On January 1, 1995, representatives from 76 countries signed the World Trade Organization (WTO) charter, which for years had been part of a temporary trade agreement. The WTO's emergence as a fully empowered supranational body seemed to reflect the triumph of what the first President Bush had described as the "new world order." That order was based on two assumptions: that a healthy economy and a sound financial system make for political stability and that countries in business together do not fight each other. The number one priority of U.S. foreign policy was, thus, to encourage the former Communist countries of Europe and the developing nations in Latin America, Asia, and Africa to adopt business-friendly policies. Private capital would flow from the developed world into these countries, creating economic growth. It sounded too good to be true and so it proved. The new world order of Bush pere and his successor, Bill Clinton, has been replaced by the new world disorder of Bush fils. Under the second Bush's administration, the economic and political rationale behind the Washington consensus of the 1990s has unraveled, forcing a radical change in our perceptions of which countries are safe for business. Negotiating this new environment will require companies to evaluate political events more rigorously and more carefully assess the links between political, economic, and financial risk factors. With careful analysis, business leaders can increase their companies' visibility and better respond to the uncertainties of the new world disorder.
Driven by ideology, religion, and mistrust, the world seems more fragmented than at any time since, arguably, World War II. But however deep the political divisions, business operations continue to span the globe, and executives still have to figure out how to run them efficiently and well. In "What Is a Global Manager?" (first published in September/October 1992), business professors Christopher Bartlett and Sumantra Ghoshal lay out a model for a management structure that balances the local, regional, and global demands placed on companies operating across the world's many borders. In the volatile world of transnational corporations, there is no such thing as a "universal" global manager, the authors say. Rather, there are three groups of specialists: business managers, country managers, and functional managers. And there are the top executives at corporate headquarters who manage the complex interactions between the three--and can identify and develop the talented executives that a successful transnational requires. This kind of organizational structure characterizes a transnational rather than an old-line multinational, international, or global company. Transnationals integrate assets, resources, and diverse people in operating units around the world. Through a flexible management process, in which business, country, and functional managers form a triad of different perspectives that balance one another, transnational companies can build three strategic capabilities: global-scale efficiency and competitiveness; national-level responsiveness and flexibility; and cross-market capacity to leverage learning on a worldwide basis. Through a close look at the successful careers of Leif Johansson of Electrolux, Howard Gottlieb of NEC, and Wahib Zaki of Procter & Gamble, the authors illustrate the skills that each managerial specialist requires.
As they search for growth, multinational corporations will have no choice but to compete in the big emerging markets of China, India, Indonesia, and Brazil. Although it is still common to question how such corporations will change life in those markets, Western executives would be smart to turn the question around and ask how multinationals themselves will be transformed by these markets. To be successful, MNCs will have to rethink every element of their business models, the authors assert in this seminal HBR article from 1998. During the first wave of market entry in the 1980s, multinationals operated with what might be termed an imperialist mind-set, assuming that the emerging markets would merely be new markets for their old products. But this mind-set limited their success: What is truly big and emerging in countries like China and India is a new consumer base comprising hundreds of millions of people. To tap into this huge opportunity, MNCs need to ask themselves five basic questions: Who is in the emerging middle class in these countries? How do the distribution networks operate? What mix of local and global leadership do you need to foster business opportunities? Should you adopt a consistent strategy for all of your business units within one country? Should you take on local partners? The transformation that multinational corporations must undergo is not cosmetic--simply developing greater sensitivity to local cultures will not do the trick, the authors say. To compete in the big emerging markets, multinationals must reconfigure their resources, rethink their cost structures, redesign their product development processes, and challenge their assumptions about who their top-level managers should be.
More and more small and midsize companies are joining corporate giants in striving to exploit international growth markets. At the same time, civic leaders worry about their communities' economic future in light of the impact of global forces on the operation and survival of businesses. How can communities retain local vitality yet still link their businesses to the global economy? Harvard professor Rosabeth Moss Kanter addresses that question in this classic HBR article, originally published in 1995. To avoid a clash between international economic interests and local political interests, globalizing businesses must learn how to be responsive to the communities in which they operate, Kanter says. And communities must determine how to create a civic culture that will attract and retain footloose companies. The author surveyed five U.S. regions with direct connections to the global economy--Boston, Cleveland, Miami, Seattle, and the Spartanburg-Greenville region of South Carolina--to determine their business and civic leaders' strategies for improving their constituents' quality of life. She identified ways in which the global economy can work locally by capitalizing on the resources that distinguish one place from another. Kanter argues that regions can invest in capabilities that connect their local populations to the global economy in one of three ways: as thinkers, makers, or traders.
