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J BUSN RES 179 1989:18:179-193
Management and Industrial Relations Strategies of Multinational Corporations in Developing Countries
Sorab Sadri University of East Asia, Macau
Caroline Williamson University of Reading, England
If capital and labor are the two factors of production that combine to form the basis of all economic activity in the market, would it not be valid to assume an ongoing relationship between corporate business policy (involving capital) and industrial relations policy (involving labor)? What would be the precise nature of this relationship? Would it be possible to systematize this relationship and describe it within the context of the macro economy of a country? These are some of the questions that the Thurley and Wood Model was addressing itself to. The Thurley and Wood Model is not only valid in a macro-economic situation but also relevant and valid for a micro-economic situation. To that extent we extend the scope of the model and demonstrate its relevance in the case of a large multinational cor- poration (MNC). To some extent we go beyond the original aims of Thurley and Wood (1983), and, in so doing, we present on one hand an analysis of the strategies adopted by a single MNC and on the other hand show that the MNC is a living example of a macro-micro synthesis. Only if the second argument were valid would a macro model hold true in a micro situation as well. But the MNC is not an ordinary micro-economic entity. It is a genre in its own right. Hence, we could say that an MNC operates as a micro-economic entity with a macro-economic logic, and, to that extent, a macro-micro synthesis is conceivable.
Neither Unilever as an MNC nor Nigeria as a peripheral capitalist country is unique. Hence, the conclusions of this empirical study can be extended to other multinationals and other countries. This paper, however, bases its prognosis on one geophysical region and thus lays the foundation for other researchers to extend the scope of the findings by studying MNCs in other peripheral capitalist countries such as India, South Korea, Malaysia, and the Philippines.
Address correspondence to Sorab Sadri, Department of Economics, University of East Asia, P.O. Box 3001, University Hill, Taipa, Macaw
Journal of Business Research 18, 179-193 (1989) 0 1989 Elsevier Science Publishing Co., Inc., 1989 655 Avenue of the Americas, New York. NY 10010
0148-2963/X9/$3.50
180 J BUSN RES 1989:18:179-193
S. Sadri and C. Williamson
Introduction
If capital and labor are the two factors of production that combine to form the basis of all economic activity in the market, would it not be valid to assume an ongoing relationship between corporate business policy (involving capital) and industrial relations policy (involving labor)? What would be the precise nature of this relationship? Would it be possible to systematize this relationship and describe it within the context of the macro economy of a country? These are some of the questions that are addressed by the Thurley and Wood Model. The Thurley and Wood Model is not only valid in a macro-economic situation, but it is also relevant and valid for a micro-economic situation, so the scope of the model is extended to demonstrate its relevance in the case of a large multinational corporation (MNC). The original aims of Thurley and Wood (1983) and Thurley (1983) are extended, and, in so doing, we present on the one hand an analysis of the strategies adopted by a single MNC and on the other hand show that the MNC is a living example of a macro-micro synthesis. Only if the second argument were valid would a macro model hold true in a micro situation as well. The MNC is a genre in its own right and operates as a micro-economic entity with a macro-economic logic, and, to that extent, a macro-micro synthesis is conceivable.
Research Background
This paper was born out of extensive field research conducted in Nigeria between 1979 and 1983 and library research conducted in the United Kingdom during 1984 and 1985. The giant singled out for analysis was Unilever (an Anglo-Dutch mul- tinational), the largest single multinational interest in the nonpetroleum sector of Nigeria. If Unilever is a typical nonpetroleum multinational and if Nigeria is a typical developing capitalist country, perhaps we can hazard an exercise in gen- eralizing from the particular.
Review of Literature
Multinational corporations are one of the most important and yet least known of institutions in today’s society according to Takayama (1985). Of the 100 largest economic units in the world, Macrae (1972) says that 50 are nation states and 50 are MNCs. La11 (1983) went so far as to claim that U.S. multinationals account for some three-quarters of the country’s export of manufactured exports. Dunning (1974) argues that MNC’s recorded a foreign output that increased at the rate of 10% per annum. This rate is twice the size of the growth of the world GNP and 40 times faster than world exports. The power of the MNCs has been described by writers such as Dunning (1974), Wilczynsky (1976), Curzon and Curson (1977), Faundez and Picciotto (1978), La11 (1983), and Neghandhi (1985).
Takayama (1985), e.g., divides literature on MNCs into three categories, as follows:
1. The work of international economists concerned with the impact of MNCs on the balance of payments, international trade, and international division of labor.
