The Deadly Sins of International BusinessGerhard Apfelthaler, 2014
www.deadlysins.info
Deadly Sins?• Patterns, wireframes, and
scaffolding• Christianity: not following (god‘s)
moral guidance• No biblical list, but some
references throughout new testament
• Christian thinkers (Augustine, Gregory the Great), monastic authors (John Cassian, Evagrius) and early Christian Writers (Prudentius‘ Psychomachia) compile lists and rank orders
• References and popularity of ‚7 deadlies‘ starts in 14th century, e. g: Alighieri‘s Divine Comedy; Chaucer‘s Canterbury Tales; Hieronymus Bosch, Tizian, Brueghel
Bosch, Seven Deadly Sins / Superbia
• Judaism: ‚avera‘=‚crossing over‘ - a moral trans-gression against god or man; three major ones.
• Hinduism: ‚papa‘ - wrongful act which creates negative karma
• Islam: Khati‘ah - anything against the will of Allah; two major forms (dhanb and ithm) – 70 major sins
• Buddhist: men and god are subject to universal law; intentions and actions against the Noble Eightfold Path, no „sins“, but 5 crimes and 108 defilements
Other Traditions
Dix‚ Seven Deadly Sins
Today
Music:– Kurt Weill & Bert Brecht, Seven
Deadly Sins– Franz List, Totentanz– Ice T‘s 7th Deadly Sin
Movies / TV:– Bedazzled (1967, 2000)– Seven (1995)– 7 Deadly Sins (2014)
Comics:– Digimon 7 Great Demon Lords in
Digimon– Seven Deadly Enemies of Man in
Captain Marvel / DC Comics
Ice Cream:– Eskimo/Unilever „7 Suenden“
Pride• Pride is deep pleasure from one‘s
own achievements; it is ego-centric, self-loving, competitive
• Long considered deadliest of all sins, but without pride one may not achieve at all…
• Companies:– Become insensitive to their
external environment– Impose their own ways on
foreign markets– „Ethnocentrism“ (Perlmutter
1969)Tizian, Vanitas
• World‘s largest company entered Germany in 1997
• Sins: Undifferentiated transfer of business model:– EDLP-strategy– Strong integration of suppliers– Employee policies– Greeters, Baggers, 10-Foot-
Policy– Non-German speaking
Managers • Exited Germany in 2006 (91
locations, 12.000 employees, about 200 mio US$ in losses)
Pride
Pride• Part of leading British retail giant
Tesco (6,000 stores globally), 2nd largest retailer worldwide
• Sins:• Entered USA in 2007• Recession• Concept based on small stores,
convenience and fresh food• “Fresh and Easy” or “Small and
Strange”• Undifferentiated product portfolio• Self-check out
• Decision to leave in 2012: $1.6 billion in losses
• Intense interest in getting one‘s fair share or more
• ‚Infectious greed‘ (Alan Greenspan) also a driver behind industriousness, wealth of nations and free trade
• Companies:– Assume a short-term view only– Under-invest– Exploit local resources– Take quick and irrational
action– Deploy ‚John Wayne‘-like
strategies– „Liability of Newness“ (Cuervo-
Cazurra., 2007)
Greed
• Entered China in 2004• Outsources ca. 20 % of
production• Motivation to reduce costs and
remain competitive with its range of high-quality toys
• Unskilled labor unable to adhere to quality standards (cross-eyed bears,
• Increasingly high costs of (minimum 12 months training)
• Accelerated employee turnover • Rising wages• Left China in 2009
Greed
• Lack of interest / reluctance to make any effort. Relax! Be happy! Let yourself go! Drift into complacency and melancholy
• Companies:– Don‘t have a clear strategy– Prepare insufficiently– Are sloppy at implementation– Give up too soon– „Liability of Foreignness“ (Zaheer, 2002)
Dürer, Melencolia
Sloth
• Entered Germany in 1995/1996• Sin: Lack of interest
– Ignored of German legal environment (opening discount)
– Made wrong location choices in suburban malls
– After sacking German MD in 1999, no replacement, running operations from San Francisco
– Ignored cost structure and consumer preferences
– CEO visited Germany only once
• Exited 2003/2004
Sloth
Sloth• Opened in 1992• Sins:
• Expectation of single market, economic growth, “chunnel”
• Labor disputes with unions• Visitors rejected over-priced fast
food• Customer is not king in France• Accusations of cultural imperialism• Bad weather
• Attendance 25,000 / 60,000• Close to bankruptcy in 1994• Saved by Saudi Arabian prince• Profitable from 2005
• Overindulgence, over-consumption, waste, habitual greed
• Companies:– Move too far too fast– Stretch existing resources– Over-invest– „Polycentrism“ (Perlmutter,
1969)
De L‘Ange, Gluttony
Gluttony
• Embarked on rapid internationalization in 1970s
• Sins:– Driven by personal motivation
of CEO of „building an international company while traveling“
– Served more than 70 markets in the 1990s
– Learning on the go– Growth from 2 products to 400
products and variations– Ventured into new business
segments– Built manufacturing in Hungary,
over-sized facility in Austria• Slipped into insolvency end
of 1990s
Gluttony
Gluttony• Part of German Metro
group• Enters China in 2010• Sins:
– Built business model around brand and consumer experience instead of products and price sensitivity
– Flagship locations only– Fully self-operated and no
store-in-store concepts• Leaves China in 2013
• Desire to possess another's superior quality, achievement, or possession; resentful longing
• Wishing misfortune on others
• Companies:– Pick the wrong markets– Are mindless followers of
competitors– Try to outdo others when it‘s
not necessary / over-adapt– „Loss of an advantage“ (Cuervo-Cazurra, 2007)
Munch, Envy
Envy
Envy• Enters China in 2006 with
12 stores• Sins:
– No Do-it-yourself culture– Abundance of cheap
labor– Loss of status– No room for tools– Lack of imagination– Lack of brand
• Leaves China in 2012• $ 160 million in losses
If IKEA can do it, we can do it”
• Anger, strong emotional response to feeling threatened or provoked
• Companies:– Make impulsive, irrational
moves– Ignore local conditions– Seek vengeance and apply
force– „Creation of a Disadvantage“ (Cuervo-Cazurra, 2007)
Star Trek, Wrath of Khan
Wrath
• Joint venture with Wahaha Group in 1996
• Sins:– Danone starts to shift decisions to
France– Danone starts squeezing Wahaha
for profits– Wahaha builds grey market– Danone sues Wahaha;
government intervention– In December 2007 court judgment
in favour of Wahaha; sales start to drop significantly
– 2013 allegations of contamination, judgement for price-fixing, allegations of bribery
• To be continued...
Wrath
America‘s Next Top Model ‚Seven Deadly Sins‘America‘s Next Top Model, Lust
• Intense wanting or desire for an object, emotion or circumstance
• Companies:– Have the wrong motives for
market entry– Excessively focus on the
present– Become blind to consequences
of their actions– Abandon home/core markets– „Liability of expansion“ (Penrose 1959, Cuervo- Cazurra, 2007)
Lust
Lust• Entered Romania in 2010
by acquiring CityDeal• Sins:
– Ignored intense competition by 2012
– Ignored digital divide– Aggressive commission
tactics– Failed to attract local talent– Staffed subsidiaries with
expatriates– Lack of local relationships
• Exits 2014
Lust• Enters China in 2006,
opens first store in 2007• Sins:
– Monumental flagship stores
– Commission based sales– Enters UK, Turkey, Mexico
at same time– Financial difficulties in US
market• Leaves China (UK,
Turkey) in 2013
Thank you…