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Conquering Future Markets: Re-thinking
Business Models and Roles of Multinational
Companies from a Post-communist
Perspective
Niels LebbinkUniversity of Groningen (the Netherlands) & Newcastle University (United Kingdom)
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Conquering Future Markets: Re-thinking Business Models and Roles of
Multinational Companies from a Post-communist Perspective
Student: Niels Lebbink
Student Number (NL): S2240289
Student Number (UK): B3002698
Email: nielslebbink@hotmail.com
Master (NL): International Business and Management (Dual Award)
Master (UK): Advanced International Business and Management and Marketing (Dual
Award) Supervisor: B. Pennink
Supervisor: S. Vincent
Date: December 2, 2013
Abstract
MNCs are supposed to adopt political roles and need to become providers of public goods, which should be integrated in their business models and core business. Hence, this study has attempted to create an understanding of how MNCs can merge generating profits with eradicating poverty with aim to conquer a future market that still struggles with the aftermath of communism. This study has conducted four depth-interviews with four MNCs in Slovakia. Empirical evidence has shown that MNCs do adopt political roles, but do not integrate them in their core business. Nevertheless, the political activities are close to the core business. MNCs do attempt to rethink their business models in order to merge their own needs with the ones of the excluded communities, but struggle with becoming profitable, the dynamicity of the context, and the post-communist heritage of the country. Moreover, MNCs have more options for merging their own interests with the ones of excluded communities (e.g.
throughout the whole value chain) than the literature suggests (e.g. at the end of the supply chain). However, the options throughout the value chain are applicable on different levels of economic development (e.g. international, national, regional, and local). This study
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Foreword
I proudly present my master thesis for my dual award MSc in Advanced International
Business, Management, and Marketing at the University of Groningen (the Netherlands) and Newcastle University (United Kingdom). I finished my VMBO education in the summer of 2006 and I could not have imagined that I would have ever been able to study a dual master at a university in the Netherlands and one in the United Kingdom. It has been a long journey for me with many uphill battles, but it also has been a great experience!
I wanted to illustrate with my dissertation that I am not only able of to deal with business, marketing, and management from an international perspective in practice, but also in theory. That is why I placed the topic of my research in a post-communist context. In this manner, I was also able to show that I was capable of setting up a project in a foreign country with a complete different culture. I completely integrated myself in the culture in order to better understand the context of my research. Moreover, I managed to study two master courses at the Comenius University in Bratislava and I participated in many projects (e.g. AZU and KPMG case study competition) during my research. I lived in one of dormitories of the Comenius University and spent most of my free time with and around Slovaks. I made many new friends and experienced great new things. That is why writing my dissertation was not only very educational, but also a great adventure!
First and foremost, I would like to thank Mr. Pennink of the University of Groningen for his support and feedback. Moreover, I would like to thank him for providing me with the freedom, flexibility, and trust for setting up my research project in Slovakia. I also would like to thank Mr. Vincent of the Newcastle University for his support, feedback and freedom.
I also would like to thank Ms. Cernekova and Ms. Bennarova for offering me to make use of the facilities of the Comenius University and making me feel welcome in Bratislava. I also would like to thank Ms. Kullova and Ms. Hlavcakova of the Pontis Foundation for helping me to get in contact with the multinational companies in Slovakia.
4 Thanks,
Niels Lebbink
5 Abbreviations
CEE Central and Eastern Europe
CEEC Central and Eastern European Countries FDI Foreign Direct Investments
CSR Corporate Social Responsibility BOP Bottom of the Pyramid
CSI Corporate Social Investment CC Corporate Citizenship
V4 Visegrád Four; an alliance between Poland, Slovakia, Czech Republic, and Hungary CSV Creating Shared Value
EU European Union
NGO Nongovernmental Organizations GDP Gross Domestic Product
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Table of Content
1. Introduction ... 7 1.1. Problem Statement ... 8 1.2. Relevancy ... 9 2. Literature Review ...11 2.1. Corporate Citizenship ...112.2. Corporate Social Responsibility ...13
2.3. Corporate Social Investment ...15
2.3.1. The Competitive Factor ...16
2.3.2. The New Moral l Marketplace Factor ...17
2.3.3. The Comparative Advantage Factor of Private Firms ...17
2.4. Bottom of the Pyramid ...18
2.5. Creating Shared Value ...19
2.6. Leadership ...21
2.7. Conceptual Model ...23
3. Methodology ...26
4. Findings ...30
4.1. Corporate Citizenship ...30
4.2. Strategies and Business Models ...32
4.3. Leadership Qualities ...35
4.4. Communist Heritage ...37
5. Discussion ...39
6. Conclusion ...46
7. Bibliography ...50
Appendix A: Matrix Ghada and Pennink ...55
Appendix B: Needs of the Excluded Communities in Slovakia ...57
Appendix C: Adapted Matrix Ghada and Pennink ...62
Appendix D: Multi-level, Multi-actor, Multi-sector Model ...64
Appendix E: Questionnaire ...66
Appendix F: Written Versions of the Interviews ...76
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1. Introduction
Everywhere in the world multinational companies (MNCs) are entering and investing in new markets in order to benefit from globalization (Scherer and Palazzo, 2011; Nagi and Pennink, 2012). Globalization is a result of political and technical progress and has decreased the costs of connection, communication, and transportation. This has enabled cross-border interaction and the transfer of capital, goods, and people (Giddens, 1990; Held et al., 1999; Beck, 2000; Matten and Krane, 2010). However, globalization is changing the historical relationship between MNCs and the society (Scherer and Palazzo, 2011; Edward, 2013). Governments are losing their governance capability and their role as a provider of public goods for example. That is why MNCs and nongovernmental organizations (NGOs) in collaboration with the governments, or without their support, have started to voluntarily contribute expertise and resources to fill gaps in global regulation and to resolve public goods (Braithwaite and Drahos, 2000; Haufler, 2001; Kaul et al., 2003; Scherer and Palazzo, 2011). Hence, corporate managers are becoming more involved with public issues now, which were covered by the governments once (Scherer and Palazzo, 2011; Edward, 2013). This means that globalization is changing the business models MNCs use in order to enter new markets.
8 success and survival as the MNC will conquer an even larger valuable market ultimately. These concepts might be the perfect solution for the effects of globalization, which forces MNCs to adopt responsibilities of the government and integrate them in their core business and business models.
1.1. Problem Statement
The markets in the more advanced economies show minimal growth and are to some extent even saturated (Prahalad, 2010). That is why MNCs heavily compete with each other for the already saturated market shares due to the growing competition and the short term focus of shareholders (Kramer and Kramer, 2011). Most MNCs are involved in an endless spiral of competition, which has been accompanied with heavy waves of restructuring, personnel reductions, relocation to lower-cost regions, commoditization, price competitions, little innovation, slow organic growth, and no clear competitive advantages (Kramer and Porter, 2011). However, this leaves little space and resources left for eradicating poverty in the emerging markets (Kramer and Porter, 2011).
