The Business World: Firms can no longer bank on a home advantage

The rule is that when exporting to the world you lose more friends than you gain by stressing your national origins
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The Independent Online
BRITISH AIRWAYS brings back the Union flag on its tail-fins; British Steel drops the "British" in favour of initials. The juxtaposition aroused wry comment for obvious reasons, but the events hide a bigger issue. Forget the marketing argument about the value (or otherwise) of the word "British". Forget the penchant for companies to drop the names under which they have traded for decades in favour of the anonymity of initials. Instead focus on the bigger issue: whether it is possible for companies to shed their national origins, however hard they might try, and whether it matters anyway.

Of course marketing matters. It is largely for marketing reasons that most multinationals seek to play down their home base. Thus Japanese companies in the US seek to present themselves as American (watch a US television advert for Toyota). BMW has kept the Rover brand name here, despite its dubious residual value. Shell (arguably the most successful cross-national enterprise) is thought of as American in the US, British here and Dutch in the Netherlands. Only where there is a strong cultural identity incorporated into the product, as in McDonald's hamburgers, is the nationality of the home base emphasised. If you are Microsoft and you have a global monopoly it does not matter much, but for the rest the rule is that when exporting to the world you lose more friends than you gain by stressing your origins.

But the relationship between national culture and multinational companies is much deeper than how to gain a marketing edge. Marketing matters, but management matters much more.

Until recently, decisions on management style have been simple. The core management style is set by head office and while it might be modified a bit to fit into local cultures, if you want to get on you wear the company uniform - whatever that might be. While the main asset of a corporation was the knowledge of how to make a product or develop a process, that worked adequately well. But two things have happened which have rendered the old model redundant.

First, human assets have become a more important element in corporate success. As a result the top-down imposed management culture becomes more difficult to sustain. You can impose an external culture but you risk losing the human capital you thought you had bought. But if you don't impose elements of discipline from HQ, the people are liable to run the show for their own benefit rather than that of the distant shareholders. The German purchases of British merchant banks and the Japanese purchases of Hollywood studios demonstrate the pitfalls of such adventures.

Second, there has been a clutch of mergers where it is not clear, initially at least, which partner will be the dominant one. Usually, after a while, it does become pretty clear. Lucas-Varity, to take a recent British-US merger, was presented as a marriage of equals, but it soon became pretty clear that it was a no-premium US takeover. Unsurprisingly it ended in tears. The one to watch, though will be Daimler-Chrysler. Everyone knew at the time that this is a German takeover, and as the shareholder register shows, that has swiftly become a reality. The proportion of the stock held by US residents has fallen sharply. Expect it to become a management reality in the coming months.

The most truly international of all corporations, perhaps, are those where there is no national shareholder ownership - the giant accountant/management consultant partnerships. This sort of global alliance has been enormously successful, but is clearly hard to manage. Keeping the various national partnerships on board has proved difficult. Besides, the partnership structure which may make these relationships a bit easier may itself not be sustainable for other reasons, witness the conversion of the most successful corporate partnership, Goldman Sachs.

It is deeply unfashionable to say it, but I suspect that for most businesses a single national culture will continue to dominate for another generation. Gradually what people will call the new international business culture will develop, but it won't really be international at all. It will be modified versions, maybe heavily modified versions, of the various US management models. In particular, there will be strong emphasis on shareholder value and US-style financial reporting standards for those shareholders. As investors increasingly adopt a common approach to running their portfolios, that will narrow the national distinctions - at least for any company that wants open access to international capital markets.

Where does this leave "British" companies? Large companies will gradually become less British because they will become more international. But there will still be national headquarters and a certain cultural national identity. Increasingly commercial competition, instead of being between different management styles, will be in areas such as new business creation, or flexibility of employment.

You can catch a glimpse of this already. The best of the large Japanese corporations are very well managed, but this has not prevented the domestic economy remaining mired in recession. The best German companies have used the past three or four years to improve their performance, but this has not created any jobs in Germany - rather the reverse, for one of the ways in which German companies have improved their bottom line has been by shifting functions offshore.

By contrast, the most remarkable features of the long US boom have been the rate of job creation by small and medium-sized companies and the creation of rafts of entirely new businesses in high-technology.

For if big companies are becoming more similar internationally, the rate of creation of small companies is becoming more different. I suspect that the cultural gulf between a German senior manager and an American one is much narrower than between a German 25-year-old would-be business executive and his or her US counterpart. Young Americans (and for that matter young Britons) often start businesses in their middle 20s, while their German counterparts are still at university. The national flag of existing businesses is less important than the national get-up-and-go of the businesses of the future.