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Rien T. Segers Editor

Multinational
Management
A Casebook on Asia’s Global Market
Leaders
Multinational Management
ThiS is a FM Blank Page
Rien T. Segers
Editor

Multinational
Management
A Casebook on Asia’s Global Market
Leaders
Editor
Rien T. Segers
Hanze University
Groningen, The Netherlands

ISBN 978-3-319-23011-5 ISBN 978-3-319-23012-2 (eBook)

DOI 10.1007/978-3-319-23012-2

Library of Congress Control Number: 2015960797

Springer Cham Heidelberg New York Dordrecht London

# Springer International Publishing Switzerland 2016
This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of
the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission
or information storage and retrieval, electronic adaptation, computer software, or by similar or
dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are exempt
from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authors or the editors give a warranty, express or implied, with respect to the material contained
herein or for any errors or omissions that may have been made.

Printed on acid-free paper

Springer International Publishing AG Switzerland is part of Springer Science+Business Media

(www.springer.com)
Preface

In this book, we want to emphasize that hundreds of emerging Asian companies will
reach out to the world and enter the global market in the next decade. At this moment,
these new companies are rather unknown in the West. The message of this book is
that this will rapidly change. After they have firmly established themselves in their
vast home markets in China, India, Japan, South Korea and other Asian countries,
they will be knocking at many Western doors. And then the central question arises:
are we in the West ready for this development unprecedented in economic history?
This book, with its case studies of 13 Asian companies and its explanation of
their hidden strategies and successes, contains an incitement to prepare ourselves in
the West for the coming era dominated by East Asia. These preparations should
consist of serious attempts to understand the cultural identity of major Asian
countries. In addition, we should study the corporate culture and business strategies
of those Asian companies which will appear in the Western market rather soon. We
have selected the most relevant and important companies in this respect.
This book results from a research project completed by members of the research
group belonging to the chair Asian Business Strategies of the International Business
School of Hanze University of Applied Sciences (Groningen, The Netherlands).
The editor wishes to thank all institutions and persons who made this book
possible. First of all, I would like to thank the members of my research team for
their great investment in time and thinking. Filip Vedder and Karen Prowse again
have proven to be excellent assistants. The Investment and Development Agency
for the Northern Netherlands (NOM) financially facilitated the research done by the
members of the research group. The International Business School of Hanze
University made the publication of this book possible. I am also grateful to the
International Business School and the Institute of Marketing and Management of
Hanze University for having granted me a leave of absence to serve as visiting
professor at UMBC (University of Baltimore). I thank my colleague Professor
Constantine Vaporis for his invitation to teach and do research at his Asian Studies
Program and for his warm hospitality during a cold winter semester in Baltimore.

Baltimore, MD Rien T. Segers

Groningen, The Netherlands
April 2015

v
ThiS is a FM Blank Page
Acknowledgment

The editor thanks the following institutions, which made the publication of this
book possible.

vii
ThiS is a FM Blank Page
Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rien T. Segers

Part I China
Alibaba: A Case Study on Building an International Imperium
on Information and E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Marieke Havinga, Martijn Hoving, and Virgil Swagemakers
Geely: A Case Study on the Trend Following Volvo-Owner . . . . . . . . . . 33
Gero von Bismarck and Yunyao Zheng
Haier: A Case Study on How One of China’s First Global Brands
Keeps Expanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Florian Pallas
Huawei: A Case Study on a Telecom Giant on the Rise . . . . . . . . . . . . . 75
Michelle Haveman and Jeroen Vochteloo
Lenovo: A Case Study on Strengthening the Position in the European
Market Through Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Franz Josef Gellert
Tencent: A Case Study on Expanding Through Micro-Innovation
and Strategic Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Filip Vedder

Part II India
Dr. Reddy’s: A Case Study on Conquering the World with Affordable
Medicine for the Masses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Maximilian Egender and Irina Rotari
Infosys: A Case Study on Becoming a Global Brand in Consulting
Technology and Outsourcing Solutions . . . . . . . . . . . . . . . . . . . . . . . . . 149
Mariusz Soltanifar

ix
x Contents

Part III Japan

Panasonic: A Case Study on Constant Change and Reinvention
of a World Brand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Uli Mathies
Rakuten: A Case Study on Entering New Markets Through an
Innovative Business-to-Business-to-Consumer Strategy . . . . . . . . . . . . . 203
Thomas S. Willenborg
Uniqlo: A Case Study on Creating Market Share with Affordable
and Timeless Designs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Frederike Schulz-Müllensiefen and Aenne St€ockmann

Part IV South Korea

Lotte: A Case Study on Market Entries Through Acquisition . . . . . . . . 239
Manuel Schlothauer and Denise Wilhaus

Part V Vietnam
Vinamilk: A Case Study on Partnering Up to Expand on the World
Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Kim Nguyen

Part VI Underlying Strategies and Success Factors of Emerging

Asian Multinationals
Corporate Enterpreneurship and Triple Helix . . . . . . . . . . . . . . . . . . . . 275
Mariusz Soltanifar
Asian Human Resource Management and Intercultural
Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
Marcel H. van der Poel
Branding Trends in Asian Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Diederich Bakker

Part VII Conclusion

Conclusions: Why and How Asian Businesses Will Conquer
the World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
Rien T. Segers and Filip Vedder
List of Contributors

Diederich Bakker International Business School, Hanze University OAS,

Groningen, The Netherlands
Gero von Bismarck The Honor’s Program of the International Business School,
Hanze University OAS, Groningen, The Netherlands
Maximilian Egender The Honor’s Program of the International Business School,
Hanze University OAS, Groningen, The Netherlands
Franz Josef Gellert FOM University OAS for Economics and Management,
Bremen, Germany
International Business School, Hanze University OAS, Groningen, The Netherlands
Michelle Haveman The Honor’s Program of the International Business School,
Hanze University OAS, Groningen, The Netherlands
Marieke Havinga School of Marketing Management, Hanze University OAS,
Groningen, The Netherlands
Martijn Hoving The SBRM program of the School of Marketing Management,
Hanze University OAS, Groningen, The Netherlands
Uli Mathies International Business School, Hanze University OAS, Groningen,
The Netherlands
Kim Nguyen The Honor’s Program of the International Business School, Hanze
University OAS, Groningen, The Netherlands
Florian Pallas Iskander Business Partner, Düsseldorf, Germany
Marcel H. van der Poel International Business School, Hanze University OAS,
Groningen, The Netherlands
Irani Rotari The Honor’s Program of the International Business School, Hanze
University OAS, Groningen, The Netherlands
Manuel Schlothauer The Honor’s Program of the International Business School,
Hanze University OAS, Groningen, The Netherlands

xi
xii List of Contributors

Frederike Schulz-Müllensiefen The Honor’s Program of the International Busi-

ness School, Hanze University OAS, Groningen, The Netherlands
Rien T. Segers International Business School, Hanze University OAS, Groningen,
The Netherlands
Clingendael Netherlands Institute of International Relations, The Hague, The
Netherlands
Mariusz Soltanifar International Business School, Hanze University OAS,
Groningen, The Netherlands
ockmann The Honor’s Program of the International Business School,
Aenne St€
Hanze University OAS, Groningen, The Netherlands
Virgil Swagemakers The SBRM program of the School of Marketing Management,
Hanze University OAS, Groningen, The Netherlands
Filip Vedder International Business School, Hanze University OAS, Groningen,
The Netherlands
Jeroen Vochteloo The Honor’s Program of the International Business School,
Hanze University OAS, Groningen, The Netherlands
Denise Wilhaus The Honor’s Program of the International Business School,
Hanze University OAS, Groningen, The Netherlands
Thomas S. Willenborg Datatrans AG, Zurich, Switzerland
Yunyao Zheng The Honor’s Program of the International Business School, Hanze
University OAS, Groningen, The Netherlands
Abbreviations

