Zdenka Berkova

The View from the Foreign Head Office

‘To see ourselves as others see us’ is often a salutary process. This chapter distils the views of the head office management of ten Continental European parent companies on their Britis h subsidiaries. Such views range from the very general to highly specific criticisms and comments of the British environment. (Details of the ten firms are given in Table 3.1a.) Open image in new window Table 3.1a Parent companies — basic details

The Impact of United Kingdom Government Policy

This chapter looks at the impact of United Kingdom policy on investment incentives and taxes on the 35 production subsidiaries analysed in Part III. It is intended to serve two purposes: first, to act as a guide to the managers of smaller companies contemplating United Kingdom direct investment; and second, to comment upon United Kingdom policy in the light of the interviews we had with the 35 subsidiaries.

The Success of Sales Subsidiaries

This chapter investigates in detail the success and decision making of sales subsidiaries established in the United Kingdom by smaller Continental European firms. Section 10.1 gives the basic data on sales subsidiaries, Section 10.2 examines the success such firms have achieved in the United Kingdom, and Section 10.3 analyses the range of functions they perform. Section 10.4 examines the motivation behind the establishment of sales subsidiaries, and in Section 10.5 we analyse entry strategies, including locational decisions. Section 10.6 examines marketing strategies. Section 10.7 investigates the attitudes of the sales subsidiaries towards the possibility of investing in production facilities in the United Kingdom. An executive summary concludes the chapter.

Sample Design and Background Data

This chapter contains the detail that is necessary to validate the study, by describing the procedures for selecting the companies for interview and by categorising the companies on standard classifications.

Other Entry Decisions

The setting up of a production subsidiary requires many decisions; this chapter will look at some of these decisions. As in the previous chapter, the success ratings are used to give added meaning to the decisions taken by the 35 firms in our sample.

The Product Decision

The previous chapter laid down criteria by which production subsidiaries may be judged. On the basis of these criteria, an overall success rating for each of the 35 production subsidiaries was assigned (see summary on page 49 and results in Table 4.8a). This and the next chapters will match these success ratings against particular actions, decisions and behaviours by the managements of the subsidiaries. This chapter will look at, perhaps, the most basic decision — what is the subsidiary going to produce and sell?

Production and Productivity

The organisation of production is clearly an important area of operations, as are achieving high levels of productivity and harmonious industrial relations and personnel policies. This chapter analyses these areas, which are often felt to be problematical in the United Kingdom.

Measuring the Success of the Production Subsidiaries

Part III studies our sample of production subsidiaries established in Britain by smaller firms based in Continental Europe. The essential fact about such foreign direct investment is that the European company purchases or creates the power to exert control over assets in an economy (the United Kingdom) other than that in which it is based. New problems arise: control over decision making, adaption to alien conditions and customs and new forms of costs. Direct investment involves not only the transfer of capital, but also the transfer of management (or direction) of technology and of skills. The investing firm faces these problems in the new environment with a view to improving the overall success of the overseas venture. In order to examine, in a cogent fashion, the planning, establishment and running of the production subsidiaries by the parent firms in Continental Europe, it is necessary to have a level of success ascribed to each subsidiary. This chapter sets up the measures of success that we employed, and gives the levels of success for the subsidiaries.

Comments on the Seven Totally Successful Production Subsidiaries

Our success index selected seven production subsidiaries as totally successful. They all achieved greater profitability in the United Kingdom than that earned by the parent firm. In addition, they had achieved substantial growth, had performed above expectations, and in market and operational success terms were the top performers in the sample. The characteristics of these firms are shown in Table 9.1.

The Success of Smaller Companies

In all the Western democracies, the value and the contribution of smaller companies is underrated. The evidence is widespread: even a cursory examination of management textbooks and magazines or government legislation on business would leave the impression that business activity was the sole prerogative of giant corporations. Of course, this is simply a wrong impression. In each Western economy, smaller companies employ significant numbers of people, produce a significant proportion of GDP, bring creativity, invention and competition into force, and, perhaps most important of all, provide an alternative employment-style to owners, managers and workers. This book is our second major push toward gaining increased recognition for the key role that smaller companies play in the life of an economy.1 In this book, our particular thrust is to examine the successes and problems that smaller European companies experienced in establishing production and sales subsidiaries in Britain.