Chapter 17 Leadership, Organization, and Corporate Social Responsibility SUMMARY A. To respond to the opportunities and threats in the global marketing environment, organizational leaders must develop a global vision and strategy. Leaders must also be able to communicate that vision throughout the organization and build core competencies on a worldwide basis. Global companies are increasingly realizing that the “right” person for top jobs is not necessarily a home-country national. B. In organizing for the global marketing effort, the goal is to create a structure that enables the company to respond to significant differences in international market environments and to extend valuable corporate knowledge. Alternatives include an international division structure, regional management centers, geographical structure, regional or worldwide product division structure, and the matrix organization. Whichever form of organization is chosen, balance between autonomy and integration must be established. Many companies are adopting the organizational principle of lean production that was pioneered by Japanese automakers. C. Many global companies are paying attention to the issue of corporate social responsibility (CSR). A company’s stakeholders may include nongovernmental organizations; stakeholder analysis can help identify others. Consumers throughout the world expect that the brands and products they buy and use are marketing by companies that conduct business in an ethical, socially responsible way. Socially conscious companies should include human rights, labor, and environmental issues in their agendas. These values may be spelled out in a code of ethics. Ideological, societal, and organizational perspectives can all be brought to bear on CSR. LEARNING OBJECTIVES 1 Identify the names and nationalities of the chief executives at five global companies discussed in the text 2 Describe the different organizational structures that companies can adopt as they grow and expand globally 3 Discuss the attributes of lean production and identify some of the companies that have been pioneers in this organizational form 4 List some of the lessons regarding corporate social responsibility that global marketers can take away from Starbucks' experience with Global Exchange DISCUSSION QUESTIONS 17-4. Are top executives of global companies likely to be home-country nationals? Answer: In a truly global company, the person chosen to the top executive job should be the best person for that job, irrespective of nationality, however, this question states “likely” and since top executives are often chosen by Boards of Directors, the “likely” answer is that most top executives would tend to be home-country nationals with some outside or overseas experience. 17-5. In a company involved in global marketing, which activities should be centralized at headquarters and which should be delegated to national or regional subsidiaries? Answer: As noted, global marketing activities expose the company to greater environmental diversity than domestic marketing activities. A geocentric orientation requires that control of some subsidiary operations be shifted to headquarters. Large companies may have global marketing product managers with staff authority. A primary task for a person in this position is to ensure that competence developed in individual country markets is leveraged worldwide. 17-6. "A matrix structure integrates four competencies on a worldwide scale." Explain. Answer: The matrix design is characterized by dual lines of reporting. Country subsidiaries provide country knowledge; functional staff in the areas of marketing, production, and finance provide functional competence, and corporate staff provide customer and industry knowledge. The key to the success of the matrix design is coordination and integration of knowledge and competency on a worldwide basis. 17-7. In the automobile industry, how does “lean production” differ from the traditional assembly- line approach? Answer: Lean production tightly integrates the various elements of the value chain, including product design, supply, distribution, manufacturing, accounting, marketing, and management. Lean production enables all parties within the extended manufacturing enterprise to share information and resources in a team-oriented, multifunctional environment. As exemplified by Toyota Production System, lean production can result in dramatic improvements in efficiencies compared to traditional mass production. Lean production also results in fewer defects per vehicle while utilizing less factory space and smaller inventories of parts and components. 17-8. Identify some of the ways the global companies discussed in this text demonstrate their commitment to CSR. Answer: At many companies, a formal statement or code of ethics summarizes core ideologies, corporate values, and expectations. GE, Boeing, and United Technologies are some of the American companies offering training programs that specifically address ethics issues. At Johnson & Johnson, the ethics statement has been translated into dozens of languages for J&J employees around the world. Starbucks founder and CEO Howard Schultz’s enlightened human resources policies have played a key part in the company’s success. Partners, as the company’s employees are known, who work 20 hours or more per week are offered health benefits; partners can also take advantage of an employee stock option plan. OVERVIEW Unilever, the global food and consumer packaged goods powerhouse, markets a brand portfolio that includes such well-known names as Axe, Ben & Jerry’s, Dove, Hellmann’s, Lipton, and Rexona. The company has approximately 167,000 employees and annual sales of almost $59 billion; Unilever can trace its roots, in part, to the northern English town of Port Sunlight on the River Mersey. Before retiring at the end of 2008, Unilever Group Chief Executive Patrick Cescau wanted to reconnect the company with its heritage of sustainability and concern for the environment (see Exhibit 17-1). These and other values reflect Unilever’s philosophy