The New Role of Regional Management

Let us be clear from the outset. We are not committing blasphemy by denying globalization. Ever-increasing globalization is as inevitable as changing weather; we may regret it or not, but we have to live with it. We are also not bemoaning the consequences of globalization. While certainly not without its problems, on balance, globalization is doing clearly more good for the economic well being of the world than bad. Neither do we yearn for some romantic notion of cocooning countries in economic self-sufficiency. This ideology of some totalitarian states has long been empirically falsified.

Companies aiming to succeed in Europe must develop a thorough understanding of Europe as a region. How are European countries interlinked? Are European states completely different, or does the continent show signs of homogeneity? And what about European consumers? Are consumption patterns similar across national borders, or do country differences and peculiarities result in a fragmented consumer market? Ultimately, this leads to the question of how much common ground there is among the country markets that make up the European region.

As outlined in the introduction to this book, one of the most persistent challenges for any firm doing business at an international scale is to manage the latent trade-off between global integration and local adaptation.¹ On the one hand, there are pressures to respond to the unique needs of the individual country markets. On the other hand, there are efficiency pressures that encourage companies to de-emphasize local differences and conduct business in a similar way throughout the world. The global integration — local responsiveness trade-off engages the firm at multiple levels, involving its overall strategy, the architectural configuration of the firm as well as the operational aspects of the firm, for example, the adaptation of individual prices or advertising campaigns to a given market. In this section, we will first summarize the key drivers of local adaptation and global integration. Based on this understanding, we will discuss common approaches to deal with this global — local trade-off. Building on our own data and recent evidence by an increasing number of scholars,² we conclude that, for most firms, the integration — responsiveness dilemma is probably best solved on a regional basis.

From the preceding chapters, we learned that many multinationals today are better off developing a regional strategy than going for a pure global or multidomestic strategy. The bare necessity, however, does say little about how managers can actually build successful strategies for a region such as Europe. This overarching question will guide us through the remainder of this book.

Managing a regional headquarters is not an easy task. In this chapter, we will draw attention to a few factors that are germane in managing a regional headquarters. These issues include managing the dual tension between subsidiaries on the one hand and corporate headquarters on the other hand. Furthermore, we will explore how much autonomy regional headquarters need to fulfil their tasks. We will then take a look at the roles and responsibilities that regional headquarters fulfil and how firms distribute their value-added activities across the network.

In the last four chapters, we have looked at the structural and managerial challenges firms face in setting up their regional operations in Europe. In this and the succeeding chapter, we take a closer look at how US and Japanese firms set up their regional operations, how they configure their global value chains and which managerial challenges they face in coming east or westwards. We start by looking at the case of US firms, notably by investigating how Nike, Ford and Pfizer built up their regional presence in Europe.

Having discussed some of the key challenges and solutions from the vantage points of the United States going to Europe, we are now taking the perspective of the Japanese companies going west. Specifically, we are presenting a cross-sectional analysis covering the automobile, pharmaceutical and sports footwear and apparel industries. Our primary objective is to determine if there are similarities or differences in the corporate structure, the regional headquarters groupings as well as functional competences in three Japanese multinational firms operating in Europe. Further, we attempt to identify what challenges these Japanese multinationals face in finding solutions to resolve conflicts or problems. Finally, we focus on some external drivers that affect the regional strategy formation. The companies reviewed for this project are Honda Motors, Astellas and Asics.

In 2007, Dr Bina Montemayor, senior partner of a large multinational consulting company stared absentmindedly at the display of her new notebook. She had just received an e-mail from Astellas’s European Vice President for corporate strategy, Mr Tadashi Yukino, asking her to prepare some notes for the annual board meeting at Astellas’s European headquarters in London. The e-mail explained that the board was especially interested in Dr Montemayor’s assessment of Astellas’s current European strategy and matrix management system, which had been newly introduced by Astellas’ European Vice President and his team two years ago. Contrary to early enthusiasm, results of Astellas’s regional strategy and design were disappointing: flat sales coupled with accelerated pressures from both local and international competitors raised questions about Astellas’s strategic focus. Many analysts questioned whether it made sense for Astellas to pursue a regional integration strategy in a highly fragmented region such as Europe, which was clearly dominated by individual country markets such as Germany or France. The strategic problems were aggravated by organizational concerns: the double reporting system of Astellas’s newly introduced matrix increased coordination efforts and was sagging employee motivation tremendously. The pressure was felt at all levels. As a result, Mr Yukino wrote, the board had to decide whether or not to put an end to Astellas’s current strategy and design.

It was Thursday, 8 p.m., and Peter Burger was still in the office going through his presentation for the next day’s meeting. It was two weeks ago that he received an urgent telephone call from his boss to meet in his office immediately.

In late fall of 2005, Piotr Cichecki, general manager, was sitting together with the sales and retail director of Puma Prague discussing the marketing, sales and finance budget for the following year. The team was preparing the final budget proposal for 2006, which had to be sent to the regional headquarters. They were aware that pending changes to the corporate structure were soon to be implemented.

We started this book with a positive statement on globalization. In concluding the book, we want to reiterate this positive tone. More importantly though, we would like to reemphasize that casting the debate in the polar extremes misses the multifaceted complexity that exists in reality. There is an important regional dimension between globalization and localization that is too often neglected. There are too many fine-grained stages of integration versus responsiveness that are missed in the debate. Contrasting only standardization versus adaptation is far too bold to capture the finegrained intricacies of the international marketing process. And in a similar vein, centralization versus decentralization inevitably fails to reflect the subtleties in strategy development and implementation.