Corporate Strategies in Developing Nations J BUSN RES 181 19X9:18:179-193
2. The work of political scientists examining the relationships between the MNCs and the nation states in terms of national sovereignty.
3. The work of business-orientated scientists investigating the internal operations.
We agree with Takayama in that although there is a growing body of knowledge incorporating the various aspects of the MNC, one field that we consider important and that is abundantly filled with problems (i.e., industrial relations) is not ade- quately researched. The ICPTU in 1971 commented that the potential power of MNCs to shift their operations and thus affect industrial relations in host countries is great. From the point of view of the MNCs, Kolde (1974) has remarked on the paucity of knowledge about industrial relations in foreign environments. Most studies are concerned with the impact of MNCs on the industrial relations system of the host country, since it is empirically convenient to pursue this line of enquiry. The IL0 study of 1973 casts serious doubts on the claim that MNCs are agencies that generate employment on a large scale. Gennard and Steuer in 1971 found that foreign subsidiaries of MNCs operating in Britain employed fewer personnel than they did in their factories in their home country. (In 1973 Forsyth came to the opposite conclusion when he found that MNCs operating in Scotland employed more personnel than they did in the factories in the home country.) According to Takayama, the lack of knowledge about internal labor management policies of MNCs is one reason why most researchers on industrial relations in MNCs have had inconclusive findings. He stresses the need for a study of the internal processes within a cross-cultural perspective. The study of Thurley et al. (1980) is important because it examined the development of personnel management practices among Japanese enterprises in Britain. Henderson andCohen’s study (1982) fills the second lacuna pointed out by Takayama: their paper describes the attempted cross-cultural analysis of Britain and Hong Kong through the international restructuring of capital labor. If the MNC negates the powers of both the market and the state, can we then say that it is “an economy within an economy”? _
MNCs are diversified in their operations, and their investments are linked by a vertical chain. Real control and policy making are functions reserved for the head office of the MNC in the core country while the operations are administered in the host country. This pattern is very much a common feature among multinationals. In studying the operations of Unilever from 1933 to 1985, we found that the substantive policies are laid down at the core headquarters while policies relating to procedural issues are often, but not always, left in the hands of the managers in the host country. The dependence of Unilever’s labor policies on its business policies shows that influence is usually unidirectional.
Purpose
A distinction is needed between a particular strategy and a company policy. A strategy is a proposed action or a sequence of actions intended to have far-reaching effects on the corporation’s ability to realize its objectives. It is, therefore, a con- sistent approach and signifies the direction in which the corporation is seen to be moving. Within the policies of an MNC a range of strategies emerge, and, by extending the Thurley and Wood typology, we propose to include the entire range
182 .I BUSN RES 1989:18:179-193
S. Sadri and C. Williamson
of these strategies. Since an MNC is almost an economy in its own right, the extension of the typology could be justified without committing either the fallacy of composition or the fallacy of accident. Modification of the typology will show how an MNC can vary its behavior to suit its immediate environment and yet remain within the broad policy guidelines set out by the headquarters at the core. The typology also aims to show the link between an MNC’s policies toward business and labor in a particular developing economy.
Whereas detailed information collated from different studies about the internal operation of MNCs would be of invaluable help to the student of industrial relations, the field of policy making continues to remain a “grey area.” Raymond Vernon in his classic 1971 study pointed out that the same policy measure may induce very different responses from different MNCs. We discover that the high degree of integration achieved by MNCs in developing countries gives them an even wider range of policies from which to choose than is generally realized. Neghandhi (1985), in analyzing the contributions of MNCs to host countries, has pointed out the existing gap between policy and practice, challenging the widespread notion that MNCs have made a significant (positive) impact on the developing economies. Our evidence of Unilever in Nigeria supports Neghandhi’s observations.
In adapting the Thurley and Wood typology to include our body of empirical evidence, what we are in fact saying is that, Vernon’s observation notwithstanding, one could posit a descriptive model, i.e., a typology of MNCs’ policies on business and labor. The word typology is used synonymously with the word model not because Thurley and Wood’s contribution is descriptive but because this typology is a part of Thurley’s Weltunschauung, which has begun to unfold over the last 4 years.
Explanation of the Typology
The Thurley and Wood typology has been modified and shown in the chart at the end of this paper. Also attached is a chart showing the various investment interests of Unilever in Nigeria.
Multinational Corporation’s Sales Outlet
The UAC began as a trading company that exported raw materials from Nigeria and imported consumer goods from Europe for sale in Nigeria. Along with the two French giants SCOA and CFAO, it managed to virtually monopolize West Africa’s distribution sector from the 1930s onward.
