Mills
Decisions about international business take into account a wide range of different factors, including political, economic and social environments, in addition to firm-specific issues such as where to produce, what the company makes and how easy it is to ship the company’s product. In this report, the case of General Mills in Europe will be considered. General Mills is a major producer on consumer consumables, and the countries in question are going to be France and Greece. The paper is going to discuss the key issues with respect to each country, keeping in mind the General Mills context.
General Mills produces food under a number of common household brands — Cheerios, Betty Crocker, Pillsbury, Haagen-Dazs, Old El Paso, Yoplait and Nature Valley. The company is based in Minneapolis and began in 1860 with two flour mills, hence the name. The company would change its name to Gold Medal Flour in the 1880s. In response to consumer questions about baking, the company’s founder created a character to give advice to consumers — Betty Crocker. This was the beginning of the brand empire. Save for a brief foray into toys in the 1960s, the company has remained steadfastly a food company, and has operated internationally for decades. The company’s stated mission is to “make lives healthier, easier and richer” which connotes some nutrition, but also convenience and value. Today, the company operates in over 100 countries and has manufacturing facilities in 30 (General Mills.com, 2013). The company has production facilities in both France and Greece. With both countries, exporting was the method of market entry initially. However, acquisitions have been used to gain market share, for example the recent acquisition of Yoplait in France (2012 General Mills Annual Report).
Background Information
It is important to understand the similarities and differences of the two countries. Politically, both share similar systems of democratic republics, and both are members of the European Union and the Eurozone. Thus, there are significant similarities and with respect to Europe there are policies to which they are both subject. Culturally, there are some similarities but the cultures are different and therefore there remain areas of divergence. In terms of business culture, both countries trend towards formality in terms of the superficial things. However, with respect to the methods of doing business, from negotiation to relationship building, the French are more analytical, drawing on northern European norms. The Greeks are purely southern in their business culture, emphasizing relationships and being less analytical in their approach.
The two countries share a currency and external trade policy as members of the EU and the Eurozone. This creates opportunities of which General Mills should be aware. There are also some strategic dimensions that need to be discussed, with respect to the availability of inputs in these countries, the respective labor costs, and the economic outlook. In these, France is generally superior to Greece, having much more agricultural land and no physical trades barriers with the rest of the EU. Greece also has a much more dire economic outlook, given the problems the country has had with budget deficits and an antiquated economic structure.
Cultural Differences
One tool that can provide good background on the differences between cultures are the cultural dimensions of Geert Hofstede. The main dimensions are power distance, individuality, masculinity and uncertainty avoidance. A fifth is time orientation but Hofstede did not study Greece for this so it will not be used. Both countries have relatively high power distance, meaning that inequalities are generally accepted in these countries. As a result, their societies have some class structure, and if there are inequalities of opportunity that is something that these societies accept — upward mobility is not as high as it might be in other parts of Western Europe, for example. France scores much higher on individuality, meaning that individuals are independent and are expected to act accordingly. By contrast, Greek culture is highly collectivist in nature. This manifests in a number of ways, including absences from the workplace to deal with family matters, and a lack of initiative-taking on the part of individual workers.
Greece scores medium on masculinity, which means that the culture places at least some emphasis on competition and achievement — they invented the Olympics, after all. In countries that combine masculinity with collectivism, achievement is shared so that if the individual enjoys success this reflect on the entire family group. France tends towards feminine society, which emphasizes quality of life, which can even take precedence over business achievement. Both cultures score high for uncertainty avoidance, which means that in both countries there is a high adherence to rules because they create a sense of order — for a country that developed the ideas of chaos and anarchy the Greeks do not like these things at all. They are the highest scoring country in the world for uncertainty avoidance, and France is not far behind.
These cultural dimensions highlight some ways where Greece and France are similar, like with uncertainty avoidance, and ways where they are different, such as along the masculinity/femininity continuum. In almost all of these, both cultures are quite different from the home culture. Americans have low uncertainty avoidance, and they have high individualism. Understanding these cultural differences will be critical to dealing in either of these countries. Fortunately, General Mills already has the experience needed to excel in either country, having operated in both for a significant length of time.
Political Economy
There are essentially three governments of note when thinking about France and Greece — each country’s national government and the European Union. While both countries are democratic republics, France has the more stable economic and political situation. French politics are typical of Western Europe, generally taking a pro-business stance. There is government support of key industries, same as would be found in the U.S., and in France these tend to be industrial or agricultural concerns.
The French economic environment is stable, with the country having an economy focused on both services and industry. France is one of the largest economies in the world, ranked 10th in the world with a value of $2.2 trillion. The French economy is well-diversified and this provides it with ample export markets for its products. Most of its key exports are industrial goods, with most agricultural products being reserved for domestic use. Food processing is noted as one of the country’s main industries (CIA World Factbook, 2013).
The Greek government is in a state of instability. The current budget crisis has led to a widespread lack of confidence among the Greek people about their politicians, most of whom are working with the EU to dismantle the Greek economy and slash the budget. This creates conditions of instability and rioting. This social disorder is likely to be ongoing in Greece, putting government stability at risk. Economically, the crisis has been a disaster for the country, with the medicine being just as bad as the illness. The GDP dropped 6% is 2012, 6.9% in 2011 and 3.5% in 2010. The Greek economy has taken a beating, and there is no particular end in sight, with EU parties calling for further ‘structural reforms’. Merits of these reforms in the long run aide, the short-term economic conditions in Greece as bad, and many talented Greeks are taking advantage of the freedom of labor movement to relocate to healthier economies within the European Union, something that will result in long-term dim economic prospects for the country (ABC, 2012).
