How to Apply Sun Tzu’s Art of War in MNCs
Managing multinational corporations has a lot of issues. The cross-cultural differences are created by various courses of development, religious and cultural influences, or political situations. They also include forced cultural isolation of certain countries for many centuries from the rest of the world. Moreover, it is obvious, that people speak different languages, and simply those kinds of differences could immediately create problems in management.
On the other hand, there is a certain core set of values and psychological features of various levels of complexity shared by everyone. Tapping into the knowledge of these could be a key to success in any cross-cultural project or venture. Those core rules of nature can be roughly divided into those that are embedded into the human psyche, meaning properties of each individual, and those that are bigger and more complex ones properties of managed crowds, emerging from the rules set on the micro-level. Understanding of those properties, and, moreover, understanding the difference between macro and micro-levels could be essential for a top manager inside an MNC or anywhere else.
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Strategic management is a very fuzzy subject. Moreover, the subject itself is based on a wide variety of such sources like the ancient writings of Sun Tzu or other Taoist masters. The works of the ancient Romans and Greeks, warrior philosophies of the Orient, Indian traditions as well as French and American history are the cornerstone of strategic management. Just like in many other state-of-the-art sciences, people who research on this area are not repulsed by esoteric traditions (like shamanism or yoga) and ancient writings. They do not consider all of them to be valuable sources of knowledge. Thus, the wise laws and rules taught there can be put on amazingly different scales. Certain principles can become a law for developing a multi-national business or for conquering a local market. They also can be used for manipulating one's classmates or some group of children one do not really know, in the yard of a grandmother's house. Hence, the important feature of these wise principles is their universality. Sometimes they are also called stratagems, meaning small pieces of strategy. Strategy is something that can be implemented anywhere.
First of all, one should emphasize the importance and magnitude of MNCs in the world political and developmental arena. One can take as an example Taiwan and the processes known as Foreign Direct Investment promotion the expansion (outsourcing) of the U.S. enterprises. Liu and Ray (2012) propose a framework that is called Triple Alliance. There are three important factors that govern the FDI-driven industrialization of any specific country: state bureaucracy, domestic business groups and multinational corporations. All of them are based on important historical examples from the extremely fast development of the Taiwanese flat screen industry. Another big giant in this region along with MNCs is the heavy industrial SMEs. It should be noted that they play the pivotal role in integration with small and medium-sized MNCs/MNEs. Economies of scale within the flat screen industry are positively associated with the global integration of business activities of Taiwanese SMEs, and better comparative advantage across countries can be reached with more global integration business activities (Johnson, Arya, & Mirchandani, 2013). Johnson et al. (2013) declare that MNCs are big integrators that play along with other existing parties like SMEs, states, and big domestic business groups. The latter most probably include everything from farming up to organized crime.
Advertisement targeted on MNE management, generally known as FDI promotion process is a very complicated process. It can include all types of marketing activities: advertising, public relations, sales promotion, personal selling, direct marketing, investment seminars, trade missions, trade shows and exhibits, and the matching of prospective investors with local partners (Wilson & Baack, 2012). Deriving an effective strategy is crucial for companies, especially if their marketing abilities and operational budget are extremely limited. The study conducted by Gabrielsson, Gabrielsson and Sepp?l (2012) describes an inverse case the marketing strategies for a foreign expansion of a company. Interestingly, though, those principles can be applied for the current problem under discussion. In the generic case, first of all, the major decisions include decision-making on the breadth of firm's product offering and the standardization of marketing strategies across various countries. Wilson and Baack (2012) discuss the importance of traditionally valued country's image in general. This is the factor of key importance in attracting direct foreign investments. For heavy industrial, while the country's international public image may play the crucial role in pre-selection, a more competitive transparent market and the presence of sufficient legal and financial systems as well as developed infrastructure may be of higher importance (Wakasugi, Ito, & Tomiura, 2008). Wilson and Baack (2012) provide a statistical breakdown of investment advertisements in the U.S. business publications, by lower-middle income, upper-middle-income, and higher-income countries. What is more, they provide the classification of these candidates into resource-seeking, market-seeking, efficiency-seeking, and strategic asset-seeking. Taiwanese heavy-industrial enterprises can be classified as both resource-seeking and strategic asset-seeking. This classification is used in terms of offering a lot of available labor force, processing capacity, and searching for direct knowledge, experience and technology exchange. It should be noted that according to World Bank, Thailand is classified as an upper-middle income country. Wilson and Baack (2012) state that only about 25.5 percent of total analyzed advertisements (37 out of 145) originated from upper-middle income countries, and as much as 73% of them were parts of an advertising campaign.
Inside Taiwan itself, big companies tend to relocate labor-intensive operations into other countries, concentrating on R&D inside their domestic operations (Liu & Nunnenkamp, 2011). This generally creates a niche for FDIs from higher-income countries. Therefore,Taiwan as upper-middle income country promises better infrastructure and proper regulation, governance and political stability compared to the typical image of lower-middle income countries (Wilson & Baack, 2012). Moreover, they tend to concentrate particularly on knowledge resources availability while the latter, lower-middle income countries can only offer natural resources and some scattered created-asset advantages.
Applying Sun Tzus Art of War to managing MNCs
The Example of Open Street Map
Since context is the most important part of any presentation, especially discussions of strategies, one should define one. This can be done while using an example of an existing IT company and its environment explaining principles from Sun Tzus book. Certain terms from Porter's five forces analysis will also be employed in this study.
