WONDER, WHY WONDER, WHY

Kermit the Frog from The Muppet Show sang a song like this. I loved the contradiction. From time to time, I wonder what makes companies more successful when they operate in multi-cultural environments. Then I wonder, why wonder, why if they are successful by being themselves? On the other hand, the current success of companies will not necessarily protect them in the future.

When companies are successful in their countries of origin, they begin to operate in other markets. In order to avoid interference from the existing company, they usually form subsidiaries that report independently to upper management. When operating in more than three or four countries simultaneously, increasing revenues and the pressure of cost reduction force them to create synergies which inevitably turn into headquarters organizations. However, every decision is still made by the local management team that has enabled the company to become an international player. These people suddenly become international players despite their strictly local backgrounds. Except for some bureaucratic requirements of the new market, they usually have a strong urge to keep the winning formula the same. In this form, companies are called multi-nationals: organizations that operate in more than one country and are managed under strict guidelines by a central administration.

As the number of operations in different countries increases, it becomes very difficult to control all aspects of the business from one center. Tougher guidelines and rules come into play, as does the necessity to build more headquarters in distant places.

Tax advantages play a big role when deciding on a location. The new locations start demanding new things from the company for their own particular needs. With the growth in revenue, they become control centers of their own, based on strategic directions from the global headquarters. Head-count fights start between country and global headquarters, and they become “fat cats” over time. More headquarters means more reports to prepare for country teams, creating more distractions from their local business objectives. At this stage, these companies are called international companies. Decision-making processes are more inter-cultural than in single-culture dominated multi-nationals. Like a pendulum, these companies swing between centralized (more people at headquarters; in other words, more chiefs than Indians) and de-centralized (more people in the countries) poles.

Then the last stage comes. When the companies mature enough, they realize that they can benefit from their multicultural environment and source different talent from different parts of the world without being prejudiced or uncertain. Design can be created in a mature market. They can take financial back-up services to a developing country where the labor costs and the systems are cheaper. Software development can be in another country. They utilize the world’s talent pool and resources based on their requirements. At this stage, companies are called global entities. There are companies that have reached the size of a global company and still act as a multi-national. You can recognize them by their shareholder structure and by the diversity of nations represented on their Board of Directors.

For emerging countries like Turkey, the best structures are global companies. With multi-nationals, the global team dictates almost everything without listening much, especially to emerging markets. Information flow is always one-way. Revenue-wise, Turkey does not get the chance to speak loudly within the global context. It can be very frustrating if you have a good team that wants to develop things and make an international career. Within an international structure, Turkey gets more breathing space and attention, but sometimes you feel like your voice is being filtered by the regional headquarters. In presentations to global teams, Turkey might only be one line in a 40-page PowerPoint presentation. Budgets are allocated first to regional headquarters and then big countries. Whatever remains is allocated to the emerging markets, Regardless of growth opportunities. It is a difficult decision-making process between sustaining a market share in mature markets and betting on the growth potential of developing markets.

Now, I wonder why a company wants to remain a multi-national despite having the prospects of a truly global structure. But, then why wonder if that particular company is successful with its own approach? Still, I wonder how easy the trip will be, with Internet access and globalization certain to shape companies operating internationally in the coming years.