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CASESTUDY COMMENT I

THINK GLOBALLY,
ACT LOCALLY By Gary Liu

H
ow can a multinational Michelin and the local employees' hamper the local vitality and lead to the
headquartered in France mindset and behaviors. In addressing “headquarters syndrome”.
meet its cultural these differences, Michelin must decide: It is generally assumed that a localized
challenge when it is whether it should be localized, how to HR management approach is preferred
operating in the Chinese balance between globalization and when (1) There is a remarkable cultural
market? What if it copies its HR policies in localization, and how to choose the difference between the parent country
the oriental cultures? These problems timing for globalization? and the host country, and (2) The
represent the common concerns of internal isomorphic pulls are weaker
business organizations in the 21st century NEED FOR LOCALIZATION? than the external isomorphic pulls.
who are struggling for a delicate For most multinationals, the question is Different cultures have different values
balance between globalization and not the choice between globalization which affect an individual's way of
localization when they operate globally. and localization, but the optimal thinking and behaviors. There is a huge
The most fundamental challenge in balance between the two. On the one gap between what Michelin advocates
international expansion, as it is found by hand, any business is an organism; it and the traditional culture of the
a number of multinational companies, needs to develop a global brand to Chinese employees. Internal isomorphic
is not the development of business, but ensure its organizational characters in pulls refer to the demand on divisions to
the integration of HR systems. This lesson global expansion. However, a global adopt the same organizational and
is important for China, as we see an brand itself is never adequate for a management structures to achieve
increasing number of Chinese multinational - it must see to it that internal consistency and to facilitate the
businesses, represented by TCL, Lenovo, employees in different locations convey resource sharing and knowledge
Haier and Huawei, are aggressively to the public the same corporate image transfer. External isomorphic pulls come
expanding into the global markets. The and have the ability to adapt to the from the local environment (e.g. the host
Michelin China can serve as a good corporate strategy, and that its country's economic system and
example for discussion. resources and knowledge are shared regulatory requirements), requiring
The major challenges facing Michelin and transferred effectively among its divisions to adopt a management
China include: the conflict between the divisions. On the other hand, the approach that aligns with the local
local culture and the French culture, the r e g i on a l div e r s it y in c u lt u r a l a n d realities. China is a transitional economy;
discrepancy in organizational characters institutional environments requires an the gover nment's involvement in
between Michelin and the acquired organization to develop local economic sectors is high. Additionally,
Chinese company, and the gap responsiveness, and over-emphasis on the local partner of Michelin is a state-
between the organizational needs of global consistency and control can only owned company controlled by the local

THELINK 2005 Fall 33


CASESTUDY COMMENT I
government. All these factors require integration. The company has a all these factors make changes at
Michelin to develop a high sensitivity to competitive edge in innovation, and a Michelin China slow and miserable. The
the local environment. key task for its operation in China is to implicit rules of “relational culture” will not
implant the same gene in its Chinese disappear overnight.
THINK GLOBALLY, ACT division. To ensure global thinking, the first Another challenge is how to change
LOCALLY important thing for Michelin China is to the local employees' values to meet the
Localization does not mean that encourage the local employees to organizational needs of Michelin. An
everything should be localized; a more accept the corporate culture and values. effective way is to improve the recruiting
appropriate explanation is that it endows In fact, good values should be able to process to ensure that only the most
a company to be more flexible or more adapt to different cultures. For example, appropriate candidates are hired. On
adaptive to the local environment in its Michelin's core values of “respect for the other hand, Michelin needs to give
HR management. A global company customers, respect for people, respect for opportunities to employees from
should focus on a combination of global shareholders, respect for facts and acquired SOEs and try its best to
integration and local adaptation, respect for the environment” have been transform them. A small number of
allowing its employees to “think globally, recognized and accepted by Chinese employees will have to be kicked out,
act locally” (Vladimir Pucik). This should employees, and the key is how to turn this which is the pain for Michelin in its
also be made the long-term objective for culture into guidelines for employees' integration.
Michelin China. behaviors. Therefore, Michelin needs time and
The degree of localization depends on patience when it tries to transfer its global
an organization's own charters. TIMING FOR management system to China, and
According to the propensities of GLOBALIZATION some adaptation is necessary to cater
multinationals in international HRM, it can Many employees of Michelin China are to the specific characteristics of local
be roughly divided into four categories: from acquired state-owned enterprises culture and local employees. For
ethnocentric, polycentric, regiocentric (SOEs). Given the nature of HR example, Michelin should localize
and geocentric. Ethnocentric and management in SOEs and the quality positions (e.g. HR executives and factory
polycentric are two extremes - the former and mentality of these employees, managers) with a lot of interaction with
gives a prominent place to global Michelin will have to replace the old, employees. Their local background and
integration, emphasizing a global inefficient management approach with expertise will help reduce the potential
strategy for HRM and non-localization of the “global system”. cultural conflict and add more flexibility
management team; while the latter However, it is recognized that the in HR practices.
attaches importance to high China-specific cultural characters and However, Michelin cannot simply wait
empower ment and localization of complex institutional environment for the best timing for globalization of its
management team. requires more localization in HR HR management. It can at least start
Some multinationals adopt a dual management. Additionally, there is a from a few things. First and foremost,
strategy in international HR huge gap between the acquired Michelin China should try its best to
management - developing a global businesses and Michelin in organizational encourage the local employees to
management system for senior characters, which means a low degree recognize its culture and act upon its
management and delegating the of readiness on the part of local core values. Second, it should allow more
management of staffs to regional employees to accept Michelin's global internal transfer and rotation between
divisions. This strategy, however, is only HT management system. Open or implicit the headquarters and the Chinese
an expedient, as it will reduce an resistance will arise if Michelin forces to division. These practices can not only
organization's internal cohesion in the implant its global HR policies. A good help eliminate the cultural differences,
long run. example is the career management but also allow the local employees to
program which meets great challenges better understand its culture. Third,
Michelin China should increase the
High communication between the
management and the staff, trying to
Global integration

Ethnocentric Geocentric reduce the power difference and show


respect for Chinese culture. Lastly, it
should rely on the compensation and
Regiocentric
incentive system to change the
employees' mindset and behaviors.
Polycentric
Low DIFFICULTIES FACING
Low High
CHINESE BUSINESSES IN
Local Adaptation
GLOBAL EXPANSION
Different from the overseas acquisitions
Sources: Heenan D.A., and H.V. Perlmutter, 1979;Multinational Organization Development of Japanese businesses in the 1980s, the
Reading, MA: Addison-Welsey, pp.18-19.
pioneers of Chinese businesses in global
expansion often do not possess
As a family-controlled enterprise with a at Michelin. Lack of qualified professional competitive edges. Their fast growth can,
long history and the pride of France, managers, impact of the traditional to a large extent, be attributed to the
Michelin is an ethnocentric business, career development path, and high-growing domestic market and the
emphasizing the importance of global recognition of business heads for HR roles, cost advantage. The first motivation

34 THELINK 2005 Fall