The traditional multinational corporation was controlled from its world headquarters (often in the US). Firm-wide policy dictated the responsibilities of its foreign subsidiaries. The subsidiaries were tightly controlled, often run by imported executives who had little flexibility in altering methods or products to conform to local cultures.

“Corporate imperialism” sought new markets as an opportunity to sell existing products, not as an opportunity for development of new ideas.

The concept of “think globally act locally” has gained credence with the increasing interrelationship technological innovation has created. Multinationals are more than just firms with operations in multiple countries. Today foreign subsidiaries often run independently. Instead of importing Harvard MBAs, the executive ranks include locally born and educated employees who have broad power to set policies and standards.

Multinationals thrive on the diversity of their employees and the markets in which they operate.

The global giants are faced with a challenge: to what extent must firms maintain control over their foreign operations? Initial forays into emerging markets produced mixed results. Cereal firms spent millions in India only to have their customers switch to generic, local alternatives as soon as they became available. Consumer product firms and automakers have had difficulty identifying middle-class needs. Clearly, some flexibility is needed to market products to a wide variety of cultures.

Gillette has been particularly successful without modifying its products for cultural variations. On a daily basis, 1.2 billion people use at least one Gillette product.

McDonald’s on the other hand has encountered differing tastes throughout the world, forcing it to serve vegetarian burgers in India and alcohol in other markets. Chevrolet would have had serious problems had it marketed its Nova automobile brand in Spanishspeaking countries, and could not sell them among Hispanic Americans (No va translated as “it doesn’t go”).

As the consumer markets in developed countries become saturated, multinationals are increasingly looking to emerging markets as the growth engines of the twenty-first century. Coca Cola, Nike, Citibank and numerous others have increased their presence in such markets. The winners in this race will be those who are able to weather the turmoil in these markets and capitalize on it. Coca-Cola (by purchasing local bottlers) and General Electric (by pursuing local contracts) have been aggressive in maintaining and bolstering operations during troubled times. In unveiling its list of the “World’s Most Admired Companies” in October, 1998, Fortune Magazine highlighted the ability of firms to allow flexibility and local control as one of the most important elements of achieving global success.

The growth of multinationals creates fears of Americanization and the loss of cultural identity to the point that entire nations feel threatened. Some of these fears are well founded, although Robert Reich argues the increasing irrelevance of corporate nationality. Multinational corporations owe their allegiance to their shareholders regardless of nationality. The outdated notion of “What is good for GM (General Motors) is good for the US” masks the reality of a global economy. Reich argues that the strongest countries are those with the most skilled workers, not the largest capital base.

Weblike organizations that are replacing the centralized multinationals will allow power to flow to those with the most valuable knowledge.