Presentation titled "Deadly Sins of International Business" at FH Joanneum University in Graz, Austria on October 1st.

1. The Deadly Sins of International Business
Gerhard Apfelthaler, 2014

3. www.deadlysins.info

4. Deadly Sins?
• Patterns, wireframes, and
scaffolding
• Christianity: not following (god‘s)
moral guidance
• No biblical list, but some
references throughout new
testament
• Christian thinkers (Augustine,
Gregory the Great), monastic
authors (John Cassian, Evagrius)
and early Christian Writers
(Prudentius‘ Psychomachia)
compile lists and rank orders
• References and popularity of ‚7
deadlies‘ starts in 14th century, e.
g: Alighieri‘s Divine Comedy;
Chaucer‘s Canterbury Tales;
Hieronymus Bosch, Tizian,
Brueghel
Bosch, Seven Deadly Sins / Superbia

5. Other Traditions
• Judaism: ‚avera‘=‚crossing
over‘ - a moral trans-gression
against god or
man; three major ones.
• Hinduism: ‚papa‘ - wrongful
act which creates negative
karma
• Islam: Khati‘ah - anything
against the will of Allah; two
major forms (dhanb and
ithm) – 70 major sins
• Buddhist: men and god are
subject to universal law;
intentions and actions
against the Noble Eightfold
Path, no „sins“, but 5 crimes
and 108 defilements
Dix‚ Seven Deadly Sins

6. Today
Music:
– Kurt Weill & Bert Brecht, Seven
Deadly Sins
– Franz List, Totentanz
– Ice T‘s 7th Deadly Sin
Movies / TV:
– Bedazzled (1967, 2000)
– Seven (1995)
– 7 Deadly Sins (2014)
Comics:
– Digimon 7 Great Demon Lords in
Digimon
– Seven Deadly Enemies of Man in
Captain Marvel / DC Comics
Ice Cream:
– Eskimo/Unilever „7 Suenden“

8. Pride
• Pride is deep pleasure from one‘s
own achievements; it is ego-centric,
self-loving, competitive
• Long considered deadliest of all
sins, but without pride one may
not achieve at all…
• Companies:
– Become insensitive to their
external environment
– Impose their own ways on
foreign markets
– „Ethnocentrism“ (Perlmutter
1969)
Tizian, Vanitas

9. Pride
• World‘s largest company
entered Germany in 1997
• Sins: Undifferentiated
transfer of business model:
– EDLP-strategy
– Strong integration of suppliers
– Employee policies
– Greeters, Baggers, 10-Foot-
Policy
– Non-German speaking
Managers
• Exited Germany in 2006
(91 locations, 12.000
employees, about 200 mio
US$ in losses)

10. Pride
• Part of leading British retail giant
Tesco (6,000 stores globally),
2nd largest retailer worldwide
• Sins:
• Entered USA in 2007
• Recession
• Concept based on small stores,
convenience and fresh food
• “Fresh and Easy” or “Small and
Strange”
• Undifferentiated product portfolio
• Self-check out
• Decision to leave in 2012: $1.6
billion in losses

11. Greed
• Intense interest in getting one‘s
fair share or more
• ‚Infectious greed‘ (Alan
Greenspan) also a driver behind
industriousness, wealth of nations
and free trade
• Companies:
– Assume a short-term view only
– Under-invest
– Exploit local resources
– Take quick and irrational
action
– Deploy ‚John Wayne‘-like
strategies
– „Liability of Newness“ (Cuervo-
Cazurra., 2007)

12. Greed
• Entered China in 2004
• Outsources ca. 20 % of
production
• Motivation to reduce costs and
remain competitive with its
range of high-quality toys
• Unskilled labor unable to adhere
to quality standards (cross-eyed
bears,
• Increasingly high costs of
(minimum 12 months training)
• Accelerated employee turnover
• Rising wages
• Left China in 2009

13. • Lack of interest / reluctance to
make any effort. Relax! Be
happy! Let yourself go! Drift into
complacency and melancholy
• Companies:
– Don‘t have a clear strategy
– Prepare insufficiently
– Are sloppy at implementation
– Give up too soon
– „Liability of Foreignness“
(Zaheer, 2002)
Dürer, Melencolia
Sloth