Nevertheless, the emerging markets possess a lot of untapped potential and in particular the BOP (Prahalad, 2010). This raises the question: “Why do MNCs not utilize their resources for finding innovative ways for transforming the BOP into valuable new markets, instead of spending it on endless competitions within the already saturated markets?”. The answer is quite simple; MNCs do not perceive the BOP as (potential) valuable customers (Prahalad, 2010). Mostly, MNCs are only involved with the BOP in terms of philanthropy or in some kind of basic concept related to corporate social responsibility (Kramer and Porter, 2011).
However, approaching the BOP as (potential) valuable customers will contribute to the inclusion of the excluded communities in the global economy. Moreover, the BOP will rise out of poverty and will gain purchasing power, which enables the MNC to gain even a larger market as explained in the introduction. From this point of view, MNCs are not only developing new business models, but a whole new market as well simultaneously.
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How can MNCs located in Slovakia merge generating profits with eradicating poverty in their core business and business models with aim to conquer a future market that still struggles with the aftermath of communism?This study has developed four sub-questions, which create a fundament for answering the main research question. This study is guided by the following sub-questions:
1. How do multinational companies adopt political roles of the government and integrate them in their core business in Slovakia?
2. How do multinational companies develop and/ or adapt their business models in order to integrate their own market interests as well as the needs of the excluded communities in Slovakia?
3. Does the multinational company needs to be a leader in order to adopt political roles and develop business models in order to support and serve excluded communities
successfully in Slovakia?
4. How does the communist heritage of Slovakia influence the ability of the multinational company to adopt political roles and develop business models in order to support and serve the excluded communities successfully?
1.2. Relevancy
Prahalad (2010) argues that CEE possesses a lot of potential for the concepts regarding the BOP as explained in the preceding sections (Prahalad, 2010). There is a lot of untapped potential for MNCs, because most countries joined the free market economy for the first time in CEE (Prahalad, 2010). However, there is not much research available regarding the concepts of the BOP from a post-communist perspective, but there is plenty available about the other emerging markets. Nonetheless, Prahalad (2010) argues that it has a lot of
untapped potential due to its transition of becoming a free market economy after the
dissolution of communism (Prahalad, 2010). There are many people living in poverty in CEE. They struggle with health, education, unemployment, housing, and social inclusion for
example. Moreover, the transition of a centrally planned economy to market-based system will places the concepts in a completely different context. The transition process seems to emphasize the leadership role of MNCs, because the MNCs and the government have both not successfully included the BOP due to the after effects of communism.
Moreover, the communities do not expect and/ or want MNCs to become political actors and providers of public goods, because of the communist heritage of Slovakia. The
10 (2013). This enables the literature to become more advanced and comprehensive.
It is also important to point out that this study also attempts to provide MNCs with an alternative for ensuring long-term survival, gaining markets share, and earning profit, because the markets in more advanced economies are stagnating (Prahalad, 2010). In contrast, the markets in emerging countries offer a lot of potential. This means that MNCs should focus on conquering and/ or developing these markets instead of being drawn in an endless spiral of price competitions, cost reductions, and reorganizations in order to survive in the already (almost) saturated markets. Moreover, globalization forces MNCs to adopt responsibilities of the governments, which means that the core business of MNCs needs to integrate social involvement anyway eventually according to Scherer and Palazzo (2011).
The results of this study can be applied to other emerging countries, which will generate gains for both the MNCs as well as the poor communities. Moreover, this research will emphasize a crucial problem within the global economy and can hopefully motivate other researchers to continue trying to discover possibilities for MNCs in order to focus on both economic as well as societal progress.
In summary, this study complements the current literature by approaching it from a post-communist perspective, which is lacking at the moment. Moreover, CEE highly requires MNCs to re-think their ways of doing business, develop new business models, and adopt political roles. Ultimately, this study will allow the literature to become advance, concrete and comprehensive.
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2. Literature Review
This chapter will discuss the background of the research. Various concepts and theories will be discussed in order to provide the reader with an understanding of the context of this study. The following topics will be discussed: corporate citizenship, corporate social
responsibility, corporate social investment, bottom of the pyramid, creating shared value, and leadership qualities. The chapter ends with the conceptual model, which illustrates how all the discussed concepts are connected.
2.1. Corporate Citizenship
Scherer and Palazzo (2011) argue that MNCs need to become political actors and addressers of public issues due to globalization and the increasing inabilities of the
governments as explained in the introduction (Scherer and Palazzo, 2011). This paragraph will discuss the extended view of corporate citizenship (CC), because it describes the corporate function for governing citizenship rights for individuals (Matten and Crane, 2010).There is only limited literature available about the extended view of CC and the political role of MNCs, but it has received more attention recently (Matten and Krane, 2010; Scherer and Palazzo, 2008). The extended view of CC acknowledges the extended political role of the MNC in the society. Literature distinguishes three different aspects of entitlements:
Social rights; provide the individual with the freedom to participate in society (e.g.education, healthcare, or various aspects of welfare). The MNC either supplies or does not supply individuals with social services. That is why the MNC largely takes on either a providing or an ignoring role. MNCs are for example engaged in initiatives within the province of the welfare state (e.g. feeding homeless people, helping schools in managing budgets, enhancing the employability of the unemployed, or improving deprived
neighborhoods)(Matten and Crane, 2010).
For example: MNCs such as Levi Straus, Shell, and Nike have adopted responsibilities of failing governments to provide a welfare state in developing countries (e.g. improving working conditions, ensuring employees a living wage, providing schools, medical
centers, and roads, and even provided financial support for the schooling of child laborers (Matten and Crane, 2010).
12 Governmental failure becomes particularly visible in developing or transforming countries in the arena of civil rights (Matten and Crane, 2010).
For example: General Motors and other MNCs exerted some pressure on the South African government to desist from violating the civil rights of black South Africans during the Apartheid period (Matten and Crane, 2010).
Political Rights; include the right to vote or the right to hold office and generally speaking, enable the individual to participate in the process of governance beyond the sphere of his or her own privacy. MNCs are essentially an additional vehicle for the exercise of political rights of individuals. That is why the MNC primarily assumes a channelling or a blocking role (Matten and Crane, 2010).Individual citizens have sought to force political change by leveraging power of MNCs through single-issue campaigns, anti-corporate protests, consumer boycotts, or other forms of sub-political action. For example; obesity campaigners achieved international coverage for their efforts by attacking the McDonalds and not the American or the English governments (Matten and Krane, 2012).
