Managing diversity for a sustainable competitive advantage in the changing European business environment

ENGLISH ABSTRACT: The purpose of this study project is to investigate how organisations operating in the European Union (EU) can sustain a competitive advantage amidst the changing European business environment. Due to stiff global competition, organisations are searching for new markets to gain access to lower cost or higher quality inputs and pre-empt competitors thatmay seek similar advantages. No global competitor can afford not to operate in the EU. The EU is the largest trade bloc in the world with 463,7 million inhabitants as opposed to 282 million inhabitants in the United States of America (USA).The strategic management model described by Thompson and Strickland is adapted and used as a framework for the analysis of the external European business environment. A PESTE analysis reveals that European integration has resulted in momentous political, economic, societal, technological and environmental developments. These have in turn dramatically altered the competitive dynamics on the external European environment. In a competitiveanalysis of the impact of the major driving forces on Porter's Five Forces the profit making attractiveness of the European environment will be identified.Generic key success factors are identified from the PESTE analysis, driving forces and Porter's Five Forces. Operational effectiveness, the ability to innovate and the European management skill in the management of diversity will provide a sustainable competitive advantage in the European environment.The management of international diversity is an essential element of the European management model. The ability of the European manager in the successful management of a diverse range of consumers, business environments, communications and behavioural styles across different states, is considered Europe's strong suit. A sustainable competitive advantage for organisations in the complex European environment lies in the ability to integrate the inherent diversity. Firstly, the ability to integrate diversity inherent in the fragmented operating structures throughout the various countries will maximize the key success factor of operational effectiveness. Secondly, the ability to integrate the workforce diversity by capturing the inherent value of diverse pockets of knowledge and experiences will achieve synergies. It will also improve the ability to innovate. The latter is the second generic key success factor.The standardized USA approach in managing of international diversity appears to be detrimental to the USA MNCs' competitiveness in developing countries with consumer bases of millions of people. They will have to develop a new mindset and adopt new business models to achieve global competitiveness. It would further appear that the lack of experience in management of international diversity in USA organisations has minimized the ability to innovate. Multinational organisations in the USA are therefore starting to outsourcecomponents of their innovative value chain to tap ideas from external sources.European organisations exercise a global strategy approach that reflects the aspirations of a global approach, while the necessity for local adaptations of business activities is at the same time acknowledged. A literature review clearly indicates that the experience of EU organisations in international markets creates a competitive advantage.European integration opens up unexploited opportunities for EU organisations to streamline value chain efficiencies and increase operational effectiveness. The practical research project performed at the Henkel Group in Dusseldorf, Germany, has revealed a strategic fit of the Henkel Group with the changing external environment. Recommendations have been made toalign the fragmented Henkel Travel Management processes with the strategic Henkel goal.Increasing operational efficiencies in line with best practices shall contribute significantly to improved operating margins.USA organisations have on average already achieved optimal levels of efficiencies through their global approach in streamlining their value chain activities. They are now focused on increasing innovation to sustain their growth. Organisations in Europe should invest in improving their innovation ability. This major opportunity to obtain a competitive advantageis highly unexploited. Market leadership can be achieved when managers stimulate innovation by accessing diverse pockets of workforce knowledge from different cultural contexts within the EU.