of “doing well by doing good”. Cescau’s vision of “doing well by doing good” manifested itself in other ways, too. For example, he guided the company’s detergent business toward using fewer chemicals and less water, plastic, and packaging. This chapter focuses on the integration of each element of the marketing mix into a total plan that addresses opportunities and threats in the global marketing environment. Business leaders today must be capable of articulating a coherent global vision and strategy that integrates global efficiency, local responsiveness, and leverage. The leader is the architect of an organizational design that is appropriate for the company's strategy. The leader must ensure that the organization takes a proactive approach to corporate social responsibility. ANNOTATED LECTURE/OUTLINE LEADERSHIP Global marketing demands exceptional leadership. As noted throughout this book, the hallmark of a global company is its capacity to formulate and implement global strategies that leverage worldwide learning, respond fully to local needs and wants, and draw on the talent and energy of every member of the organization. Overall, the leader's challenge is to direct the efforts and creativity of everyone in the company toward a global effort that best utilizes organizational resources to exploit global opportunities. An important leadership task is articulating beliefs, values, policies, and the intended geographic scope of a company's activities. Using the mission statement or similar document as a reference and guide, members of each operating unit must address their immediate responsibilities and at the same time cooperate with functional, product, and country experts in different locations. As noted in Chapter 1, global marketing further entails engaging in significant business activities outside the home country. Global marketing means exposure to different languages and cultures. In addition, global marketing involves skillful applications of specific concepts, insights, and strategies. Such endeavors may represent substantial change, especially in U.S. companies with a long tradition of domestic focus. When the "go global" initiative is greeted with skepticism, the CEO must be a change agent who prepares and motivates employees. In addition to “selling” their visions, top management face the formidable task of building a cadre of globally orientated managers. Top Management Nationality Many globally minded companies realize that the best person for a top management job is not necessarily someone born in the home country. The ability to speak foreign languages is one difference between managers born and raised in the United States and those born and raised elsewhere. U.S. Department of Education recently reported that 200 million Chinese children are studying English. By contrast, only 24,000 American children are studying Chinese! Table 17-1 shows examples of corporate leaders who are not native to the headquarter country. Leadership and Core Competence Simply put, core competence is something that an organization can do better than their competitors. Prahalad and Hamel note that a core competence has three characteristics: 1. It provides potential access to a wide variety of markets. 2. It makes a significant contribution to perceived customer benefits. 3. It is difficult for competitors to imitate. Few companies are likely to build world leadership in more than five or six fundamental competencies. In the long run, an organization will derive its global competitiveness from its ability to bring high-quality, low-cost products to market faster than its competitors. To do this, an organization must be viewed as a portfolio of competencies rather than a portfolio of businesses. ORGANIZING FOR GLOBAL MARKETING The goal in organizing for global marketing is to find a structure that enables the company to respond to relevant market environment differences while ensuring the diffusion of corporate knowledge and experience from national markets throughout the entire corporate system. The struggle between the value of centralized knowledge and coordination and the need for individualized response to the local situation creates a constant tension in the global marketing organization. A key issue in global organization is how to achieve balance between autonomy and integration. Subsidiaries need autonomy to adapt to their local environment, but the business as a whole needs integration to implement global strategy. When management at a domestic company decides to pursue international expansion, the issue of how to organize arises immediately. • Who should be responsible for this expansion? • Should product divisions operate directly, or should an international division be established? • Should individual country subsidiaries report directly to the company president, or should a special corporate officer be appointed to take full-time responsibility for international activities? After the decision of how to organize initial international operations has been reached, a growing company is faced with a number of reappraisal points during the development of its international business activities. • Should a company abandon its international division, and, if so, what alternative structure should be adopted? • Should it form an area or regional headquarters? What should be the relationship of staff executives at corporate, regional, and subsidiary offices? • Specifically, how should it organize the marketing function? • To what extent should regional and corporate marketing executives become involved in subsidiary marketing management? Even companies with years of experience competing around the globe find it necessary to adjust their organizational designs in response to environmental change. As markets globalize and as Japan opens its own market to more competition from overseas, more Japanese companies are likely to break from traditional organization patterns. Many of the Japanese companies discussed in this text qualify as global or transnational companies because they serve world markets, source