The Multinational As Cultural Chameleon
April 10 2005 by Chief Executive
AMERICAN multinational companies face many challenges these days, including possible adverse reaction to American policies in Iraq, says Ronald M. DeFeo, chief executive of the Terex Corporation of Westport, Conn. Terex, a maker of construction and industrial equipment, has annual sales of $5 billion, of which 61 percent comes from outside the United States. Here are excerpts from a recent conversation:
Q. What effect has the war in Iraq had on American companies around the world?
A. It’s made it harder to focus on customers that are nonpolitical entities that want to buy our products. There’s a natural tendency for people to look at you as an American company, when in fact our goal is to be seen as a multinational purveyor of products and services. You try to avoid the politics and focus on areas of common interest with customers and partners. We’ve had to go out of our way to reach out to our European colleagues and participate on their turf on their terms, not just run the company as we might have historically done from a purely American perspective.
Q. Have you tried to build bridges in, say, Germany, which has opposed American policy in Iraq?
A. We had our leadership meeting in Munich instead of in the U.S., with 240 of our top leaders from around the world. There was simultaneous translation so that everybody could understand what was being said. But we also conducted parts of the meeting in German at least for a short period so the Americans could understand what it’s like when business is being done in someone else’s language.
Q. What’s the situation for American companies in France, which also opposes the Iraq occupation?
A. Business in France has always been a bit special. It will always be a bit special. The objective of any multinational is to appear to be local in their market while having the benefits of a global cost structure. You have to be French in France.
Q. How do you handle the issue of being American in the Mideast?
A. We also sell under European or local brand names. If someone is buying product out of Germany, a customer doesn’t think, “Who owns the company?” You sell through a bit of a veil. We’re not selling into places like Iran. But we do sell from Germany into Saudi Arabia and the customers are dealing with Germans, not Americans. That’s one of the benefits of being a multinational.
Q. Have you sought to include more people of different nationalities at the top of your company?
A. We have nationalities or Americans with particular historical backgrounds of European experience. The guy who runs our construction business is Scottish. The fellow who runs our crane business is American but has lived in Europe for the past 15 years. He speaks fluent French and several other languages.
Q. Over all, would you say American multinationals are gaining in world markets, or are they on the defensive?
A. The multinationals that focus on customers, not politics, can still do business. If we go back on our heels and think about world politics, we should go back to the university.
Q. Is the emergence of China having a big impact on you?
A. China is a market in a region that will set the course of business for multinationals for the next 20 years. Understanding how to grow a domestic business in China is critical, as well as using China as a support base for your other businesses. If you build products that build infrastructure, as we do, you have to be there.
Q. Do you worry about the low cost of manufacturing in China?
A. No, I don’t. Yes, many routine jobs may go to China, but you still have the issue of distance and freight cost and availability of ships. I think there will be a place for Chinese-produced goods but not everything will be made there.
Q. Are you disadvantaged in China because the Chinese do not like the United States’ Mideast policies?
A. No. There’s no negative toward us being Americans that I see unless we want to be just Americans and not open our eyes to their culture. The key is to do business in a sensitive way. If you can look at the world through the eyes of your customers, you can offer effective products and services. But if you believe that you’re standing up on a soapbox and other nationalities have to accept your company on your conditions, you’re destined for failure.
Q. How do you explain that some American brands are seen as being “too American” while others are seen as highly desirable?
A. There is a dichotomy. We have a brand reputation as Americans as being free and living well. But we have a political reputation of being a bit arrogant and domineering. It’s up to businesspeople to leave the political issues aside and focus on those things that are attractive to others. A C.E.O. of an American company has to be somewhat of a global thinker. We have to keep our own political views on the sideline so we can put the interest of our shareholders first.
Q. Some chief executives perceive creeping hostility at home, because of regulations like Sarbanes-Oxley. Do you feel that?
A. I don’t feel the hostility but I feel the regulations. I understand the reasons for the regulations. It’s a slightly higher burden, but it’s a burden of progress.