In summary, CC argues that MNCs are powerful public actors that can have a significant impact on citizen rights. Similarly, the failure of governments to fulfill some of their traditional functions in combination with the rise of corporate power, has meant that that MNCs have increasingly take on roles in society which is similar to that of traditional political actors. Hence, MNCs enter the arena of citizenship at the point where the traditional governmental actors start to fail to be the only ‘counterpart’ of citizenship. They can be said to partly take over those functions with regard to the protection, facilitation, and enabling of citizen’s rights, which formerly belonged to the government (Matten and Krane, 2010). The MNC will fulfill its role as a responsible political actor not only for its own profit, but also for its fellow citizens.
13 discussed in a post-communist context. That is why the next paragraph will discuss CSR in a post-communist context. It is important to have a fundamental understanding of the influence of the communist heritage in order to also understand the context of the more advanced concepts which will be discussed in the upcoming paragraphs.
2.2. Corporate Social Responsibility
Corporate Social Responsibility (CSR) includes the economic, legal, and philanthropic, expectations placed on organizations by society at a given point in time (Matten and Crane, 2010). Scholars argue that CSR is missing and MNCs are more social irresponsible in Slovakia (Monzon, 2008).The business environment shows characteristics of wild capitalism, which contrast fundamentally with CSR (Apostol, Näsi, Laine, 2008). That is why emerging trends in CSR are not an outcome of local societal expectations, but are rather brought from abroad and introduced to the local communities (Apostol, Näsi, Laine, 2008).
Many scholars have labeled foreign direct investment (FDI) as a travelling vehicle for business models, concepts, and theories from the more advanced economies. Moreover, scholars argue that FDI and close ties with MNCs from more advanced economies serve as a travelling vehicle for CSR in particular (Lankova, 2008). They argue that the diffusion of CSR is the key in the transformation process of becoming a free market economy in a socially responsible manner, which includes all the classes of the society in the global economy (Lankova, 2008). However, the travelling vehicle seems not to work, because the diffusion of CSR faces many barriers (Lankova, 2008).
Research has shown that the communist heritage of Slovakia hinders the successful
14 Nevertheless, in the late 1980s and early 1990s, Slovakia (former Czechoslovakia) and most central and eastern Europe (former Soviet Union and members of the Warsaw Pact)
abolished their communist political regimes and started their journey towards a society based on capitalist values (Abrams, 2004; Apostol, Näsi, Laine, 2008). Subsequently, a distinctive separation of economic and social roles emerged, whereby economic ones are assigned to firms and social ones to governments (Kolevaa et al., 2010). Moreover, firms had to
completely cut down their social programs in order to secure survival in the new competitive market environment. This made the transition process problematic, which resulted in high social costs, unemployment, a radical flexibilization of the workforce, and less access to healthcare and social marginalization (Rainnie, Smith, and Swaine, 2002; World Bank, 2005; Csafor, 2008; Lankova, 2008; Kolevaa et al., 2010). Additionally, firms started to adopt a short-term focus, trying to exploit loopholes in the legislation, and started to consider social activities and the environment as irrelevant (Murrell 2000; King 2001; Kooskora 2006; Lankova, 2008). Moreover, firms struggled with the adoption of Western-oriented strategic objectives (e.g. being market-driven, generating profit, maximizing growth, prioritizing securing survival, etc.)(Lankova, 2008).
In short, MNCs did not attempt to solve the public issues. The government was supposed to step up and address the public issues. However, the government was not capable of
addressing public issues either, which has caused for a stronger need for a social economy (Lankova, 2008; Kolevaa et al., 2010). That is why Slovakia still struggles with severe poverty in the stagnating communities, insufficient social inclusion and integration of minorities and people with special needs, high unemployment, and underperforming educational system (Strečanský and Stoláriková, 2012; World Bank, 2012). This situation has caused communities to express a growing dissatisfaction with the European Union, which has resulted in conflicts and developed into nostalgia for the old order (Lankove, 2008).
That is why MNCs should intervene and step up as political actors, providers of social goods and as addressers of social issues in order to compensate for the disabilities of the
government at this point according to Scherer and Palazzo (Scherer and Palazzo, 2011). However, most MNCs only consider customers, employees, and top management as important stakeholders in Slovakia. The MNCs do not consider local communities as important stakeholders in Slovakia (Csafor, 2008). Moreover, citizens do simply not force MNCs to behave in a responsible manner and they cannot be expected to restrict
themselves (Csafor, 2008). Additionally, citizens have bad experiences with the social
15 which has evolved in a strong believe that addressing public issues is the primarily role of governments (UNDP, 2007). However, governments are not capable of providing public goods yet as stated in the preceding section. Additionally, there are also other factors that hinder the implementation of CSR in Slovakia (e.g. insufficient understanding of CSR, absence public pressure, lack of company culture, inactive government, limited research for solutions, nature of the policies, inability to implement and manage socially innovative approaches and programs, etc.)(CSR Europe, 2010; Lubelcova 2012; Strečanský and Stoláriková, 2012).
In summary, firms and the government are both not involved with addressing public issues in Slovakia, due to the communist aftermath of the country. That is why MNCs should step up as political actors and introduce the concepts such as CSR to Slovakia. However, the introduction and implementation of CSR is hindered by the communist heritage. Citizens do not expect and/ or want MNCs to become political actors in Slovakia, due to the bad
experiences with the social involvement of MNCs during the communist era. This has resulted in MNCs not identifying communities as important stakeholders. It seems that the communist heritage decreases the ability of MNCs to successfully develop business models and adopt political roles. The business environment in Slovakia seems to only acknowledge an extreme form of a social or a market economy, which has resulted in many social issues. That is why this study is attempting to provide MNCs with an approach that balances the two perspectives. The interests of the MNCs and the ones of the communities seem only to exist in isolation, but the scholars in the more advanced economies have attempted to merge them. This emerging perspective which is originated in the more advanced economies might be a solution for the public issues in Slovakia. Moreover, it fits perfectly with the perspective of Scherer and Palazzo (2011). That is why the next section will discuss the concept of corporate social investment, because it encompasses an approach that merges the interests of the MNCs with the needs of the excluded communities.
2.3. Corporate Social Investment
The effects of globalization and the increasing burdens on governments to provide
16 (CSI) and focuses on corporate community involvement, which is strongly related to the core competencies and the resources of the organization (Hess, Rogovsky, and Dunfee, 2002). CSI projects have become more focused on sustainable development, governance issues, and questions of public-private partnerships (Hamann et al., 2005; Sonnenberg and Hamann, 2006; Friedman, Hudson, & Mackay, 2008; Habib, Maharaj, and Nyar, 2008; Hamann, 2009).
Moreover, CSI is connected to the core values of firms, responsive to moral pressures, based on the firm’s core competencies, and have clear objectives and means of
measurement. CSI aims to gain competitive advantage, which is integrated in the strategy of the MNC (Hess, Rogovsky, and Dunfee, 2002). In other words, CSI is grounded in the core competencies of the MNC and it is related to the long-term strategy. In this manner, MNCs are becoming key providers of aid to civil society. The literature distinguishes between three drivers of CSI: competitive advantage, new moral marketplace, and the comparative
advantage of private firms (Hess, Rogovsky, and Dunfee, 2002).