ADS American Depositary Shares

AIS Automotive & Industrial Systems Company (Panasonic)
AMNC Asian Multinationals
AP Appliance Company (Panasonic)
API Active Pharmaceutical Ingredients
ATHS Asia Triple Helix Society
AVC AVC Networks Company (Panasonic)
B2B Business-to-Business
B2B2C Business-to-Business-to-Consumer
B2C Business-to-Consumer
BP Business Performance
BPO Business Process Outsourcing
C2C Consumer-to-Consumer
CAGR Compound Annual Growth Rate
CE Corporate Entrepreneurship
CEAI Corporate Entrepreneurship Assessment Instrument
CEO Chief Executive Officer
CERN European Organization for Nuclear Research
CMO Chief Marketing Officer
CPG Consumer Packaged Goods
CR Corporate Renewal
CSR Customer Social Responsibility
CV Corporate Venturing
EC European Commission
EO Entrepreneurial Orientation
ES Eco Solutions Company (Panasonic)
FCF Free Cash Flow
FDA Food and Drug Administration (US)
FDI Foreign Direct Investment/Investor(s)
FY Financial Year
Hanze UAS Hanze University of Applied Sciences
HR Human Resources
HRM Human Resource Management

xiii
xiv Abbreviations

ICT Information and Communication Technology

IHRM International Human Resource Management
IPO Initial Public Offering
IS Innovation System
ISP Internet Service Provider
IT Information Technology
ITHA International Triple Helix Association
KBE Knowledge Based Economy
KBS Knowledge Based Society
M&A Merger and Acquisition
M2M Machine-to-Machine
MEI Matsushita Electric Industrial Co. Ltd. (Panasonic)
MIDH Mobile Internet and Digital Home Business Group (division of
Lenovo)
MNE Multinational Enterprise
NFIA Netherlands Foreign Investment Agency
NVC New Venture Creation
NYSE New York Stock Exchange
O&M Operations and Maintenance
O2O Online-to-Offline
ODM Original Design Manufacturer
OECD The Organization for Economic Co-operation and Development
OEM Original Equipment Manufacturer
OP Operating Profits
OPCE Organizational Preparedness for Corporate Entrepreneurship
OPM Operating Profit Margin
PR Public Relations
R&D Research and Development
RoE Return on Equity
SE Strategic Entrepreneurship
SR Strategic Renewal
TH Triple Helix
TMS Top Management Support
UHT Ultra High Temperature
VAS Value Added Service(s)
VC Venture Capital
YoY Year-on-Year
ZZJYT Zi Zhu Jing Ying Ti (self-managed teams from Haier)
Introduction

Rien T. Segers

Abstract
Asia will soon reshape the global economic landscape. This undoubtedly will
result in a change in the global power center—both soft and hard—from the
West to the East. In global business, interactions between Asia and the West will
most likely intensify. The West will encounter Asian values more than before in
a working environment. In this book, we want to emphasize that hundreds of
Asian companies will reach out to the world and enter the global market. At this
moment, most of these new companies are relatively unknown in the West. The
message of this book is that this will rapidly change. By choosing to highlight
rather recently-established, multinational, companies, we hope to show what
kind of strategies these exemplary companies have developed to become suc-
cessful not only in their home market, but also in the world market and thus
become strong competitors to their Western rivals. We have selected at least one
company to analyze from the key countries of China, India, Japan, South Korea
and Vietnam, with a focus on its strategies and endeavors to become a global
multinational.

1 The Rise of Asia

After the current financial-economic crisis, the world will have a completely
different outlook. Three developments will be decisive in this respect. First of all,
the leadership of the United States, the undisputed leader of the second half of the
twentieth century, will no longer be self-evident. In addition, the integration process
of the European Union and especially that of the Eurozone has come to a standstill,

R.T. Segers (*)

International Business School, Hanze University OAS, Groningen, The Netherlands
Clingendael Netherlands Institute of International Relations, The Hague, The Netherlands
e-mail: [email protected]

# Springer International Publishing Switzerland 2016 1

R.T. Segers (ed.), Multinational Management, DOI 10.1007/978-3-319-23012-2_1
2 R.T. Segers

and maybe worse, is on the brink of destruction. Finally, yet importantly, the global
economic center of gravity is shifting more rapidly than expected from the West to
the East. All of this means that the twenty-first century may very well be the Asian
century.
If that is the case, then Asia will soon reshape the global political-economic
landscape. This undoubtedly will result in a change in the global power center—both
soft and hard—from the West to the East. In global business, interactions between Asia
and the West will most likely intensify. In the West, we will encounter Asian values
more than before in our working environment: business cultures and conventions that
are so different from ours, based as they are on a completely different philosophy and
another outlook on life. Is the West prepared for these encounters that are going to
happen on a more frequent basis?
Many members of the Asian elite have given negative answers to this question.
For example, the former top diplomat and current dean of the Lee Kuan Yew
School of Public Policy at the National University of Singapore, Kishore
Mahbubani, recently mentioned that no country has done more than the United
States “to spark the rise of Asia. But paradoxically, America is among the countries
least prepared to handle the rise of East Asia.”
High growth, rapid industrialization, economic reforms and the gradual opening
of domestic markets to foreign competition characterize the economic development
path of emerging Asian economies. Asia’s high growth combined with its vast
market potential and large diversified labor pool has made it a favored investment
location for Western companies. The influx of FDI has generated positive spillover
effects in Asian economies. Asian firms were quick to absorb knowledge, techno-
logy and best practices from foreign firms to enhance their own operational
capacities and build up their domestic market share. In addition, Asian firms have
increased their ability to read trends in global markets and make the most of the
endowments provided by their domestic environment to climb up the global ranks.
Many Asian governments actively require and stimulate outbound activities of
companies and are gradually cutting away the red tape that (formerly) impeded
cross-border investments.
During the economic downturn in 2008, many Asian economies demonstrated
great resilience, quick recovery and stable economic growth. Furthermore, the
volume and global share of Asian cross-border investments continued to grow
despite the dominant downward trend in global OFDI. Although the overall share
of Asia in global OFDI is still relatively small, predictions are that it will increase
based on Asia’s current economic growth levels and a possible upcoming recession
in Europe and North America.
Introduction 3

2 Growth in the Asian Hemisphere

2.1 China

The most eye-catching feature of Asia’s economic ascent is the rise of China. Since
the gradual opening up of the Chinese economy in 1978, economic growth rates
have averaged nearly 10 % per year. According to forecasts, economic growth
levels in China will persist, be it at levels significantly less than 10 %, and China
could overtake the United States as the world’s largest economy (by GDP) by 2020.
Although market forces have entered China, the government still exerts great
influence on the economy. The initial economic success of China lies primarily in
using economies of scale to their advantage. A large and diversified labor pool and
considerable inward investment have been important factors for China in becoming
a powerful source of low-cost manufacturing and industrial exports in the world.
The Chinese government intends to diversify its economy and develop more
knowledge- and technology-intensive economic activities. Chinese exports and
outward FDI have grown explosively, especially after China joined the WTO in
2001. Government incentives have assisted Chinese companies in establishing a
global footprint. Large greenfield investments of State-owned enterprises (SOEs)
have sprouted in Central Asia, Latin America and Africa to safeguard resources and
energy supplies for China’s industries. The number of Chinese companies (mainly
SOEs) acquiring European and North American targets in high-tech, manufacturing
and raw materials has grown exponentially to secure intangible assets, knowledge
and technology.

2.2 India

Although still a poor country with vast socio-economic problems, India has man-
aged to become the ninth largest economy in the world since economic liberal-
ization in 1991. Between 1990 and 2010, the annual average growth rate of the
Indian economy was 6.6 %. For an emerging economy, India has well-developed
services and ICT industries which have showcased remarkable growth over the
years. Indian ICT companies have been quick to embrace overseas clientele and
business opportunities and have created a low-cost niche in the global ICT market.
They derive the majority of revenues from services and software exports to
developed markets.
Although service exports are booming, India has a trade deficit due to large
importation of commodities. To improve its trade situation, India is negotiating
various free trade agreements. Indian OFDI and M&A have surged since
restrictions on outward investment and cross-border acquisitions have been loos-
ened. Indian OFDI is mainly concentrated in the manufacturing sector followed by
services and wholesale/retail activities. Favored investment destinations are
Singapore, the Netherlands, United Kingdom, United States, various tax havens
and the Middle East.
4 R.T. Segers

Indian greenfield investment mainly concerns mining, construction and heavy

manufacturing activities in developing nations, often resource-rich countries.
Indian outbound M&A has skyrocketed. Conglomerates have been especially
keen to acquire foreign firms to gain market access and intangible assets. Indian
outbound M&A activity is concentrated in developed nations’ manufacturing sector
and, to a lesser extent, in services.