UAC operated in a situation where its share of the market was more or less secure. The smaller competitors were relegated to a secondary position not only because they could not compete with costs but also because they lacked sales outlets. Since the market was established and competition minimized, the levels of tech- nological innovation and advertising were minimal, brand loyalty was developed on a macro level, and the outlets themselves (Kingsway Stores or G. B. Olivant) were never advertised.
The attitude toward the union was one of detached paternalism, and, since negotiations were held by the UAC (N) conglomerate, the local industrial relations issues were often relegated to the background. Collective bargaining with the
Corporate Strategies in Developing Nations J BUSN RES 183 1989:18:179-193
National Union of Shops and Distributive Employees (NUSDE) was also dealt with on a superficial basis, and sales persons could be hired and fired at will.
The total absence of a welfare state and the large reserve army of unemployed persons made it possible for management to exercise tight control over work op- erations. Working class consciousness was low, and the attitude of the Nigerian managers was clearly colonial in character. Even in Niger Motors, a sales outlet for the Federated Motor Industries, and another operative of UAC (N), the man- agers displayed a marked autocratic tendency towards labor.
Multinational Corporation’s Service Organization
The Materials Delivery Service (MDS) and the Tractor and Equipment (T&E) divisions of the UAC (N) were basically service organizations aimed at profit making. The former set up a chain of warehouses scattered throughout Nigeria while the latter bought and hired out earth-moving equipment on behalf of Unilever.
The service rendered by both MDS and T&E division was always very effective and reduced Unilever’s transportation, material handling, and storage costs con- siderably. To add to this, the Research Bureau Nigeria Ltd. (RBNL) was an organization that had no connection officially with Unilever, but which was the eyes and ears of Unilever as far as market research went. RBNL was housed at Old Niger House, Apapa, where other UAC offices were located (see Table 1). When we approached them, they refused to even speak to us without first having obtained permission from UAC (N) headquarters. This seems rather odd for a concern that claims to be independent.
The market environment was purely oligopolistic, and all disclosure of infor- mation to the public was rigidly monitored. The rules covering this were so formal that they were virtually unpenetrable by the investigator. The market research unit was excellent, and it was claimed that it even conducted market surveys for the Ministry of Trade and Industries.
RBNL had a strange autonomy that gave it a wider scope for collective bargaining than the larger UAC (N). Since the white-collar staff was influenced by embor- geoisement, labor democracy at the lower levels of management remained only a theoretical possibility.
The public recognition of monopoly rights in Nigeria is ensured. Growth at MDS and RBNL is needed to avoid zero sum conflict. Management (and union) control over MDS, RBNL, and T&E remains very flexible.
Key Companies of the Multinational Corporation
The Federated Motor Industries (FMI), Bordpak, and Palmlines are three operative divisions of UAC (N) that could be called key companies. The first assembles automobiles, the second makes paper cartons and packages, while the third is concerned with stevedoring and ocean transport. Together they give some idea of the extent of vertical intergration in Unilever.
All three of these concerns are based on government industrial policy, have effective production lines, and are quite modern (by Nigerian standards) in their approach to manufacturing and trade.
Tab
le
1.
The
T
hurl
ey
and
Woo
d M
odel
A
dapt
ed
for
Uni
leve
r in
Nig
eria
Exa
mpl
e B
usin
ess
Stra
tegy
A
ppro
pria
te
Con
ditio
ns
Indu
stri
al
Rel
atio
ns
Stra
tegy
A
ppro
pria
te
Con
ditio
ns
Dep
artm
enta
l st
ore
(Kin
gsw
ay
Stor
es)
Serv
ice
orga
niza
tion
( Re-
se
arch
B
urea
u N
iger
ia
Lim
ited)
Key
pri
vate
co
mpa
nies
(G
uinn
ess
Nig
. L
imite
d an
d N
iger
ian
Bre
wer
ies
Ltd
. )
Eco
nom
ic
mis
sion
ba
sed-
St
able
m
arke
t w
ith a
n es
tab-
ra
tiona
l lo
ng-t
erm
tr
adin
g lis
hed
shar
e-lo
w
leve
l of
ob
ject
ives
fr
om
the
colo
n-
tech
nolo
gica
l in
nova
tion;
ia
l da
ys;
to c
reat
e a
de-
selli
ng o
f lu
xury
ite
ms;
m
aod
for
none
cono
mic
th
e he
gem
ony
of t
op
need
s so
app
ropr
iatio
n m
anag
emen
t fr
om
Lon
- th
roug
h di
stri
butio
n is
do
n is
nev
er
ques
tione
d m
ade
poss
ible
Serv
ice
base
d-pr
ovis
ion
of
Mon
opol
istic
m
arke
t-no
ef
fect
ive
serv
ice
to s
iste
r gr
oup
has
a m
ore
effi
cien
t co
ncer
ns
at l
owes
t co
st;
netw
ork
of w
areh
ousi
ng
tran
sfer
pr
icin
g ef
fect
ivel
y fa
cilit
ies
and
ship
ping
se
r-
used
to
step
up
pro
fit
vice
s m
akin
g ve
rtic
al
inte
- m
argi
ns
grat
ion
of b
usin
ess
poss
ible
Bas
ed
on g
ovt.
