For many U.S. pharmaceutical and biotech companies, the globalization of their business is closely linked to growth in investment, R&D, and manufacturing in Asia. For larger U.S. firms, and multinational companies (MNC) in particular, this has meant the establishment of wholly owned subsidiaries and/or joint ventures. The success of such operations is dependent in large part on the quality of its top management.
Starting in the late 1950s, MNCs began putting into place a management and training system that provided Western managers for their Asian operations. The expense and effort of maintaining such a system is significant. It can cost as much as five times more to have an expatriate manager than a local Asian one. Aside from the higher salaries, the expatriates typically receive valuable perquisites such as housing, cars, and health and education allowances. Unfortunately, expatriates have a high rate of attrition— 15%–25% on average and as high as 70% in certain developing countries.
Initially Western multinational corporations (WMNC) were dominant and made extensive use of expatriate managers sent from their home offices. That business universe has been transformed with WMNCs integrating their Asian operations into their global strategy, the addition of powerful Asian MNCs and the emergence of new Asian high-tech companies. The objectives vary in that Asian MNCs are moving from dominance in domestic/regional markets to the global marketplace while the new high-tech companies are using novel technology to position themselves in their home markets.
Typically, WMNC managers go through training programs run by their corporations. More innovative approaches include short-term assignments and the use of information technology for distance management. However, such strategies were inadequate in dealing with the principal challenges of operating in an Asian environment: lack of knowledge of the local language, cultural insensitivity, and the absence of a network of local contacts.