HOW TO BE A GLOBAL MANAGER You may have to produce and sell worldwide just to survive. The problems are daunting, the opportunities vast. Companies that do it best offer valuable lessons.
(FORTUNE Magazine) – MR. AND MRS. Victor Pelson are in the midtown Manhattan offices of Moran Stahl & Boyer, a consulting firm that is helping them with their approaching adoption. They are looking forward to a new way of life. But they are not going to adopt a baby. Instead they hope that a country, Singapore, will more or less adopt them. Pelson is a marketing executive for AT&T, which has asked him to learn all he can about the island nation. Other senior AT&T managers will be taking in countries too. It's the company's way of making sure its executives become skilled global managers. The consulting company, which specializes in corporate resource deployment -- relocation, in a simpler age -- is briefing the Pelsons on what to expect in the Far East. Pelson will go there with his wife for a while to soak up the atmosphere and learn about the Singaporean way of doing business. He will return to headquarters as the resident expert on Singapore, where AT&T makes telephone equipment. When problems involving that country arise in New York, Pelson will be called on to solve them. As more business battles cross borders, many executives must broaden their view of markets and competition. Newcomers to the global war can learn a lot from veterans -- including how to find the right country in which to build a plant, how to coordinate production schedules across borders, and how to absorb research wherever it occurs. They can learn what sort of people to hire, how to inculcate a global mentality in the ranks, and when to sell standardized products instead of customizing them for local markets. Of these issues, all vital in going global, standardizing vs. customizing is often among the first to arise. Making a uniform product is cheaper but risks losing business where preferences vary from the norm. And if a standard looks like the ticket, what standard? ''It's a deceiving word,'' says Professor Howard V. Perlmutter of the Wharton School. ''To develop a standard in the U.S. and use it as a model for the world is different from getting inputs from all places you want to sell the product and using that to make a standard.'' An example of how to do it right: Boeing's rescue of the 737. Introduced 20 years ago to compete with McDonnell Douglas's DC-9, the 737 won orders from several U.S. airlines. But in the early Seventies sales began to tail off. The DC-9 was in some respects a superior plane -- it was a little faster, for one thing -- and it had come to market three years before the 737. Boeing figured it had a loser and was on the verge of killing the program. Giving it one last chance, Boeing called on engineer Bob Norton to save the plane, and he steered off on a far tack in search of a bit of wind. ''We looked at underdeveloped parts of the world -- mainly the Mideast, Africa, and South America,'' he says. ''That's where the battleground was going to be. Even if we weren't able to sell a lot of planes at once, we would build a customer base.'' Boeing needed to adapt the plane to the idiosyncrasies of Third World aviation. The runways in developing countries were too short to accommodate the jet, and too soft, made of asphalt instead of concrete. Boeing's engineers redesigned the wings to allow shorter landings and added thrust to the engines for quicker takeoffs. Norton and his team then went to Africa to watch how pilots flew there. They saw aviators who lacked the abilities immortalized in song -- except, perhaps, dirges. ''They tended to come in hard when they landed,'' he says, ''and when the plane bounces up in the air, the brakes can't work. So they would run out of runway.'' Boeing redesigned the landing gear and installed low-pressure tires so the plane would stick to the ground when it touched down. Says Norton with great pride: ''You can crash a 737, but you can't bounce it.'' The gambit worked. Boeing sold one or two 737s at a time to airlines throughout the developing world, rather than the batches of 20 or 30 that U.S. airlines order. Production rates held at reasonable levels, and the plane built its reputation. As fledgling Third World airlines grew, they began buying Boeing's larger planes. Recently the 737 became the best-selling commercial jet in history. Companies can have their cake and eat it by developing standardized products that are easy to modify for different countries. That is the strategy of the consummate global competitor, IBM. ''Our overall concept is to develop a worldwide product line,'' says Kaspar Cassani, head of IBM's international activities and recently elevated to vice chairman. ''Each development lab has responsibility for a product from cradle to grave. It is also responsible for identifying customer requirements all around the world, irrespective of the lab location.'' The arrangement is unaffected by IBM's recent reorganization. IBM factories can modify products to meet local needs. To accommodate different languages, for example, IBM makes dozens of different keyboards; Europe alone needs