2.3 Japan

Japan was the first country in Asia to industrialize. In the latter half of the
19th century, foreign expertise and technologies were borrowed to create a solid
industrial base. The main objective was to catch up with the West. After WWII,
Japan’s industry evolved quickly from light industrial production to heavy
manufacturing. By the 1970s, Japanese industry had upgraded to mass-production
of consumer goods. Japanese companies were successful and out-competed West-
ern manufacturing by developing efficient lean production processes and thorough
quality control systems. In the 1980s, Japan’s industrial catch-up process was
finalized when industries started to focus on innovation-driven activities. Since
the end of WWII, Japan experienced continuous economic growth.
However, since 1989, when the economic bubble started to go bust, Japan has
been in an on-going recession. The Japanese economy has been plagued by
deflation, an ageing workforce and a banking crisis for two decades. Furthermore,
Japan is still recovering from 3/11, the Fukushima triple disaster (earthquake,
tsunami and nuclear meltdown). Japanese firms have seen their labor productivity,
export revenues, domestic sales and production volume drop. International compe-
tition has increased and, in many industries, Japanese firms have lost market share.
Therefore many Japanese multinationals are trying to reinvent themselves.
These factors have re-invigorated Japanese OFDI. In recent years, Japanese
outbound investments have increased. Surprisingly, non-manufacturing FDI flows
have overtaken manufacturing investment since 2007. Japanese overseas affiliates
are mainly active in wholesale trade, transport equipment, various services,
machinery and electrical equipment. Japanese companies have established a global
footprint and are now strengthening and expanding their overseas production
networks through investment. The scale and scope of activities of overseas
subsidiaries have increased to build global market share. Many Japanese companies
are globalizing their R&D base to enhance firm competence and international
competitiveness. Many of these recent expansion efforts have been carried out
through cross-border M&A.

2.4 South Korea

In South Korea, we witness that industrialization with close state monitoring,

development of industrial conglomerates (chaebol), domestic market protection
Introduction 5

and export promotion has fueled high economic growth. Growth levels were high
until the Asian Crisis in 1997 hit South Korea hard. Drastic reforms in the labor
market and in the corporate and financial sectors were undertaken to avert total
economic collapse. The chaebol, the main pillars of the South Korean economy,
were forced to downsize and switch course from labor intensive production to
capital- and technology-intensive production.
The South Korean economy quickly recovered and chaebol have become world-
wide household names in handsets, LCD devices and automobiles. Chaebol domi-
nate South Korea’s outbound economic activity, accounting for a large share of
manufacturing exports and 80 % of outbound investment. South Korea’s prominent
outward economic activity is rooted in export. It is the seventh biggest exporter and
eighth largest importer in the world in terms of value. Many South Korean indus-
trial companies choose to maintain production facilities in the home market, hence
the large volumes of commodities flowing into South Korea.
Numerous FTAs are being negotiated to facilitate intensified trade flows. South
Korean OFDI has grown substantially over the years. The majority of investments
is concentrated in China, South East Asia, North America and Europe, in that order.
Electronic equipment, shipbuilding, motor vehicles and petrochemicals are the
main industries in which South Korean companies hold foreign assets. Greenfield
investments are preferred over M&A deals, but the number of cross-border
acquisitions is on the rise. Even though foreign assets of South Korean companies
have grown, export will not be substituted for outward investment anytime soon.

3 Building Globally-Competitive Firms Which Will Conquer

the World

Asian companies are gaining competence and becoming competitive in the global
economy. Cost advantages have been essential for them to break into international
markets. Factors such as government support, internalization of best practice in
manufacturing, and economies of scale have also been instrumental to the growth of
Asian firms. Some firms have adapted to tough business conditions at home and
created new opportunities in other emerging economies with similar market
conditions. Although the growing success of Asian corporate internationalization
is evident, capability constraints, such as the lack of international experience, brand
names, innovation, management competence and quality products, can hinder
international competitiveness of Asian firms (with the exception of South Korean
and Japanese firms).1
In this book, we want to emphasize that hundreds of Asian companies will reach
out to the world and enter the global market. At this moment these new companies
are relatively unknown in the West. The message of this book is that this will

1
The previous pages of this chapter are taken and adapted from Segers and Stam (2013),
pp. 29–33.
6 R.T. Segers

rapidly change. After they have firmly established themselves in their vast own
Chinese, Indian, Japanese, South Korean and other Asian markets, they will be
knocking at many Western doors. In China, the government has given orders to a
large number of companies to also become a brand outside China itself; this became
known under the term go out strategy.
By choosing to highlight rather recently-established, multinational, companies
in this book, we hope to show what kind of strategies these exemplary companies
have developed to become successful not only in their home market, but also in the
world market and thus become strong competitors to their Western rivals. We have
selected companies from Asian countries that are promising as future economic
giants. Right now, Japan and South Korea are already among the most sophisticated
and competitive nations in East Asia, followed by China (among others) and at a bit
larger distance, by India and Vietnam. From all these countries, we have chosen at
least one company to analyze with a focus on its strategies and endeavors to become
a global multinational.2

3.1 China

In China, we have selected six companies, large and powerful in their home market,
while relatively unknown in the West, but definitely on their way to become a world
brand.
Alibaba is a giant e-commerce company, established only in 1999 by Jack Ma; in
September 2014 its market value was 25 billion US$. Alibaba became known in the
West by its spectacular IPO.
Geeley is another Chinese company this book focuses upon; it is an automotive
manufacturing company. The company became somewhat known in the West by
buying up the Swedish car maker Volvo in August 2010.
We further concentrate on Haier, a multinational consumer electronics and
home appliances company; its products include air conditioners, mobile phones,
computers, microwaves ovens, washing machines, refrigerators and TV sets; its
revenues were 2.45 billion US$ in 2014, earned with 70,000 employees.
Another multinational company producing networking and telecommunications
equipment and services is Huawei, headquartered in Shenzhen, Guangdong prov-
ince. Founded in 1987 by Ren Zhengfei, it now has over 140,000 employees.
Lenovo is a computer technology company with headquarters in Beijing. It
designs and manufactures tablets, computers, smartphones, work stations and
servers. Together with Huawei, Lenovo is undoubtedly China’s most well-known
company in the West with many branches and products sold in the world. The
company was founded in 1984 and has now more than 54,000 employees.

2
The description of the following 13 companies is selectively taken from Wikipedia (>Wikipedia.
org), in combination with facts taken from the 13 analyses in this book.
Introduction 7

Tencent is the sixth Chinese company in this book. It is an investment holding

company whose subsidiaries provide mass media, entertainment, internet, and
mobile phone value-added services. Those services include social networks, web
portals, e-commerce and multi-player online games. It is the fifth-largest internet
company in the world after Google, Amazon, Alibaba and Ebay (figures as of
October 2014). Its market value is now about 150 billion US$.

3.2 India

We focus on two promising Indian companies: Dr. Reddy’s and Infosys.

Dr. Reddy’s Laboratories is a pharmaceutical company based in Hyderabad.
Dr. Reddy’s has developed 190 medications and started exporting them to non- or
less-regulated markets. The profitability from these unregulated markets enabled
the company to get approval from drug regulators in more developed economies in
Europe and the US. In 2012, the company had revenues of 2.1 billion US$ and
16,300 employees.
Infosys provides business consulting, information technology, software engi-
neering and outsourcing services. Its headquarters can be found in Bangalore. The
company was founded in 1981 and has over 165,000 employees. It already has a
clear global presence with 72 offices and 94 development centers in India, the US,
China, Australia, Japan, the Middle East and in Europe.

