You are advised to spend about 20 minutes on the questions based on this reading passage.

Rethinking Europe:  ICI and the Single European Market

Amid a fanfare of proclamations by its senior managers about the need to ‘reshape for the single market challenge’, the world’s fourth largest chemical multi-national created a new regional organisation, based in Brussels.  Then, barely sixteen months later, it decided quietly – although amid internal controversy – to shut it down.  The closing down of ICI Europe, in the countryside near Brussels, reflects the company’s new-found willingness to adjust to changing circumstances far more rapidly than in the past.

By reversing its decision, ICI had done two things.  First, it recognised that it had overrated the potential demand from multi-national customers – ranging from BMW to several household appliance makers – for cross-border European sales co-ordination across its various businesses.  Instead, it now feels that any pan-European sales ‘synergies’ can be handled within individual businesses.  Second, the turnaround represented the final triumph within ICI of a movement which, as in many multi-nationals today, was already on the rise inside the chemical company before the Brussels decision was taken:  the need to speed decision-making and cut costs by streamlining the complex ‘matrix’ structures through which they had been managed since the 1960s.

In September 1990, when ICI celebrated the opening of ICI Europe, a clear shift of influence towards the global businesses, away from its existing regional organisations and national companies, had already been under way since the 1970s.  Although the reasons for the creation of ICI Europe seemed powerful to those directly involved and to the outside world, it was seen elsewhere within ICI as being inappropriately timed.

With hindsight, it is said that ICI Europe was really a project, not a permanent organisation.  This is because its most publicised purpose, the creation of ‘corporate coherence’ towards customers in continental Europe, proved to be ahead of its time.  Car companies, for instance, still prefer not to purchase through a single point, even if four ICI businesses supply them separately with paint, polyurethane for bumpers, advanced materials for engines, and fibres for seats.

ICI is by no means the only large multi-national which, in its Euro-enthusiasm, misread its customers’ purchasing intentions in this way.  Nonetheless, it is surprising that ICI accepted the now mainly discredited ‘supermarket’ theory of business-to-business purchasing.  The result was that ICI Europe’s main tasks from the start actually turned out to be transitional:

			to establish an orderly transfer of sales activities and staff from the fifteen national companies to ICI’s global businesses, splitting sales staff into European sub-regions such as Benelux, Nordic and what ICI calls ‘mid-Europe’ (Germany, Austria and Switzerland)
			to establish an orderly transfer of sales activities and staff from the fifteen national companies to ICI’s global businesses, splitting sales staff into European sub-regions such as Benelux, Nordic and what ICI calls ‘mid-Europe’ (Germany, Austria and Switzerland)
			to support the businesses across Europe by creating half a dozen sub-regional centres for ‘shared support services’, such as information technology, finance, health and safety, public affairs and personnel
			to streamline the old way of maintaining a ‘corporate presence’ in each country.

By the summer of 1991, several things had happened:

			most of the first two tasks were well in hand or complete
			the business climate had changed for the worse, and ICI’s profits had slumped.  Moreover, a takeover was threatened and a desperate hunt was under way within ICI to simplify structures and cut costs
			from the beginning of 1991 the group’s fourteen businesses had been agglomerated into eight larger units, all with revenues of more than ₤1 billion.  If necessary, regional co-ordination could be done at that level
			it was felt that the upkeep of ICI Europe was affecting their European selling costs.  Furthermore, it was also felt that control over the entire business process, from the customer right back to the factory, was being affected.

The response from ICI’s top management was to set up a study group.  It decided that ICI Europe had, in effect, fulfilled much of its remit.  It should be shut down, and its remaining activities split up.  The provision of shared services would be transferred to the strongest business in each country or sub-region.  At the same time a senior manager in each business would be selected to act as a part-time ‘ICI supremo’ there.  The first to take on such a representative role, for the whole Nordic area, was the head of ICI Pharmaceuticals.

Both these moves follow the growing tendency within other multi-nationals of stream-lining their bureaucracies, by delegating such geographical ‘head office’ responsibilities to senior divisional managers on a part-time basis.-  The decision to conform with international practice was not unanimous, however.  There were complaints that it was not adequately discussed and it was opposed by the main ICI board member responsible for Europe, by the chairman of ICI Europe, and by one of the business heads.  One concern was that ICI might lose continental perspective; another was that it would lose the ability to develop international managers capable of moving across businesses.

The costs saved by shutting ICI Europe are hard to estimate, since about twenty of its sixty staff have been transferred, either to the UK head office or to the businesses.  More significantly, its efforts cut the cost of ICI’s continental support services by a fifth between 1990 and 1992.  There is potentially at least as much again to be saved through streamlining within the businesses.

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