2.3.1. The Competitive Advantage Factor
Traditional sources of competitive advantage (e.g. financial capital, technology, location, etc.) are becoming less strong as competitive advantages, because they become more accessible due to trade liberalization and the rapid growth of technology (Hess, Rogovsky, and Dunfee, 2002). Hence, MNCs are looking for new, hard-to-imitate, and less tangible sources of competitive advantage. Scholars argue that CSI could provide new competitive advantages (e.g. reputational assets and international expansion)(Hess, Rogovsky, and Dunfee, 2002).
CSI provides a greater benefit to corporate reputation assets than traditional corporate philanthropy. Long-lasting community involvement programs are more likely to improve the image of the corporation than after-profit cash contribution (Hess, Rogovsky, and Dunfee, 2002). Reputation is also an important source of competitive advantage in foreign
environments. As firms enter new, unfamiliar markets, community involvement programs in those countries can help the expansion succeed (Hess, Rogovsky, and Dunfee, 2002). These programs can develop reputation assets in the new market, strengthen marketing and branding initiatives, improve relations with local governments, and assist in the
17 2.3.2. The New Moral Marketplace Factor
Moral desires expressed by stakeholders are embodied in capital, consumer, and labor markets. Marketplace participants make trade-offs between their moral desires and desires for lower-priced goods and better investment returns. The aggregate product of moral desires of the participants in their choices as consumers, investors, and employees represents “morality in markets” and has the potential to impact the outcome of the commercial marketplace (Dunfee, 1998).
2.3.3. The Comparative Advantage of Private Firms
MNCs can also gain comparative advantage by solving certain social problems, because governments and/ or non-profit organizations are not capable of doing this anymore in some situations. This advantage is most seen in the developing world, but it also exists in
developed nations (Hess, Rogovsky, and Dunfee, 2002). Comparing the public sector (including NGOs and nonprofit corporations) and the private sector under a resource based view-type perspective provides the explanation of this comparative advantage. Through intense marketplace competition, firms have developed unique competencies that provide them not only with a competitive advantage over other firms in the marketplace, but also a comparative advantage over governments in being able to respond to certain problems (Waddock and Boyle, 1995; Dunfee and Hess, 2003). In general, MNCs are adept problem solvers with knowledge bases and stocks of resources that may far exceed those of
governments or nonprofits in addressing a particular problem. In other words, MNCs can play important complementary roles to government and NGOs when they exercise a core
competency in responding to a social need (Hess, Rogovsky, and Dunfee, 2002).
In conclusion, the effects of globalization and the decreasing capacities of governments have resulted in an evolvement of CSR to a point that it has become more integrated in the core business of the MNCs. This is called Corporate Social Investment (CSI). CSI addresses both the needs of excluded communities as well as the interests of the MNCs. MNCs will invest in communities and will earn positive returns after the situation of the excluded communities has improved (e.g. reputation, quality employees, market share, etc.). The concept is more relevant in developing countries where local communities, disillusioned with weak
18 merge their own interests with the ones of the excluded communities. That is why the next section will discuss the concept of the bottom of the pyramid, because it provides the study with a fundamental understanding of how MNCs can merge their own interests with the ones of the excluded communities.
2.4. Bottom of the Pyramid
Prahalad (2010) argues that MNCs are able to realize their own profit-driven objectives (e.g. gaining market share, earning profits, growth, etc.) and can contribute simultaneously to the improvement of the living conditions of the poorest five billion people in world (Prahalad, 2010). Prahalad (2010) refers to the poorest five billion people in the world as the bottom of the pyramid (BOP)(Prahalad, 2010). However, MNCs need to revolutionize their ways of doing business in order to realize a model that integrates the interests of both the MNC as well as the BOP (Prahalad, 2010). More specifically, MNCs need to redesign their current business models in order to become capable of merging the interests of both parties
(Prahalad, 2010). In this manner, MNCs do not only gain access to a fortune of opportunities, but also to the possibility to bring prosperity to the aspiring excluded communities (Prahalad, 2010).
Moreover, Prahalad (2010) argues that the markets of the advanced economies are not promising anymore and are even saturated (Prahalad, 2010). That is why Prahalad (2010) suggest it is better to focus on emerging markets that are joining the market economy for the first time, because they offer a lot of overlooked potential (Prahalad, 2010). From this
perspective, Slovakia and the rest of CEE should be seen as valuable future markets that offer enormous opportunities for MNCs (Apostol, Näsi, Laine, 2008; Prahalad, 2010). Additionally, a huge part of the population in Slovakia lives in exclusion, but will evolve into the emerging middle class soon, due to the recent changes (e.g. integration European Union, transition to a free market economy, globalization, and the contributions of MNCs in order to improve the situation of the BOP). That is why Prahalad (2010) states that MNCs should not target the wealthy or even the emerging middle-income consumers, but the most excluded people that are living at the bottom of the so-called bottom of the society. The excluded communities will emerge into the middle class of the future, which enables MNCs to conquer an even more valuable market (Prahalad, 2010).
19 poor communities continues to widen. That is why MNCs need to contribute to the
improvement of the living conditions and wellbeing of the BOP, because it is not only the responsibility the government (Prahalad, 2010).
In summary, there is a lot of untapped purchasing power at the so-called bottom of the pyramid of the society. Prahalad (2010) argues that former communist countries (e.g. former Soviet Union and the members of the Warsaw Pact) offer many opportunities for the concept of the BOP, because those countries will join the free market economy for the first time (Prahalad, 2010).That is why MNCs should approach the BOP in Slovakia as a valuable future market, so they can generate profits and gain market share for example. Moreover, MNCs will bring prosperity to the BOP and contribute to the eradication of poverty
simultaneously. MNCs need to revolutionize their ways of doing business and redesign their business models. The concept of the BOP seems to be the solution for merging the interests of the MNCs with the ones of excluded communities. Nevertheless, the BOP concept as presented by Prahalad (2010) is surrounded by a lot of discussion. There are many
successful examples discussed in the literature, but a large part has failed as well (Prahalad, 2006; Karnani, 2007; Jaiswal, 2008; Prahalad, 2010; Simanis, 2012).
However, there is not much literature available regarding the BOP concept in Slovakia or in the CEE. Nevertheless, the concept of BOP has emerged under the label of creating shared value and has been described as the future recently in Slovakia (Hrdinová, Sakál and Šmida, 2011). The ideology of creating shared value is quite similar to the BOP, but it focuses more on the context of the next evolution of capitalism, which suits better with the approach of Scherer and Palazzo (2011)(Hrdinová, Sakál and Šmida, 2011; Kramer and Porter, 2011). That is why the next section will discuss the concept of creating shared value.
