Company Approaches
Company Approaches
Many firms strongly believe that by acting as a good corporate citizen abroad they will remove local animosities and concern that might affect their short-or long-term competitive ability. Some have even gone so far as to set their own published codes of conduct. The behavior itself may not be sufficient, however, since employees, governmental officials, consumers, and other groups may not know or understand what the company is doing. W. R. Grace's chairman, J. Peter Grace, said, "No matter how responsibly a corporation behaves, it will be viewed with skepticism unless it effectively communicates its activities, its plans, and its goals to its many publics."40
Because of conflicting pressures on the international firm from different groups, the investor can almost always be accused of bad behavior by someone. For instance, if the company offers higher wages, it may be accused of monopolistic practices and aiding inflation by attracting workers from competitors. If it pays only the going wage, it may be accused of exploiting the workers. By understanding the relative power of competing groups served by the firm, management may at least be able to emphasize practices that benefit most of the groups that are in a position to help or hurt the firm in a substantial way. A good rule for serving a given group is to try to maximize benefits without excessively disrupting the local situation. Within any given economy there usually is a range of prices, wages, and returns on investment. The international company thus may be able to be among the leaders (e.g., have wage rates or investment returns among the top quarter of firms) without being accused of disruptive practices, while still satisfying the groups directly involved.
Management should avoid public confrontation whenever possible, because this confrontation may force opponents to become more adamant in their views. When government accusations against a foreign company in India were leaked to the press, the company countered by refuting the charges in newspaper advertisements, a tactic that merely served to challenge authority and publicly tarnish the government's credentials. Conversely, in response to newspaper criticism about a U.S. pharmaceutical firm's labeling in Europe, the company decided to work with the Health Ministry, since criticisms affected not only the company but also the ministry's supervision of the matter. By jointly answering the charges, the firm maintained rapport with the ministry, its major regulator and consumer.41
Saint Augustine recounted that in his youth he used to pray, "Give me chastity and continence, but not yet." Like Saint Augustine, many companies try to put their efforts off as long as possible. As in the above examples, much of a company's public-relations effort is defensive—that is, it occurs in response to public criticism. Once a company is on the defensive, however, these efforts may be too little, too late. Gulf & Western, for example, reacted to adverse criticism, primarily in the United States, about its labor-relations practices in the Dominican Republic by committing $100 million over a ten-year period to improve worker welfare through such initiatives as housing construction and education programs. Several years later, however, the criticism had not subsided measurably, and Gulf & Western announced it would cease operations in the Dominican Republic.42
Firms should organize means to increase the number of local supporters and dampen potential criticism. Opinion surveys of such interested parties as customers and workers can be conducted through various means so as to allay misconceptions, anticipate criticism, and thereby head off potentially more damaging accusations. Many MNEs use advocacy publicity at home and abroad in an aggressive effort to win support for their international activities.43 Mobil, for example, has used newspaper and magazine advertisements to support its international vertical integration. Both Rohm and Haas and Caterpillar have made films to support the positive effects their activities have on home- and host-country societies. MNEs have also set systematic means to identify and react to external conditions that may adversely affect their operations abroad.44
While it may not always be possible to dispel criticism, the international firm can do several things to mitigate it. One method is to consider those things that are important to people in the host country, or it may be something as fundamental as having the new manager continue a policy initiated by previous domestic management. On the question of what to centralize and what to decentralize, there is much to be said for permitting the local manager to determine policies concerning local customs and social matters. On such sensitive issues as employment and worker output, changes should be made only after consultation regarding the attitudes of locally interested parties. Headquarters personnel also may serve a useful public-relations function on the local scene. Since they have higher status than local managers, they may sometimes be better received by higher governmental authorities.
Many firms strongly believe that by acting as a good corporate citizen abroad they will remove local animosities and concern that might affect their short-or long-term competitive ability. Some have even gone so far as to set their own published codes of conduct. The behavior itself may not be sufficient, however, since employees, governmental officials, consumers, and other groups may not know or understand what the company is doing. W. R. Grace's chairman, J. Peter Grace, said, "No matter how responsibly a corporation behaves, it will be viewed with skepticism unless it effectively communicates its activities, its plans, and its goals to its many publics."40
Because of conflicting pressures on the international firm from different groups, the investor can almost always be accused of bad behavior by someone. For instance, if the company offers higher wages, it may be accused of monopolistic practices and aiding inflation by attracting workers from competitors. If it pays only the going wage, it may be accused of exploiting the workers. By understanding the relative power of competing groups served by the firm, management may at least be able to emphasize practices that benefit most of the groups that are in a position to help or hurt the firm in a substantial way. A good rule for serving a given group is to try to maximize benefits without excessively disrupting the local situation. Within any given economy there usually is a range of prices, wages, and returns on investment. The international company thus may be able to be among the leaders (e.g., have wage rates or investment returns among the top quarter of firms) without being accused of disruptive practices, while still satisfying the groups directly involved.
Management should avoid public confrontation whenever possible, because this confrontation may force opponents to become more adamant in their views. When government accusations against a foreign company in India were leaked to the press, the company countered by refuting the charges in newspaper advertisements, a tactic that merely served to challenge authority and publicly tarnish the government's credentials. Conversely, in response to newspaper criticism about a U.S. pharmaceutical firm's labeling in Europe, the company decided to work with the Health Ministry, since criticisms affected not only the company but also the ministry's supervision of the matter. By jointly answering the charges, the firm maintained rapport with the ministry, its major regulator and consumer.41
Saint Augustine recounted that in his youth he used to pray, "Give me chastity and continence, but not yet." Like Saint Augustine, many companies try to put their efforts off as long as possible. As in the above examples, much of a company's public-relations effort is defensive—that is, it occurs in response to public criticism. Once a company is on the defensive, however, these efforts may be too little, too late. Gulf & Western, for example, reacted to adverse criticism, primarily in the United States, about its labor-relations practices in the Dominican Republic by committing $100 million over a ten-year period to improve worker welfare through such initiatives as housing construction and education programs. Several years later, however, the criticism had not subsided measurably, and Gulf & Western announced it would cease operations in the Dominican Republic.42
Firms should organize means to increase the number of local supporters and dampen potential criticism. Opinion surveys of such interested parties as customers and workers can be conducted through various means so as to allay misconceptions, anticipate criticism, and thereby head off potentially more damaging accusations. Many MNEs use advocacy publicity at home and abroad in an aggressive effort to win support for their international activities.43 Mobil, for example, has used newspaper and magazine advertisements to support its international vertical integration. Both Rohm and Haas and Caterpillar have made films to support the positive effects their activities have on home- and host-country societies. MNEs have also set systematic means to identify and react to external conditions that may adversely affect their operations abroad.44
While it may not always be possible to dispel criticism, the international firm can do several things to mitigate it. One method is to consider those things that are important to people in the host country, or it may be something as fundamental as having the new manager continue a policy initiated by previous domestic management. On the question of what to centralize and what to decentralize, there is much to be said for permitting the local manager to determine policies concerning local customs and social matters. On such sensitive issues as employment and worker output, changes should be made only after consultation regarding the attitudes of locally interested parties. Headquarters personnel also may serve a useful public-relations function on the local scene. Since they have higher status than local managers, they may sometimes be better received by higher governmental authorities.
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