Many managers face increasing calls to invest corporate resources in charitable causes. How should executives balance a firm's very real economic imperative to maximize profitability with its hypothetical moral imperative to improve society? To provide one answer, the author draws on his experience as president of an economic-development company, IBEC. Viewing profit as "an essential discipline and measurer of economic success" but not "the sole corporate goal," the company actively invested in social programs that met four criteria: They served a need of the local population; they required innovative approaches; they made sense on economic grounds; and they respected the social norms of the community. Such civic-minded efforts, the author argues in this prescient 1971 HBR article, not only improve people's lives but also create the foundation for more affluent and dynamic markets--markets that ultimately produce greater profits for business. For example, one of IBEC's earliest ventures was directed toward solving Venezuela's problems in retail food marketing. Many important items were unavailable at the small stores where people shopped. So in 1949, working with local partners, IBEC opened a supermarket. Supermarkets soon changed the food-buying habits of the nation, and the initiative helped alter patterns of food distribution and created the reliable demand needed to establish a host of local suppliers. Return on IBEC's investment, and that of its local partners, was most satisfactory, the author reports. The road to meeting a public need--especially a major one--is rarely easy, the author says. But if management sizes up the need well, there is a good chance its new venture will survive under adversity.
Mike Graves, the general manager of a U.S. apparel company's 50/50 joint venture with a Chinese manufacturer, has made the joint venture into a big success, at least in the eyes of its Chinese executives and local officials. Zhong-Lian Knitting has turned around three money-losing businesses and has increased its payroll from 400 to 2,300 employees. But Mike's boss, the CEO of the U.S. company, Heartland Spindle, doesn't share the rosy view. He's looking for a 20% ROI, which he says will require laying off 1,200 Chinese workers. He also wants to aim at the high end of the clothing market, meaning the JV will have to meet much tougher standards of quality than it has been able to do so far. To make matters worse, the Chinese executives now want to make a fourth acquisition, which they hope will position the venture to start its own brand of apparel--a move that could eat into profits for years. Can Mike keep the joint venture from unraveling? In R0308A and R0308Z, four commentators offer expert advice on this fictional case study: Eric Jugier, the chairman of Michelin (China) Investment in Shanghai; Dieter Turowski, a managing director in mergers & acquisitions at Morgan Stanley in London; David Xu, a principal at McKinsey in Shanghai; and Paul W. Beamish, the director of the Asian Management Institute at the University of Western Ontario's Richard Ivey School of Business in Canada.
Mike Graves, the general manager of a U.S. apparel company's 50/50 joint venture with a Chinese manufacturer, has made the joint venture into a big success, at least in the eyes of its Chinese executives and local officials. Zhong-Lian Knitting has turned around three money-losing businesses and has increased its payroll from 400 to 2,300 employees. But Mike's boss, the CEO of the U.S. company, Heartland Spindle, doesn't share the rosy view. He's looking for a 20% ROI, which he says will require laying off 1,200 Chinese workers. He also wants to aim at the high end of the clothing market, meaning the JV will have to meet much tougher standards of quality than it has been able to do so far. To make matters worse, the Chinese executives now want to make a fourth acquisition, which they hope will position the venture to start its own brand of apparel--a move that could eat into profits for years. Can Mike keep the joint venture from unraveling? In R0308A and R0308Z four commentators offer expert advice in this fictional case study: Eric Jugier, the chairman of Michelin (China) Investment in Shanghai; Dieter Turowski, a managing director in mergers & acquisitions at Morgan Stanley in London; David Xu, a principal at McKinsey in Shanghai; and Paul W. Beamish, the director of the Asian Management Institute at the University of Western Ontario's Richard Ivey School of Business in Canada.
Starbucks, the dominant specialty-coffee brand in North America, must respond to recent market research indicating that the company is not meeting customer expectations in terms of service. To increase customer satisfaction, the company is debating a plan that would increase the amount of labor in the stores and theoretically increase speed-of-service. However, the impact of the plan (which would cost $40 million annually) on the company's bottom line is unclear.
Following her husband's death in 1994, Carol Brewer took over the management of her family's investments. This case describes the decisions Brewer made during this process, including her choice to seek active account management, her selection of an investment firm, and her determination of asset allocation within her portfolio. In 2003, Brewer is reassessing her previous investment choices and considering changes she might need to make in the future in light of her plans to retire in six years and live on the income from her investments.
By 2000, Natura was a leader in the Brazilian cosmetics and personal care industry. The company had participated in social projects developed in communities surrounding its plants and offices. However, when it launched the Ekos product line, Natura drove social responsibility to the core of its business. Ekos' distinctive feature was its rooting in Brazilian biodiversity. The new product line incorporated several substances that had been used only by traditional indigenous communities in the hinterlands. Instead of simply buying the raw materials from them, Natura built a partnership with these communities to share with them the economic benefits resulting from responsible resource exploration. These communities had the key expertise needed to develop Ekos products and lived in extremely primitive conditions at remote locations. Thus, Ekos' success would potentially affect their living conditions dramatically. The civil society organization Imaflora also participated in the alliance to ensure that this natural resource exploration was socially, economically, and environmentally sustainable.
