(FORTUNE Magazine) – That's what Samsung CEO Jong-Yong Yun, whose company prizes technology, says about understanding local markets. Going global has always been a tricky business. For many people, the emergence of a global economy has meant unprecedented wealth and unparalleled access to goods and services. A cosmetics brand born in Tennessee can become wildly popular in Shanghai. For those in business, however, globalization has brought unrelenting change and fierce competition. To find out how the best companies manage in a world that's getting smaller and more complicated, we asked five CEOs of FORTUNE Global 500 companies how they've stayed on top of the game. Whether based in Europe, the U.S., or Asia, they've successfully managed global businesses in everything from refrigerators to fragrances. Here's what they had to say. --Janet Guyon

Lindsay Owen-Jones L'Oreal CEO SINCE 1988

Global Makeover L'Oreal's 2003 sales: $15.9 billion

Western Europe 53% North America 27% Rest of world 20%

ON WHAT MAKES A GLOBAL BRAND: Ultimately it is a question of imagination and intuition in equal parts. It is intuition [when one asks] what do these brands have that just might seduce the world? But also in terms of imagination, what could they become to seduce the world? It took imagination to think that a nice, homey, very basic, user-friendly, popular, and cheap but really not sophisticated make-up line called Maybelline made in Memphis could become the hottest thing for young women in Shanghai. That is why this business is always looking for candidates who not only have basic business disciplines but also an ability to dream. We call them, in French, poetes et paysans.

ON RESEARCHING MARKETS: We try to do a major market visit every month. Since the beginning of the year we've been to the U.S., Japan, Russia, Germany, and Brazil. Typically, the first day we will spend just visiting stores. That's an opportunity not just to look at the stores but to look at what women are wearing and what they've got in their shopping carts. You look at them buying all kinds of other things, not just our products. I usually like to have a quick look at the clothes department if it is a department store, or perhaps cereal or instant coffee if I'm in a supermarket.

ON BEAUTY: Understanding what women want anywhere, including your home country, is a major challenge, especially in something as personal as beauty. People do not talk honestly of their aspirations. You knock on the door and say, "Do you have a secret aspiration to be a chic French woman?"--they would laugh you out of the door. The key words I would use are observation, cultural understanding, empathy, and intuition. These are probably more important than the traditional scientific marketing-research approaches. I think we are helped by our European heritage. Cultural diversity is an everyday factor of life. Our success in the U.S. has been heightened by our understanding and awareness of ethnic differences. Every new country you are successful in gives you an added dimension of understanding how the world is different.

ON SETTING AN EXAMPLE: When you have spent a day tramping from morning to evening, and from store to store, eating sandwiches in a minibus as you go from one place to another, you are sending an unwritten message to teams everywhere in the world that the CEO is doing the same thing he expects them to do--which is for all of us to avoid [living] in some sort of ivory tower and to listen to our customers.

ON LONG-TERM PLANNING: Everybody who manages a business at L'Oreal has a basic responsibility to the company to do what we [call] "a cow and a calves policy." You are responsible not only for managing profitably today's business but also for preparing what will be profitable many years after you have left that particular country or assignment. And you will be judged not only on your ability to produce the numbers now but on the credibility of the plans that will be there when you leave--to create businesses that one day will be the future. --Richard Tomlinson

Charles O. Holliday DuPont CEO SINCE 1998

Chemical Expansion DuPont's 2003 sales: $27.7 billion

U.S. 45% Europe 28% Asia/Pacific 17% Rest of world 10%

ON GLOBAL EXPANSION: Developing countries are growing more rapidly, but you need to make sure you're bringing in the right products and services at the right time. We have ways of looking at the economy in each country to see if it's ready for agricultural products, automotive products, or construction products. The metric we had going into a developing country was $1,000 GDP per capita, and that's still a general rule of thumb. But averages can be terrible in developing countries because they can be much different in the cities than in the country. You see that in China, where the differences in income are as wide as they can be between the coastal areas and the inner provinces. So we've done regional breakdowns. We look at Jakarta vs. the rest of Indonesia, for example. Jakarta might have a GDP of $1,500 per capita, yet the rest of the country is at $800. We might put in distribution around the major cities if we can't get it into the entire country yet. In China, we sell our Corian countertop material to the upper end. We also bought a producer of solid-surface countertop that's lower end. We're using our branding on it and all our technology to make it an even better lower-end product.

