multinational firms: the global-local dilemma

The phrase “think globally and act locally” doesn’t quite capture
what multinationals are up against. Companies with multiple lines of
business that span the world must respond to the unique situations
they face in each market, and at the same time operate to take
advantage of their scale and scope. A more accurate motto would
be “think and act globally and locally.”
Living that motto, however, is challenging, because it requires an
organization to work in two dimensions. For example, the Coca-
Cola Company has global leads who are responsible for marketing
and innovation in product categories such as sparkling soft drinks,
water, and energy/sports drinks, as well as “cluster” leads who are
charged with driving sales and distribution in individual countries
around the world. Oil giant BP has global business units for
exploration and production, refining, retailing, and chemicals, and
also regional heads for North America, Europe, Asia, and so on.

But organizing and operating in two dimensions complicates the

design and implementation of strategy. Should a multinational have
global strategies that get tailored locally, or local strategies that get
reconciled globally? Either way, how do you make that work? Who
gets to decide how to position or make or price or market a product
or business in a particular market — the global or local dimension?
How does the company know whom to hold accountable for a
strategy?
The answer to these questions comes in four parts. The first is
to matrix your strategies by making explicit their global and local
elements. For example, BMW’s value proposition everywhere in the
world is “the ultimate driving machine,” but its product mix is specific
to individual markets. Thus, in the U.S., BMW has a relatively richer
mix of SUVs, whereas in Germany it has a higher proportion of top-
end luxury and sporting models.
Another example is Starbucks. The roasts and recipes used in its
core menu of coffee drinks are the same from market to market, but
its broader value proposition varies around the world. Stores in the
U.S. have more of a fast-food feel, whereas in Germany they have a
high-end café atmosphere. Both the BMW and Starbucks strategies
have global and local elements, although they are different: BMW
has a global positioning with a local product mix, whereas Starbucks
has a global menu with a location-based positioning.
In any case, having spelled out the global and local elements of
your particular strategy, you are then able to split authority for its
implementation within your organization. Implementing a strategy
requires hundreds if not thousands of decisions, regarding pricing,
sourcing, manufacturing, marketing, compliance, regulatory, and
staffing. The global and local sides of your organization cannot both
have authority for making any of these decisions unless you want to
seriously gum up the works. Those that are most critical to the
global elements of your strategy must be owned by the global side
of your organization. Local decision-making authority must be
granted only for the local elements of your strategy. This may sound
obvious, but it’s easier said than done — and impossible unless you
have matrixed your strategy (hence, that comes first, as described
above).
It is human nature to want authority that is commensurate with one’s
accountability. For example, if you are accountable for the
profitability of a particular market or line of business, you want
authority to make all the decisions — be it pricing, marketing, or
manufacturing — that affect its profitability. Thus you see
multinationals struggle to define accountabilities for the global and
local dimensions of their organizations, because each side’s
decision making affects the other’s results, often in quite material
ways.

To resolve these issues, the global and local units in your

organization must share accountability for the same bottom-line
results where their lines of business and geographic markets
overlap. This asks the global and local units to see themselves as
two parts of a single team, rather than as two teams with multiple
(possibly competing) accountabilities. If they share accountability,
they will want to make decisions that optimize the whole strategy
rather than just their part of it.
Your global and local units should see themselves as two
parts of a single team.

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The final piece of the puzzle is to make information on bottom-line

results readily and equally available. Shared accountability with split
authority requires everyone to be informed about bottom-line results
— and what is driving them — where their operations overlap.
Imagine that your local units have authority for marketing and that
your global units have control of manufacturing. Of course, the
marketing decisions made by your local units affect the growth and
profitability of your global units, and the global units’ manufacturing
decisions have a big impact on local results. Local unit results
should include global manufacturing costs and global unit bottom
lines should include local marketing expenses. Moreover, the global
and local units should have access to information on one another’s
results so they can know the full enterprise impact of their decisions.
If your company is struggling to make its strategies span the global–
local divide, try asking how well it’s following these four
prescriptions. You’ll gain insight into how to think and act both ways
at once — enabling you to implement strategies effectively
everywhere you compete.