2.5. Creating Shared Value
20 A shared value lens can be applied to every major company decision. Could our product design incorporate greater social benefits? Are we serving all the communities that would benefit from our products? Do our processes and logistical approaches maximize efficiencies in energy and water use? Could our new operations be constructed in a way that achieves greater community impact? How could we enhance our community as a business location? If sites are economically equally, at which one will the community benefit the most? (Kramer and Porter, 2011).
Kramer and Porter (2011) argue that CSV will give rise to the next major transformation of approaching business, because the MNC will create shared value and not only profits (Kramer and Porter, 2011). This will drive a new wave of innovation, and productivity growth in the global economy. This thinking will represent an innovative way of understanding customers, productivity, and the external influences on corporate success. It emphasizes the needs to be met, the large new markets to serve, and the internal costs of social and
community deficits, as well as the competitive advantages from addressing them. The focus on CSV will reinvent capitalism and its connection with the society (Kramer and Porter, 2011). Based on this, CSV fits perfectly as an answer in the perspective of Scherer and Palazzo (2011).
MNCs that focus on creating economic and societal progress will make it possible for the society to advance more rapidly and simultaneously allow business to grow even more (Kramer and Porter, 2011). Hence, CSV will develop a positive cycle of MNC and community prosperity, which ensures long-term success and survival of the business (Kramer and Porter, 2011). This point of view fits perfectly with the argument of the BOP, which argues that excluded communities will evolve into the middle class when MNCs target them with a business model that has merged their own interests with the ones of the BOP.
Moreover, shared value is not philanthropy, sustainability, or social responsibility, but an innovative way of achieving economic success (Porter and Kramer, 2011). It is not a side activity, but it is integrated in the core business of the MNC. That is why businesses should act as businesses and not as charitable donors, which will be the most powerful source of the pressing issues society faces (Kramer and Porter, 2011). CSV will also be more effective and far more sustainable than the majority of corporate efforts in the social arena, for
21 to expand its activities. Declaration of responsibility by the company is not required.
Therefore, responsibility is an integral part of CSV (Kramer and Porter, 2011).
The concept of CSV is based on the principle of policy making and doing practices, which allow creating economic value for enterprise and social value for society by addressing the needs and problems simultaneously. CSV is based on previously overlooked opportunities that are given by re-conceiving new customer needs, products and markets, the new definition of productivity in the value chain and enabling the development of local clusters (Hrdinová, Sakál and Šmida, 2011).
In summary, MNCs that focus on creating economic and societal progress will make it possible for the society to advance more rapidly and allow business to grow even more simultaneously. Hence, CSV will develop a positive cycle of MNC and community prosperity, which ensures long-term success and survival of the business. MNCs need to revolutionize their ways of doing business in order to realize a model that integrates the interests of both the MNC as well as the BOP. MNCs need to redesign their current business models in order to become capable of merging their own interests with the ones of the excluded
communities. This is easier said than done and specific qualities are required in order for MNCs to be capable of revolutionizing their ways of doing business. Previous research suggests that MNCs need to act as strong leaders and need to possess certain leadership qualities. The next paragraph will discuss the required leadership qualities in more detail.
2.6. Leadership
Previous studies argue that MNCs need to be leaders in order to realize economic and political change (Stimson et al., 2009). MNCs with strong leadership utilize their resources properly and are able to stimulate entrepreneurial activities and change institutional factors to enhance the wealth of the excluded communities (Ghada, 2012). In order words, leadership is very important for MNCs, because the literature suggests it enables MNCs to develop business models that merge the interests of the MNC with the needs of the excluded communities. Additionally, it is supposed to enable MNCs to adopt political activities and integrate them in their core business.
pro-22 activity, purpose, and creating change (Stimson et al., 2009).
MNCs need to posses the following three leadership qualities in order to stimulate political change and entrepreneurship: farsighted vision (1), pragmatic openness (2) and conscious presence (3)(Saddi, 2010). Farsighted vision is a long-term outlook that recognizes the importance of building sustainable institutions for future generations. Pragmatic openness is the willingness to seek ideas from around the world and customize them for the unique circumstances of the environment in where the MNCs operate. Conscious presence is the recognition of the fact that the MNCs are not just building their own organizations, but also acting in concert to establish the region as a global player (Saddi, 2010).
Moreover, leadership is not based on traditional hierarchy, but on collaborative relationships among institutional actors working in public, private, and community sectors and is based on co-operation and mutual trust. From this perspective, the following two leadership qualities can be derived: trust among employees (4) and trust in the value chain (5)(Stimson et al., 2009). MNCs will earn positive returns when they behave in an ethical responsible manner. That is why MNCs with strong leadership should also not participate in corruption and always act in a responsible manner (Graham, 2012). However, MNC will have to face possible slowdowns, because they do not participate in corruption. Nevertheless, MNCs should be strong and large enough to deal with it in a proper manner. The MNC acts as a leader and will inspire other MNCs to follow their lead. In this manner, the value chain will be liberated from corruption at some point. Strong leaders have very high standards and values, which are accompanied with a high level of compliance everywhere and anytime (Graham, 2012).
Furthermore, MNCs need to be consistent with their integrity, honesty, and openness, because it will inspire other corporations to follow their lead. That is why MNCs need to be open (6), so that other corporations can learn from the leader. Additionally, MNC need to have an egalitarian approach (7)(Graham, 2012). This means MNCs should approach people equally and not exclude anybody. Moreover, the MNCs should have personal conviction (8). This means that MNCs should be driven to engage in responsible behavior by their values and virtue, which goes beyond following the rules and be compliant with the law (Graham, 2012).
In summary, MNCs need to possess the following eight leadership qualities in order to be a leader: 1) farsighted vision, 2) pragmatic openness, 3) conscious presence, 4) trust among employees, 5) trust among suppliers in the value chain, 6) openness, 7) egalitarian
23 business models and adopt political roles, which will merge their own interests with the needs of the excluded communities.
2.7. Conceptual Model
The conceptual model in figure 1 illustrates how all the concepts of the literature review are connected. The theory of Scherer and Palazzo (2011) and the extended view of corporate citizenship suggest that MNCs need to become political actors and addressers of public issues, which should be integrated in their business models and core business of the
corporations. This has resulted in the development of the conceptual model, which illustrates how MNCs can re-think their business models and ways of doing business. The conceptual model illustrates how the concepts of the literature review are related and create a skeleton for answering the main research-question of this study:
How can MNCs merge generating profits with eradicating poverty in their corebusiness and business models with aim to conquer a future market that still struggles with the aftermath of communism?