indu
stri
al
Exi
sten
ce
over
gov
t. po
l-
stra
tegy
-the
ne
ocol
onia
l ic
y-th
e In
digi
nisa
tion
and
peri
pher
al
capi
talis
t D
ecre
es
of 1
972
and
1977
, ec
onom
ies
allo
w t
he r
ela-
ha
ving
fai
led
the
Gov
t.,
tions
of
pro
duct
ion
to r
e-
polic
y ha
s al
way
s fa
vore
d m
ain
unal
tere
d in
con
tent
th
e fo
reig
n co
mpa
nies
ov
er 5
0 yr
s
Rec
ogni
tion
deci
ded
by t
op
man
gt.
belie
fs-t
he
scop
e of
col
lect
ive
barg
aini
ng
is
very
lim
ited;
se
lect
ion
of
empl
oyee
s ac
cord
ing
to t
his
crite
ria;
al
l be
liefs
te
le-
guid
ed
from
L
ondo
n
Rec
ogni
tion
of m
any
unio
ns-
the
Shop
and
Dis
trib
utiv
e E
mpl
oyee
s U
nion
(N
USD
E)
and
the
food
, to
bacc
o et
c.
Em
ploy
ees
unio
n ar
e jo
intly
re
cog-
ni
zed.
U
AC
de
als
with
8
trad
e un
ions
in
Lag
os.
Wid
e sc
ope
for
colle
ctiv
e ba
rgai
ning
on
man
agem
ent
term
s
Gov
t. re
cogn
ition
of
mul
dna-
tio
nal
righ
ts-g
row
th
need
ed
to a
void
a z
ero
sum
co
nflic
t. L
oose
m
angt
con
- tr
ol o
ver
day
to d
ay o
pera
- tio
ns
but
tight
con
trol
ov
er
polic
y is
sues
of
all
kind
s.
Gov
ernm
ent
keep
s a
low
pr
ofile
Rec
ogni
tion-
Uni
leve
r di
d A
dapt
ive
I.R
.-th
e ta
sk o
f no
t re
cogn
ise
a un
ion
until
I.
R.
is t
o av
oid
rock
ing
the
the
1950
s an
d st
ill m
aint
ain
boat
; he
nce,
by
thr
eat,
a po
licy
of p
ater
nalis
tic
au-
brib
e an
d,
fals
ehoo
d,
stat
us
tocr
acy
in I
.R.
quo
is m
aint
aine
d
Lab
our
mar
ket
allo
ws
seve
re
sele
ctio
n an
d di
smis
sal
a hi
gher
po
ssib
ility
-the
co
n-
trol
ove
r th
e w
orkf
orce
is
ve
ry t
ight
an
d th
e sl
ight
est
mis
take
ca
n re
sult
in d
is-
mis
sal;
larg
e-sc
ale
redu
n-
danc
ies
are
very
com
mon
as
tr
ade
cycl
es t
ake
a pl
unge
Tab
le
1 (c
onti
nued
)
Exa
mpl
e B
usin
ess
Stra
tegy
A
ppro
pria
te
Con
ditio
ns
Indu
stri
al
Rel
atio
ns
Stra
tegy
A
ppro
pria
te
Con
ditio
ns
Con
glom
erat
e (U
AC
of
B
ased
on
lon
g-te
rm
plan
- A
wor
ld b
ody-
form
alis
ed
Dif
fuse
d I.
R.
polic
y-I.
R.
is
Loc
alis
ed
I.R
. D
ept-
geo-
N
ig.
Ltd
) ni
ng-e
xplo
itatio
n of
ful
l pr
oduc
t or
gani
satio
n an
d no
t ce
ntra
lised
bu
t al
l 1.
