What Not to Do When Going to Europe

WESTERN EUROPE

For reasons of both profit and prestige, U.S. companies find Western Europe increasingly attractive as a place to do business. Since 1958 their investment in European ventures has more than doubled, from $4.6 billion to an estimated $9.6 billion last year--and it is still rising fast. Obviously, the ocean crossing has been largely successful, or American firms would not be so anxious to make the trip. But too often, both Europeans and Americans in Europe agree, U.S. businessmen step onto Europe on the wrong foot, making costly blunders that are usually avoidable.

Some mistakes, of course, stem only from the inevitable irritations of clashing cultures. It may be an American's abrasive first-name greeting or a sledgehammer sales pitch to a more reserved European manager. It may be the way some businessmen and their families live abroad, spending money ostentatiously, not bothering to learn the language and clustering in American communities. Or it could be Yankee cockiness. "Americans tend to overestimate their abilities," says a German executive for a U.S. subsidiary. "Consciously or unconsciously, they tend to ignore the different mentality of Europeans and force the American way of thinking on people under their authority."

The most serious mistake that U.S. businessmen fall into is their habit of regarding Western Europe as a 51st state, forgetting that a product or business technique that goes over big in Memphis will not necessarily succeed in Munich. The Common Market notwithstanding, Western Europe is still composed of individual nations and sections that have widely different tastes and buying idiosyncrasies. Says Belgium's Marcel de Meirleir, a plant-location expert: "Americans just don't understand that, for instance, Rotterdam and Antwerp are commercially not just two different cities--they're different worlds."

So are the U.S. and Europe, and the American businessman who wants his company to make a smooth transition between the two should remember a few basic but frequently ignored cautions about investment in Europe:

> Don't rush in. Though prosperous and expanding, Europe is no pushover market. Most Europeans feel that American firms do not sufficiently study their potential market, location and labor force beforehand. Too often they send over flying squads of vice presidents without serious preparation to make a crash decision in a matter of days. With time for only a ledger-eye view, they often wind up either buying nothing or buying unwisely. When the Monsanto Co. recently decided to set up a plant in a Luxembourg town, it discovered too late that the town has acute shortages of both water and labor--but the plant is under construction.

> Don't be top-heavy with U.S. brass. Local lawyers and accountants should be hired to run interference in dealing with the tangle of tax laws and bureaucratic red tape. In Rome, for example, only an Italian could have a feel for the legendary way of doing business known as arrangiarsi--roughly, arranging things to one's best advantage.

> Don't treat subsidiaries as if they were divisions, always dictating from the home office and ignoring the advice of local managers. This delays the decision-making process, has brought on the resignation of many experienced European executives. IBM recently put Denmark under the area run by its German representative--though many Danes, remembering World War II, still harbor a deep dislike of Germans.

> Don't insist, as a rule, on setting up a wholly owned subsidiary right away. A local partner can smooth the start-up and lessen the risk while the U.S. company retains controlling interest.

> Don't assign men to Europe who are inexperienced in European business, or transfer them out of a country as fast as they learn their way around. Some French businessmen refer to the U.S. practice of shifting executives from job to job and country to country as la valse des directeurs.

> Don't be inflexibly devoted to a system just because it worked elsewhere. Going into France, one U.S. soft-drink company fell flat at the start when it tried to use the same plan of operation that it used in underdeveloped countries--even including spending plans, sales goals and advertising ideas. Campbell Soup saved itself a lot of grief by discovering, before it set up any plants, that Italians could not provide the tomatoes of uniform quality that it insists on; it withdrew.

> Don't try to change the ways of European workers overnight. When John Deere took over a German-owned company in Mannheim, it decided to save time by sending carts along the production line for the morning beer break. But workers liked the chummy atmosphere of the old canteens, went on an eleven-day strike until Deere gave in.

Americans are not alone in the mistakes they make: European firms often err themselves when they move into another European country. And Europeans concede from hard experience that American businessmen are by no means innocents abroad. "U.S. business methods are often the best there are," says Michael Grunelius, Paris-based specialist in placing corporate executives. "But these methods have to be changed to accommodate local conditions." Increasingly, U.S. companies find the rich European market, for all its problems, worth a try. Since 1958, more than 2,100 U.S. companies have started new operations or licensed the manufacture of their products in Western Europe. Only a handful have failed.

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