Independent Intervening Dependent Variables Variables Variables
Needs of the Excluded Communities Needs of the MNCs Positive Returns for the MNCs Positive Returns for the Excluded Communities Leadership
Qualities
Creating Shared Value
24 The dependent variables represent the positive returns for the MNCs and the excluded communities, which is the desired outcome of the concept CSI as discussed in the literature review. MNCs can realize positive returns for both parties by rethinking their business models and ways of doing business. The literature review discusses two possible concepts (i.e. bottom of the pyramid and creating shared value), which are represented by the intervening variables (i.e. needs of the MNCs, creating shared value, and needs of the excluded communities). The intervening variables reflect the first two sub-questions (i.e. “How do multinational companies adopt political roles of the government and integrate them in their core business in Slovakia” and “How do multinational companies develop and/ or adapt their business models in order to integrate their own market interests as well as the needs of the excluded communities in Slovakia?”). Moreover, the intervening variables are quite complex, intertwined, and require a better visual and structural understanding. That is why this study has adopted the matrix of Ghada and Pennink (2013), which illustrates how MNCs can connect the needs of excluded communities with the strategies of the MNCs (Ghada and Pennink, 2013). The matrix has been specifically adapted to the situation in Slovakia. The matrix of Ghada and Pennink (2013) and the adapted version can be found in appendix A and C.
The literature review also discusses the required leadership qualities, which represent the independent variables of the conceptual model. The independent variables (i.e. personal conviction, egalitarian approach, trust supply chain, trust among employees, openness, farsighted vision, conscious presence, and pragmatic openness) represent what is required in order for MNCs to re-develop their business models and ultimately generate positive returns for themselves and the excluded communities simultaneously. The independent variables reflect the third sub-question (i.e. “Does the multinational company need to be a leader in order to adopt political roles and develop business models in order to support and serve excluded communities successfully?”).
26
3. Methodology
This study has made use of qualitative research in order to answer the following open research question:
How can MNCs merge generating profits with eradicating poverty in their corebusiness and business models with aim to conquer a future market that still struggles with the aftermath of communism?
This study has attempted to understand how MNCs can match their strategies with the needs of the excluded communities through the perspective of the managers involved in Slovakia. This means the concept has been approached from the ‘outside in’. That is why the
preceding literature review has mainly discussed sensitizing concepts, which has stimulated to gather data by observations. Moreover, the current literature is incomplete and has many unanswered questions. The literature lacks the perspective of post-communist countries, while it is one of the parts that possess a lot of untapped potential according to the scholars. Additionally, the literature and the concepts are still in an evolving process.
It is very important that the research has not been approached from a western perspective in order to avoid prejudice and become able to purely understand the behavior in certain situations. It is has been necessary for the researcher to become one with the situation and the context of the research. That is why I moved to Bratislava in Slovakia instead of writing in the Netherlands or England. Moreover, I decided to live with Slovaks instead of living on my own during my research in Bratislava in order to better understand the culture and aftermath of communism. I lived in one of the dormitories of the Comenius University in Bratislava for approximately three months. I shared a bedroom with a Slovak and the rest of the apartment with ten other students in a complex which accommodates 6.500 mostly Slovakian students. Additionally, I have attended two Master courses (i.e. Marketing Management and
Management of Innovation and Change) at the Comenius University in order to increase my understanding of the approach towards business on an academic level in Slovakia. This means I will live, study, eat, sport, and spent my leisure with and around Slovaks, which has contributed to my integration process and my understandings of the cultural context of my research.
27 the Modified Grounded Theory acknowledges that a pre-existing conceptual tool can be used with aim to visualize the emergent theory, which this study aims to do with the adapted matrix of Ghada and Pennink (2013) and the multi-level, multi-actor, and multi-sector model for local economic development of Pennink (2013)(Strauss and Corbin, 1990; Strauss and Corbin, 1998; Axelsson and Goldkuhl, 2004).
The Modified Grounded Theory uses the same methods as the more “pure” version. The theory has been developed during data collection and the material has been coded subsequently. The data has been used to search for categories, characteristics, and the relationships between them (i.e. matches between the strategies of the MNCs and the needs of the excluded communities). In general, GT exists out of the following four phases: 1) exploration (to identify terms), 2) specification (to develop terms), 3) reduction (to determine the central term), and 4) integration (to elaborate the theory). GT has been very applicable for this study, because it focuses on developing a theory that is grounded in the ‘local’ reality of the situation that has been investigated. The sensitizing concepts which have been
discussed in the literature review have been filled with the elements that are emerging from the data. Moreover, the data has been placed in some pre-existing tool in order to generate a better visual and structural understanding
In practice, this study started with open coding in which I have tried to develop categories that appeared in the material. I have continued to find more evidence in the material in order to support the categories and redefine other ones. I have focused on refining the categories and discovering relations between the categories in the next phase. It is important to point out that GT required me to systematically write everything down and to use my own considerations and reflections as a source of data. In general, most important elements of GT are: keeping a diary, work on the basis of memos, constantly compare and integrate, applying plural data sources, using the existing theory of notions at different moments during the research, and continue until the point of saturation (e.g. no more new insights are being generated).
Mainly linguistic data has been used, which means that conversations have served as an ‘instrument’ to generate data. The conversations have been recorded with an electronic device, which has been followed up by observations. The results have been classified and analyzed, which means that the data have been divided in usable pieces.
28 constructionist and symbolic model has been used as the theory of questioning. This means that the questioner has asked the respondent a question. The respondent has formulated an answer and has presented it to questioner. However, there is a semi-permeable barrier which permits words and other expressions of meaning (e.g. gestures, facial expresses, etc.) to be exchanged between the parties, but which prevent either having direct access to the meanings of the other (e.g. the questioner cannot see inside the head of the respondent and read the thoughts and meanings). That is why this study integrated the following conditions, which is based on the Principle of Invariance of Meaning: 1) the questioner must have a clear understanding of what the intended meaning of the question is, 2) the respondent must understand the question to have the same meaning as the questioner, 3) the respondents must be able to formulate an answer that accurately conveys his or her meaning, and 5) the questioner must understand the answer in the same way as the respondent does.
Additionally, this study also made use of the Theory of Question Understanding, which has detected invalid questions. The theory argues that when a question is asked, the questioner expects an answer that is at least feasible, and then it will be assumed that the question has been understood. If the answer seems to be infeasible, then the answer will be assumed to be invalid. In other words, the questioner has compared each answer with a feasible set of answers that could have been answered if the respondent has understood it properly (Thomas, 2004).
I have interviewed the managers of the following MNCs: Nestlé, Heineken, Provident Financial, and T-Mobile. All the MNCs are ‘leaders’ regarding their social involvements and are actively involved with sharing their best practices. I have contacted Nadácia Pontis (Pontis Foundation) and they were able to help me to get in contact with the right people of the MNCs in question. I have contacted the MNCs and Pontis Foundation by e-mail in the Netherlands. I have visited Pontis Foundation in order to discuss the research within the first two weeks of my arrival in Slovakia.
