Transnational corporations can have serious strategy problems.
Melding the diverse cultures in a transnational creates a double-edged sword. Although employees from different countries may use English as their lingua franca, they don't always speak the same language. "The challenge for the company is to maintain its sense of corporate identity," says Allen Morrison, J. Armand Bombardier Chair in Global Management at Western Ontario University's Richard Ivey Business School. "To do it, you need really strong managers. The natural reaction for humans is to be clannish."
Indeed, rivalries can easily crop up between national factions. Before Guerrino De Luca became CEO of computer peripherals maker Logitech International (LOGI ) five years ago, "the company was two-headed," he says, split between its dual headquarters in Switzerland and Fremont, Calif. Early on, the two executive teams couldn't even agree on the name for their primary mouse product. The Europeans called it Pilot Mouse and, the Americans, First Mouse. Neither side would give in, even after the press and customers became confused.
This is one of the toughest issues large companies face. It may make some CEOs think twice about sending jobs to India. Saving a few bucks on labor may not make up for the coordination and culture problems that arise from having employees on the other side of the world. (Of course, for some jobs, like Helpdesk service, it works out well because people in India can work while we sleep, making 24 hour access possible without third shift workers).