Katoen Natie (KTN) has long profited from taking a rather unconventional approach to international expansion. Between 1986 and 2004, it succeeded in transforming itself from a small Belgian-based warehousing operation, into a global leader in value-added logistics and related high-tech services. By 2005, KTN was operating logistics platforms in 33 countries in Europe, East Asia and the Americas.
Charlotte Butler, Research Studies Manager at EACrc-INSEAD and co-author Prof. Dirk Van den Berghe's EFMD 2005 award-winning case relates how KTN succeeded in penetrating the Asian market by exploiting its low-profile way of doing business to great effect. This approach was linked with KTN's unique culture, the cornerstone of which is the 'company bible'. At the core of the KTN philosophy is an analysis of the strengths and weaknesses of both large and small companies: by then combining the strengths of both types, KTN aims to create a winning team.
Another essential tenet is the delegation of authority. The company has so far refused to adopt any centrally dictated human resources management (HRM) or strategy function. Instead, business support groups travel to the business units in various locales to provide expertise and networks as needed, while local recruitment and new investment projects come mainly from the business units themselves.
This decentralised system seeks both to encourage independent, entrepreneurial senior managers and to provide KTN with enough flexibility to adapt to local conditions as it expands globally. The company places a lot of confidence in its young managers who, after a thorough grounding in the KTN way of doing business, are given the freedom and responsibility to develop its international operations.
KTN's expansion into the Asia-Pacific region began with moves into Singapore and Thailand, and was not preceded by any elaborate research efforts. The company rather chose to hire local partners to provide local market expertise and make initial contacts with potential clients. The case describes KTN's prudent approach to minimising its risks in an untested market through securing its Thai capital investments, including its insistence on maintaining full share ownership. Before start up, KTN sent in a specialist team who remained until the operation was up and running whilst the training of local staff, who were brought back to Belgium for several months at a time, is ongoing.
The Thai operations provided a test case for its flexible approach to staffing issues. With no central HRM department, KTN's expat manager in Thailand was directly in charge of recruitment. Staffing followed the typical local pattern of family involvement, and workers proved so committed that KTN was amazed to find a new software system up and running faster in Thailand than in Houston, despite the language problem. However, in other ways recruitment in Asia proved difficult, as ambitious Chinese recruits did not readily accept the KTN method of training, where everyone started on the shop floor.
The company's atypical approach to growth is demonstrated by its ambivalence towards entering the China market, based on the feeling that national infrastructure and rules on foreign ownership are not yet right for KTN's particular modus operandi. The case concludes by asking whether KTN can realistically continue to avoid entering China when the industries with which it does the most business in the region - automotive, petrochemicals and plastics -are already setting up there in such huge numbers.
Another question concerns the by-now established Thai market, where KTN needs to make faster progress in attracting new local customers. The problem is that they, unlike KTN's multinational clients, are not yet convinced of the long-term advantage of outsourcing their logistics operations.
Finally, the dynamics of the logistics industry determine that KTN must continue to expand internationally in order to maintain and strengthen its global position. But will this be possible without introducing some type of formal HRM structures, and how would such a change affect the KTN culture that has been instrumental in its success so far?