Managing multinationals

So your existing domestic market is saturated and you decide to branch out internationally. One of the decisions you have to make is how to set up your structure and capabilities to realise the options available.

There are issues in international strategy implementation, including operational issues, international management processes, centre<->periphery issues and network management issues. Normally, the most problematic is that of cross-cultures.

The trade off to be made is between
the search for global integration and scale efficiencies
the need for responsiveness to local markets and customer preferences

All international strategy decisions are/should be made with this trade off in mind. This approach is contingent upon context, and emphasises the optimal functioning of MNCs in the markets in which they operate. See Diagram 5.1 u7 p99

There is a need for strategic flexibility in international operations. Achieving this in practice is very difficult.

It takes a lot of skill to integrate and co-ordinate internationally. Mistakes can be highly visible (eg Dasani in Europe, u7 p102)

Previous posts have discussed that in a complex MNC, resources, responsibilities and decision-making are dispersed across all types of units, not just concentrated at the centre or the periphery. The units themselves may be asymmetrical in size and duration. This is what Bartlett and Ghoshal (1993) mean in "Beyond the M-form" where M is multidivisional. The N-form (Network) is here (Hedlund, 1994). In an N-form organisation, co-ordinating mechanisms are vital and senior management's role is different. There are many different types of co-ordinating mechanisms. Example - HP, P103, U7.

Bartlett et al (2004) say that the main responsibilities of managers in new transnational organisations are

close interplay between three key roles
frontline entrepeneurs
coaches (for the integration process)
corporate leaders (for the renewal process)

Each type of organisational structure resolves some problewms but causes others, and there can be competition for organisational resources. Close examination of the relationship between MNCs and their subsidiaries is a recent development within the field. Many organisations appear to neglect the creative potential of their subsidiaries.

Traditionally the subsidiary's role has been seen as reflecting the importance of its local market and its own competence. It was to identify local tastes by gathering market intelligence and then act as a local antenna to send signals about changing demand back to HQ. This is now perceived as a view that is much too narrow. In fact it sits an an interface with three sorts of markets.
Local market - competitors, suppliers, customers, regulatory bodies - all local stakeholders.
Internal market - head office and all other subsidiaries and related businesses
Global market - competitors, customers and suppliers beyond local and internal markets.

This is effectively viewing each subsidiary as operating in its own environment, with a "tunnel" through which it links itself to HQ.

Alliances can be an effective way of implementing your international strategy. Not all companies will be able to allocate resources or develop capabilities themselves for consistent management of quality and responsiveness across geographic boundaries. The favoured form of the firm has become a federal structure of operating divisions drawing on a common source of internal expertise, but where each division belonging to the federation is free to outsource expertise if it so desires (Buckley and Casson, 1998)


Rugman and D'Cruz (1997) concept of the flagship firm provides a good illustration as to how international collaborative networks and virtual organisations work in practice. A flasgship firm provides direction and strategic leadership to a network consisting of four other sets of partners
key suppliers
key customers
selected competitors
the non-business infrastructure (education, training, trade associations, government bodies, trade unions etc).

The presence of the flagship firm pulls the network together and provides strategic leadership for the network as a whole, and firms exist that have established key relationships with the flagship. Flagship firms are always an MNC. It is often in competition with other similar networks addressing the same end consumer. The flagship sets the strategy and the partners are intimately involved in implementing it but do not have any control over it. Example - DaimlerChrysler.

Many international strategies are now realised through strategic alliances. Stimuli for creating partnerships may be both external and internal. These are not just confined to the private sector. Virtual organisations require as much, if not more, management time, skill, effort and resources and have at least as many management pressures as wholly owned structures.

Example: the ending of the amazon/toys r us relationship, p117 u7

Virtual and network MNC forms are not easier options. Just different ones.