R.
grap
hica
l m
obili
ty
of m
an-
prof
it fr
om p
rodu
ct
life
a po
wer
ful
cent
ral
body
de
cisi
ons
are
mad
e to
sup
- ag
ers,
de
skill
ing
of
and
deve
lopm
ent
of n
ew
to t
ake
stra
tegi
c de
cisi
ons
plem
ent
corp
orat
e bu
sine
ss
oper
atio
nal
jobs
an
d se
c-
luxu
ry p
rodu
cts
deci
sion
s tio
nal
barg
aini
ng
disc
our-
ag
ed;
larg
e-sc
ale
ratio
naliz
atio
n em
bark
ed
upon
Smal
l fi
rms
(Von
o Pr
od-
Bas
ed o
n ec
onom
ic
sur-
Fl
exib
ility
of
org
anis
atio
n-
Avo
idan
ce
of s
hop
stew
ard
Lin
e m
anag
ers
cont
rol
indu
s-
ucts
Ltd
. an
d V
itafo
am)
viva
&sh
ort-
term
pr
ofita
- go
od s
ourc
e of
fin
ance
co
ntro
l-th
e sh
op
stew
ard
tria
l re
latio
ns-a
ll I.
R.
mat
- bi
lity
and
mai
ntai
nanc
e of
(U
nile
ver)
an
d go
od
rela
- is
jus
t a
nam
e;
he i
s se
ldom
te
rs
are
deal
t w
ith b
y th
e sa
les
thro
ugh
a la
rger
tio
ns w
ith c
usto
mer
s in
co
nsul
ted
and
has
no p
ower
Pr
oduc
tion
Man
ager
; pe
r-
UA
C
netw
ork
the
nam
e of
UA
C
form
s a
PR f
unct
ion
New
fir
m p
rodu
ct
(Lip
ton
Bas
ed o
n in
nova
tion-
new
St
aff
with
pro
blem
-sol
ving
A
void
tr
ade
unio
ns-a
mph
a-
Skill
ed s
taff
-hig
hly
mot
i-
of N
ig.
Lim
ited)
lu
xury
pro
duct
s ar
e de
vel-
ca
paci
ty-l
inks
w
ith p
ro-
sis
on s
kills
and
in
the
vate
d st
aff
with
ded
icat
ed
oped
an
d m
arke
ted
spec
tive
cust
omer
s an
d fi
- na
me
of e
con.
de
v.,
trad
e an
d se
lfle
ss
attit
udes
ba
sed
nanc
ial
supp
ort
for
are
cast
asi
de
on f
alse
con
scio
usne
ss
inve
stm
ent
Est
ablis
hed
firm
s in
eco
- B
ased
on
cri
sis
reso
lutio
n-
Cri
sis
due
to t
rade
cy
cle-
Pr
oduc
tivity
ba
rgai
ning
- St
rong
un
ion
orga
niza
tion-
no
mic
dec
line
(Lev
er
dive
rsif
icat
ion
in 1
972
to
cris
is d
ue t
o th
e pr
oduc
- ac
hiev
ed
thro
ugh
a un
ion
poss
ible
re
depl
oym
ent
as
Bro
ther
s N
iger
ia
avoi
d a
falli
ng m
arke
t; re
- tio
n of
lux
ury
good
s th
at
orga
niza
tion
at a
ll le
vels
th
e ne
gotia
ting
unio
n L
imite
d)
tren
chm
ent
in 1
982
to
cann
ot
be s
old
as t
he
(NU
CN
NP)
i.e
., is
ver
y av
oid
fall
in p
rofi
ts
pric
es
wer
e be
yond
th
e co
nsci
ous
of i
ts r
ole
reac
h of
the
com
mon
m
an
LEV
ER
UN
IUV
ER
PLC
UNITED AFRICA COMPANY
INTERNATIONAL
____________________-_______-_I
2
/
I
I
BROTHERS
PA
MO
L LIPTON
NIGERIAN
GUINNESS
UAC OF NIGERIA
LTD
I
: I
(NIG
.1
LTD
O
F NIGERIA
(NIG.1
LTD
I BREWERIES
(NIG.1
LTD
r24 operating
divisions.
