Political Factors as Managerial Decision Elements in Formulating Multinational Strategies

Author(s): David Carson

Source: Management International Review, Vol. 19, No. 1 (1979), pp. 71-79
Published by: Springer
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D. Carson*

Political Factors as Managerial Decision Elements in

Formulating Multinational Strategies

A scheme of managerial strategies for coping with rapidly-shifting political situations has
been developed by the author based upon the 41 sub-Saharan countries, and the expe-
riences of multinational organizations. The most pertinent elements in this geographic
area were determined to be moves toward federation, national fragmentation, effects of
external ideological drives, governmental styles, socio-political stability, and tendencies to
Africanize management. Although these conditions are particularly relevant to investments
in sub-Saharan Africa, managers of multinational operations may adapt this approach to a
global scale.

Few regions of the world have experienced the fundamental political shifts during the last
two decades as has sub-Saharan Africa. Because of the socio-economic diversity of its
peoples and of its nations - including their politics - the region in many respects can
serve international managers as a model for choice of strategies in facing rapid political
change.
Africa, like Caesar's Gaul, may be divided into three areas: (1) the five nations bor-
dering the Mediterranean Sea, primarily Arabic in language, culture, and international
orientation; (2) eight off-shore political entities ranging from the "postage-stamp"-size
Comoro Islands to Malagasy (formerly Madagascar), roughly equivalent to Sweden in
population but larger in area; and (3) the 41 Continental states located in, and south of,
the Sahara, variously known as sub-Saharan or Tropical Africa. This paper concentrates
on the third area, by far the largest in terms of size and of population, although it has
intimate political, economic, and cultural ties with the first two areas.

Strategic Alternatives

In view of the diversity of opportunities for investing in sub-Saharan Africa, the present
or potential investor must consider the individual characteristics and situations existing in
the nations and project them for the future, but the area's rapidly shifting political scene
makes this difficult.

Several scales of political stability have been formulated by political scientists.4 Al-
though of some value for the international manager, they generally lack direct application
for specific situations, products, individuals, and opportunities. The most comparable
schema directly related to international management was published over ten years ago,
but was never meant to be more than a conceptual approach.2 MNCs which attempt to
apply a wide range of quantitative data to basic decisions relating to environmental
conditions in specific nations commonly report that difficulties in obtaining reliable,

* Professor David Carson is Professor of Business Administration at Boston University, Boston,

Mass., U.S.A.

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comparable, current information make these efforts merely supportive and peripheral to
non-quantitative considerations.
A systematic scheme toward approaching strategic investment decisions is illustrated in
Table 1. Naturally, decisions are modified by such considerations as the existence and size
of investments in a nation; the degree of risk related to potential for profit (including the
likelihood of recouping existing investments); synergistic considerations with other na-
tions in the area or within the firm, or even with LDCs (less developed countries)
throughout the world; and the availability within a nation of such particular managerial
facilities or institutions as efficient, cooperative distribution channels.

Table 1: Strategic Positions Toward Investing in Tropical Africa

POSITION: POSITIVE NEUTRAL NEGATIVE

Dominant considerations Maximize Maintain Minimize

control flexibility risks

Preferred actions Holding Decrease position

Enter position
Expand Withdraw

Time span Long-term Medium-term Short-term or

immediately

Arrangements Own branches, Licensing Import

and distributor-

ships Management Export

contracts

Joint ventures Management contracts

Major Political Directions

The current systems and trends of the 14 sub-Saharan nations are predictably diverse,
but the vast majority nevertheless appears to follow the following six directions to some
degree: (a) moves toward federation, (b) national fragmentation, (c) the effects of exter-
nal (often worldwide) political ideological drives, (d) particular types of governmental
styles, (e) a considerable degree of instability, and (f) a decided trend toward Africaniza-
tion. Seemingly opposite tendencies are frequently observed in these nations, accounting
to some extent for the pervasive instability in the area.
The remainder of this paper will describe the principal elements of the six major
political directions noted in the area, applying the three strategic positions presented in
Table 1 to each of these elements. The scheme for the six parts of Table 2 has been based

