Becoming locally responsive

Local responsiveness involves analyzing and responding to local environments and to differentiated market needs. The story of Lincoln Electric’s international expansion provides a vivid example of a firm facing the challenge of local responsiveness, as no company can operate abroad without assessing how local conditions impact its business model. In this chapter we explore key factors influencing how firms may adapt management and people practices in diverse international markets, and what capabilities are required to do this successfully. Firms and managers must know themselves and others. We start with an examination of two major - and well-researched - sources of diversity in context: cultural diversity and institutional diversity. Learning about these (and other) sources of international diversity is key to developing local responsiveness which is today a critical organizational capability for many multinational firms. Innovations more often stem from local differences than from HQ analysis. Because understanding and responding to local contexts is hardly possible without a strong local management team, the final part of the chapter focuses on attracting and retaining local managers. Our conclusion emphasizes the paradox that successful localization does not necessarily mean playing by the local rules.