globally, or do both. No single correct organizational structure exists for global marketing. Even within a particular industry, worldwide companies have developed different strategic and organizational responses to changes in their environments. Leading-edge global competitors share one key organizational design characteristic: • Their corporate structure is flat and simple, rather than tall and complex. The message is clear: The world is complicated enough, so there is no need to add to the confusion with a complex internal structuring. Simple structures increase the speed and clarity of communication and allow the concentration of organizational energy and valuable resources on learning, rather than on controlling, monitoring, and reporting. A geographically dispersed company cannot limit its knowledge to product, function, and the home territory. Company personnel must acquire knowledge of the complex set of social, political, economic, and institutional arrangements that exist within each international market. Many companies start with ad hoc arrangements such as having all foreign subsidiaries report to a designated vice president or to the president. Eventually, such companies establish an international division to manage their geographically dispersed new businesses. It is clear, however, that the international division in the multiproduct company is an unstable organizational arrangement. As a company grows, this initial organizational structure frequently gives way to various alternative structures In the fast-changing competitive global environment of the twenty first century, corporations will have to find new, more creative ways to organize. New forms of flexibility, efficiency, and responsiveness are required to meet the demands of globalizing markets. The need to be cost effective, to be customer driven, to deliver the best quality, and to deliver that quality quickly are some of today’s global realities. These designs acknowledge the need to find more responsive and flexible structures, to flatten the organization, and to employ teams. There is the recognition of the need to develop networks, to develop stronger relationships among participants, and to exploit technology. These designs also reflect an evolution in approaches to organizational effectiveness. At the turn of the twentieth century, Frederick Taylor claimed that all managers had to see the world the same way. Then came the contingency theorists, who said that effective organizations design themselves to match their conditions. These two basic theories are reflected in today’s popular management writings. As Henry Mintzberg has observed, “To Michael Porter, effectiveness resides in strategy, while to Tom Peters it is the operations that count—executing any strategy with excellence. Kenichi Ohmae recommends a type of "global superstructure" at the highest level that provides a view of the world as a single unit. Your authors believe that successful companies, the real global winners, must have both good strategies and good execution. THE CULTURAL CONTEXT Can A New Leader Reinvent Sony, the “Apple of the 1980s,” in the Twenty-First Century? Sony Corporation is a legend in the global consumer electronics industry. Its reputation for innovation and engineering has made it the envy of rivals. In 2005, a tumbling stock price resulted in the resignation of chairman and CEO Nobuyuki Idei. Sir Howard Stringer, a Welsh-born American who had been knighted in 2000, was named as Idei’s replacement (see Exhibit 17-3). One of Stringer’s first priorities was to bridge the divide between Sony’s media businesses, which included music, games, and motion pictures, and its hardware businesses. As Stringer himself declared, “We’ve got to get the relationship between content and devices seamlessly managed.” Management writers often use terms like silos, stovepipes, or chimneys to describe an organization in which autonomous business units operate with their own agendas and a minimum of horizontal interdependence. This was the situation at Sony, where the internal rivalries between different engineering units—the PC and Walkman groups, for example—were ingrained in the corporate culture and regarded as healthy. Because Sony’s consumer electronics business accounts for more than two-thirds of Sony’s worldwide sales, breathing new life into the unit is important. To do this, Sir Howard developed a restructuring plan that called for cutting 10,000 jobs, reducing the number of manufacturing sites from 65 to 54, and eliminating some unprofitable products. Cost cutting is only part of the story. Boosting revenues with new products is also crucial to Sony’s recovery. Sir Howard believes that Sony’s TV business will recover, thanks in part to the new Bravia line of HDTVs. The company has also launched an e-book reader. Although Sir Howard had high hopes for the launch of the PlayStation 3 (PS3) game console in mid-2006, production issues delayed the introduction until November. By 2011, Microsoft’s Xbox 360 was the top selling console, thanks in part to its new Kinect controller. Meanwhile, Sony was struck by a one-two punch from two calamities, one natural and the other man-made. The earthquake and tsunami that hit Japan early in 2011 affected Sony and many other Japanese companies. Supply chains were disrupted and the power grid in the vicinity of Tokyo was severely compromised. Then, compounding Sony’s troubles, its online PlayStation Network was the victim of hacker attacks. Will Sir Howard succeed in effecting a turnaround at Sony? While some consider him an outsider, he is known for his non-confrontational style. Because of Sony’s complexity, Sir Howard will be heavily reliant on the skills of his Japanese management team. Sir Howard explains, “I had to do two things: develop those relationships and convince them that the kind of changes I had in mind would be worthwhile. Patterns of International Organizational Development • (Learning Objective #2) Organizations vary in terms of the size and potential of targeted global markets and local management