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East-West business corporation: tradition, renewal and challenge of the '90s.



When I was growing up in the 1930's, East-West cooperation was already very much part of the Bata culture. When my father thought of marketing shoes, he never thought simply in terms of Czechoslovakia; he thought of the whole of Europe and, indeed, of the world as whole. By the time he was killed, in 1932, in an aircraft crash, we were already marketing millions of shoes in dozens of countries, including the United States, and we were building, or about to build, factories in Switzerland, in France, in Holland in the United Kingdom. Some of my earliest jobs within the organizations were in Germany at the age of 17, in Switzerland at 18 and in England in my early twenties.

As far back as I can remember, East-West cooperation was not some sort of elusive objective. It was literally a fact of life. The world for us was a single market, inhabited by tens of millions of actual, or potential, customers. That was an important part of the tradition with which I grew up.

Let me add that another part of that tradition was a system of management which, I am proud to say, is still regarded throughout Czechoslovakia, and elsewhere, as a model of efficiency. Indeed many of the aspects of what many people in the west call The Japanese System of Management" was pioneered by my father. Use of the latest technology, independent profit centres, rigorous training (including foreign language training), so-called management by walking around - all this was part and parcel of that system.

Perhaps most important of all, I was taught from early childhood that excellent service to consumers is the heart and soul of any business. And that was not just a slogan: it was an article of faith, something everyone within the organization practised. For instance: in the pre-war organization, all retail managers and executives had to spend a week or two every so often working as salesmen in a Bata store, so they would not lose touch in the offices with people who bought and wore Bata shoes.

This was the tradition that was, so to speak, mother's milk to me. Then came World War 11 and its aftermath. The major enterprises my father had built were nationalized by the communists and many of the others had been heavily damaged during the war. To embark on a period of renewal, we had to start almost from scratch.


But while there was relatively little left in terms of bricks and mortar, I was fortunate enough to have one tremendous asset, namely my associates. They were a band of young people, mostly of Czechoslovak origin, but with an international outlook partly because they had been imbued with the Bata tradition. Partly because many of them had served in the war and had therefore become exposed to different cultures. And they had one other thing going for them: they were determined to succeed, determined to show to the communist regime in their native country that they were the best, the creme de la creme.

Those postwar years were a period of the independent national state, when many countries had been liberated from Nazi occupation and when new countries were being created by decolonization in Africa and in Asia. Thanks to the international outlook of our people and thanks to our management system of independent profit centres, we were ideally suited to participate in the economics of those newly independent countries. Where we had previously had our own enterprises, either in Europe or overseas, we proceeded to rebuild and expand them. In these and other countries, we built new factories and established new marketing organizations in most of the recently decolonized countries.

Within a few years the business grew to the point where we had 65 factories and over 5,000 retail stores, with annual sales of some 300 million pairs of shoes. In the process, we had arrived at a clear understanding of a golden rule developed years later, namely to "think globally but act locally."

Considering how long it took in those days to move from country to country, it was essential that each operation should be as independent as possible. At a time when nationalism prevailed throughout the world, it was equally essential that these units should be part of their local economics rather than branch plants of some foreign-based headquarters.

And so we became not a multinational in the traditional sense of the term, but rather what we call a multidomestic enterprise. We were not a monolithic centralized operation, but rather a federation of autonomous units. Yet the survival of each operation, and its ability to provide the increasingly sophisticated merchandise that consumers demanded, depended on the existence of a global organized management that would provide experts, product development, equipment, materials and inspiration. We had to develop people of many nationalities, people who, given the training and the opportunities, would be able to assume management positions in their own countries. So we built colleges in different parts of the world. We developed training courses and we had the satisfaction of seeing people of many nationalities assume increasingly responsible positions within the organization.

Yet no sooner had we developed and implemented this strategy than we saw dramatic changes in the structure of the world economy. Europe was the first continent that began working towards an open market system, first through EFTA, then through the European economy community.

Stores carried merchandise from the whole European continent rather than only whatever was manufactured in their own countries. Consumers were able to buy shoes imported from countries that enjoyed the greatest cost-quality advantage. Components started moving across borders and tremendous efficiencies could be achieved through specialized worldwide services. In economic terms, the era of the fortress-like nation state was coming to an end.