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upon an analysis of the experiences of several scores of multinational firms in sub-Saharan
Africa.
Federation: Table 2(a) delineates the elements of the first of the six political direc-
tions, federations. "High" indicates a likelihood that an element would lead to a strategic
position; "Low" indicates little likelihood of its doing so. For instance, the first element
under "Federation" is "Homogeneous in language, ethnicity, religion". If such homoge-
neity is strong ("High") in a nation, it tends to support federation with the country. The
element would, moreover, encourage investors to assume a positive stance (as described in
Table 1) toward investment in that nation. Should this element be weak ("Low"), the
investor would be likely to adopt a negative position.

Table 2(a): Selected Elements Influencing Adoption of Strategic Position(s)

POSITION: POSITIVE NEUTRAL NEGATIVE

Homogeneous in language,
ethnicity, religion High Medium Low
Ethnic, tribal groups all contained
within national boundaries High Medium Low
Adherence to viable regional
organizations, blocs, customs unions,
etc. High Medium Low
Wide usage of international
languages High Medium Low
Strong economic infrastructure High Medium Low
Strong traditional marketing networks High Medium Low

During the latter half of the 1950s and the early 1960s, when political sovereignty was
attained by a majority of the sub-Saharan nations, a high priority was set on unifying
peoples separated for centuries by approximately 1,000 distinct languages, by religions
(principally Christian, Moslem, or local traditional), by numerous ethnic cleavages, by
small political (tribal) units, and by rigid socio-economic classes. Efforts toward uni-
fication benefited from fresh memories of opposition to colonial rule, by a new-born
fervor for pan- Africanism, and by the use of languages spanning wide geographic, ethnic,
and social sectors. French, English, and Portuguese were pragmatic legacies of former
colonial powers. And for centuries, several African tongues had served as common means
of commercial and political communication for vast territories. Swahili, Fulani, Hausa,
and Kikongo are still in wide usage.3
Current political boundaries between the various states were drawn in general during
the latter part of the 19th century by the European colonial powers in their haste to
expand their empires, without a shred of concern for those lives were disrupted by the
new borders.4 Considering the centrifugal pressures inherited by the contemporary states,
the survival of so many for so long is remarkable.

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 Nigeria is a salient example, for since its founding in 1960 there has hardly been a year
when the Federal Republic was not being torn asunder. The Biafran sessionist war of
1967-1970 was only one of such serious threats, but nevertheless by mid- 1978 Nigeria
remained a viable federated nation.5
Fragmentation: Table 2(b) illustrates elements of fragmentation. Contemporary
sub-Saharan political history is rife with examples of territorial fragmentation: the split-
up of the Mali Federation into the Republics of Senegal and Mali; the ineffectiveness of
the brief union between Ghana and Guinea; the demise of the East African Common
Market; the dismemberment of the federation of Rhodesia and Nyasaland into Zambia,
Malawi, and Rhodesia; and attempts to wrest the Shaba (Katanga) Province from Zaire
soon after Zaire's independence from Belgium in 1960, and again in 1977 and 1978,
presumably with Angolan, Cuban, and Soviet support.6

Table 2(b): Selected Elements Influencing Adoption of Strategic Position(s)

POSITION: POSITIVE NEUTRAL NEGATIVE

Serious disputes with neighbors Low Medium High

Ethnic, tribal groups extending
beyond national boundaries Low Medium High
Usage of international languages High Medium Low
Maldistribution of assets, incomes,
by class, by ethnic groups, by
geographic district Low Medium High