(foods, cosmetics)
(rub
ber)
(t
ea)
I N
mer
, soft
(stout.1
(a conglomerate)
drinks)
I 1
1 VONO PRODUCTS
VITAFOAM
LIMITED
(NIG.1
LIMITED
(foam mattresses)
(furniture)
____
--__
-___
____
___
I I
NIPOL
1
LIM
ITE
D
(pla
stic
I- _-
_-__
____
_-
__ __
____
___-
__-_
__
r 1
conta
iner
s)
RE
SFA
FC
H
BU
RE
AU
PH
ILIP
MoR
R1s
WFST
AFR
ICA
N
(NIG
) LT
D
(NIG
) LT
D
FC
wIA
ND
clw
f%w
cO
.LT
D
(mar
ket
stu
die
s)
(cig
aret
tes)
(c
emen
t ,g
unny b
ags)
Offi
cial
ly
acce
pte
d
inte
grat
ion
by U
nil
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Corporate Strategies in Developing Nations .I BUSN RES 1989:1X:179-193
All three are provided with large resources needed for research by the Unilever empire. The Textiles Division of UAC (N) and Pamol in addition to the above three concerns have potential export markets in West Africa, operate closely in line with government policy, and show the degree of horizontal intergration within the group.
Since all five of these constitute the backbone of Unilever in Nigeria in terms of the fortunes they reap, it becomes necessary to have industrial peace at all times. The unions get more cooperation from the management, although the disclosure of information and industrial democracy leave a lot to be desired.
The personnel department is well managed and efficient, which is necessary if labor is to be manipulated to get optimal results. One way of avoiding con- flicts was to introduce an incentive bonus plan and emphasize growth as a nec- essary condition for existence. This situation is well managed by the personnel department, which rides roughshod over all union officials when it fails to buy them out.
The Multinational Conglomerate
The UAC (N) is a conglomerate that effectively uses its integrated structures to monopolize the West African market. Nigeria serves as an effective launching pad for this strategy.
Its operations are well planned and form a part of the overall global policy to establish a monopoly in developing countries. The last stage of distribution is used to appropriate its profits, and its long historical roots are used to exploit the system. UAC (N) influences state policies due to its close connection with the government and holds the labor movement liable to ransom by imposing mass redundancies if imports are restricted. The coups that overthrew Gowon and Shagari were pre- ceeded by such redundancies. The MNC then allegedly used the Nigeria Labour Congress to pressure the government to grant import licences, which had been delayed or denied them previously.
The global connections of the MNC help to formalize the divisional product organization. Its virtically integrated structure ensures profits at every stage of distribution. The oligopolistic nature of the import market and the oliopsonistic nature of the export mark assures Unilever a stable share at both ends of this trade continuum.
Therefore, it has the ability to portray itself as having a flexible labor policy. Its labor policy is in fact varied, and the degree of variation is regulated by the extent to which the product market varies. It always wants to bargain individually and does not wish to involve itself in industry-wide bargaining. Unilever’s identity (management argued), which must not be lost, would be lost if the MNC bargained along with other employers (controlling the Marketing Boards was a different matter, even when done jointly).
The localized personnel department, which appears to be both decentralized and autonomous, is in reality nothing of the kind. Job rotation and geographi- cal mobility of managerial staff ensures a uniform policy and centralized con- trol. Sectional bargaining is never used, and automation is encouraged. The training school at Apapa is used to effectively dovetail operational jobs to fall
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in line with changing market situations. Structural unemployment, though rampant, is negated by the large array of unemployed persons, and training costs are kept low.
The Small Firm within the Multinational’s Canopy
Small firms like Nipol produce plastic containers for Unilever products and brew- eries, Bordpak produces paper packaging for Unilever products, and G. B. Olivant provides sales facilities for Unilever products, RBNL, provides market research while Vono and Vitafoam as subsidiaries of UAC (N) provided further horizontal intergration.
All of these are based on the need for economic survival and are used to boost Unilever’s larger interests such as Nigerian Breweries, Lipton, Guinness, and Lever Brothers.
The production organization is flexible and customer relations are excellent. The close links between the Unilever Empire and both Lloyds Bank PLC and Barclays Bank PLC provide a dependable source of finance.
The industrial relations policies of Nipol, Vono, and Vitafoam are personalized. Union power is nonexistent, and the workers are told that the management knows what is best for them.
All personnel matters are dealt with by the operations manager to whom the personnel manager reports. The personnel policy is centralized, and the personnel officer at local level is in fact only in charge of canteens and latrines. The attitude of management towards researchers is antagonistic.
The Multinational’s New Firm Product
Lipton, Guinness, and Nigerian Breweries (NBL) are relatively new Unilever in- terests. They bridge the gap in the demand for beverages and create new markets by dint of superior marketing strategies.
They constantly encroach upon new zones of trade. For instance, you can buy Guinness, Harp, or Star beer hundreds of miles away from Lagos at a time when Nigeria boasted of having 21 breweries for 80 million people.