competence in different country markets. Conflicting pressures may arise from the need for product and technical knowledge: functional expertise in marketing, finances, operations, and area and country knowledge. A company engaging in limited export activities often has a small in-house export department as a separate functional area. Most domestically oriented companies undertake initial foreign expansion by means of foreign sales offices or subsidiaries that report directly to the company president. International Division Structure As a company's international business grows, the complexity of coordinating and directing this activity extends beyond the scope of a single person. Pressure is created to assemble a staff that will take responsibility for coordination and direction of the growing international activities of the organization. The creation of an international division is typically the next step. (Figure 17-1) Four factors contribute to the establishment of an international division. 1. Top management's commitment to global operations has increased enough to justify an organizational unit headed by a senior manager. 2. The complexity of international operations requires a single organizational unit whose management has sufficient authority. 3. The firm has recognized the need for internal specialists to deal with the special demands of global operations. 4. Management’s recognition of the importance of strategically scanning the global horizon for opportunities Regional Management Centers When business is conducted in a single region that is characterized by similarities in economic, social, geographical, and political conditions, there is both justification and need for a management center. Thus, another stage of organizational evolution is the emergence of an area or regional headquarters as a management layer between the country organization and the international division headquarters. The increasing importance of the European Union as a regional market has prompted a number of companies to change their organizational structures by setting up regional headquarters there. Regional management can offer a company advantages. • Many regional managers agree that an on-the-scene regional management unit makes sense where there is a real need for coordinated, pan-regional decision-making. • Coordinated regional planning and control are becoming necessary as the national subsidiary continues to lose its relevance as an independent operating unit. • Regional management can probably achieve the best balance of geographical, product, and functional considerations required to implement corporate objectives effectively. • By shifting operations and decision making to the region, the company is better able to maintain an insider advantage. The disadvantage of a regional center is its cost. The cost of a two-person office could exceed $600,000 per year. The scale of regional management must be in line with the scale of operations in the region. Geographical and Product Division Structures As a company becomes more global, management frequently faces the dilemma of whether to organize by geography or by product lines. The geographical structure involves the assignment of operational responsibility for geographic areas of the world to line managers. The corporate headquarters retains responsibility for worldwide planning and control, and each area of the world—including the "home" or base market—is organizationally equal. This structure is most common in companies with closely related product lines that are sold in similar end-use markets around the world. McDonald’s U.S. is organized into five geographical operating divisions and McDonald’s International has four. When an organization assigns regional or worldwide product responsibility to its product divisions, manufacturing standardization can result in significant economies. One potential disadvantage of the product approach is local input from individual country managers may be ignored with the result that products will not be sufficiently tailored to local markets. The Matrix Design In the fully developed large-scale global company, product or business, function, area, and customer know-how are simultaneously focused on the organization's worldwide marketing objectives. This type of total competence is a matrix organization. Management's task in the matrix organization is to achieve an organizational balance that brings together different perspectives and skills to accomplish the organization's objectives. The matrix form of organization is well suited to global companies because it can be used to establish a multiple-command structure that gives equal emphasis to functional and geographical departments. Professor John Hunt of the London Business School suggests four considerations regarding the matrix design: 1. The matrix is appropriate when the market is demanding and dynamic. 2. Employees must accept higher levels of ambiguity and understand that policy manuals cannot cover every eventuality. 3. In country markets where the command-and-control model persists, it is best to overlay matrices on only small portions of the workforce. 4. Management must be able to clearly state what each axis of the matrix can and cannot do. Management can expect the matrix to integrate four basic competencies on a worldwide basis: • Geographic knowledge. An understanding of the basic economic, social, cultural, political, and governmental market and competitive dimensions of a country is essential. • Product knowledge and know-how • Functional competence in such fields as finance, production, and, especially, marketing • Knowledge of the customer or industry and its needs Under this arrangement, instead of designing national organizations or product divisions as profit centers, both are responsible for profitability—the national organization for country profits and the product divisions for national and worldwide product profitability (Figure 17-4). The key to successful matrix management is ensuring that managers are able to resolve conflicts and achieve integration of