In chapter seventeen several topics for debate are presented about managing global operations. For many global organizations, or organizations that produce or sells goods or services in more than one country, a difficult question is how to develop and place managers in foreign operations. Some people believe organizations should let foreign managers run foreign subsidiaries because of the large differences among national cultures while others believe that domestic managers should be trained to run foreign subsidiaries because of loyalty issues.
Nation culture is the particular set of economic, political, and social values that exist in a particular nation. This culture effects all aspects of global organizations operations. Foreign exchange rates, banking and accounting laws, and tax codes can all affect the profitability of foreign subsidiaries. These rules and regulations vary from country to county. The way Japan accounts for good will varies dramatically from the way the United Sates regulatory agency demands it be recorded. In some countries politics play a larger role than others. In smaller less industrialized countries it may be necessary to support specific political candidates in order to be able to establish a profitable business. To do business in a country like Iraq you would probably have to make a large donation to the Hussein family, however in England you don’t have to support the Royal Family to operate an organization. In addition to economic and political problems a more fundamental problem appears. Social values have a dramatic affect on how products and services are perceived and how effective advertising can be. An advertising campaign with women in bikinis promoting Budweiser products may be highly effective in a small collage town in the United States, but in Saudi Arabia it would probably offend a number of people, because of the local customs. Having a local foreign manager can aid in the efficiency of foreign operations because of their better understanding of local laws and regulations, lobbying systems and societal norms.
Placing a local manager in head of foreign operations can also lead to insecurities about loyalty. It becomes easier for subsidiaries to be overtaken and spun off if the local management has little ties to the central organization. Training and placing loyal domestic managers in foreign operations can be on way of countering this potential problem. Some companies have successfully employed this type of global strategy with success but training mangers in local customs and laws can be timely and costly.
Although in the future the world may merge customs, languages and currencies, in today’s world there is a vast difference between national cultures. An effective way to operate a foreign organization is to have a manager that has previously lived, been educated and has operated in that particular nation. Loyalty to any one organization is based on other things besides just nationality. So training and placing a domestic manager in a foreign division may not be the best choice for the organization. By placing the most trained and qualified people, regardless of race, religion, sex, or nationality, to do the best job in each part of an organization is the most effective way to do business. And who more qualified than those who know first hand what the national culture is.