29 I have visited the managers at headquarters of the MNCs, which were located in Bratislava (Slovakia). Each interview took approximately one and a half an hour. The managers were limited in time, so I started mostly immediately with questionnaire after a few minutes of small talk. The interviews have been recorded with an electronic device in order to make sure I would capture the data. Additionally, the managers have sent me reports and additional information in order to complement the interviews. The interviews have been completely written out and can be found in appendix F. After that, the data has been grouped and
analyzed. This can be found in appendix G. This study continued with comparing the findings of the MNCs, which can be found in chapter 4. The findings have been discussed and
connected with the existing literature in chapter 5. Finally, conclusions have been drawn in chapter 6.
30
4. Findings
This study has interviewed the managers of four MNCs in Bratislava (Slovakia). I have interviewed Mr. Gec (Manager External Relations) from Provident Financial, Mr. Walter (Corporate Affairs Manager) from Nestlé, Ms Gligić (Corporate Relations Manager) from Heineken, and Ms Dvoranová (Communication Specialist) from T-Mobile. This chapter will discuss the findings of the interviews. The written version of the interviews can be found in appendix F and the analysis in appendix G.
The findings regarding the concepts of the first sub-question (i.e. corporate citizenship) will be discussed first. After that, the chapter will continue with discussing the findings regarding the concepts of the second sub-question (i.e. strategies and business models). These two first paragraphs together represent the intervening variables of the conceptual model. The intervening variables are supposed to generate the desired outcomes (i.e. positive returns for the MNC and the excluded communities simultaneously), which are the dependent variables. The chapter continues with discussing the leadership qualities, which is covered by the third sub-question and represent the dependent variables. The leadership qualities are supposed to enable MNCs to properly deal with the intervening variables with aim to generate the desired outcomes. Finally, the chapter will discuss the context of the conceptual model, which is addressed by the fourth and last sub-question.
4.1. Corporate Citizenship
All the representatives of the MNCs recognize the needs of the excluded communities and label education and employment as most important. The representatives also recognize that the excluded communities are mainly located in the eastern part of Slovakia. They argue that the excluded communities are very reactive and do not attempt to improve the situation by themselves. The MNCs are involved with the excluded communities, but they all focus on different social groups (i.e. Heineken focuses on elderly, T-mobile on the hearing impaired, Nestlé on the local communities in the area of its operations, and Provident Financial focuses on the poor communities). The representatives argue that they need to prioritize certain social groups, because they are simply not capable of addressing all the public issues due to the limitations in their core competences and financial resources. That is why the MNCs are focusing on social issues that are close to their core business. That is why Provident
Financial is involved with the financial literacy and education of the excluded communities for example, because it makes more business sense from the perspective of a financial
31 The representatives of Provident Financial, Heineken, and T-mobile argue that they are to some extent substituting the role of the government. Provident Financial attempts to achieve more political focus on financial literacy. Heineken attempts to promote transparency among companies, self-restrict its own business, and forces the government to implement more extensive policies regarding alcohol. T-mobile addresses the issues of the hearing impaired and attempts to include them in the society. The three MNCs are all focusing on providing social rights, but only Heineken and Provident Financial also address civil rights with their activities regarding transparency. T-Mobile is the only MNC that also enables civil rights, because it attempts to give the hearing impaired community a ‘voice’. On the contrary, the representative of Nestlé is fierce against adopting political roles and argues that the roles of the government and the MNCs should be strictly separated. Moreover, the representative argues that the assumption of MNCs substituting the role of governments is not
well-grounded, because businesses are to do business and they should be mainly focused on its own interests. The representative of Nestlé states: “The assumption of MNCs substituting the role of governments is not well-grounded, because businesses are to do business. It is rather the angle of how you look at the opportunities in the social arena than some pre-designed desire to change the political or economic landscape of the country you operate in. It is rather vice versa. MNCs should abide to the local laws and situation and should not have any ambition to substitute the political role of the government. MNCs could cooperate with the government if it makes sense from a business perspective”. The representative of Nestlé goes even further and approaches the discussion from the opposite perspective and states: “The governments should be the one that is supposed to address more public issues and facilitate social inclusion. The governments should adopt concepts of the corporate world (e.g. as CSV, CSI, and CSR)”. That is why the representative of Nestlé argues that
governments should become more socially responsible and there should be some academic pressure on the governments as well. The representative states: “Everybody is pointing the finger at the MNCs. They always say that the MNCS are the ones that need to be more responsible. The government is just thinking how to squeeze the money out of the
32 and billions in an irresponsible way behind the scene. So, I think there should also be some academic pressure on the governments. They should be the ones that need to adopt political roles!”.
It seems that the political activities of Provident Financial are very integrated in its core business, because it is very close to core activities. In reality, Provident Financial keeps its political activities (e.g. offering education in order to improve the financial literacy of the excluded communities) strictly separated from its market ones, which mean it is not integrated in its core business and should be more seen as a side-activity. Provident Financial offers lectures in order to improve the financial literacy of the excluded communities. However, the lecturers are neutral and are prohibited to offer any kind of advice that will benefit the MNC. Heineken also keeps its political activities strictly separated from its core business. Heineken is an alcohol company which hinders the integration of the political activities in its core business. The MNC would like to educate children, but cannot approach them. The MNC is not allowed to focus on them with advertising, because any form of communication towards children is seen as a form of promotion. Moreover, Heineken is selling alcohol and being accused of promoting alcohol among children under the label of CSR, CSI or CSV is quite controversial. T-Mobile also keeps its political activities regarding the hearing impaired separated from their market ones. The MNC does not seek any competitive advantages with their political activities.
4.2. Strategies and Business Models
33 perceived by the clients. Moreover, the agents collect the money on a weekly basis instead of monthly. The representative states: “the clients are better able to manage their debts on a weekly basis, because they have insecure incomes and they are not good with budgeting”. In this manner, Provident Financial addresses its own interests and the needs of the excluded communities simultaneously (e.g. access to financial services, financial education and literacy, and protection of exploitation and illegal practices). Hence, Provident Financial conquered a market by adapting a traditional model that merged the needs of the MNC and the excluded communities. However, the representative argues that the MNC is not strong in transforming itself and states: “I have seen that some of our customers have become
entrepreneurs. They became a part of the higher middle class. They used to be our customers ten years ago. They are a part of a completely different segment now. We offer only products that include only medium groups. Our customers tend to move upwards and go to other companies (e.g. competitors). We do not have ten products. This is a bit a
disadvantage for us”. In other words, some of the clients have risen out of poverty, but the MNC only offers one product. That is why Provident Financial loses clients, because the product does not match with the needs anymore. This means that the MNC is developing a market, but it is incapable of conquering it.