organization programs and plans. The mere adoption of a matrix design or structure does not create a matrix organization. The matrix organization requires fundamental changes in management behavior, organizational culture, and technical systems. In a matrix, influence is based on technical competence and interpersonal sensitivity, not on formal authority. In a matrix culture, managers recognize the absolute need to resolve issues and choices at the lowest possible level and do not rely on higher authority. Some companies are moving away from the matrix in response to changing competitive conditions. In the twenty-first century, an important task of top management is to eliminate a one-dimensional approach to decisions and encourage the development of multiple management perspectives and an organization that will sense and respond to a complex and fast-changing world. LEAN PRODUCTION: ORGANIZING THE JAPANESE WAY • (Learning Objective #3) In the automobile industry, a comparison of early craft production processes, mass production, and modern “lean” production provides an interesting case study of the effectiveness of new organizational structures in the twenty-first century. The advantage of the mass producers lasted until the Japanese auto companies revised the value chain and created lean production, thereby gaining for themselves the kinds of dramatic competitive advantages that mass producers had previously gained over craft producers. For example, the Toyota Production System (TPS), as the Japanese company’s manufacturing methods are known, achieves efficiencies of about 50 percent over typical mass production systems. To achieve these gains at Toyota, production gurus Taiichi Ohno and Shigeo Shingo challenged several assumptions traditionally associated with automobile manufacturing. They made changes to operations within the auto company itself such as reducing setup times for machinery. The changes also applied to operations within supplier firms and the interfaces between Toyota and its suppliers and to the interfaces with distributors and dealers. Ohno and Shingo’s innovations have been widely embraced in the industry; as a result, individual producers’ value chains have been modified, and interfaces between producers and suppliers have been optimized to create more effective and efficient value systems. Assembler Value Chains Employee ability is emphasized in a lean production environment. Before being hired, people seeking jobs with Toyota participate in the Day of Work, a 12-hour assessment test to determine who has the right mix of physical dexterity, team attitudes, and problem-solving ability. Quality control is achieved through kaizen, a devotion to continuous improvement that ensures that every flaw is isolated, examined in detail to determine the ultimate cause, and then corrected. (Exhibit 17-5) Mechanization, and particularly flexible mechanization, is a hallmark of lean production. For example, a single assembly line in Georgetown, Kentucky, that produces Toyota’s Camry sedan also produces the Sienna minivan. The Sienna and Camry share the same basic chassis and 50 percent of their parts. Of the 300 different stations on the line, only 26 stations require different parts to assemble minivans. In contrast to the lean producers, U.S. mass producers typically maintain operations with greater direct labor content, less mechanization, and much less flexible mechanization. They also divide their employees into a large number of discrete specialties with no overlap. Employee initiative and teamwork are not encouraged. Quality control is expressed as an acceptable number of defects per vehicle. Even when the comparisons are based on industry averages, the Japanese lean producers continue to enjoy substantial productivity and quality advantages. Again, these advantages put the lean producers in a better position to exploit low-cost or differentiation strategies. They are getting better productivity out of their workers and machines, and they are making better use of their factory floor space. The relatively small size of the repair area reflects the higher quality of their products. A high number of “suggestions per employee” provides some insight into why lean producers outperform mass producers. First, they invest a great deal more in the training of their workers. They also rotate all workers through all jobs for which their teams are responsible. Finally, all workers are encouraged to make suggestions, and management acts on those suggestions. These changes to the value chain translate into major improvements in the value of their products. It should come as no surprise that many of the world's automakers are studying lean production methods and introducing them in both existing and new plants throughout the world. Downstream Value Chains The differences between lean producers and U.S. mass producers in the way they deal with their respective dealers, distributors, and customers are as dramatic as the differences in the way they deal with their suppliers. U.S. mass producers follow the basic industry model and maintain an “arm’s length” relationship with dealers that is often characterized by a lack of cooperation and even open hostility. There is often no sharing of information because there is no incentive to do so. The manufacturer is often trying to force on the dealer models the dealer knows will not sell. The dealer, in turn, is often trying to pressure the customer into buying models he or she does not want. All parties are trying to keep information about what they really want from the others. This does little to ensure that the industry is responsive to market needs. The problem starts with the market research, which is often in error. It is compounded by lack of feedback from dealers regarding real customer desires. It continues to worsen when the product planning divisions make changes to the models without consulting the marketing divisions or the dealers. This process invariably results in production of models that are unpopular and almost impossible to sell. The manufacturer