Somalia's armed attempts to annex the bleak Ogaden region of Ethiopia in 1977
alerted Kenya, since Somalis predominate in its Northeast territory, and alarmed Djibouti
(formerly French Somaliland), about half of whose people are Somalis. The tenet of the
inviolability of territory espoused by the OAU (Organization of African Unity) and the
UN conflicts with the Somali drive to bring together a people homogeneous in terms of
language, religion, and culture, but long separated by the imposition of political borders.7
Ideologies: Elements of political ideologies are listed in Table 2(c). Although the sub-
Saharan nations have nominally liberated themselves from colonial dominance in one

Table 2(c): Selected Elements Influencing Adoption of Strategic Position(s)

POSITION: POSITIVE NEUTRAL NEGATIVE

Marxists active, vocal Low Medium High

Ties to international Marxist groups Low Medium High
Ties to major (non-Marxist)
industrial nations High Medium Low
Ties to traditional Arab nations Medium Medium Low

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sense or another, political ideologies which originated elsewhere still exert a powerful
influence on the region. France continues to provide political direction - along with
cultural and economic aid - to most of its former territories, as does Britain in several of
its one-time vassal states. And even the USA retains a special relationship, however
altered, with Liberia. Although political cords to the "Motherlands" have been formally
snipped, many of the economic ties remain firm, and their accompanying political mes-
sages are unmistakable.8
Marxist influence, emanating largely from the Soviet Union and its satellites, was until
recently merely a threat to sub-Saharan Africa. During the past several years, however,
Soviet-type Communism has been officially espoused by Mozambique, Somalia, and
Benin; and more recently Guinea, the Congo Republic, Angola, and Ethiopia have follow-
ed suit in practice, if not in name. China's influence has been more limited politically as
well as geograhically. Even nations of such differing political persuasions as Nigeria and
Tanzania have adopted some facets of socialism or, at the least, given lip-service to them.9
Links to North Africa and to other Arab nations, until recently historical curiosities
excaept for territories abutting Arab states (e. g., Sudan, Mauritania), have of late been
reenforced. The 22-nation Arab League, financed to a large extent by its oil-rich members,
has been making unmistakable inroads into Mid- Africa. Thus in summer 1977, when
Kenya found it impossible to conduct trade as usual with most of its immediate neigh-
bors, the Arab League encouraged Kenya's establishment of commercial relations with
the Middle East. The ideological implications of these connections are clear.10
Increasingly then, sub-Saharan Africa is being swept into the mainstream of the world's
major ideological currents.
Government Styles: Major governmental styles in the area are enumerated in
Table 2(d). At least half of the African nations are ruled by military or by civilian-mili-

Table 2(d): Selected Elements Influencing Adoption of Strategic Position(s)

POSITION: POSITIVE NEUTRAL NEGATIVE

Authoritarian Low Medium High

Socio-political tradition of
authoritarianism Low Medium High
Government highly centralized Medium Medium High
Wide sharing of power High Medium Low

tary cliques, and government and business corruption is believed to be rampant. Interna-
tional smuggling and profiteering are customary. Yet public and private investments
continue to flow to the Continent, attracted by economic opportunities. From 55 to
80 % of government budgets are commonly earmarked for salaries for the military and
police forces, and for the civil service. "Show" projects such as superhighways or elegant
public buildings are often favoured over more fundamental social or economic improve-
ments.11
The elevation of Bokassa, President of the Central African Republic for 1 1 years of
adroit political maneuvering, to "Emperor" of the Central African Empire in December