To respond to this development in these increasingly sophisticated markets, we decided to embark on a complete change of business strategy. What I might call renewal number two. Instead of our retail stores being a captive market for our products, which they had been up until then, we created a retail organization that was completely separate from manufacturing. Every plant had to find its own customers, and every retailer had to find his own suppliers.

For many of our old-timers, this was a traumatic development, but under the circumstances it had to be done. I suspect that a similar trauma now faces manufacturing enterprises in this part of the world. After being captive, for over 40 years, to a centrally planned system, where selling their products wasn't part of their responsibility, many of them may have a hard time adjusting to the discipline of the market place.

What I am trying to emphasize is that today, when economic groupings are evolving not only in Europe but also in other parts of the world, it is absolutely essential that a business management should be flexible enough to adjust its strategy to changing conditions. And this is next to impossible in a state controlled environment.

I have seen promising countries stagnate when they were seduced into adopting a so-called "planned economy-. We lost a number of enterprises to nationalization in different parts of the world, and when they were returned to us, as most of them eventually were, they were usually in such terrible condition that reconstruction was barely worthwhile.

In recent years, countries throughout the world are becoming increasingly interdependent. Common membership in the U.N. International Civil Aviation Organization requires that all international airport be built to minimum safety standards. We all have discovered, to our grief, that pollution of the environment does not stop at national borders and has to be tackled by intergovernmental agreements. What happens on the stock exchange in New York or Tokyo is watched with delight or anxiety by governments and business people throughout the world.

In the case of our own organization, this growing globalization is reflected in the composition of our executive team. One hundred most senior executives are people with 37 national backgrounds.

To give you a few examples: the head of our Kenyan company is a Bolivian, the head of the Zimbabwe company is of Indian descent, the head of the Malaysian company is a Canadian, the head of the United States operation is a Swiss, and so on.

Another result of the globalization of business is the development of polycentrism. Let's take technology as an example. Before World War II, technological innovation was essentially confined to a small handful of countries. Today sources of such innovation include Japan, several of the far eastern tigers, India, Brazil, Mexico, Australia, Canada, South Africa and many other countries.

Again, a parallel development has occurred within our own organization. For instance: where at one time all the product development, all the technological research and most of the training were concentrated in Zlin, these activities are now dispersed among our enterprises in some dozen countries.


So much for renewal. What about challenges for the 1990's? I am sure we all look forward to the time when the political liberation of Czechoslovakia and its neighbours will be translated into the economic integration of east and west. I am sure we also know that it won't be easy.

I hope and believe the west will help its eastern neighbours make the difficult transition from a planned to a market economy. I also hope that the eastern countries, for their part, will do their utmost to encourage local entrepreneurship. Many such entrepreneurs have already tested their talents and their initiative within the underground economy. What they need is help in developing their financial knowhow and in establishing international contacts. That is where foreign investment can be tremendously helpful.

In my view, this kind of advice or schooling is the most important way in which foreign business, call it western business if you will, can help local managers and entrepreneurs bridge the gap between the planned economy in which they grew up, and the market economy that lies ahead. Transforming state enterprises into joint stock companies will not, in itself, bring about any real change. What is needed is a relationship whereby experienced investors will introduce local managers and entrepreneurs to techniques and skills that were neither needed nor wanted under the previous regime. By doing this, foreign capital could make a major contribution toward a healthy, efficient private sector.

But in the final analysis, the major challenge for the 1990's lies within the newly liberated countries themselves. After so many years of soviet domination and after their painful experiences with the Nazi regime, it is understandable that some of the countries in this part of Europe are less than enthusiastic about foreign involvement in their affairs.

Nevertheless, on the basis of my observations, I am convinced that the countries that succeeded in achieving prosperity for their people where the ones that had an international outlook on investment and ownership, and whose politicians had the courage to make difficult decisions.
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Title Annotation:Profile; East-West cooperation
Author:Bata, Thomas J.
Publication:Canadian Manager
Date:Dec 22, 1990
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Next Article:The role of the North American Management Council (NAMCO).

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