more than 20. ''What is important,'' says Cassani, ''is that the concept of adaptability is built into the product.'' Selling in many countries inspires thoughts of manufacturing worldwide. But where? And how can a company coordinate plants operating in different markets as exchange rates vary? Dow Chemical has devised one of the more sophisticated systems for juggling international production schedules. Using a computerized linear programming model that it began developing five years ago, the company weighs everything from currency and tax rates to transportation and local production costs to identify the cheapest maker of each product. For example, in making chloralkali and its derivatives, some of which require several intermediate chemicals, Dow's network chooses among factories on three continents to supply customers throughout the world. Once established overseas, a good global competitor knows how to assimilate the best aspects of local practice. ''We've become more receptive as we've become more international,'' says Ralph Biggadike, president of Becton * Dickinson's hypodermic syringe business, which sells and manufactures worldwide. When Becton opened factories in Spain and West Germany, both within the last two years, the company learned that Europeans run their production lines more slowly than Americans do and get higher reliability in return. When a manufacturing process demands synchronization of different machines to join several components, the risk of jams increases. Slackening the speed improves quality and saves money. Becton is adopting slower -- and more economical -- factory lines in the U.S. SOME COMPANIES designate globetrotters just to glean knowledge at its source. Pall Corp., a leading manufacturer of filters for substances ranging from airplane fuel to wine, employs a special gang of Ph.D.s to gather useful information from customers and feed it back to researchers. Makers of magnetic tape, for example, couldn't figure out how to lay down a smooth layer of magnetic particles without filtering the slurry over and over again, at great cost. Pall's scientific and laboratory services unit called on manufacturers and users of tape in Japan, West Germany, the Netherlands, and the U.S. and helped devise a simple two-step procedure. Unlike the company's marketing staff, which is also composed mainly of scientists and engineers, the SLS team calls on customers only to solve technical problems and never to make a sale. As Pall chief executive Abraham Krasnoff bluntly explains, ''A scientist at a leading-edge company doesn't want to screw around with a bunch of nice sales and marketing people no matter what their pedigrees are.'' On-site experts can help as well. Loctite Corp. sells adhesives in Japan at higher prices than most domestic competitors. How? The glues are especially useful for joining components of the flat motors that drive videocassette recorders and compact disc players, most of which are made in Japan. The key, says Loctite chief executive Ken Butterworth: ''We have a very large team of Japanese engineers working with VCR and CD designers and showing them how they can use our expensive products.'' A bonus: Loctite's presence overseas has improved its product worldwide. ''The Japanese customer demands better quality,'' says Butterworth. ''That helps us back here in the U.S.'' How can companies inculcate the global mentality? The surest way is to bring foreigners into the fold and develop a cadre of managers adept at working abroad. Start by setting the right tone at the top of the organization. ''I am an internationalist,'' says IBM's Cassani, who is Swiss. ''For me, to be internationally competitive is the name of the game.'' Smaller companies that have done well as worldwide competitors know this too. Ken Butterworth, Loctite's head, is an Australian. The president of Pall is British. So is Biggadike of Becton Dickinson. To help enforce the right way of thinking, companies have played with their organization charts. A favorite stratagem is to establish a world product group, in which group managers have worldwide responsibility for their product lines; in older regimes, the heads of each foreign affiliate were responsible for all product lines in their countries. But the new arrangement works well only if foreign managers are brought into the act as group leaders. They may feel their views on customer trends and design needs are ignored if teams are dominated by Americans, while American team leaders may find that managers abroad don't appreciate the costs of granting a customer's wish. Roger Johnson, chief executive of Western Digital, a maker of microcomputer components, advises, ''Don't let your people in the U.S. think they know best. They probably don't.'' Diversities in national outlooks leap into high relief when good ol' boys set foot on foreign soil. ''If you send a Texan to Thailand, he won't necessarily know how to handle the situation,'' says Philip Kotler, marketing professor at Northwestern's Kellogg Graduate School of Management. Some Texans might disagree. Texas Instruments has been making semiconductors in Japan since the late Sixties. The company started by