3.3 Japan

Japan has a large number of companies which have enjoyed world brand status for a
long time, including Canon, Honda, Mazda, Mitsubishi, NEC, Panasonic, Sony,
Suzuki, Toyota, Yamaha, etc. These are all large and prestigious companies, well-
established for a long time at home as well as on the global market. Often these
companies are threatened by the new emerging Asian multinationals and many of
them see their revenues dropping. Most of these well-established and brand
companies are trying to reinvent themselves to stop the downturn. In this sense,
they will also become ‘new’ companies entering the world market with a new
strategy. From these companies we selected one example: the famous company
Panasonic.
Panasonic, formerly known as Matsushita Electric Industrial Co., was founded
in 1918 and has grown to become one of the largest Japanese electronics producers
together with Sony. Its total revenues in 2014 were 64 billion US$ and it has over
300,000 employees and some 580 subsidiaries. Panasonic is now trying to get its
own house in order. Consumer electronics were once the basis for Panasonic’s and
Japan’s economic miracle after World War II. But in recent years South Korea
(e.g. Samsung) and Silicon Valley (e.g. Apple) have moved to the fore in techno-
logical innovation. That means it was necessary for Panasonic and other established
Japanese companies to reinvent themselves. In Panasonic’s case, it meant providing
8 R.T. Segers

less visible but more profitable industrial technologies (International New York
Times 2013). Panasonic focuses now on two areas: homes and cars. In homes, it no
longer sells only individual products (refrigerators, TV-sets, etc.) but sells systems
which integrate all home products. In the automotive market, it supplies battery
cells to makers of electric cars, like Tesla motors.
But in Japan there also exists a large number of rather recent and globally
unknown companies which are going to enter the global market rather soon or
have done so recently. From those companies, we selected Rakuten and Uniqlo,
respectively.
Rakuten is a relatively unknown e-commerce and internet company, established
in 1997 and based in Tokyo, providing online shopping. In 2013, Rakuten’s
revenues were over five billion US$, providing work for over 11,000 employees.
In 2005, Rakuten started expanding outside Japan, mainly through acquisitions and
joint ventures.
Uniqlo (a contraction of “unique clothing”) is a casual-wear designer, manufac-
turer and retailer, founded in 1949. Only at the end of the 1990s did Uniqlo became
a successful brand in Japan. At that time, Uniqlo opened its first urban stores in
Tokyo, offering good and cheap clothing which was a hit in recession-stricken
Japan. After 500 stores were in operation in Japan, Uniqlo decided to establish itself
abroad, first of all in China in 2002. After that year, many stores in many countries
were opened, including one flagship store in the SOHO fashion district of Manhat-
tan in 2006.

3.4 South Korea

In South Korea we focused on the Lotte conglomerate.

Lotte is a multinational food and shopping company with headquarters in
South Korea and Japan, established in Japan in 1948. The Lotte Group consists of
over 60 business units employing 60,000 people in very diverse industries such as
candy manufacturing, beverages, hotels, fast food, financial services, entertain-
ment, etc. The Lotte Group is relatively old, which means it has to reinvent itself
constantly to survive the attacks from newly-emerging multinationals in East and
West. So far, Lotte’s strategy to affect all parts of its customers’ lives (not only in
South Korea but also in the rest of Asia) has proven to be very successful. Lotte is
now a conglomerate company that is broadly engaged in food, retail, tourism,
petrochemicals/construction/manufacturing, service/study and finally also finance.
That means the company is able to compensate any losses in one particular domain
by its gains in another.

3.5 Vietnam

In Vietnam, our research has dealt with Vinamilk.

Introduction 9

Vinamilk was founded in 1976 and is the biggest dairy company in Vietnam. The
major activities of the company are to produce and distribute condensed milk,
powdered milk, fresh milk, soya milk, yoghurts, ice cream, cheese and other
products derived from milk. Revenues are 1.3 billion US$ and headquarters are
located in Ho Chi Minh City.

3.6 Underlying Strategies and Success Factors of Emerging Asian

Multinationals

The above 13 companies are analyzed in detail in this study. From these analyses,
an intriguing question arises: how is it possible that these newly emerged Asian
multinationals (as well as the ‘old’ companies reinventing themselves now) are set
to become so successful in the world market that they will become strong
competitors to existing prestigious Western companies? In part VI “Underlying
Strategies and Success Factors of Emerging Asian Multinationals”, we describe a
number of underlying strategies and success factors of these multinationals. It
concerns factors such as Asian corporate entrepreneurship and the strong phenom-
enon of the so-called Triple Helix system: the close collaboration between govern-
mental and educational institutions with the business community. In addition, there
are success factors such Asian human resource management, intercultural compe-
tence and branding.
The overall message of this book is that we in the West should prepare ourselves
for a business world which is going to be increasingly dominated by Asian
companies. These companies have enjoyed great successes in their home market,
but are relatively unknown so far in the West, except for many Japanese and, to a
lesser extent, South Korean companies. Our research reported in this book makes it
evident that many of those companies will become household brands in the West in
the near future. This might seem unbelievable to many, but recent history has
shown us a similar development of other companies.
Some fifty years ago, the Japanese Sony’s and Toyota’s were completely
unknown in the West, but 15 years later—around 1980—they became well-
known and well-respected companies in the world, and moreover, also strong
competitors for Western companies. Most of the Japanese multinationals became
very successful in the West. We call this phenomenon the first wave of
Asianization, mostly coming from Japan during the years 1970–1990.
The second wave of Asianization gradually became visible since the turn of the
century. This second wave has a much broader and stronger character. The current
second Asianization process concerns more Asian countries and thus much more
companies than in the first wave which was only Japan-based. But the tempo and
scale in which the new Asian companies will conquer the world is much faster and
larger than in the case of the first wave.
That means that this book implicitly contains an incitement to prepare ourselves
in the West for the coming Asian era. These preparations should consist of serious
attempts to understand the cultural identity of the several Asian countries and the
10 R.T. Segers

corporate culture and business strategies of the Asian companies which will appear
in the Western market rather soon. In this book, we have selected the most
important companies in this respect.

References
Segers, R. T., & Stam, T. (2013). Asia reshaping the global economic landscape. Maastricht:
Shaker Media.
International New York Times. (2013, December 28–29). Business Asia. International New York Times.
Part I
China
Alibaba: A Case Study on Building
an International Imperium on Information
and E-Commerce

Marieke Havinga, Martijn Hoving, and Virgil Swagemakers

Abstract
The Alibaba Group is a group of internet based businesses with a mission to
make it easy for anyone to buy or sell anything, anywhere in the world, but
especially to make Chinese businesses more open and accessible for the world.
The revenue of the Alibaba Group is running high, since they achieve more sales
than their competitors Ebay and Amazon.com together. Alibaba is the first
company to make market information and data available for free to all the
users, all over the world. Customers/providers of goods can expand the reach
of their business quickly. In addition, the connection system of Alibaba and how
they connect business people with suppliers is fascinating. Their business strat-
egy has made them both well-known and successful in Asia already. Alibaba’s
international interest is to get more access to popular Western brands, especially
high-end and luxury brands, given the huge unmet demand among Chinese
consumers for products that are not yet available in China. For that matter, it
is likely that Alibaba will become a successful brand for retailers all over the
world for selling their products and since the world is getting smaller, perhaps
even for B2B or C2C markets.

M. Havinga (*)
School of Marketing Management, Hanze University OAS, Groningen, The Netherlands
e-mail: [email protected]
M. Hoving • V. Swagemakers
The SBRM program of the School of Marketing Management, Hanze University OAS, Groningen,
The Netherlands

# Springer International Publishing Switzerland 2016 13

R.T. Segers (ed.), Multinational Management, DOI 10.1007/978-3-319-23012-2_2
14 M. Havinga et al.

1 Introduction

Once upon a time there was a large and successful company in China called the
Alibaba Group, a large internet and e-commerce company ready to conquer the
world. The company is already well known in many countries all over the world and
is getting more attention in every European country. This is especially true now that
Alibaba has applied for its initial public offering (IPO) in the New York Stock
exchange market, and it is expected that Alibaba will make history with the largest
IPO ever and make a fairytale come true.
The Alibaba Group is a group of internet based businesses with a mission to
make it easy for anyone to buy or sell anything, anywhere in the world, but
especially to make Chinese businesses more open and accessible for the world.
The Alibaba Group consists of many subsidiaries. One of them is Alibaba.com. By
offering online web portals for the Business-to-Business market and online retail-
ing, companies are able to purchase and contact the suppliers. The revenue of the
Alibaba Group is running high, since they achieve more sales than their competitors
Ebay and Amazon.com together.
Alibaba is the first company to make market information and data available for
free to all the users, all over the world. Customers/providers of goods can expand
the reach of their business quickly. In addition, the connection system of Alibaba
and how they connect business people with suppliers is fascinating. Their business
strategy has made them both well-known and successful in Asia already, and it is
interesting to see how this was accomplished. It also raises the question if it is
possible for Alibaba to become a successful player on the B2B, B2C or C2C world
market.

