • gagdets • 1971-84 - after Disney: • lack of new ideas • evaporating movies market share (down to 4 %) • 1984-94 – period of Wells i Katzenberg: • „Beauty and Beast”, „King Lion” • video cassettes • amusements parks also for adults • 1994-02 – period of expansion: • purchase of Capital Cities/ABC for 19,6 billions USD • Creation of own stores network • Co-operation with Pixar, bringing finanancial successes (fe. „Monsters Inc.”), but brought a growing dependence on the partner’s know-how. Robert Uberman, Multinational Corporations (MNCs)

29. Corporate traditions - Dell’s case(An interview with M. Dell and K. Rollins, HBR, March, 2005, pp.102 –111) • „Why Kmart can’t imitate Wal-Mart? Because it takes more than strategy. It takes years of consistent execution for a company to achieve sustinable competitive advantage”. • „the key to our success is years and years of DNA development within our teams that is not replicable outside the company”. • „Dell bubbled up through a kind Darwinian evolution, finding holes in the way the industry was working”. • Dell has always focused on innovation leading to cut costs not to improve products themselves. • Dell – founded in 1984, founding capital 1 000 USD. 2004 r. - 53,000 employees, market value above 100 bln USD. Robert Uberman, Multinational Corporations (MNCs)

30. Corporateideologies vs crises and changes in environment(Interview with R.Tillerson, CEO ExxonMobil, FT, 9th March, 2009) • Question:How ExxonMobil will adapt to falling oil prices (decline from 150 down to 50 USD/bbl? • Answer: We are not planning any changes. Just carrying on our 30-yrs strategic plan. • Question: Would ExxonMobil take advantage of low quotation of oil companies for takeovers of either companies or individual projects?. • Answer: There are many changes around. We have not achieved a clear view here, yet. Robert Uberman, Multinational Corporations (MNCs)

31. What visionary companies are not? • „Business archaeologists” keeping up to old patterns: on the opposite, they can hang on audacious, far going and risky goals especially at turning points • Wonderful working place for everybody: on the opposite, visionary MNCs remind religious orders, either you fully belong to them or you are rejected • „Genuine warriors” destroying competitors: on the opposite, visionary MNCs focus on their relations to customers and themselves, beating competitors is just a by-product of pursuing core ideology • Wonderful machines programmed by founders: on the opposite, visionary MNCs reached their vision working and making mistakes, though ultimately they spelled out one it had come after years of searching Robert Uberman, Multinational Corporations (MNCs)

32. What visionary MNCs never do? (Collins J., „How the Mighty Fall” ,The Economist, 12th December, 2009) • Buy-out other big corporation to change main business • Introduce a radical change questioning or neglecting previously created competences and successes. • Undertake never-ending programs restructuring all key activities • Believe in a success due to totally new, not really analysed and practiced, strategies (investments in new technologies or entering new markets) • Hire an external star-CEO who even does not attempt to learn the company but strongly believes in his „idee fix”. Robert Uberman, Multinational Corporations (MNCs)

33. Why do people want to work for „visionary” MNCa(GoffeeRob, Jones Garreth „Creating the Best Workspace on Earth” , Harvard Business Review, May, 2013) 3 out of 6 fundaments of „the ideal workplace” established by the research strictly correspond to fundamental rules of the visionary MNCs: • Ideal company is aware of it’s culture, working habbits & standards and even preferred clothes. • Ideal company has a goal going beyond a mere “value creation” for shareholders – a goal shared by employees; • Ideal company stands by the rules, which employees take as their own ones. The remaining three are not contradictory (free information flow, satisfaction and remunerating brave innovation). Robert Uberman, Multinational Corporations (MNCs)

34. Corporate ideology - profitability Source: Collins, Porras, ”Built To Last”, p. 5 Robert Uberman, Multinational Corporations (MNCs)

35. The loyalty effect and MNCs’ value • Right customers • Right employees • Right shareholders • Right = accepting and following same rules and values Robert Uberman, Multinational Corporations (MNCs)

36. The loyalty effect and MNCs’ value- benefits from customers’ loyalty (case of US brokerage industry) Source: Reichheld, „The Loyalty Effect” p. 13 Robert Uberman, Multinational Corporations (MNCs)

37. The loyalty effect and MNCs’ value- benefits from customers’ loyalty – various industries Source: Reichheld, Sasser, „Zero Deffection ...” HBR, Sept./Oct. 1990 Robert Uberman, Multinational Corporations (MNCs)

38. MNCs’ ideology and brands’ value Source: FT, GlobalBrands, April 23, 2007 and Business Week, Special Report - 100 top brands Robert Uberman, Multinational Corporations (MNCs)

39. MNCs’ ideology and brands’ value (2) • Among the Top 100 most valuable brands worldwide : • Less than 10 are not equal to company names (and in some such cases a • brand on the list is the only in company’s portfolio to count : Indesit - Zara) • the highest brand ever taken over was 33rd (Gilette) and sold with the • owning company Source: FT, GlobalBrands, May 22, 2012 p. 2 Robert Uberman, Multinational Corporations (MNCs)

40. Corporate ideology in view of crises and turbulent environment (Interview with RexTillerson, CEO ExxonMobil, FT, 9th March, 2009) • Question:How is ExxonMobil reacting to the deep fall in oil prices (from ca. 150 to 50 USD/barrel)? • Answer: We really make no adjustment to our strategy (..) based on 30-yers investment horizon –refusing to give into pressure to spent more when prices rise and not cutting back when prices fall. • Question: Some analysts now expect Exxon to capitalise on buying opportunities. • Answer: „It’s very much in a state of change. It has not settled in my view”. Robert Uberman, Multinational Corporations (MNCs)

41. Corporate traditions and strategic planning • Corporate traditions create fundament for MNCs’ existence • Strategic plans will always be interpreted and implemented in context of a company ideology • Although value building is a universally recognised goal of all MNCs each of them needs an individual purpose accepted by it’s own customers, shareholders and employees. Robert Uberman, Multinational Corporations (MNCs)

42. Critics on corporate ideology (traditions) as a base for success in business • Corporate longevity is not generally associated with high performance • In a competitive market economy, performance is fundamentally relative, not absolute (see GM history) • Lasting success is a delusion, statistical anomaly • A sober understanding of risk offers the best guidance for effective decisions See: Phil Rosenzweig, „The Halo effect, and other managerial delusions”, The McKinsey Quarterly, 2007/1 Robert Uberman, Multinational Corporations (MNCs)

43. Corporate ideologies and strategic planning theories • McKinsey, based on ca. 1000 responses from 250 MNCs identified 3 factors, determining the success: • Clear accountability of employees • Vision • Corporate culture („Management Practices that work”, McKinsey Quarterly, Sept. 2007) Robert Uberman, Multinational Corporations (MNCs)