sending over a team of expatriates, who hired a Japanese staff that eventually took over management. There were teething pains, to be sure. ''When you're starting in a brand-new place, mixing two different cultures can cause unexpected problems,'' says Roy Pendergrass, in charge of international personnel. At first TI took an American approach to hiring, pay, and benefits, dismissing the Japanese system of offering bonuses two times a year as impractical. The workers disagreed. Morale crumbled, and TI had trouble recruiting employees.The company adopted Japanese methods of recruiting and reward, including bonuses and a promotion system based strongly on seniority. Today TI is the only American semiconductor company with duplicate memory chip factories in the U.S. and Japan. In 1985 TI won the Deming Prize in Japan, awarded for quality control. Every globalizing company should think seriously about joint ventures and other sorts of alliances between competitors. Even a company the size of, say, IBM? ''Yes,'' says Kaspar Cassani. ''Our field of application -- information handling -- is so huge, especially now that we are in telecommunications, that certain things are much better done if two or three parties get together.'' American companies have traditionally worried about seeing their blood on the floor from tangos with the wrong partners, particularly Japanese ones. George Lindamood of the Gartner Group, a consulting firm, points out the faulty underlying belief: ''If it benefits the Japanese, the Americans must be getting screwed.'' Joint ventures also go wrong because American partners approach them arrogantly. ''If you have a joint venture with a Japanese company,'' says Perlmutter of the Wharton School, ''they'll send 24 people here to learn everything you know, and you'll send one person there to tell them everything you know because you don't think you can learn anything from them.'' So what are the benefits of a joint venture? It can help a company penetrate distribution networks in new regions, and it can defray costs of large-scale development and manufacturing programs. Ford, for example, is making the successor to the best-selling Escort in a joint venture with Mazda of Japan. In South America, Ford and Volkswagen last year formed Autolatina; in a plant formerly owned by Ford, it will make VWs and Fords on the same assembly line. The formula for a successful joint venture, says Cassani, is ''complementarity of skills. In other words, we don't go with somebody who we think is a lame duck. We go with somebody who is a leader in what has to be achieved.'' Cassani notes IBM's agreements with L.M. Ericsson of Sweden and Siemens of West Germany, two leading telecommunications firms. Perlmutter of Wharton offers further advice: Be clear about your goals; plan for the downside; pick people who firmly believe in the venture to run it, then support them; and make sure there is a mechanism for mediating conflict. Ken Butterworth urges picking a partner with whom you are financially simpatico. If you are looking for long-term profits, it is pointless to ally with a company that can't afford to reinvest earnings. And put an escape clause in your contract so you can buy out or get out. Even good alliances often drift closer to the interests of one party or the other. Managers ready to make the leap overseas may well ask where in the world they should go. Some decisions are easy. Companies that expect to do a lot of business in Europe will want a plant within the European Economic Community to avoid import tariffs, and Ireland is becoming a popular choice. Roger Johnson, Western Digital's head, is attracted by the government's favorable attitude to business and the low tax rate and cost of capital. In Asia, Singapore has lured many companies besides AT&T. Biggadike of Becton Dickinson says, ''When you arrive in the country, somebody from the ministry of trade and industry will escort you to industrial sites and take you to established companies. If you want certain kinds of engineers, they will find out where they are and take you to visit them so you can see the quality of tooling work done locally.'' BEWARE OF COUNTRIES that are eager for you to build a plant within their borders but make it difficult to import equipment. A company that wanted to manufacture a high-tech product in Brazil discovered it could not get permission to bring in accurate measuring devices essential to production. It had to leave its Brazilian operations as a token business. The country that widens many managers' eyes most is China. Boeing has a deal to buy tail sections for the 737 from a Chinese factory, and Pall won a large order from the government. But watch out. Tempted executives should heed the experience of Alcatel of Belgium, a telecommunications company with a joint venture in China (its partner is the Shanghai post office). Maurice Van der Kuylen, senior vice president in charge of Asian operations, recalls his first contact with the Chinese. '' 'Mr. Fong,' I said, 'time is money.' To which Mr. Fong replied, 'Mr. Van der Kuylen, time is eternity.' '' Scaling the Great Wall may prove the global manager's ultimate challenge. |
|