uses incentives and other schemes to persuade the dealers to accept the unpopular models, such as making a dealer accept one unpopular model for every five hot-selling models it orders. The dealer then has the problem of persuading customers to buy the unpopular models. U.S. mass producers follow the basic industry model and maintain an "arm's-length" relationship with dealers that are often characterized by a lack of cooperation and even open hostility. Within the mass assembler’s value chain, the linkage between the marketing elements and the product planners is broken. The external linkage between the sales divisions and the dealers is also broken. The production process portion of the value chain is also broken in that it relies on the production of thousands of unsold models that then sit on dealer lots, at enormous cost, while the dealer works to find customers. Within the dealerships, there are even more problems. The relationship between the salesperson and the customer is based on sparring and trying to outsmart each other on price. When the salesperson gets the upper hand, the customer gets stung. It is very much like the relationship between the dealer and the manufacturer. Each is withholding information from the other in the hope of outsmarting the other. Too often, salespeople do not investigate customers’ real needs and try to find the best product to satisfy those needs. Rather, they provide only as much information as is needed to close the deal. Once the deal is closed, the salesperson has virtually no further contact with the customer. No attempt is made to optimize the linkage between dealers and manufacturers or the linkage between dealers and customers. EMERGING MARKETS BRIEFING BOOK Western Business Executives Scold China What happened when the chief executives of some of the world’s biggest global companies got a chance to meet face-to-face with China’s Premier Wen Jiabao? They gave him an earful; that’s what. The CEOs, Jürgen Hambrecht of BASF and Peter Loescher of Siemens, were accompanying Germany chancellor Angela Merkel on a four-state visit. The criticism reflected broader concern among Western business and government leaders about China’s business environment. One issue is bidding procedures that appear to discriminate against foreign companies. While acknowledging China’s strategic importance to GE, Immelt also made it clear that the Middle East, Africa, and Latin America are emerging as key world markets. Google CEO Eric Schmidt also made his voice heard. Addressing the Council on Foreign Relations in New York recently, Schmidt expressed concern about Beijing’s ongoing efforts to censor the Internet. For much of 2010, Google and the Chinese government clashed over issues concerning filtering content accessed via search engines. Beijing is also struggling to keep control over new media. The contrast with the lean producer is again striking. In Japan, the dealer’s employees are true product specialists. They know their products and deal with all aspects of the product, including financing, service, maintenance, insurance, registration and inspection, and delivery. A customer deals with one person in the dealership, and that person takes care of everything from the initial contact through eventual trade-in and replacement and all the problems in between. Dealer representatives are included on the manufacturer’s product development teams and provide continuous input regarding customer desires. The linkages between dealers, marketing divisions, and product development teams are totally optimized. Ethics, Corporate Social Responsibility, and Social Responsiveness in the Globalization Era • (Learning Objective #4) Today’s chief executive must be a proactive steward of the reputation of the company he or she is leading. A stakeholder is any group or individual that is affected by, or takes an interest in, the policies and practices adopted by an organization. (Exhibit 17-6) Top management, employees, customers, persons or institutions that own the company’s stock and suppliers constitute a company’s primary stakeholders. Secondary shareholders include the media, the general business community, local community groups, and nongovernmental organizations (NGOs). Stakeholder analysis is the process of formulating a “win-win” outcome for all stakeholders. The leaders of global companies must practice corporate social responsibility (CSR), which can be defined as a company’s obligation to pursue goals and policies that are in society’s best interests. Organizations can demonstrate their commitment to CSR in a variety of ways including cause-marketing efforts or a commitment to sustainability. (Exhibit 17-7) As noted in Chapter 1, one of the forces restraining the growth of global business and global marketing is resistance to globalization. In a wired world, a company’s reputation can quickly be tarnished if activists target its policies and practices. In a socially responsible firm, employees conduct business in an ethical manner. In other words, they are guided by moral principles that enable them to distinguish between right and wrong. At many companies, a formal statement or code of ethics summarizes core ideologies, corporate values, and expectations. For the global company with operations in multiple markets, the issue of corporate social responsibility becomes complicated. When the chief executive of a global firm in a developed country or government policymakers attempt to act in “society’s best interests,” the question arises: Which society? That of the home-country market? Other developed countries? Developing countries? (Exhibit 17-9) A multinational firm may rely on individual country managers to address CSR issues on an ad hoc basis, while a global or transnational may create a policy at headquarters. Arthaud-Day proposed a three-dimensional framework for analyzing the social behavior of international, multinational, global, and transnational firms. The second dimension of the model includes CSR’s three “content domains”: human rights, labor, and the environment. These