Why International Companies No Longer Work
In January of 2012, Azerbaijanis faced the real possibility of a future without Kit Kat bars, Nescafe, and Hot Pockets. After government officials demanded that they offer bribes to do business in the country, Nestlé pulled its products from the Azerbaijan’s shelves. Azerbaijan certainly isn’t a huge market, but the decision for a business to completely withdraw from any market isn’t easy. However, it’s sometimes the only alternative for organizations that operate globally.
Several decades ago, it was easier to run an “international company” – a business with home offices in one country and divisions providing products and services in others. The profits flowed back to the parent company while, by and large, any negative publicity over unethical business practices didn’t.
This scenario seems like a distant memory in today’s tightly connected global economy patrolled by 24-hour cable news networks and the Internet. For example, the 2012 alleged bribing of local officials by Wal-Mart México was front-page news that became a public relations disaster for the company. General Electric was brought to task in the Western media for allegations of bribing Iraqi officials between 2000-2003. The lesson is that any corruption, anywhere on Earth can cause and damage a company’s brand globally.
In this era, management and owners need to stop imagining that they can continue successfully running international companies — and realize that they should be leading global organizations. What’s the difference? A global company recognizes that everything is interlinked, that there are no corporate firewalls, and that unethical business practices in one country will eventually lead to bad practices in others. When leaders are moved to different regions or units, they may bring their practices with them. Ethical transgressions are like global viruses, and often just as well publicized as epidemics.
Although strong, creative companies can often find ways to succeed in ethically challenged countries and industries, when they find that there are no good options left, they should make the same decision as Nestlé. If your business can’t compete in a market without blowing out the ethical envelope, the business in that market is simply not worth it.
Lou’s Take Away: As a global company, do not enter or stay in markets where you can’t compete ethically. The short-term regional profits could damage your global brand and ultimately devalue your entire company.