2 Company Profile

2.1 History

In 1999, Jack Ma (Yun Ma) and 17 others founded Alibaba Group. Mr. Ma visited
the city of San Francisco in 1999 and got the idea to set up a company named
Alibaba. The name Alibaba comes from the story “Alibaba and the 40 thieves”.
This online selling and buying place was set up to open an international business
world. The name Alibaba can also be linked to the saying of Alibaba, “Open,
Sesame”. Jack Ma used this saying to refer to the fact that the world would become
open for China. The company started in the Business-to-Business market. However,
in 2003, the consumer e-commerce website Taobao was founded, and Alibaba
expanded with the online payment system Alipay. In 2002, Alibaba.com became
profitable, but after 2005, Alibaba Group began to grow quickly. The strategic
partnership with Yahoo Inc and taking over the operation of China Yahoo, seems to
have been a successful strategy for generating growth. In 2006, the group makes a
strategic investment in Koubei.com, and in June 2008, Koubei.com merges with
China Yahoo to form Yahoo Koubei.
Alibaba: A Case Study on Building an International Imperium on Information. . . 15

From 2007 onwards, many new services are generated. First, Alisoft, an internet-
based business software company, is launched in January, followed by Alimama, an
online advertising exchange company, in November. In this same month, Alibaba.
com Limited is listed on the Hong Kong Stock Exchange. In April 2008, the Taobo
Mail (currently known as Tmall.com) is introduced, and Alimama is integrated in
Taobao in September of 2008. Alibaba groups continued to set up new services,
including Alibaba group R&D Institute in September 2008 and Alibaba Cloud
Computing in September 2009, thus making Alibaba a real virtual empire, serving
business customers and private customers but also offering every imaginable
multimedia service. Also in 2008, Alibaba.com Japan is founded as a joint venture
between Alibaba.com and Softbank and its first international steps are taken.
Mergers then follow: Alisoft merges with Alibaba Group R&D Institute (July
2009); Alisoft’s Business Management Software division is injected into Alibaba.
com (August 2009); and Koubei.com is injected into Taobao as part of the “Big
Taobao” strategy. The “Big Taobao” strategy positions Taobao as a one-stop
e-commerce service provider to promote wider use of e-commerce among
consumers. In March 2010, Alibaba Group creates a cross-business team compris-
ing senior managers from Taobao, Alipay, Alibaba Cloud Computing and China
Yahoo to execute a full scale roll-out of this “Big Taobao” strategy. In 2011,
Alibaba Group expanded its consumer market and announces its plan to build a
network of warehouses across China.
Alibaba takes a new direction in 2010 by wanting to contribute to society. This
initiative started with the announcement that it will begin to earmark 0.3 % of
annual revenues to fund efforts designed to spur environmental awareness and
conservation in China and around the world (Alibaba 2014a).
To better adapt to China’s fast growing e-commerce environment, Alibaba
Group reorganizes the company in 2011 with lots of new business groups. As of
now and beginning in 2013, the company is divided into 25 business units. New
business initiatives, such as mobile platforms and financing small businesses, show
that Alibaba envisions changes in the e-commerce world and the broader interna-
tional business world. They know how to pool market information, how to identify
future opportunities, and how to develop innovative projects.
Recently, Alibaba bought stakes in four major online media giants in China, the
Chinese Twitter lookalike Sina Weibo (2013), ChinaVision (March 2014), Wasu
Media and the Chinese Youtube lookalike Youku Tudou (April 2014), to boost their
consumer-facing non-e-commerce business.
Investments have been made to improve their position in the international
e-commerce market by purchasing ShopRunner in September 2013, which is the
biggest competitor of Amazon.

2.2 The Founders

The main founder Jack Ma (Yun Ma) founded Alibaba Group with 17 other people
in 1999. Jack Ma is a Chinese internet entrepreneur, the first Mainland Chinese
Exploring the Variety of Random
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unceremoniously as if they were at home. Concord seems to reign at
table. I have never seen the legitimate larva take offence at the
indiscretion of the strangers, nor observed these attempt to trouble
its repast. All keep themselves together, and eat peaceably without
annoying their neighbours.

So far all would be well, were it not that a grave difficulty arises.
However active may be the mother-nurse, it is clear that she cannot
meet such a consumption of food. She has to be incessantly on the
[246]wing to feed one larva: what must happen if there are a dozen
gluttons to provide for? The result of this enormous increase of
family can only be want, or even famine, not for the larvæ of the
Dipteron (which develop more rapidly than that of the Bembex,
profiting by the days when abundance still reigns, their host being
yet in early youth), but for the latter, who reaches the moment of
metamorphosis without being able to make up for lost time. Besides,
when the first guests become pupæ and leave the table free to it,
others come, as long as the mother visits the nest, and complete its
starvation.

In burrows invaded by numerous parasites the Bembex larva is

undoubtedly much smaller than one would expect from the heap of
food consumed, the remains of which encumber the cell. Limp,
emaciated,—only half or a third of its proper size,—it vainly tries to
spin a cocoon, the silk for which it has not got, and it perishes in a
corner of the cell, amid the pupæ of guests more fortunate than
itself. Or its end may be yet more tragic. Should provender fail, or the
mother delay too long in returning with food, the Diptera devour it. I
ascertained this black deed by bringing up the brood myself. All went
well as long as food was plentiful, but if through neglect, or on
purpose, the daily supply failed, next day or the day after I was sure
to find the Diptera larvæ greedily rending that of the Bembex. Thus,
when the nest is invaded by parasites, the legitimate larva is fated to
perish either by hunger or a violent death, and this it is which makes
the sight of Miltogramma prowling round the nest so odious to the
Bembex. [247]

The Bembex is not the only victim of these parasites: the burrows of
one and all of the mining Hymenoptera are invaded by Tachinids,
especially by the Miltogramma. Various observers—notably
Lepeletier de Saint Fargeau—have spoken of the manœuvres of
these impudent Diptera; but as far as I know none have perceived
the very curious case of parasitism at the expense of the Bembex—
very curious, because the conditions are quite different. Nests of
other Fossors are stored beforehand, and the Miltogramma drops an
egg on the prey just as it is being carried in. The provender stored
and her egg laid, the Hymenopteron closes up the cell where
thenceforward live the legitimate larva and the strangers, unvisited in
their prison. Thus, the robbery committed by the parasite is unknown
to the mother, and must consequently remain unpunished.

With the Bembex it is quite otherwise. The mother constantly returns

during the fortnight that she is bringing up the larva; she knows that
her offspring is living among numerous intruders, who appropriate
the greater part of the food; every time that she brings provender she
touches and feels at the bottom of her den these detestable guests,
who, far from contenting themselves with remains, seize what is
best. She must perceive, however small her powers of arithmetic
may be, that twelve are more than one; besides, she would discover
this from the disproportion between the consumption of food and her
means of hunting, and yet, instead of seizing these bold intruders
and bundling them out, she serenely tolerates them. Tolerates! Why,
she [248]feeds them and brings them their rations, and perhaps feels
as much tenderness for them as for her own larva. It is a new
version of the cuckoo story in yet more singular circumstances. The
theory that the cuckoo, almost as big as a sparrowhawk and
coloured like it, should look imposing enough to introduce an egg
unresisted into the nest of the weak hedge-sparrow, and that the
latter, overawed perhaps by the alarming look of her toad-faced
nursling, should accept and care for the stranger, has something in
its favour. But what shall we say of a sparrow which, turning parasite,
should go with splendid audacity and intrust her eggs to the eyrie of
a bird of prey—the nest of the sparrowhawk itself—the sanguinary
devourer of sparrows? What should we say of the bird of prey who
should accept the charge and bring up the brood tenderly? It is
precisely thus that the Bembex acts,—she, a captor of Diptera who
yet brings up other Diptera—a huntress who distributes food to a
prey whose last repast will be her own disembowelled offspring! I
leave to cleverer people the task of explaining these amazing
relations.