The European government has played a large role in the Greek economic and political turmoil, mandating harsh cuts to public service in exchange for loans. Greek insolvency is a major political and economic issue for the European Union, to the p
Global Trade and Currency Exchange
Both France and Greece are part of the European Union, which is a customs union throughout much of Europe. There are no customs or tariffs, nor physical borders to trade, between the countries in the union. Greece, however, is along with Cyprus an exclave of the European Union, separated by the countries of the Balkan Peninsula from the other EU countries. Access to Greece is therefore via sea or air. Trade with external countries like the EU. While the EU and the U.S. are both party to the World Trade Organization and therefore committed to reducing trade barriers between the member countries. However, there is no comprehensive trade agreement between the U.S. And the EU at present. There are talks, underway, however, but there are many stakeholders with concerns and such an agreement could take a long time to be reached (BBC, 2013).
In addition to having a common customs union, France and Greece share a currency. This makes for free-flowing trade between the two countries and the other Eurozone countries as well. Moreover, the euro is a highly liquid currency, so American companies are able to trade the euro freely and build in hedges using derivatives to reduce the risk associated with euro exposure. The current USD-EUR exchange rate (Oanda.com, 2013) is 1.311 dollars to the euro. The rate has been relatively stable the past couple of months but does fluctuate when there is major news on the economic situation of the two areas. There are also implications for Greece of being on the euro. Having no ability to conduct its own monetary policy is part of the reason it is having trouble resolving its deficit issues without destroying its own economy.
Business Strategy and Operations
The basic strategy for General Mills is to produce regionally, and market based on premium positioning. The company seeks to build brand awareness and use that awareness to charge premium prices for its products. As the company has expanded internationally, it has focused on a handful of star brands that it feels it can take global. The company produces in Europe for the European market, and tends to use acquisitions and wholly-owned subsidiaries in order to enter foreign markets once it has established that it wants a significant presence in that market. Production for both France and Greece therefore occurs in many different European countries, although France is one of the biggest producers. This is especially the case with the acquisition of Yoplait, a major yoghurt producer in France.
Logistics between the two countries is straightforward. While most European markets can be reached via trucks and trains, France and Greece are linked via Mediterranean shipping routes either from the south of France or from ports in Italy. Greece is an easy market to reach because it has only one main port of entry at Piraeus (near Athens) and distribution then occurs via domestic channels throughout the country. Distribution in Greece is more challenging than in France because France is more oriented towards major retailers like Carrefour. Also, packaging for products bound for Greece needs to be altered to feature Greek typeface prominently, something that is not necessary in France.
Business Protocol and Tips
Both countries have relatively formal business cultures. Greece business culture emphasizes relationships, where the French are more results-oriented and tend to ask more questions. Both countries value business dealings over food. The French are food-oriented because of their emphasis on quality of life, while the Greeks emphasize the social aspects of food. There are more etiquette issues to deal with in France. However, the common thread for both countries is that business dealings include an element of personal relationships but also elements of formality in matters of dress and ensuring that the other side feels good about the relationship before addressing details. In both countries, it is expected that communication will flow well, and disagreement will be subject to active debate in search of resolution.
When dealing in both countries, it is advisable to send representatives with some knowledge of the local culture and norms, in order to ensure that the business deals are not sidetracked by cultural insensitivity. The language at General Mills is English in all countries. Greeks are more likely to deal in English since few outsiders speak Greek (other than Cypriots) while the French are more likely to be chauvinistic about the language. It does not hurt to send Canadians to France to work with local agents in either language, even if final agreements are made in English.
Current News
The situation in Greece lends itself to avoiding the Greek market. If the economic decline, wage declines and brain drain continue, Greece will be an increasingly tough market for a company that deals in premium products, especially ones that are seen as being American. There has even been speculation that Greece might leave the Eurozone or even the EU. While such an eventually is unlikely, it would also make Greece a very unattractive market for a long time. The decision to produce in Greece for the European market would be challenging under these circumstances. An exception would be where Greece has a specific competency or access to ingredients — Yoplait Greek yoghurt will be better there than if produced in France, for example, but that is an exceptional product. Most of the time, the current situation in Greece make that market unattractive despite the customs and currency union.
France, on the other hand, remains one of the stronger European economies. Its central location within the EU, robust agricultural regions and its strong manufacturing infrastructure, along with a healthy domestic market, make France a very appealing base for continental operations. Despite having the same trade laws and currencies as Greece, there are clearly significant differences with the French market that make it more attractive.
Works Cited:
ABC. (2012). Brain drain: 120,000 professionals leave Greece amid crisis. Der Spiegel. Retrieved May 6, 2013 from http://www.spiegel.de/international/europe/unemployment-and-recession-in-greece-lead-to-brian-drain-a-893519.html
General Mills.com (2013). History & brand heritage. General Mills. Retrieved May 6, 2013 from http://www.generalmills.com/Company/History/Brand_heritage.aspx
2012 General Mills Annual Report.
Hofstede, G. (2013). France. Retrieved May 6, 2013 from http://geert-hofstede.com/france.html
Hofstede, G. (2013). Greece. Retrieved May 6, 2013 from http://geert-hofstede.com/greece.html
Oanda. (2013). Currency converter. Retrieved May 6, 2013 from http://www.oanda.com/currency/converter/
BBC. (2013). Culture fears over planned EU-U.S. trade. British Broadcasting Corporation. Retrieved May 6, 2013 from http://www.bbc.co.uk/news/world-europe-22261877
CIA World Factbook. (2013). France. Central Intelligence Agency. Retrieved May 6, 2013 from https://www.google.com/search?q=cia+world+factbook+france&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-U.S.:official&client=firefox-a
CIA World Factbook. (2013) Greece. Central Intelligence Agency. Retrieved May 6, 2013 from https://www.cia.gov/library/publications/the-world-factbook/geos/gr.html
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