Black Holes in Business

The use of subsidiaries in international business is often overlooked and misinterpreted.  Many headquarters managers in multi-national corporations see their role as the coordinators of key decisions and controllers of resources and see the subsidiaries in foreign countries as mere implementors and adaptors of global strategy.  This view however severely limits and squanders the creativity of the local managers and their country organizations.

There are many roles that a country organizations can play.  The bulk of them are implementors and mostly exist for sales purposes in slightly less-developed, less-strategic nations.  This a not a role to be slighted.

A better way to utilize country organizations is to use the specialized knowledge of foreign markets to better design and implement technologies and products worldwide.  These are called contributors.  For example DuPont delegates responsiblity for  each different application of Lycra to managers in a country where the application is the strongest; i.e. Brazil for swimwear and France for fashion.  The global brand manager for Lycra ensures that those applications come together in an overall strategy.

In countries that are strategic markets for a company, it is ideal to be a strategic leader.  Strategic leaders use local knowledge competently in the way of contributors, but they also design and market products that cater specifically to the foreign market.  Allowing local subsidiaries to design and sell specialized products maximizes a companies international component.

Finally, black holes.  Black holes characterize country organizations that are well placed in strategic markets but fail to gain a foothold, usually from misreading the market or foreign government restrictions.  Thankfully, unlike real black holes, there is a path to escape.  Subsidiaries generally can try to forge strategic alliances or joint partnerships to conquer the foreign market.  Examples include partnerships with the government in China, where foreign businesses have a tough time entering; and acquisitions of successful, experienced companies to gain market share and knowledge.

Black holes can also exist when a company has no country organization at all in a strategic market.