Let us observe the tactics employed by the Tachinid, whose object is

to confide her egg to the nest of the miner. It is an invariable rule that
the fly should never penetrate into the burrow, even if left open and
the owner absent. The crafty parasite would take good care not to
entangle itself in a passage, where, having no possibility of flight, it
might pay dearly for its effrontery. The only moment for its designs—
a moment watched for with the greatest patience—is that when the
Hymenopteron [249]enters the gallery, clasping her prey. At that
instant, brief as it is, when the Bembex or any other miner has half
her body within the entrance, and is about to disappear
underground, the Miltogramma arrives on the wing, perches on the
prey slightly, projecting beyond the hinder end of the Bembex, and
while she is delayed by the difficulties of entering, the Miltogramma,
with unparalleled promptitude, lays an egg on the prey, or two, or
even three eggs, successively. The hesitation of the Bembex,
embarrassed by her load, lasts but the twinkling of an eye; but that
matters not—it is long enough for the fly to accomplish its misdeed
without being dragged beyond the threshold. What must not be the
suppleness of organs to achieve this instantaneous laying of the
egg! The Bembex disappears, herself introducing the enemy, and
the Tachinid goes and crouches in the sun, close to the burrow, and
meditates fresh crimes. If one would make sure that the Dipteron’s
eggs have really been deposited during this rapid manœuvre, it
suffices to open the burrow and follow the Bembex to the bottom of
her abode. The prey which one takes from her bears underneath at
least one egg—sometimes more, according to the length of the delay
at the entrance. These very minute eggs could only belong to a
parasite, and if any doubt remained, you can bring up the brood in a
box, and the result will be Diptera larvæ—later pupæ, and finally
Miltogramma.

The fly shows wonderful sagacity in the moment selected by it—the

only one which could permit of her carrying out her purpose with
neither peril nor vain efforts. The Bembex, half-way through [250]the
entrance, cannot see her enemy audaciously perched on the hind
quarters of the prey, or, if she suspects the bandit’s presence, cannot
drive it away, having no freedom of movement in the strait passage,
and in spite of all precautions to facilitate speedy entrance, cannot
always vanish underground with the celerity required, so quick is the
parasite. In fact, this is the only propitious moment, since prudence
forbids the Dipteron to penetrate into the den, where other Diptera,
far stronger than itself, are served up as food for the larvæ. Outside,
in the open air, the difficulty is insurmountable, so great is the
vigilance of the Bembex. Let us give a moment to the arrival of the
mother, when the nest is being watched by the Miltogramma.

Some of these flies—more or fewer, generally three or four—have

settled on the sand and are quite motionless, all gazing at the
burrow, the entrance of which they know very well, carefully hid
though it be. Their dull-brown colour, their large crimson-red eyes,
their intense stillness, have often made me think of bandits who,
dressed in a dark material, with a red kerchief over their heads, are
lying in wait to do some evil deed. The Hymenopteron comes,
loaded with prey. Had she no anxieties she would alight straightway
at her door. Instead, she hovers at a certain height, descends slowly
and circumspectly, hesitates, and vibrates her wings, producing a
plaintive hum denoting apprehension. She must have seen the
malefactors. They too have seen the Bembex. The movement of
their red heads shows that they are following her with their eyes;
every gaze is fixed on the coveted [251]booty. Then come marches
and counter-marches of cunning versus prudence.

The Bembex drops straight down with an imperceptible flight, as if

she let herself sink gently, making a parachute of her wings. Now
she is hovering just above the ground; the flies take wing, placing
themselves one and all behind her,—some nearer, some farther,—in
a geometrical line. If she turns round to disconcert them, they turn
too, with a precision which keeps them all in the same straight line; if
she advances, so do they; if she draws back, they draw back too,
measuring their flight, now slow, now stationary, on that of the
Bembex at the head of the file. They do not attempt to fling
themselves on the desired object, their tactics being merely to hold
themselves in readiness in the position of rearguard, so as to avoid
any hesitation when the rapid final manœuvre shall come.

Sometimes, wearied out by their obstinate pursuit, the Bembex

alights, and the flies instantly settle on the sand, still behind her, and
keep quite still. She rises again, with a sharper hum—the sign no
doubt of increasing indignation; the flies follow her. One last means
remains to throw the tenacious Diptera off the track; the Bembex
flies far away—perhaps hoping to mislead the parasites by rapid
evolutions over the fields. But the crafty flies are not taken in; they let
her go, and settle down again on the sand round the burrow. When
the Bembex returns the same manœuvres begin again until the
obstinacy of the parasites has exhausted her prudence. At a moment
when her vigilance fails, the flies are [252]instantly there. Whichever is
at the most favourable point drops upon the vanishing prey, and the
thing is done—the egg is laid.

There is ample evidence that the Bembex is conscious of danger,

and knows how disastrous for the future of her nest is the presence
of the hated fly; her long efforts to throw the parasites off her track,
her hesitation and flights, leave not a doubt on the subject. How is it
then, I ask myself once more, that the enemy of Diptera should allow
herself to be annoyed by another Dipteron—a tiny robber, incapable
of the least resistance, which, if she chose, she could destroy
instantly? Why, when once free from the prey which hampers her,
does she not pounce on these ill-doers? What is needed to
exterminate the evil brood around her burrow? Merely a battle which
would take but a few instants. But the harmony of those laws which
govern the preservation of species will not have it so, and the
Bembex will always allow herself to be harassed without ever
learning from the famous “struggle for life” the radical means of
extermination. I have seen some which, pressed too closely, let fall
their prey and flew off wildly, but without any hostile demonstration,
although dropping their game left them full liberty of action. The prey,
so ardently desired a moment earlier by the Tachinidæ, lay on the
ground at the mercy of them all, and not one cared about it. It had no
value for the flies, whose larvæ need the shelter of a burrow. It was
valueless also to the Bembex, who came back, felt it for an instant
and left it disdainfully. The little break in her custody of it had
rendered her suspicious of it. [253]

Let us end this chapter by the history of the larva. Its monotonous life
offers nothing remarkable during the two weeks while it eats and
grows. Then comes making a cocoon. The slight development of
silk-producing organs does not allow of a dwelling of pure silk, like
those of the Ammophila and Sphegidæ—made of several wrappers
which protect the larva, and later the nymph, from damp in the ill-
protected, shallow burrow during autumn rains and winter snows. Yet
this Bembex burrow is in worse conditions than those of the Sphex,
being made at a depth of only a few inches in very permeable soil.
To fashion a sufficient shelter the larva supplements by its industry
the small amount of silk at its disposal. With grains of sand
artistically put together and connected by silky matter, it constructs a
most solid cocoon—impenetrable to damp.

Three general methods are employed by fossorial Hymenoptera to

construct the dwelling in which metamorphosis is to take place.
Some hollow burrows at a great depth under a shelter, and then the
cocoon consists of a single wrapper, so thin as to be transparent.
Such is the case with Philanthidæ and Cerceris. Others are content
with a shallow burrow in open ground; but in that case they have silk
enough for manifold wrappings of the cocoon, as with Sphegidæ,
Ammophila, and Scolia; or if the quantity be insufficient, they use
agglutinated sand—as, for instance, the Bembex and Palarus. One
might take a Bembex cocoon for a solid kernel, so compact and
resistant is it. The form is cylindrical—one end rounded, the other
pointed. [254]The length is about two centimetres. Outside it is slightly
wrinkled and coarse, but within the walls are smoothed by a fine
varnish.

Rearing at home has enabled me to follow every detail of the

construction of this curious piece of architecture—a real strong box
which can brave all the severity of the weather. First of all the larva
pushes away the remains of its feast into a corner of the cell, or the
compartment arranged for it in a box with paper partitions. Having
cleared a space, it affixes to the walls of its abode threads of a
beautiful white silk, forming a spidery web which keeps the heap of
food-remains at a distance, and serves as scaffolding for the work to
come.

This work consists of a hammock, suspended far from anything that

can defile it, in the centre of threads stretched from wall to wall. Fine,
beautiful white silk is the only material used. The shape is that of a
sack open at one end, with a wide circular orifice, closed at the other
and ending in a point; a fisherman’s basket gives a very fair idea of
it. Then the edges of the aperture are permanently kept apart by
numerous threads fastened to the neighbouring walls. The tissue of
the bag is extremely fine, allowing all that the grub does to be seen.

