UK: Multinationals search for a structure for Europe. (3 of 4)

UK: Multinationals search for a structure for Europe. (3 of 4) - In ICI's recent realignment of its European structure, also announced in 1990, the centre-periphery issue was taken one stage further. The reshuffling of the traditional product divisions i

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Last Updated: 31 Aug 2010

In ICI's recent realignment of its European structure, also announced in 1990, the centre-periphery issue was taken one stage further. The reshuffling of the traditional product divisions into 15 "businesses" and the cutting back of the head office had been achieved some years earlier. However, European operations had remained as a hybrid around its Europa regional office near Brussels.

ICI Europa had been established nearly 20 years previously to tackle certain continental markets where ICI products had previously been handled only by agents; also to encourage the product divisions to take an interest in the emerging European Community. Like many product divisions, ICI's were heavily influenced by their existing business and structure, and were wary of these tricky new continental markets. More important, they did not relate to each other, and therefore the ICI presence in a given territory was fragmented. Europa sought to act as a bridge, and eventually its sales companies in each continental country offered a service to the divisions. But in large companies he who makes the profit calls the tune, and even in the past few years the product divisions (by now businesses) did not give continental markets the attention that some thought they deserved.

It is a common problem, visible in companies as diverse as 3M, Kodak and ICI's direct rival, Du Pont. The scale of investment required in chemical R and D and manufacture, and their highly specialised markets, demand a product divisional structure. But the opportunities that arise in geographical markets, and the industry trend towards speciality chemicals rather than commodities, demand close local support and attention. Technical solutions are what is needed, rather than, say, 1,000 more tons of soda ash, and these often involve several different divisions. Yet delivery of the product is expected in a matter of hours, not weeks.

To provide Mannheim with that level of support from Runcorn or Billingham was, to say the least, difficult. In times past it might have been regarded as an appropriate role for the centre; a matter for "co-ordination" via ICI's Byzantine matrix structure, where board members had functional, geographic and product responsibilities. Instead it was decided to make the product businesses responsible for their own marketing and sales in continental markets; but also, at the same time, to raise Europa's status by appointing a chairman, David Beynon, based in Brussels, who reports direct to the central ICI executive, just like the heads of ICI Americas and Asia-Pacific. He has no profit responsibility, but will develop a European strategy in a forum consisting of the European marketing directors of each business. The UK will become just one of seven regions, each with its own manager who will be "Mr ICI", reporting to Beynon and charged with maintaining close contact with the group's major customers, and spotting the potential for new ICI business - whatever the product.

The new structure puts ICI "ahead of the game", according to Beynon, and will ensure that the crucial customer contact will remain unaltered: "The French will deal with the French, the Italian with the Italian. The contact will be as strong as ever, but better and faster." It should be noted that the European strategy will emanate not from Beynon or a head office department but from the directors of the 14 businesses themselves, thereby ensuring their commitment. That, anyway, is the intention.

Other companies in the survey reinforce the point that it is the personal identification with the strategy which counts, not the lines on the organisation chart. The Brussels-based president of Honeywell Europe, Jean-Pierre Rosso, expresses "grave doubts about headquarters expertise". The European part of the company, long since free of its computer interests, is divided (like ICI) into profit-responsible business units, ranging from domestic heating controls to industrial and aerospace control systems. Unlike ICI, it also gives profit responsibility to each national marketing subsidiary. This balanced matrix is an unusual feature. Honeywell says that it relies on rational discussion - and Rosso's casting vote - to thresh out any conflicts.

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