are the universal concerns for global companies established by the United Nations Global Compact. The third dimension consists of three perspectives: • The ideological dimension of CSR pertains to the things a firm’s management believes it should be doing. • The societal dimension consists of the expectations held by the firm’s external stakeholders. • The operational dimension includes the actions and activities actually taken by the firm. As illustrated in Figure 17-6, the interaction between the dimensions can result in several conflict scenarios. Conflict may arise from three areas: 1. If there is an incongruity between those things that a company’s leadership believes it should be doing and the expectations of stakeholders 2. When there is an incongruity between those things that a company’s leadership believes it should be doing and the things it actually is doing 3. From an incongruity between society’s expectations and actual corporate practices and activities CASES Cases: 17-1: Unilever Overview: Unilever, the global food and consumer packaged goods powerhouse, markets a brand portfolio that includes such well-known names as Axe, Ben & Jerry’s, Dove, Hellmann’s, and Lipton. The company has approximately 200,000 employees and annual sales of $57 billion. These and other values reflect Unilever’s philosophy of “doing well by doing good”. Cescau’s vision of “doing well by doing good” manifested itself in other ways, too. For example, he guided the company’s detergent business toward using fewer chemicals and less water, plastic, and packaging. In addition, he recognized that today’s “conscience consumers” look to a company’s reputation when deciding which brands to purchase. Cescau also bet heavily on emerging markets to jump-start sales growth. Brands managers have been instructed to innovate by taking a “clean slate” 17-9. If a company such as Unilever has to make trade-offs between being a good corporate citizen and making a profit, which should have the higher priority? Answer: These questions are not mutually exclusive: In today’s global environment, being a good corporate citizen is a means to making a profit. The leaders of global companies must practice corporate social responsibility (CSR), which can be defined as a company’s obligation to pursue goals and policies that are in society’s best interests. Global firms must address the ideological, societal, and operational dimensions of their business and act to preserve, and protect the environment and their unique business needs. 17-10. Assess Cescau’s response to the Greenpeace palm-oil protest. Was it appropriate? What type of relationships should Unilever cultivate with Greenpeace and other NGOs in the future? Answer: According to the case, “Cescau responded to the protest by calling for a moratorium on rain forest destruction by Indonesian oil producers. The Unilever chief also pledged that the company would only buy palm oil from producers who could prove that the rain forest had not been sacrificed to produce the oil. A spokesperson also indicated that, although the company was aware of the protests, the proposed change in its palm-oil sourcing strategy had been in the works for months. Nevertheless, Greenpeace and other nongovernmental organizations claimed victory. If there was a strategic decision in the works to prohibit buying palm oil from producers who did not engage in sustainable farming, Unilever, should have been proactive on that front and come out with their decision before the Greenpeace organization. As a major user of palm oil, Unilever, should have shown leadership in this regard. As Cescau’s remark makes clear, “doing well” is also part of the leadership equation.” Unilever, and Greenpeace and other NGO’s should establish lines of communications and have a relationship built on trust and cooperation and coordination instead of conflict. 17-11. Do you think that a streamlined management structure and emphasis on emerging markets will enable new CEO Paul Polman to lead Unilever to improved performance? Answer: When an organization assigns regional or worldwide product responsibility to its product divisions, manufacturing standardization can result in significant savings. In the twenty-first century, an important task of top managers is to eliminate a one-dimensional approach to decisions and to encourage the development of multiple management choices. By re-directing resources, and responsibilities away from established markets, Cescau has laid the foundation for continued growth of the brands and the company in emerging markets. For example, as noted in the case, “emerging markets to jump-start sales growth: According to company forecasts, by 2010, one-sixth of the world’s population—some 1.2 billion people—will buy packaged goods for the first time” Considering that Europe’s population is approximately 400 million and the United States is 350 million, in the next few years, more people, than Europe and the United States combined, will be purchasing their first packaged goods—I’d say Cescau is positioning Unilever on the right track! TEACHING TOOLS AND EXERCISES Cases: "Pepsi Canada: The Pepsi Refresh Project", by Matthew Thomson and Ken Mark, HBS, Richard Ivey School of Business Foundation, Sept. 2011. W11191-PDF-ENG. 12 pg. " Nike Football: World Cup 2010 South Africa" by Elie Ofek and Ryan Johnson. June 2011. HBS 511060-PDF-ENG. 29 p. " The Dannon Company: Marketing and Corporate Social Responsibility (B)" by Christopher Marquis and Bobbi Thomason. HBS Sept. 2011. 