Things had been in this state since the previous evening, when I
heard the larva scratching in the box. On opening, I found my captive
busy scratching the cardboard walls with the tips of its mandibles, its
body half out of the bag. Already it had made considerable progress,
and a heap of little fragments were piled before the opening of the
hammock, to be utilised later. For lack of other [255]materials it would
doubtless have used these scrapings for its constructions, but I
thought it better to provide according to its tastes and give it sand.
Never did Bembex larva build with such sumptuous material. I
poured out for my prisoner sand for drying writing,—sand well
sprinkled with gilded grains of mica,—before the opening of the bag,
which was in a horizontal position, suitable to the work which would
follow. The larva, half out of its hammock, chose its sand almost
grain by grain, routing in the heap with its mandibles, and, if one too
bulky presented itself, it was seized and cast aside. The sand being
sorted, the larva introduced a certain quantity with its mouth into the
silken fabric, then retired into its sack and began spreading the
materials in a uniform layer on the inner surface, then glued together
various grains and inlaid them in the fabric, with silk for cement. The
outer surface was constructed more slowly. These grains were
carried singly and fixed on with silk gum.
This first deposit of sand only concerns the anterior part of the
cocoon—that half which ends in the opening. Before turning round to
work at the back part, the larva renews its store of materials and
takes certain precautions, so as not to be embarrassed in its
masonry. The sand heaped before the entrance might slip inside and
hinder the builder in so narrow a space. The grub foresees this, and
glues some grains together, making a coarse curtain of sand, which
stops up the orifice, imperfectly indeed, but enough for the purpose.
These precautions taken, the grub labours at the back part of the
cocoon. From time to time it turns round to get [256]fresh materials
from outside, tearing away a corner of the protecting curtain, and
through this window grasping the materials needed. The cocoon is
still incomplete—wide open at the upper end and without the
spherical cap needed to close it. For this final bit of work the grub
provides itself abundantly with sand, and then pushes away the heap
before the entrance. A silken cap is now woven and fitted close to
the mouth of this primitive basket. On this silken foundation are
deposited, one by one, the sand grains kept in the interior and
cemented with silk-spittle. This lid completed, the larva has only to
give the last finish to the interior of the dwelling and glaze the walls
with varnish, to protect its tender skin from the roughness of the
sand.

The hammock of pure silk and the cap which later closes it are
evidently only scaffolding intended to support the masonry of sand
and to give it a regular curve. One might compare them to the
constructions used by builders when making an arch or vault. The
work being completed, the silken support disappears, partly lost in
the masonry, and partly destroyed by contact with rough earth, and
no trace remains of the ingenious method employed to put together
a construction perfectly regular, yet made of a material so little
coherent as is sand. The spherical cap which closes the original
basket is a separate work, adjusted to the main body of the cocoon.
However well the two pieces are fitted and soldered, the solidity is
not such as the larva would obtain had it built the whole dwelling
continuously. Thus, on the circumference of the cover there is a
circular line less capable of resistance, but this is not [257]a fault of
construction. On the contrary it is a fresh perfection. The insect
would experience grave difficulty in issuing from its strong box, so
thick are the walls, did not the line of junction, weaker than the rest,
apparently save much effort, as it is usually along this line that the
cover is detached when the perfect Bembex emerges.

I have called the cocoon a strong box. It is indeed a solid article,

both from its shape and the nature of its materials. Landslips or
falling sand cannot alter its form, since the strongest pressure of
one’s fingers cannot always crush it. Thus it matters little to the larva
if the ceiling of its burrow, dug in loose soil, should sooner or later fall
in, and it need not fear, even should a passing foot press down the
thin covering of sand; it runs no risks when once enclosed in its stout
shelter. Nor does damp endanger it. I have immersed Bembex
cocoons for a fortnight in water without finding any trace of damp
inside them. Ah! why cannot we have such waterproof for our
dwellings? To sum up: the cocoon, of graceful oval shape, appears
rather the product of patient art than the work of a grub. For any one
not behind the scenes, the cocoons which I saw in process of
construction with the sand from my inkstand might well have been
precious articles of some unknown industry—great beads starred
with golden dots on a ground of lapis lazuli, destined for the necklace
of some Polynesian belle. [258]
[Contents]
XIX
 THE RETURN TO THE NEST

The Ammophila digging her well late in the day leaves her work after
stopping the entrance with a stone, flits away from one flower to
another, goes into a new neighbourhood, and yet next day can return
with a caterpillar to the abode hollowed out the evening before,
notwithstanding her want of acquaintance with the locality—often
new to her; the Bembex, loaded with prey, alights with almost
mathematical precision on the threshold of a dwelling blocked by
sand and rendered uniform with the rest of the sandy surface. Where
my sight and memory are at fault, theirs have a certainty verging on
infallibility. One would say that the insect possessed something more
subtle than mere recollection—a kind of intuition of locality with
which nothing in us corresponds—in short, an indefinable faculty
which I call memory for lack of any other expression by which to
designate it. The unknown cannot be named. In order to throw if
possible a little light on this point in the psychology of animals I
instituted a series of experiments, which I will now describe.

The first had for its subject Cerceris tuberculata, [259]which hunts the
Cleonus. About 10 a.m. I took a dozen females busy at the same
bank and of the same colony, either hollowing or storing burrows.
Each was enclosed in a twist of paper, and all were put into a box.
About two kilometres from the nests I freed my captives, first
marking them with a white dot in the middle of the thorax by means
of a straw dipped in an indelible colour, in order to recognise them
later. They flew on every side—some here, some there, but only a
few paces, alighting on blades of grass and passing their forelegs
over their eyes for a moment, as if dazzled by the bright sunshine to
which they were suddenly restored. Then they took flight—some
earlier, some later; and one and all took unhesitatingly a straight line
south, i.e. in the direction of their home. Five hours later I returned to
the common territory of the nests. Almost directly I saw two of my
white-dotted Cerceris working at their burrows. Soon a third came in,
with a weevil between her feet. A fourth soon followed—four out of
twelve in a quarter of an hour was enough for conviction; I judged it
useless to wait longer; what four could do, the others could, if indeed
they had not already done it, and one may very well suppose that the
eight absentees were out hunting, or perhaps had retired into the
depths of their burrows. Thus, carried to a distance of two
kilometres, in a direction and by a way which they could not possibly
perceive from the depths of their paper prison, the Cerceris—at all
events part of them—had returned home.

I do not know to what distance they go hunting; possibly they know

the country round for some two kilometres. In that case they would
not have been [260]far enough away, and came home by their local
knowledge. The experiment had to be tried again at a greater
distance, and from a point which the Cerceris could not possibly
know.

I therefore took nine females from the colony whence I had got them
in the morning; three of these had been already experimented upon.
Again they were conveyed in a dark box—each imprisoned in a
paper twist. The starting-place was to be the neighbouring town of
Carpentras, about three kilometres from the burrows. I meant to
release them not amid fields as before, but in a street in the midst of
a populous quarter, where the Cerceris, with their rustic habits, had
assuredly never penetrated. As the hour was late I put off the
experiment, and my captives spent the night in their prison cells.

The next morning, towards eight o’clock, I marked them with a

double white spot on the thorax to distinguish them from those of the
evening before, which had only one, and set them free successively
in the middle of the street. Each mounted vertically, as if to get as
soon as possible from between the houses and gain a wide horizon,
then rising above the roofs, instantly and energetically turned its
flight south. And it was from the south that I brought them into the
town, and their burrows are south. Nine times with my nine prisoners
did I obtain this striking result—that an insect quite beyond its
bearings should not hesitate a moment what direction to take to
regain its nest.

Some hours later I too was at the burrows. I saw several of my

yesterday’s Cerceris with a white dot, but none of the last set free.
Had they been [261]unable to find the way back? Were they out
hunting, or in their galleries recovering from the excitement of such a
trial? I do not know. The next morning I came again, and had the
satisfaction of finding at work, as active as if nothing extraordinary
had happened to them, five Cerceris with two white dots. Three
kilometres of distance,—the town with its houses, roofs, and smoky
chimneys—all so novel to my rustic Cerceris,—had proved no
obstacle to their return home.

Taken from its brood and carried an enormous distance, the pigeon
returns promptly to its dovecote. If one were to consider the length of
journey in proportion to the size of the animal, how superior to the
pigeon is the Cerceris carried away three kilometres and returning to
its burrow! The size of the insect does not equal a cubic centimetre,
while that of the pigeon must quite equal the cube of a decimetre, if it
does not exceed it. The bird, a thousand times larger than the
Hymenopteron, ought, in order to rival it, to find its dovecote at a
distance of 3000 kilometres—thrice the greatest length of France
from north to south. I do not know if a carrier-pigeon has ever shown
such prowess, but wing-power and yet more lucidity of instinct
cannot be measured by yards. Nor can we here consider the
question of size, and one can only see in the insect a worthy rival to
the bird without deciding which has the advantage.