ON CHINA: We see China as a big logistics and distribution challenge. We build smaller facilities close to our customers to maximize the logistics, as opposed to a big, cost-efficient plant. The other thing about China is they are turning out about 300,000 engineers a year, compared with 62,000 in the U.S., and they are technically just as good as our crop in the U.S. So we are doing more of our engineering in China.

ON U.S. COMPETITIVENESS: The real test is if can we go to a higher level of knowledge-content products, which means more research and development around biotechnology and nanotechnology. If we are successful in leading the world in those sciences, then the U.S. is going to be very successful. If we can't, it's more problematic. Let's take genetically modified food, which is a big business for us. The U.S. is a world leader today. And the approvals from other parts of the world are starting to come in. Brazil and China are accepting genetically modified soybeans, for instance. It's a great example of how the U.S. is winning.

ON CORPORATE SOCIAL RESPONSIBILITY: You need to pay attention to local customs and practices. In India, we wanted to do something good for a community where we were trying to build a plant. So we decided to put up a free clinic with a nurse and some over-the-counter medicines. We saw that as a big need. We then found that an activist group was pushing against our building the plant. Lo and behold, a local doctor was in the activist group. We weren't thoughtful enough about the fact that we were taking his business away by building a free clinic. How could we be so stupid? We ended up moving the plant to a different town. It's critical to have good people on the ground who know the customers. But we never compromise our ethical standards. We try to think local and resource global. --Janet Guyon

David Whitwam Whirlpool CEO SINCE 1987

It's a Cool World Whirlpool's 2003 sales: $12.2 billion

North America 64% Europe 22% Latin America 11% Asia 3%

ON WHY WHIRLPOOL WENT GLOBAL: In the late 1980s we were the dominant player in the U.S. market, which was growing very slowly. Everyone had a refrigerator or a dishwasher. We faced a dilemma in getting growth. We didn't start with a global view; everyone said the appliance market was a local one. And we looked at a number of different alternatives on how we could create value, such as expanding into other industries. But we spent six to eight months looking at appliance markets around the world and came to the conclusion that the consumers and the technology weren't all that different. We felt we could design a platform that was common and would significantly reduce costs and increase our participation and ability to bring innovation to various markets. We came to the conclusion that the industry would become a global one and that someone had to shape it. Today we have about 15% of the global market, which is 40% more than our closest competitor. When we began we were a $3.5 billion company; we'll end this year with more than $13 billion in revenue.

ON BRANDING: Today the Whirlpool brand is the No. 1 major-appliance brand in the world. But when we went to Europe, people had never heard of it. It was our view that there was a great advantage to global branding and that you could build it with the right advertising. You could build a loyal relationship with consumers in which they felt the brand was theirs, even though in many places they couldn't pronounce Whirlpool. But if you spend enough on advertising, they learn to.

ON INNOVATION: Many people believe that the way to drive innovation is to carve out a few creative people. Our view is entirely different. We need innovation from everyone. We believe it is a skill that can be taught. So at the beginning of 2000 we began to embed innovation as a core competency of the company. Today close to 1,000 people have been through training to develop the skills of innovation. We've had more innovation in the past 18 months than in the 17 years I've been CEO. One prime example is the garage category. Most appliances are bought by women, but a group of employees wanted to expand the consumer base to men. So they created a set of products for the garage--flooring, appliances, cabinets.

ON LEADERSHIP: Leading a company today is different from the 1980s and '90s, especially in a global company. It requires a new set of competencies. Bureaucratic structures don't work anymore. You have to take the command-and-control types out of the system. You need to allow and encourage broad-based involvement in the company. Especially in consumer kinds of companies, we need a diverse workforce with diverse leadership. You need strong regional leadership that lives in the culture. We have a North American running the North American business, and a Latin American running the Latin American business. We do have a North American running the European business, but at the lower levels we have no more than 30 to 35 expatriates. --Janet Guyon

Tom McKillop AstraZeneca CEO SINCE 1999

Pharmacopia AstraZeneca's 2003 sales: $18.9 billion

U.S. 46% Europe 36% Japan 6% Rest of world 12%

ON INDUSTRY CONSOLIDATION: There is no sign that getting bigger leads to a better-quality business. GlaxoSmithKline is a product of a series of mergers, and there's no real evidence that it is a better-quality company. Our merger between Astra and Zeneca was different, because we were two medium-sized companies and we needed to get bigger for sales and marketing. We were totally committed to research and development. We've had an excellent flow of new products, and we've got a good pipeline. Our merger was not about cost cutting.