Top management is very efficient and has a reputation for being very sophisti- cated. All these three interests have a very good reputation with the general public, and the Unilever Empire ensures financial support not normally necessary since all three of these interests do quite well for themselves and have already secured a share in the Nigerian market because of brand loyalty.
Trade unions were only recognized when it became absolutely necessary. The officials of the Food, Beverages, and Tobacco Workers Union confirmed that management always emphasized skills and tried to professionalize the workforce. In Vono and Vitafoam, this was virtually achieved when industrial relations were left in the hands of the line managers.
Evidence exists to show that while the staff at NBL and Guinness was adaptive, the staff at Vitafoam and Vono had to be cajoled into working long hours for low overtime rates.
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The Multinational Corporation’s Declining Giants
Palmol and Lever Bothers of Nigeria Ltd. (LBN) are established Unilever firms that went into economic decline with untold effects after 1970 because of the dip in world trade cycle that ushered in the great slump of 1971.
The post-1971 policy of both these concerns was based on crisis resolution. Palmol imported Malaysian rubber trees to increase productivity while LBN went into manufacturing with a plant at ABA and at Oshobo. Productivity became a key phrase as both concerns made an all out bid to survive.
Although the crisis was brought about by the world trade situation, it was ag- gravated by the colonial industrial structure of both Palmol and LBN, which could not step up their productivity without major overhauls. This trend was later ar- rested, and by 1979 both concerns began to recover from the crisis. In 1981 the oil slump pushed them back again as demand fell along with the price of palm oil. The prevarication of the Shagari administration leading to the ill-construed Eco- nomic Stabilization Act of 1981 did not help the recovery either. Nigeria, one of the world’s largest exporters of palm oil, sadly began to import palm oil to meet domestic needs.
When the Second Republic had successfully dug its own grave, it began to look for scapegoats which it found in the foreign firms. Licences were restricted and the cost of living rose dramatically after 1981. Productivity became a bargaining point both at Pamol and at LBN, and union involvement was stepped up.
The check-off system was introduced in 1979, and the shop stewards became more conscious of their tasks. Industrial relations began to improve, and both these concerns adopted a more forward-looking policy. This was temporarily brought to a standstill during 1983-1984, but in 1985 recovery seemed to have begun once again.
Concluding Remarks
The sheer size of Unilever in Nigeria and the degree of intergration involved in the MNC’s operations has made adaption of the Thurley and Wood typology possible for a single multinational in a developing country. Within the broad frame- work of corporate objectives, Unilever’s business and labor policies vary according to the needs of the particular situation and the firm’s strategic position. A strategic change would become necessary if there was a gap between the firm’s objectives and its strategic position in future. Accordingly, Ansoff defined a business strategy as being concerned with the product market portfolio of a firm (1969). Ansoff’s approach underlines the need of having organizational resources that enable a firm to review its situation and decide on a basic business strategy rather than allow a strategy to develop on an ad hoc basic arising from decisions of individual managers. The Unilever experience points unmistakably towards the existence of such a basic business strategy under a canopy covering the period 1933-1983 and that industrial relations (or labor) strategies of Unilever are also dependent on the global business strategy of the group.
Industrial relations strategies are treated from a managerial viewpoint be- cause, for Unilever, there is but one role for labor, this being the role of a factor of production (in a strict neo-Ricardian sense), which needs to be appro-
190 J BUSN RES S. Sadri and C. Williamson 1989:18:179-193
priated to optimize business results. Unilever’s activities bear out the CIR’s (1973) fear that industrial relations could easily be neglected by the concentra- tion of top management decisions based purely on business activities and ob- jectives. The “labor” policy of Unilever is therefore subordinated to the business policies of the group and is meant to help in attaining the business objectives and to extend Unilever’s control over the processes of production in keeping with changes in the political economy of developing countries and with changes in the political economy of developing countries and geared along the guidelines set out by the MNC’s global policy. These are aimed at increasing the profit margin and market share over a period of time. Evidence exists of a definite relationship between business strategy and industrial relations strategy, and, since Unilever’s labor policy is ideally aimed at helping to achieve its business policy, the link is easy to establish.
Literature on corporate strategy seems to imply that strategy must be determined autonomously from above. If one knows how the capitalist system functions, this observation seems almost tautological. The Unilever experience points toward an amalgam of the positivist and the normative versions of Contingency Theory. At the very top, Unilever lays down the normative version, which instructs local management to fit their own policies within the overall global aims of the group. At the national level, Unilever appears to follow a positivist line by which man- agement adapts their organization to meet the “contingent” factors. Unilever’s “dualistic nature” in this respect is not paradoxical but pragmatic. The positivist line is followed with an overall normative canopy that is laid down by an global policy. The dependent position of the Nigerian economy and its links with the world capitalist system facilitate this policy. During both of these periods (1933- 1945 and 19451985), the labor policy of Unilever merely helped realize the business policies that in turn were a part of a conscious philosophy based on structured foresight. The development of the MNC’s “strategic management” depended on a special mix born out of experience of Nigeria.
