Wednesday, October 1, 2008

Reasons Why Internationalization Fails - 2 (Use and Abuse)

Looking at our motivation is important, because it sends very clear signals to those in our new “partner” country. In the 20th century many Western multinationals seemed to have the main goal of “taking the maximum” and “giving the minimum”. Some examples of this trend would be an American rutile mining company and a Swiss aluminium mining company in Sierra Leone, who managed to ravage areas of arable land while reducing workers’ wages. The Swiss company reported on a UK television program in 1989/90 that they “had” to put workers’ wages down to 25 cents a day plus a bowl of rice. Other examples are such as well-known US entertainment company and the cheap T-Shirt-making labor they recruited in Haiti. In each case the mark-ups on the cost for these materials were several thousand percent, and the “partner” country saw next to nothing. (In fact in countries where corruption was rife, often deals were “made with the devil”, profiting a dictator at the expense of the people).

This might sound like a study on ethics, but there is also a very pragmatic and selfish business observation to be made from these practices. In each of these cases, the end result is antagonism to the Western country(ies) involved and therefore no loyalty to build the business. While a company may make a short-term gain (in the past this could be a decade or two), it will ultimately lead to collapse, reprisal and an enormous international marketing obstacle to overcome. This “take what we can” mentality is therefore very short-sighted. While it may have pleased shareholders for as much as a decade or even two in the past, it will not please those shareholders’ children. As the world changes today at a much faster pace, future “gains” through the “take it all method” are likely to be very short-lived.

What is the answer? The same as fruitful marketing in one’s own country. Give great service. Build brand loyalty and goodwill. Have your workers be enthusiastic marketers for your organization. Give them ownership and access to higher levels of authority. Recognize the skillsets and experience they bring while bringing yours to them. Some companies are beginning to initiate training in very underdeveloped areas of the world. Those that successfully meet standards are able to create wealth that improves the whole family and community. The message given to the new internationals is, “You are valuable. If you give your best, we will give you ours”. This kind of mass loyalty growth will give companies stability in unstable areas of the world. This kind of international partnership will produce the next “mega-companies.”

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