Open Street Map is quite a recent project started by the companies CloudMade and Open Street Map Foundation. OSM is a collaborative environment that allows free access to mapping data. It is inspired by great and influential projects like Wikipedia from the Wikimedia Foundation and the general movement for free and open source software and information. It is owned by a community under terms of a Creative Commons Attribution-ShareAlike 2.0 license. Many of the maps data were generated by outsourcing this task to regular people (or at least the company states so). Currently, it allows editing and refining the map by virtually anyone - by using any GPS tracking receiver and the cross-platform editor. The latter is freely available.
The strategy employed in this kind of a startup is quite obvious - by terming the Open Street Map non-commercial the founders go ad hominem. It means that one appeals to common people that feel they can become a part of the company and have some rights and ownership on the information they generate and provide. On the other hand, CloudMade is a purely commercial company. The same people run and own it being fed by this crowd funded data. It is able to provide development services, SDKs, and other tools for businessmen wishing to employ maps in their products.
This strategy follows the modern trend in IT business strategies. Everything is made "open," "free" and available to everybody, especially the pure "information" (as opposed to Services). Thus, the whole industry is called Information Technology. This brings up whole new meanings to the words "information" and "technology." The latter is concentrated not only on algorithms and math, but also on business techniques, and on making money with purely information by using elaborate arts of strategy and warfare.
The next item under consideration is "Free culture" movement. For several years already, there have been an outstanding number of new projects and ventures that were quite successful. They were related to free culture. Free culture is strongly associated with the GNU Software foundation, the GNU Software License, the GNU/Linux family of operating systems, and other software foundations with their accompanying licenses. All these projects share a similar vision that is significantly expanded upon the internet and other media. They share a common resource of information and software that can be successfully used to build profitable projects. In all of their ventures, free projects oppose the other players on the market meaning the proprietary culture. This can be reached while applying a hippy-like philosophy, which has also been mentioned by Sun Tzu. According to the strategist and philosopher, the best way to win a battle is to make fighting unnecessary. Open Street Map treats its competitors in a similar way.
The OSM (and other Open Maps projects hosted by CloudMade) have quite a lot of competitors. The competition could be quite hard if they tried to enter the market using traditional approaches. Nevertheless, if one makes another smart strategic move, a lot of credit will be immediately obtained. The good thing is that CloudMade has created a new ecosystem of mapping services providers, thus employing all of their potential users in maintaining the stability of their business. This, in turn, creates a unique informational product, that is under threat of being substituted (at least for now). The bargaining powers of the customers and suppliers are greatly intermixed with the non-commercial OSMF. As a result, there is no clear distinction between customers and suppliers. As for CloudMade, this is a great competitive advantage through innovation in their intense competitive rivalry with other services, like Google Maps or any other mapping service provider. Sun Tzu stated that people skilled in war could not have been brought to the field of battle. Instead, they bring their foes to the field. Moreover, according to the latest approaches, the best skilled people are not even present at the battlefield. Thus, the rivalry with the opponents is done, but not by CloudMade. It grows between the corporations that stand as providers and ordinary citizens that are more and more corporations culture-hating and wishing to make their consumer choices in favor to something that is "free" and "open." For this reason, the power of the monster like Google, who has also been created by people, is generally being thrown back on itself. Furthermore, the CloudMade itself does not only hold the service, but actually works for its customers providing them with real solutions. Meanwhile, there are "lazy" providers, who just have the information and sell it virtually doing nothing and getting profits. It appeals even more to the working people in a company's image of a hardworking bee. Of course, this is all just a trick, as according to Sun Tzu, All warfare is based on deception (2011). For an enlightened observer, it is quite obvious that there is no substantial difference between Google when it had started or OSMF. They are both projects trying to make a living and get success.
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The entry of new competitors to CloudMade can be possible only if they hold a strong brand and leadership position which is supposed to guarantee the best deals on the market. This has a lot of in common with the first Sun Tzus principle of survival and prosperity Your aim must be to take All-under-Heaven intact. Thus, your troops are not worn out and your gains will be complete. This is the art of offensive strategy (Sun Tsu, 2011).
Current author's advice on this and similar projects would be to take over where others left off in expansion of the Open Source international brand and public movement. Particularly, this is the best move for the Open Street Map Foundation. It would open up extensive public marketing and public relations campaigns, the same as sister project Wikipedia does. Being already on the general bandwagon, Open Maps should just make their names publicly known. For example, almost everybody knows what a Google or a Wikipedia is. Therefore, the term of an Open Street Map should be kept in people's minds.
Another reasonable suggestion would be a more aggressive formation of alliances not only with purely IT commercial companies, but also with manufacturers of navigation hardware. They will be provided with software and reliable services of maps information. If the project is widely accepted and filled with information by the general public, the data presented could be one of the most accurate and of the highest quality. Thus, it would be very good for company's development, if it has already had another ecosystem ready for it's employment. This represents two other Sun Tzus principles about speed in the art of war and alliances formation. This also presents a similar term from Western business practices smart value chain formation, with probably other directions, apart from those mentioned being available as well.
From the case study outlined above, it can be seen how abstract wisdom-like sayings and concepts can be applied to a particular area managing a multi-national company. For some people, the concept model of a multi-national company is a traditional franchise like McDonald's, or manufacturers (OEMs) from developed countries. They outsource industrial activities in Taiwan, like in the previous example. Actually, a lot of different models for an MNC exist. For example, there is an IT company rooted in the Silicon Valley, with offices in GB, CEE region and Japan. It sells its informational services worldwide, and its map includes the whole planet. That is why one can make the conclusion that it can be used everywhere. Thus, the case study explained it properly, especially since strategies are essential everywhere.
Knowing and understanding the importance of strategic planning and great strategic mastership is essential for running a successful company. It is also crucial for an innovative startup only trying to establish itself in a competitive environment. Different frameworks for analysis and strategic approaches may be involved. It may range from ancient writings of The Art of War by Sun Tzu and ending with other modern business analysis and strategic planning systems.