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1977 is an example of an extremely repressive regime. Despite the liquidation of the
central bank, and dire mass poverty reflected in annual per capita income of somewhat
over $ 100, Arab and French interests were not deterred in exploring further investment
opportunities in the "Empire".12 Even Nigeria, among the politically freer countries in
the area, professed increased social justice as a national goal while many of its major
newspapers remained government-owned.13
The move to totalitarianism is by no means one way, however. In 1969 Ghana, after
being ruled by Kwame Nkrumah and later by a junta since its founding in 1960, returned
to a civilian government. In summer 1977 the military regime which assumed power in
1972 announced a timetable for another return to civilian rule by mid-1970. Admittedly,
unlike the typical African nation, Ghana has a broader middle class to support a demo-
cratic regime, and a larger body of highly-educated civilians.14
Relative Stability. Major factors influencing political stability in the area appear in
Table 2(e). The reasons for political instability are manifest - poverty and gross maldistri-
bution of income, raging inflation (especially since 1973), unprofessional and inexperi-
enced public and private management, and endemic tribal animosities.15 The wonder is
that governmental coups and seizures, and outbreaks of violence, have not been more
frequent. Not atypical is Insert C: Benin (Dahomey) which experienced no fewer than six
military coups from 1963 to 1972:16

Table 2(e): Selected Elements Influencing Adoption of Strategic Position(s)

POSITION: POSITIVE NEUTRAL NEGATIVE

Standard of living, broad

distribution of income High Medium Low
Broad middle class High Medium Low
Educational levels High Medium Low
Level of industrialization High Medium Low
Ratio of exports in crops, raw
materials Low Medium High
Socio-economic ferment Low Medium High
Prevalence of forced/violent

political change Low Medium High

Yet forced turnovers of national regimes are not by themselves solid measures of
political instability. Sekou Toure, who became head of the Guinean Government in 1958,
was still the undisputed ruler by mid-1978 - with the strong help of the military forces,
the gendarmerie, and other trappings of a police state.17
Major international powers - all of which offer obeisance to "freedom of conscience",
"democracy", and "human decencies" - often support severely repressive regimes when
it is in their geopolitical and economic interests. France is one of the more blatant
examples of such practices in Africa.18

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 Africanization: Crucial elements related to Africanization are noted in Table 2(f). Even
before the African nations were granted their independence, most colonial powers and
their home-based business firms introduced programs to train Africans to perform highly
skilled tasks and to assume managerial positions. With the assumption of power by the new
regimes, requests for such assistance frequently turned into government edicts. The next
step, the take-over of many foreign enterprises (in part, or through outright expropria-
tion), seemed inevitable.

Table 2(f): Selected Elements Influencing Adoption of Strategic Position(s)

POSITION: POSITIVE NEUTRAL NEGATIVE

Cordial relations with former

colonial rulers High Medium Low

Prevalence of Marxist ideologies Low Medium High
Openness to foreign investment High Medium Low
Threats or actual expropriation of
foreign investments Low Medium High
Potential among Africans for
advanced training High Medium Low

For instance, even before Nigeria achieved its independence from Britain in 1960,
considerable effort was exerted to train Nigerians for higher positions in the public sector.
Similar measures were also taken in the private .sector, hut less formally. But until 1972
company owner-ship in the private sector by foreign interests generally continued essen-
tially unchanged. The "Nigerian Enterprises Promotion Decree" proclaimed in 1972, and
amended in 1976, formalized the proportion of equity to be held by Nigerians. Owner-
ship was specified for indiviual branches of the private sector (e. g., oil extraction, bank-
ing, manufacturing). Some flexibility has been evident, however. When eight major multi-
national oil firms curtailed exploratory drilling and the inflow of fresh capital in early
1977, in response to what they considered harsh disincentives, the Nigerian government
responded by altering certain provisions in order to spur the MNCs to higher levels of
involvement and performance. Nonetheless in Nigeria - as elsewhere in the area - the
specter of expropriation looms.19

Conclusion

In view of the rapidly changing sub-Saharan political scene and the differences in applying
this approach to specific situations, each current or potential investor must make his own
application of this approach toward decision-making. And, since the elements in Table 2
were selected for their importance to sub-Saharan Africa, the identical elements may not
be equally appropriate when applied to other regions. But in view of the great diversity of
the political environment in Tropical Africa, the basic approach may be adopted by
MNCs and by other international management groups in formulating their own policies
toward foreign investments on a global scale.