Fenix Group's business spans from general merchandise retailing to Italian fashion. The diversity stems from the management's multiniche marketing strategy. Looks at the journeys of two entrepreneurs who started out with a tiny garment trading company and, in the span of 30 years, expanded into a multinational network of manufacturing and retailing with $230 million annual turnover. How did Fenix identify and tap into niches in different markets? What does it take to be successful in niche markets? Also analyzes Fenix's strategy and discusses the critical success factors of its multiniche marketing strategy.
Corporacion Credito al Menor (CCM) was created to protect young girls at risk from abandonment, poverty, or abuse. The CCM was developed from within Banco BCI, a local bank. The early proponents were the managers of BCI and the bank controller, who provided funds out of their own pockets to finance the nascent institution. Later, the bank contributed with additional funding. Though there was no legal agreement that tied the CCM to Banco BCI, in time a de facto commitment and collaboration developed between the two organizations. The nonprofit grew and faced the challenge of expanding its facilities to other regions of the country. The decision to expand required finding new sources of funding for CCM and considering going beyond the bank's boundaries to seek new donors. However, this latter option might threaten the special relationship forged between CCM and BCI. Illuminates the process by which individual business leaders can become social entrepreneurs.
Describes the collaboration between Junior Achievement Argentina and Coca-Cola Argentina and the development and implementation process of a customized educational program focused on environmental issues implemented at schools by Junior Achievement Argentina. Junior Achievement Argentina is exploring the possibility of exporting the program to other countries to generate additional revenues, but there is an exclusivity agreement with Coca-Cola Argentina for program delivery. Allows for the analysis of collaborations between NGOs and private companies, where "customized" educational projects help to meet the companies' strategic needs. Also, describes the joint work process involved, while tackling the "ownership" issues that crop up in programs developed and financed by a single company, and explores how to balance the needs and interests of private companies and NGOs.
McKinsey is an international consulting company that operates in 43 countries. Fundacion Compromiso is an nonprofit entity that provides training, counseling, and technical assistance to improve the management and impact of other nonprofit entities of Argentina. A third organization, Ashoka Association, supports social entrepreneurs and has a global alliance with McKinsey. Ashoka's intermediation is responsible for a cooperation program through which McKinsey applies its central skills to provide technical assistance to Fundacion Compromiso. The objectives of this activity are to evaluate one of Fundacion Compromiso's most important programs and establish a long-term growth strategy for this nonprofit entity. However, following the technical assistance work developed by McKinsey is a dramatic change in Argentina's social, political, and economic situations, which limit the agreed-on strategic plan, forcing Fundacion Compromiso to reconsider its growth strategy.
In 1999, Richard Townsend, M.D. was the newly appointed executive director (CEO) of the Liberty Medical Foundation (LMF). Townsend was responsible for both the Liberty Medical Group (LMG), a large, 3,000 physician multispecialty medical group that provided health care to two million subscribers, and the Liberty Medical Plan (LMP), a nonprofit insurance company. This was his first official meeting as CEO with the board of directors and a critical one. In it, he would formally present to the board his strategy for the struggling LMF. Townsend believed that Liberty faced a stark strategic choice: either dramatically lower its rates through cost cutting to become a cost leader once again or to differentiate itself by building a reputation for both quality and service. The first option would require them to re-establish a price advantage by reducing the cost structure by 10% to 15%. This tact would almost certainly entail layoffs and salary reductions. The second option would be to raise rates and rely on a service, access, and quality strategy.
This case provides the outcome to "The Refinancing of Shanghai General Motors (A)" in which the CFO of General Motors' joint venture in Shanghai, Shanghai General Motors (SGM), wants to refinance almost $900 million of project finance it raised to begin operations. The highest priority is improving the terms of the financing with regard to costs and specific covenants. Several factors complicate the CFO's objective, including the presence of capital controls, the impending entry of China into the World Trade Organization, the joint venture partner's captive finance subsidiary, and the conflicting goals of the joint venture partners. The case illustrates how subsidiary financial decisions must trade off entity-level and parent-level concerns. It also illustrates how multinational financial decision making--including transfer pricing, repatriation, and funding decisions--must be designed to accommodate governance concerns, financial objectives, and the potentially divergent interests of joint venture partners. The framework of the ongoing operational and investment decisions that Shanghai General Motors undertakes in its early growth dmeonstrates the "life cycle" of subsidiary finance. The case also touches on elements of foreign governments' attempts to regulate capital markets, the dynamic between domestic and international banks in competing for lending opportunities to multinational subsidiaries, and how subsidiary management can achieve the most desirable funding terms.