Lord Wei speaks on ‘The Local Multinational’ at the World Economic ForumSeptember 13, 2013
Key points made in the session were that Multinationals, like all companies, should focus on creating value for customers and shareholder benefit will follow. Multinationals must be sensitive to local interests, tastes and concerns, while remaining true to core corporate culture and values and organizational culture is critical to fostering entrepreneurship and innovation.
Other speakers were; Paul A. Laudicina, Partner and Chairman Emeritus, A.T. Kearney, USA, Andrea Illy, Chairman and CEO, illycaffè, Italy, Yoshiteru Uramoto, Regional Director, Asia-Pacific, International Labour Organization (ILO), Bangkok, Patrick Malcor, CEO, Theodor Wille Intertrade, Switzerland
The key to success for multinational companies in local communities is the same as for local companies: focus on creating value for customers; wealth will follow. “Local customers and consumers want to buy from companies that are perceived as acting responsibly,” said Paul Laudicina. “Bad corporate behaviour will not be countenanced. Companies, including multinationals, should act in the best interests of all stakeholders. If they do, their shareholders will benefit in the long run,” he added.
Consumers increasingly expect multinationals to engage with and be attuned to local interests and concerns. “Multinationals should engage with local governments where they do business,” urged Lord Wei.
A global company is not the same as a multinational company. A global company pursues the same strategy and vision around the world, with appropriate local adaptions, according to Andrea Illy. “The challenge is to bring consistency throughout the organization,” he said.
Multinationals are facing increasing pressures from Western consumers regarding the low wages and poor working conditions of workers of their developing country suppliers. However,“there is an asymmetry of information between Western consumers and what is actually happening with workers in their value chains,” noted Yoshiteru Uramoto. Over and above potential Western consumer backlash due to mistreatment of workers in their supply chains, multinationals using developing country suppliers should take a longer-term view and recognize that improved working conditions will create new consumers for their products.
“Organizational culture is critical to fostering innovation and entrepreneurship,” stressed Patrick Malcor. While each organization needs its own culture, there are three fundamental elements, according to Malcor. First, culture must actually be meaningful to people’s lives. Second, culture must be arrived at and propagated through inclusive dialogue, not simply dictated from above. And third, “culture must manifest itself in behaviour and actions that actually advance the culture’s values.”
Arriving at the appropriate mix between expats and local employees in the local operations of multinationals is complicated. Lord Wei argued that enlightened multinationals allow locals to participate in employment, management and ownership. Illy agreed: “When you go to a foreign country, you need a local guide. Leaders of local operations should be local.”
Consumers tend to choose local brands because they feel connections with those brands.“To be successful, multinationals need brands anchored in local tastes and consistent with local culture and values,” Laudicina said.