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Footnotes

1 E. g.: Kenneth M. Coleman and Charles L. Davis, "The Structural Context of Politics and Dimen-
sions of Regime Performance: Their Importance for Comparative Study of Political Efficacy',
COMPARATIVE POLITICAL STUDIES, July 1976, pp. 189-206,; Walter L. Barrows, "Ethnic
Diversity and Political Instability in Black Africa", COMPARATIVE POLITICAL STUDIES, July
1976, pp. 139-170,; William H. Franigan and E. Fogelman, "Patterns of Political Violence in
Comparative Historical Perspective", COMPARATIVE POLITICS, October 1970, pp. 1-20; R J.
Rummel and David A. Heenan, "How Multinationals Analyze Political Risk", HARVARD BUSI-
NESS REVIEW, January-February 1978, p. 67 ff.
2 Bertil Liander et. al., "Comparative Analysis for International Marketing" (Allyn and Bacon, Inc.,
Bosten, 1967).
3 Joint ECA/FAO Agriculture Division (ECA), "Agricultural Development Through Multilateral Co-
operation and Trade Expansion: Possibilities for Dahomey, Niger, and Nigeria", ECONOMIC
BULLETIN FOR AFRICA (United Nations, 1975), Vol. 11, No. 1, pp. 12-56; Tetteh A. Kofi,
"The Need for and Principles of a Pan-African Economic Policy", CIVILISATIONS (Brussels), Vol.
26, 1976, Nos. 3/4, p. 205 ff.; "Africa Year Book and Who's Who - 1977" (London: Ltd., 1976),
especially pp. 6-9; "Africa's Experiments in Economic Integration", BUSINESS INTERNATIO-
NAL, August 5, 1977, pp. 246-247; Michael T. Kaufman, "African Tribalism is Bar to Unity",
THE NEW YORK TIMES, January 8, 1978, p. 10; John F. Burns, "In Age of Nations, Tribalism
Still Counts", THE NEW YORK TIMES, April 2, 1978, p. E-5.
4 Roland Oliver and J. D. Page, "A Short History of Africa" (New York: University Press, 1962), pp.
135-257; Basil Davidson, "The African Past" (Boston: Little Brown and Co., 1964), especially pp.
359-372: David Carson, "Wholesaling in Tropical Africa", in Robert Bartels, Editor, "Compara-
tive marketing: Wholesaling in Fifteen Countries" (Homewood, 111.: Richard D. Irwin, 1963),
p. 179 ff.
5 "Africa Year Book and Who's Who - 1977", op. cit., pp. 665-677; "Africa South of the Sa-
hara, 1977-78" (London: Europa Publications Ltd., 1978), pp. 647-653.
6 "Africa Year Book and Who's Who - 1977", op. cit., Part Three; Galen Hull, "Internationa-
lizing the Shaba Conflict", AFRICA REPORT (New York), July-August 1977, pp. 4-9.
7 Michael T. Kaufman, "Ethiopian Conflict Echoes Many Rivalries", THE NEW YORK TIMES,
September 25, 1977, p. E-3.
8 U.S. Direct Investment Position Abroad at Yearend - 1974, Table 13, SURVEY OF CURRENT
BUSINESS, August 1976, pp. 48-49; "Liberia's Close Ties With U.S., Positive View of Invest-
ment, Outweigh Difficulties, Risks", COMMERCE AMERICA, March 28, 1977, p. 28; Paul
Lewis, "Africa's Economic Showcase", THE NEW YORK TIMES, Februarys, 1978, p. F-3;
"France: A Growing Economic Stake in Black Africa", BUSINESS WEEK, June 26, 1978,
p. 55.
9 David Carson, "The Influence of World Politics on Marketing in Africa", in Peter D. Bennett et
al., MARKETING AND ECONOMIC DEVELOPMENT (Chicago: American Marketing Assn.,
1965), pp. 121-127; "Red on Black", THE ECONOMIST (London), February 12, 1977, pp.
16-17; "Five Black Nations: Living With More Activist Government", BUSINESS WEEK, Fe-
bruary 14, 1977, pp. 77-80; THE AFRICAN COMMUNIST (London), especially quarterly
issues 72-74 (1978).
10 QUARTERLY ECONOMIC REVIEW OF KENYA (London: The Economist Intelligence Unit
Ltd.), 2nd Quarter 1977, pp. 13-14; Richard R. Leger, "The Arab Connection: Kenya Sets Up
Trade Links to the Mideast to Help Surmount its Border Difficulties", THE WALL STREET
JOURNAL, October 12, 1977, p. 48; Michael T. Kaufman, "Roadblocks Become African Policy
Tool", THE NEW YORK TIMES, October 16, 1977, p. 19.
11 "Africa Year Book and Who's Who - 1977", op. cit., Part Three; "Nigeria: Year of Agriculture
and Industry", Africa (London), May 1977, pp. 116-117; "Africa South of the Sahara,
1977-78" op. cit., especially pp. 18-23.
12 "Africa Year Book and Who's Who - 1977", op. cit., pp. 315-320; "The World Almanac &
Book of Facts, 1978" (New York: Newspaper Enterprise Assn., 1977), p. 521; "Africa South of
the Sahara, 1977-78", op. cit., pp. 245-246.
13 QUARTERLY ECONOMIC REVIEW OF NIGERIA (London: The Economist Intelligence Unit
Ltd.), 3rd Quarter 1978, pp. 4-7.
14 "World Tables, 1976" (Baltimore: The Johns Hopkins U. Press, for the World Bank, 1976),
especially Series IV, Social Indicators; "Africa Year Book and Who's Who - 1977", op. cit., pp.
437-448; "Africa South of the Sahara, 1977-78", op. cit., pp. 373-382.

