Freedom is Slavery: Localization and CSR Strategy

Dr. Jean-Marc F. Blanchard's picture

Chinese companies like Bright Foods, Dalian Wanda, Fosun Group, Midea, and State Grid have been active buyers of European companies over the past few years. In 2014, they invested USD $18 billion while in 2015 they poured $23 billion into Europe. Reasons include inter alia purchasing brands, acquiring technology, and gaining market access. One question for Chinese firms is how to manage the businesses that they have acquired and how to fit them into whatever overarching business plan they have. Fosun’s strategy has been to give substantial independence to acquired firms such as Club Med, Fidelidade, and Thomas Cook and to leave local managements teams in place, the essential reasoning being that Fosun Group knows China while the members of its expanding global portfolio know their local markets. Localization does have advantages, but, as I highlighted in an earlier blog (Loco about Localization) it should not be done mechanically but in a thoughtful way. This argument applies to the practice of corporate social responsibility (CSR), too. While CSR does need to be sensitive to local laws, regulations, and norms, it also needs to be sensitive to expectations. This is well shown by the recent Ikea fiasco in China. In this case, Ikea initially shunned the recall of some potentially hazardous furniture in China, even though it had recalled such products in Canada and the United States, arguing its product met regulatory requirements in China and, moreover, that there were no reports of deaths linked to its furnishings. Of course, the Chinese blogosphere went ballistic over China’s “second class citizen” treatment and Ikea was eventually obligated to recall the suspect product. The Ikea case suggests doing what is okay “locally” is not necessary the best CSR strategy in an era of global information and expectations because the local has become global.