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 / Fall 2004 / Issue 36(originally published by Booz & Company)


Think Global, Act European

The E.U.’s growth to 25 countries is forcing multinational managers to recast how they “glocalize.”

Illustration by Lars Leetaru
What is the New Europe, and how can multinationals reconcile the challenges it presents? The questions are simple enough; the answers are not. The New Europe is a mix of cultures, histories, trends, and economies, of which the European Union (E.U.), newly expanded to 25 countries, constitutes an ever-larger portion. The New Europe is also a highly competitive market that, although still defining itself, offers tremendous revenue potential. This paradox — the conflict between single-market concentration and multimarket fragmentation — presents a management challenge new to the world.

To be sure, managing a multinational company in Europe was always highly complex. Although the creation of the E.U.; the growth of global financial markets; and the introduction of new technologies for production, distribution, and communication have reduced that complexity, Europe remains a heterogeneous environment. It cannot be managed as a single market, the way the United States or Japan can.

Managers who must cope with the contrast between global infrastructure and local objectives often conclude that a blended management style is needed. This “glocal” approach depends on having exploitable global processes that can then be localized to address specific local needs. But the New Europe adds a new dimension to the traditional global-versus-local conflict. A multinational company doing business in Europe today operates in three dimensions — global, local, and regional — that potentially conflict. This complexity requires a new operating model, something we call dynamic management.

Dynamic management addresses two themes influencing management in Europe: the localization of products, processes, and people; and the reconciliation of regional, local, and global management.

It is important to distinguish the E.U. from “Europe.” Non-European multinationals confuse the European Union with Western Europe and, therefore, wrongly believe that Europe is one homogeneous territory in which business can be conducted as simply as it is within the United States. This is a misconception for three reasons. First, Europe is much broader than the E.U. alone. Second, non-European multinational companies generally organize themselves even more broadly, assigning executives responsibility and creating operations for Europe (East as well as West), the Middle East, and Africa (EMEA). Third, even the E.U. doesn’t constitute a unified business territory — especially now, with the addition last spring of 10 countries in Central and Eastern Europe.

Nevertheless, the basic principles underlying the creation and expansion of the E.U. make it, without question, the most tantalizing territory within EMEA for both European and non-European multinational companies.

A Single Market?
The business challenge of the New Europe can be summed up in a sentence: It is both homogeneous and heterogeneous. Consider the factors that make it a single market, not just in theory but in fact:

• Borderless Trade. E.U. member states constitute one open-border territory in which goods, capital, and people can be freely transferred. The removal of duties and taxes on trade within the E.U. has created an environment in which trade and competition can flourish.

• One Dominant Business Language. English is to an ever-greater extent recognized as Europe’s commercial language. This has made trade significantly smoother by improving communication and reducing fear of miscommunication.

• Common Currency. The euro was introduced in 1999 to improve price transparency, facilitate cross-border trade, and drive price convergence, thereby reducing parallel pricing and the costs of doing business. At Apple, where I work, we have harmonized euro pricing (including value added tax [VAT]) across the euro zone. This has decreased parallel importation.

• Borderless Communication. Almost 50 percent of West European households have access to the Internet, according to research by IDC and the Ipsos Group. The Internet, satellite television, cinema, and even changing travel tendencies have rendered brand marketing more effective and more efficient. Marketing has a much greater impact and return on investment today than it did in the past.

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