Are the two guided by memory when placed by man beyond their
bearings and carried to great distances—into regions with which they
are unacquainted and in unknown directions? Is memory [262]as
quick when, having reached a certain height at which they can in
some sort take their bearings, they launch themselves with all their
power of wing towards that part of the horizon where are their nests?
Is it memory which traces their aerial way across regions seen for
the first time? Evidently not. It is not possible to recollect the
unknown. The Hymenopteron and the bird know nothing of their
surroundings; nothing can have taught them the general direction
which they followed when carried thither, for it was in the darkness of
a closed box that the journey was made. Locality, orientation,—all is
unknown, and yet they find their way. They have then as guide
something better than simple memory—a special faculty, a kind of
topographic consciousness of which we can form no idea,
possessing nothing analogous to it.

I am now about to establish experimentally how subtle and precise is

this faculty in the narrow cycle where it is applied, and also how
limited and obtuse when it has to move out of habitual conditions.
Such is the invariable antithesis of instinct.

A Bembex, actively engaged in feeding her larva, has left her burrow.
She will return immediately with the product of the chase. The
entrance is carefully stopped with sand—swept backward by the
insect before departing. Nothing distinguishes it from the rest of the
sandy surface. But this offers no difficulty to the Hymenopteron, who
finds her doorway again with a sagacity which I have already
described. Let us plan some treachery; let us perplex her by altering
the state of the place. I cover the entrance with a flat stone as large
as [263]my hand. She soon returns. The complete change made upon
her threshold during her absence does not seem to cause her the
slightest hesitation; at all events she alights immediately upon the
stone, and tries for an instant to hollow it, not at a chance spot, but
exactly over the opening of her burrow. Quickly turned aside from
this attempt by the hardness of the obstacle, she traverses the stone
in every direction, goes round it, slips underneath, and begins to dig
in the precise direction of her dwelling.

The flat stone is too trifling an obstacle to disconcert the clever fly; let
us find something better. I did not allow the Bembex to continue her
excavation, which I saw would soon prove successful, and drove her
far off with my handkerchief. The absence of the frightened insect for
a considerable time allowed me to prepare my snares leisurely. What
materials must now be employed? In these improvised experiments
one must know how to turn all things to profit. Not far off on the high
road is the fresh dropping of a beast of burden; here is wood for our
arrow. The dropping was collected, crushed, and spread in a layer at
least an inch thick on the threshold of the burrow and its
surroundings over more than a quarter of a yard. Assuredly here was
such a façade as never Bembex knew. Colour, the nature of the
material, the effluvium,—all combined to deceive the Hymenopteron.
Can she take this stretch of manure—this dung—for the front of the
dwelling? She does! Here she comes; studying from above the
unusual condition of the place, and settling in the middle of the layer,
just opposite the entrance, routing about, making a way [264]through
the fibrous mass, and penetrating to the sand, she promptly
discovers the mouth of the passage. I stop and drive her away a
second time.

Is not the precision with which the Bembex settles before her
dwelling, though masked in a way so novel, a proof that sight and
memory are not in such a case the only guides? What further can
there be? Smell, perhaps. That is very doubtful, for the emanations
from the dung could not baffle the perspicacity of the insect.
Nevertheless, let us try another odour. I happen to have with me, as
part of my entomological outfit, a little phial of ether. The covering of
manure is swept off and replaced by a cushion of moss, not very
thick, but covering a wide surface, on which I pour the contents of
my phial the moment I see the Bembex coming. The over-strong
emanations keep her off, but only for an instant. She alights on the
moss, still reeking of ether, traverses the obstacle and penetrates to
her dwelling. The etherised effluvia did not disturb her any more than
did those of the manure; something surer than smell tells where her
nest is.

The antennæ have been often suggested as the seat of a special

sense to guide insects. I have already shown how the suppression of
these organs appears to offer no obstacle to the researches of the
Hymenoptera. Let us try once more in wider conditions. The Bembex
is caught, its antennæ amputated to the roots, and is then released.
Stung by the pain—wild with terror at being held between my fingers
—the insect flies off swifter than an arrow. I had to wait a whole hour,
uncertain as to its [265]return. However, it came, and with its
invariable precision alighted quite close to its doorway, whose look I
had changed for the fourth time, having covered the site with a large
mosaic of pebbles the size of a nut. My work, which, compared to
the Bembex, surpassed what for us are the Megalithic monuments of
Brittany, or the lines of Menhirs at Carnac, was powerless to deceive
the mutilated insect. Though deprived of antennæ it found the
entrance in the midst of my mosaic as easily as would have done an
insect under other conditions. This time I let the faithful mother go
home in peace.

The site transformed four times over, the outworks of the abode
changed in colour, scent, and material, the pain of a double wound,
—all failed to disconcert the Hymenopteron or even to make her
doubtful as to the precise locality of her doorway. I had exhausted
my stratagems, and understood less than ever how the insect, if it
have no special guide in some faculty unknown to us, can find its
way when sight and smell are baffled by the artifices of which I have
spoken. Some days later an experience gave me the opportunity to
take up the problem from a new point of view. The Bembex burrow
had to be bared in its whole extent, without quite destroying it, to
which operation its shallowness and almost horizontal direction, and
the light soil in which it was made, lent themselves readily. The sand
was gradually scraped off with the blade of a knife, and thus,
deprived of roof from end to end, the underground abode became a
semi-canal or conduit, straight or curved, some eight inches long,
open where was the entrance, and ending [266]in a cul-de-sac where
lay the larva amid its food.

The dwelling was uncovered in full sunshine; how would the mother
behave on her return? Let us consider the question scientifically. The
observer may be greatly embarrassed: what I have already seen
leads me to expect it. The mother’s impulse is to bring food to her
larva, but to reach this larva she must first find the door. Grub and
entrance are the points which appear to deserve being separately
examined; therefore I take away grub and food, and the end of the
passage is cleared. There is nothing more to do but arm one’s self
with patience.

At last the Bembex arrives and makes straight for her absent door,
only the threshold of which remains. There for a good hour did I see
her dig, sweep the surface, send the sand flying, and persist, not in
making a new gallery, but in seeking the loose sand barrier which
should yield to the mere pressure of her head and let her pass
easily. Instead of loose materials she finds firm soil not yet disturbed.
Warned by this resistance she limits her efforts to exploring the
surface, always close to where the door should be, only allowing
herself to deviate a few inches. She returns to sound and sweep
places already sounded and swept some twenty times, unable to
leave her narrow circle, so obstinately convinced is she that the door
must be there and nowhere else. With a straw I pushed her gently
and repeatedly to another point. She would have none of it, and
came back at once to where the door ought to have been. Now and
then the gallery, turned into a semi-canal, appeared to attract [267]her
attention, but very faintly. She would go a few steps along it, still
raking, and then return to the entrance. Two or three times I saw her
go the whole length of the gallery and reach the cul-de-sac where
the larva should be, do a little careless raking, and hurry back where
the entrance used to be, and continue searching with a patience
which exhausted mine. More than an hour had passed, and still she
sought on the site whence the door had disappeared.

What would happen in the presence of the larva? That was the
second part of the question. To continue the experiment with the
same Bembex would not have offered sufficient guarantee, as the
creature, rendered more obstinate by her vain search, seemed
possessed by a fixed idea, and this would have interfered with the
facts which I wanted to prove. I required a new subject, concerned
solely with the impulses of the actual moment. An opportunity soon
came. The burrow was uncovered, as I have just said; but I did not
touch the contents; larva and food were left in their places,—all was
in order inside, the roof only was wanting. Well, with this open
dwelling, whose every detail the eye could embrace,—vestibule,
gallery, cell at the far end, with the grub and its heap of provender,—
this dwelling turned into a roofless gallery at the end of which the
larva was moving restlessly, under the hot sun, its mother continued
the manœuvres already described. She alighted just where the
entrance had been, and there it was that she hunted about and
swept the sand—there that she always returned after some hasty
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