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15 Brendan Jones, "Business in Africa: Woes Stem from Recession and Conflict", THE NEW
YORK TIMES, July 2, 1976, p. D-3; W. B. Morgan, "Food Supply and Staple Food Needs in
the Developing World", DEVELOPMENT DIGEST (Washington: Agency for International De-
velopment), April 1977, p. 9 ff; "The Sahel: Recovery Recurrence? " AFRICA NEWS, Sep-
tember 12, 1977, pp. 6-11; "Prospects for Profits: Nigeria", BUSINESS INTERNATIONAL,
July 28, 1978, pp. 263-267.
16 "Africa Year Book and Who's Who - 1977", op. cit., pp. 259-267; "Africa South of the Saha-
ra, 1977-78", op. cit., pp. 161-166.
17 Lasine Kaba, "Guinean Politics: A Critical Historical Overview", THE JOURNAL OF MODERN
AFRICAN STUDIES (London), March 1977, pp. 25-45; "Africa South of the Sahara,
1977-78", op. cit., pp. 405-407.
18 "Central African Empire Fits Developing Country Pattern, With Problems, Opportunities", COM-
MERCE* AMERICA, July 18, 1977, pp. 28-29; "France's Bid in Africa", BUSINESS WEEK,
December 19, 1977, p. 62; "France: A Growing Economic Stake in Black Africa", BUSINESS
WEEK, June 26, 1978, p. 55; John Darnton, "Dirty Little Wars Get Bigger", THE NEW YORK
TIMES, May 21, 1978, Section 4 p. 1.
19 "Outlook for Nigeria", BUSINESS INTERNATIONAL, January 14, 1977, p. 13 ff.;"But It Still
Hurts", FORBES, July 15, 1977, p. 26; "Nigeria: Expansion Continues; U.S. Sales Near Si Bil-
lion", COMMERCE AMERICA, August 1, 1977, p. 45; "Nigeria: An Economic Report",
AFRICA (London), September 1977, p. 77 ff., especially p. 87; "I.B.M. to Close Business in
Nigeria", THE NEW YORK TIMES, June 27, 1978, p. 44.

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