412047-PDF-ENG. "The Clorox Company: : Leveraging Green for Growth", by Elie Ofek and Lauren Barley. Harvard Business School. Aug. 2011, 512009-PDF-ENG. 30 p. “Banyan Tree: Sustainability of a Brand During Rapid Global Expansion”. Ali Farhoomand; Pauline Ng; Cathy Enz. HBS HKU774. Videos: Occupy Wall Street: http://online.wsj.com/video/is-american-business-being-socially-responsible/03E85AD9-D2BB-4B26-B0F9-AE9036523F2A.html Working with stakeholders around the world-from the owner/operators who run restaurants in their local communities, to leading NGOs and third party experts - to continuously improve our social and environmental performance, these are the people who have seen the real world of McDonald's. http://www.youtube.com/watch?v=S_bgP3ASUM4&feature=related Activity: By now, students should have completed their Cultural and Economic Country Analysis and presented their in-country Marketing Plan. Assign student or student groups to present their projects to the entire class. Movie: Assign Al Gore’s An Inconvenient Truth. The documentary puts CSR into a whole new light—regardless of your politics. Out-of-Class Reading: Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Brooking Institute Press, 2006. Internet Exercise: Go to the Corporate Social Responsibility News website (http://www.csrwire.com/). Take a look at current news headings on CSR and report to the class. Interview: Interview three marketing managers from different organizations. Ask them about their budgeting responsibilities and the “lessons” they have learned about budgeting. SUGGESTED READINGS Books Bartlett, Christopher A. and Sumantra Ghoshal. Managing Across Borders: The Transnational Solution, 2nd ed. Boston: Harvard Business School Press, 1998. Cairncross, Frances. The Company of the Future. Cambridge, MA: Harvard Business School Press, 2002. Gerlach, Michael L. Alliance Capitalism: The Social Organization of Japanese Business. Berkeley and Los Angeles: University of California Press, 1992. Going Global: Succeeding in World Markets. Boston: Harvard Business School Press, 1991. Govindarajan, Vijay and Robert Newton. Management Control Systems. New York: McGraw-Hill/Irwin, 2000. Katzenbach, Jon R., and Douglas K. Smith. The Wisdom of Teams: Creating the High Performance Organization. Boston: Harvard Business School Press, 1993. Kets de Vries, Manfred. The New Global Leaders: Richard Branson, Percy Barnevik, and David Simon. San Francisco: Jossey-Bass, 1999. Snyder, Neil. Vision, Values, and Courage. New York: Free Press, 1995. Stopford, John M., and Louis T. Wells. Managing the Multinational Enterprise. New York: Basic Books, 1972. Tuller, Lawrence W. Going Global: New Opportunities for Growing Companies to Compete in World Markets. Homewood, Ill.: Business One Irwin, 1991. Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington, D.C.: Brooking Institute Press, 2006. Yip, George S. Total Global Strategy. Upper Saddle River, N.J.: Prentice Hall, 1992. Articles Asakawa, Kazuhiro. "Evolving Headquarters-Subsidiary Dynamics in International R&D: The Case of Japanese Multinationals." R&D Management 31 no. 1 (January 2001), pp. 1-14. Becker-Olsen, Karen L., Taylor, Charles R. & Hill, Ronald P. "A Cross-Cultural Examination of Corporate Social Responsibility Marketing Communications in Mexico and the United States: Strategies for Global Brands". Journal of International Marketing: (Volume 19, Number 2, p. 30-44) 2011 Birkinshaw, Julian, "Encouraging Entrepreneurial Activity in Multinational Corporations," Business Horizons 38, no. 3 (May-June 1995), pp. 32-38. ________ , and Neil Hood. "Unleash Innovation in Foreign Subsidiaries." Harvard Business Review 79 no. 3 (March 2001), pp. 131-137. Crittenden, Victoria L, Crittenden, William F. Pinney, Christopher C, Pitt, Leyland. "Implementing global corporate citizenship: An integrated business framework" Business Horizons. September 2011. HBS BH 488-PDF-ENG. 9 p.m Dyment, John J. “Strategies and Management Controls for Global Corporations.” Journal of Business Strategy 7 (Spring 1987), pp. 20-26. Gupta, Anil, and Vijay Govindarayam. "Managing Global Expansion: A Conceptual Framework." Business Horizons 43, no.2 (March/April 2000), pp. 45-54. Halal, William E. "Global Strategic Management in a New World Order." Business Horizons 36, no. 6 (November-December 1993). Harris, Milton and Artur Raviv. “Organizational Design.” Management Sciences 48 (July 2002), pp. 852-865. Harzing, Anne-Wil. "Of Bears, Bumble-Bees, and Spiders: The Role of Expatriates in Controlling Foreign Subsidiaries." Journal of World Business 36 no. 4 (Winter 2001), pp. 366-79. Hewett, Kelly, and William O. Bearden. "Dependence, Trust, and Relational Behavior on the Part of Foreign Subsidiary Marketing Operations: Implications for Managing Global Marketing Operations." Journal of Marketing 65, no. 4 (October 2001), pp. 51-66.p Hsieh, Tsun-Yan, Johanne La Voie, and Robert A. P. Samek. “Think Global, Hire Local.” The McKinsey Quarterly 35, no. 4 (1999), pp. 92-101. Islam, Muhammad Azizul & Deegan, Craig." Media Pressures and Corporate Disclosure of Social Responsibility Performance Information: A Study of Two Global Clothing and Sports Retail Companies". Accounting and Business Research (Volume 40, Issue 2) 2010 Kashani, Kamran. "Beware the Pitfalls of Global Marketing." Harvard Business Review 67, no. 5 (September-October 1989), pp. 91-98. Kuniyasu, Sakai. "The Feudal World of Japanese Manufacturing." Harvard Business Review 68, no. 6 (November-December 1990), pp. 38-49. Morrison, Allen J., David A. Ricks and Kendall Roth. "Globalization Versus Regionalization: Which Way for the Multinational?" Organizational Dynamics (Winter 1991), pp. 17-29. O'Reilly, Anthony J. F. "Leading a Global Strategic Charge." Journal of Business Strategy 12, no. 4 (July-August 1991), pp. 10-13. Stewart, Art. "Corporate and Social Responsibility: The Changing Context for Marketing Communications Practice". Journal of Integrated Marketing Communications. (Volume 21, p.59-64) 2011 Link: http://works.bepress.com/art_stewart/10 Thurow, Lester. "Who Owns the Twenty-First Century?" Sloan Management Review 33, no. 3 (Spring 1992), pp. 5-17. Williams, Sandra L. "Engaging values in international business practices" Business Horizons. July 2011. Vaaland, Terje, Heide, Morten, Gronhaug, Kjell. “Corporate Social Responsibility: Investigating theory and Research in the Marketing Context”. European Journal of Marketing. 2008. v. 42. issue: 9/10. pp. 927-953. Solution Manual for Global Marketing Warren J. Keegan, Mark C. Green 9780133545005, 9781292017389
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