ON THE COST OF R&D: R&D has been getting more expensive, and you do need to be big enough to afford the different technologies that will keep you competitive. But beyond a certain point you risk running a less efficient R&D business. You need speed and creativity. Those aren't attributes that you normally associate with big companies.

ON GENERICS: There is a synergy, or symbiosis, between the generics industry and the innovative industry. Our industry depends fundamentally on intellectual property that is respected and protected. Otherwise people will not invest. At the end of the patent period it is natural that other competitors can come in, and that will bring the cost down dramatically to create economic headroom for innovation. What is worrying is if there is a premature attack on intellectually protected product. Then you take away the incentive for innovation.

ON THE GRAY MARKET FOR CHEAP DRUGS: In Europe we have a single economic unit with free movement of goods between countries, which arbitrarily change and set prices. That has led to a downward pricing of drugs, which has been extremely negative for the industry and for R&D in Europe. And that has led to the U.S. being the big economic winner. Many European politicians realize this is crazy, because historically the pharmaceutical industry was the most successful industry in Europe. But it's been dramatically losing competitiveness to the U.S. In Canada we've had an artificial market, with high generic prices, while not rewarding companies for their in-novative drugs. If U.S. legislation is passed insisting on product availability through Canada, then no company could afford to launch a new product.

ON THE SAFETY OF DRUGS BOUGHT ON THE INTERNET: The FDA has done a study in which it ordered products from Internet sites. Eighty percent of the products had something wrong with them, or were mislabeled or improperly stored. Companies are legally liable for their products. But if we don't know where the product has been, how can we be liable? We are heading into very dangerous waters here. The flow of product that has been counterfeited with no active ingredient is increasing. Very loose distribution systems are highly dangerous. --Janet Guyon

Jong-Yong Yun Samsung Electronics CEO SINCE 1999

Brand Power Samsung's 2003 sales: $36.4 billion*

Korea 21.3% Rest of Asia 34.9% U.S. 20.4% Europe 22.9% Africa 0.5%

* Unconsolidated

ON SOUTH KOREA'S SUCCESS: While it is true that the West has viewed Korea as a quiet and closed country, the nation has [entrusted its] destiny [to] being an export nation since the industrialization of the 1970s, because of the shortage of natural resources and limited size of the domestic market. Because of these constraints, Samsung Electronics, since its establishment in 1969, has manufactured products not with the aim to sell in the domestic market but for export to the overseas market. Currently 83% of our sales are derived through exports, and we operate approximately 100 offices for production, sales, distribution, and R&D in 50 countries throughout the world.

ON MANAGING GLOBALLY: The key to monitoring the progress of the entire company is in setting the right incentives, controls, and standardized processes in the corporate environment. At Samsung each division is empowered through a system called the Global Business Manager. Implemented several years ago, this system places responsibility on the division head for the profits generated. At the same time, the head is given the flexibility to make prudent decisions, which are crucial for the division's advancement.

ON COMMUNICATING: I spend much of my time visiting our domestic and overseas work sites to examine operations from the ground, receiving face-to-face reports and indicating areas for improvement. This gives me the opportunity to freely discuss matters with the person directly involved, from the top management to the junior staff of that work site. While many people believe that developments in digital technology have brought convenience in managing a global business, I still believe that no innovation can replace the valuable information that is gathered through direct discussions.

ON GLOBAL BRANDING: The Samsung Electronics brand needs to be managed in a unified manner and maintained consistently for the mid- to long-term. The company produces and sells a variety of products that must be unified under the premium-brand positioning that we are seeking. Prior to Samsung's decision to manage the brand image through a central organization, many of the marketing activities were localized to the region. What we found was dilution of the brand and a misconception of the corporate identity. --Clay Chandler