14. • Entered Germany in 1995/1996
• Sin: Lack of interest
– Ignored of German legal
environment (opening
discount)
– Made wrong location choices
in suburban malls
– After sacking German MD in
1999, no replacement, running
operations from San Francisco
– Ignored cost structure and
consumer preferences
– CEO visited Germany only
once
• Exited 2003/2004
Sloth

15. Sloth
• Opened in 1992
• Sins:
• Expectation of single market,
economic growth, “chunnel”
• Labor disputes with unions
• Visitors rejected over-priced fast
food
• Customer is not king in France
• Accusations of cultural imperialism
• Bad weather
• Attendance 25,000 / 60,000
• Close to bankruptcy in 1994
• Saved by Saudi Arabian prince
• Profitable from 2005

16. • Overindulgence, over-consumption,
waste, habitual
greed
• Companies:
– Move too far too fast
– Stretch existing resources
– Over-invest
– „Polycentrism“ (Perlmutter,
1969)
De L‘Ange, Gluttony
Gluttony

17. • Embarked on rapid
internationalization in 1970s
• Sins:
– Driven by personal motivation
of CEO of „building an
international company while
traveling“
– Served more than 70 markets
in the 1990s
– Learning on the go
– Growth from 2 products to 400
products and variations
– Ventured into new business
segments
– Built manufacturing in
Hungary, over-sized facility in
Austria
• Slipped into insolvency end
of 1990s
Gluttony

18. Gluttony
• Part of German Metro
group
• Enters China in 2010
• Sins:
– Built business model
around brand and
consumer experience
instead of products and
price sensitivity
– Flagship locations only
– Fully self-operated and no
store-in-store concepts
• Leaves China in 2013

19. • Desire to possess another's
superior quality, achievement,
or possession; resentful longing
• Wishing misfortune on others
• Companies:
– Pick the wrong markets
– Are mindless followers of
competitors
– Try to outdo others when it‘s
not necessary / over-adapt
– „Loss of an advantage“
(Cuervo-Cazurra, 2007)
Munch, Envy
Envy

20. Envy
• Enters China in 2006 with
12 stores
• Sins:
– No Do-it-yourself culture
– Abundance of cheap
labor
– Loss of status
– No room for tools
– Lack of imagination
– Lack of brand
• Leaves China in 2012
• $ 160 million in losses

21. • Anger, strong emotional
response to feeling threatened
or provoked
• Companies:
– Make impulsive, irrational
moves
– Ignore local conditions
– Seek vengeance and apply
force
– „Creation of a Disadvantage“
(Cuervo-Cazurra, 2007)
Star Trek, Wrath of Khan
Wrath

22. • Joint venture with Wahaha
Group in 1996
• Sins:
– Danone starts to shift decisions to
France
– Danone starts squeezing Wahaha
for profits
– Wahaha builds grey market
– Danone sues Wahaha;
government intervention
– In December 2007 court judgment
in favour of Wahaha; sales start to
drop significantly
– 2013 allegations of contamination,
judgement for price-fixing,
allegations of bribery
• To be continued...
Wrath

23. America‘s Next Top Model ‚Seven Deadly Sins‘
America‘s Next Top Model, Lust
Lust
• Intense wanting or desire for an
object, emotion or circumstance
• Companies:
– Have the wrong motives for
market entry
– Excessively focus on the
present
– Become blind to consequences
of their actions
– Abandon home/core markets
– „Liability of expansion“
(Penrose 1959, Cuervo-
Cazurra, 2007)

24. Lust
• Entered Romania in 2010
by acquiring CityDeal
• Sins:
– Ignored intense competition
by 2012
– Ignored digital divide
– Aggressive commission
tactics
– Failed to attract local talent
– Staffed subsidiaries with
expatriates
– Lack of local relationships
• Exits 2014

25. Lust
• Enters China in 2006,
opens first store in 2007
• Sins:
– Monumental flagship
stores
– Commission based sales
– Enters UK, Turkey, Mexico
at same time
– Financial difficulties in US
market
• Leaves China (UK,
Turkey) in 2013

26. Thank you…