There exist a wide range of possibilities open to Unilever in developing countries. Our investigation, like the Lyons et al. study (1982), reveals that it is correct to apply the “strategic management” thesis to MNCs. Our investigation also affirms that there is no justification for a simplistic thesis that asserts the exploitation of developing countries by MNCs. Most managers in Unilever are Nigerian, all the supervisors are Nigerian, and between them they take most procedural decisions. What the MNC has created is an “ethos,” a broad policy guideline within which managers must operate. All substantive issues are decided upon at the headquar- ters, while most procedural decisions are made in the New Niger House, which is the headquarters of the MNC within the host country, and relatively few decisions are taken at the actual production site. Hence, to say that the Nigerians have no control would be an. inaccuracy. The control is exercised by the Nigerian managers under supervision from London and Rotterdam, which, operating under a false consciousness, actively assists in the appropriation of the Nigerian economy. The class connections between the government and these Nigerian managers are used to create conditions whereby appropriation is legitimized. The parallel economy and the capitalist ethics of the government make it individually worthwhile for these officials to be a party to the appropriation. The labor aristocracy and a low
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level of class consciousness among many trade union leaders makes the task of appropriating wealth easy. The radicals are outnumbered and quite often outmaneuvered.
Implications
Therefore, if a “specific” theory of Industrial Relations (it was felt) were to be posited, it would have to be firmly based on the study of Economic Development and form a part of the overall study of political economy. Since an MNC is the only constant factor present in all phases of capitalist development, this specific theory will have to revolve around the MNC. The Thurley and Wood model was a very convenient tool for studying the strategies of the MNC, thereby forming the basis for the positing of the specific theory (Sadri and Williamson, 1988).
The management planners can see how the multinational looks in its entireity. This would help them to visualize the horizontal and vertical integration of pro- duction more clearly. That, in turn, would facilitate planning and coordination of operations. It would present more than just a bird’s eye view of the rather com- plicated network of relations between the various individual investments of the same multinational. To begin with, few except those at the very top know the full extent of a multinational’s investment interests in a geo-physical region.
The marketing manager could then see where he could procure the raw materials most readily from, and the sales manager could see where he could channel his output in the best way. The finance manager could similarly use it to plot a critical path for fund flows, and this would make his capital budgeting easier.
The real benefit would, however, accrue to the top level management, which could see at a glance how the various departments are linked in terms of (1) policies and (2) operations. They could see how the corporate business strategies influence the industrial relations strategies. That would help them to visualize how the various corporate policies effect both capital and labor through their industrial relations policies. This indubitable link between corporate business strategy and industrial relations strategy makes long-range planning more meaningful and comprehensible.
For the state, the implications are even more far reaching. The state can see the extent of the global reach of the MNC and the extent to which the MNC controls the product market of the country. From this, the extent of the dependency of the host country can be gauged both in form and in content. The Central Bank can similarly use it to see where and how the flow of funds can take place without its knowledge. A good idea could be obtained about the internal cross-influences within the canopy of the multinational’s investment, and this would give a good idea of how to control the flow of funds. For instance, the Central Bank of Nigeria did not have up-to-date data on fund flows. And, as Sadri (1988) has shown, the import bill of UAC of Nigeria alone was large enough to challenge the credibility of the IMF data on the total import bill of Nigeria from 1970 to 1980. This was made possible perhaps by the close links UAC of Nigeria (a principal Unilever conglomerate) has with the Barclays’ Bank PLC (the holding bank of Union Bank of Nigeria, which was the banker for UAC of Nigeria); without the link, fund flows could not be checked. If a study like the one undertaken by us was available to the Central Bank of Nigeria, perhaps it could have performed its audit function
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more easily. But the utility of such a study is limited by the fact that on its own, it cannot help the various management functions to perform efficiently. What it can do is to provide ideas and a basis for further work, which in turn can be beneficial to the realization of corporate goals.
Other studies being undertaken in other countries are recommended so that the findings of the study can be cross-checked. If our findings are found to be supported, then the Thurley and Wood model is a general model. If the findings are found to be in conflict with ours, then the experience of Unilever and Nigeria is specific.
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