Chapter 7: Managing political risk in global business: Beiersdorf 1914–90
As MNEs crossed borders during the first global economy, the greatest challenge was to create managerial structures which operated effectively over substantial geographical distances. Although exporting strategies were disrupted by rising tariffs during the second half of the nineteenth century, governments only rarely imposed restrictions on firms simply because of their nationality. The era of high receptivity to foreign business changed dramatically after the outbreak of World War I. The management of distance was replaced by the management of governments as a central challenge faced by firms. Corporate strategies ranged from building strong local identities to divert nationalistic pressure, to participating in coups to overthrow foreign governments perceived as hostile. The peculiarities of twentieth-century German history meant that German-owned firms were especially vulnerable to political risk. Two world wars and four fundamentally different political systems, including the Nazi regime (1933–45), meant that German firms were exposed in an extreme fashion to the impact of politics and governments on business. The resulting strategies, especially during the Nazi era, have been examined in detail in studies of several major firms, which have revealed that they devised elaborate organizational structures for their international businesses, designed to circumvent real and potential hostile governmental interventions.
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