Nestlé also adapted its existing business model in order to address its own interests as well as the ones of the excluded communities, but the MNC has focused on the sourcing and production stages of the supply chain instead of adapting its products and/ or service in Slovakia. Nestlé states: “There is one difference with the BOP in Slovakia, if you compare it with Asia, Brazil, or Africa. They receive the pay check weekly or daily in Africa, Brazil, or Asia, and in Slovakia it is monthly. This is a really important difference. Even the social allowances are monthly, not weekly, or daily. This causes specific patterns of consumption in Slovakia that are not replicable from Africa, India, and Brazil”. Thus, the salaries are paid on a monthly basis in Slovakia, which causes different consumption patterns. This makes it unnecessary to execute radical adaptations that go beyond slightly size adjusted products. Nestlé does not focus on the availability or accessibility of its products, because it is does not sells its products directly. The representative argues that retailers need to decide if it wants to make the products available or accessible to the excluded communities. The
34 their sourcing (e.g. collaborating with local suppliers in Slovakia and apprenticeships).
However, the concepts of Nestlé are only locally applicable. The representative states: “Nestlé willingly adopted the creating shared value approach in order to be a social
responsible ethical business. The consequence is that we are always doing it locally”. Hence, Nestlé focuses on creating shared value models in the sourcing and production stages of the value chain, which covers only local clusters. That is why Nestlé argues that it serves as an example for other MNCs and stimulates them to adopt their approach and implement it in other local clusters. However, this requires Nestlé to act as a strong leader, because it needs to inspire other organizations to follow their lead.
Heineken did not adapt or develop business models in order to make it more suitable for excluded communities. The representative of Heineken argues that the MNC is not capable of approaching the excluded communities from a business perspective, because it does not have the required resources and competences in Slovakia. The representative states: “We are still not at this level. We still need to work on our business. The departments still need to collaborate better (e.g. sales, marketing, PR, research, etc.). Sometimes people are different and they think those activities are against our selling activities. The company first needs to become a whole and needs to collaborate better. Everybody needs to have the same mind-set. Many people in the organization do not understand the urge to merge the interests of the MNC with the ones of the excluded communities”. Hence, this makes it really difficult to develop innovations, because the departments do not have the same mind-set and do not collaborate properly. Additionally, Heineken does not sell its products directly, but through retailers and horeca. That is why the representative argues that the rest of the supply chain is also responsible to some extent. Moreover, it is really difficult to develop business models that merge the interests of the MNC as well as the needs of the excluded communities from the perspective of an alcohol company. Heineken recognizes that the excluded communities are purchasing their products (e.g. the products are available and accessible to these
35 by a third party”. That is why Heineken would like to move away from the win-win situation, which means it tends to evolve in the opposite direction of what this research is suggesting. The representative states: “It has been moved a bit from example: we have a business and if we help, they will help in another way back (e.g. a win-win situation). It was more something like I will give you some money and something will come to me in the past. We moved from this stage and we are heading more away from the win-win ideology”. Hence, Heineken is deliberately attempting not to merge its own interests simultaneously with the needs of the communities.
T-mobile has adapted their business model to the needs of the excluded communities. However, mobile only focuses on a specific group within the isolated communities. T-mobile has adapted their business model to the special needs of the hearing impaired (HI), because this community was very excluded in Slovakia according to the representative of the MNC. Moreover, supporting the HI is close to the core business of T-Mobile. T-Mobile slightly adapted the rating plans for the HI (e.g. unlimited internet and text). These rating plans are only available for the HI. Additionally, T-mobile needed to teach its employees sign language in order to make it possible to communicate with the HI. Most shops have at least one person that speaks sign language. They wear a special logo, so they can be easily recognized. In this manner, T-Mobile addresses its own interest and the needs of the excluded communities simultaneously (e.g. social capital, access mobile and wireless facilities, availability products, and lower priced products).The representative argues that the business model is very
advanced, but struggles with becoming profitable. The representative states; “The model is not very successful and not very profitable yet. It might become profitable if we roll it out to other countries”. However, T-Mobile has not planned to roll out the model internationally. This also would require the support of the headquarters, because they make the decisions on this level. Nevertheless, the MNC is still exploring new innovative ways in order to improve its business model in order to make it profitable.
4.3. Leadership Qualities
36 The representative of Provident Financial only somewhat disagrees with farsighted vision, which is a possible explanation for why the MNC struggles with renewing its business model. Provident Financial loses a lot of customers, because the MNC is incapable of retaining its customers after they have been raised out of poverty. In other words, Provident Financial develops a valuable future market, but fails to conquer it afterwards due to the lack of sufficient farsighted vision.
The representative of T-mobile strongly agrees with most leadership qualities, which has resulted in the successful adoption of political activities and development of the business models. The representative only somewhat agrees with trust among employees and trust among suppliers in the value chain. However, the MNC sells directly to its customers and has intensive training programs for its employees in order to make it suitable for the excluded communities. That is why the slightly lower scores do not undermine the ability of the MNC to create shared value models as well as executing their political activities.
37 egalitarian approach. The representative somewhat agrees/ somewhat disagrees with
conscious presence and somewhat disagrees with pragmatic openness, which contradicts with their view on being a leader in showing other MNCs the models of how to create shared value.
The representative of Heineken only strongly agrees with trust among employees, openness, and egalitarian approach. The representative somewhat agrees with personal conviction and somewhat agrees with pragmatic openness, conscious presence, trust among employees, and trust among suppliers in the value chain. The representative of Heineken strongly/ somewhat disagrees with farsighted vision. Hence, Heineken does not score very high with its leadership qualities, which explains to some extent why Heineken is not capable of innovating new business models that merge the needs of the MNC with the ones of the excluded communities. Additionally, the MNC also struggles with adopting political roles that are close to its core business. Heineken argues that the nature of its core business hinders the integration process as well. Hence, Heineken is not capable of merging the needs of both parties in their business models as well as fulfilling political roles close their core business due to the lack of leadership qualities and the nature of its core business. Hence, Heineken needs to score even higher with their leadership qualities in order to still find way as an alcohol company to merge the needs of both parties in the business models and adopt political roles close to its core business.
4.4. Communist Heritage
The representatives of Heineken, Provident Financial, and T-mobile argue that the
communist heritage of Slovakia hinders the adaptation of the concepts such as CSR and the more advanced CSI and CSV. The corporations needed to learn how to survive in a new competitive environment first after the return of the market powers. Companies did not prioritize CSR, CSI or CSV, because they needed to deal with many other things first (e.g. survival, ownership, etc.). Additionally, the representatives of Heineken, Provident Financial, and T-mobile agree with the scholars that argue that a kind of CSR existed during the communist era. The representatives argue that it might be an explanation for the reactive behavior of the Slovaks; because they are used to be taking care of by others (e.g. other people tell them what to do). On the contrary, the representative of Nestlé argues fierce that this is a twisted way of looking at CSR and the more advanced concepts such as CSI and CSV. The representative states that it was a completely different system and it is not
