Chapter 5 Flashcards
Homogenization:
treating all the subsidiaries the same
Centralization:
making all strategic decisions at the headquarters
Universal/ United Nations model of multinational management
The mistake of homogenisation.
The MNEs give each subsidiary the same roles and responsibilities and the subsidiaries are subjected to the same coordination and control systems.
This approach usually involves complete subsidiary independence (as in multicentered MNEs) or complete dependence (as in centralized exporters and international projectors). Universal response helps to deal with the coordination problem, but sometimes it is better to allow limited subs authorisation.
Headquarters hierarchy syndrome
The mistake of centralisation.
The subsidiaries are seen as units that act as implementers and
adapters.
Views that the organisation consists of two levels, the dominant layer and the subordinates that will implement.
The dominant headquarters control key decisions and company
resources to be able to implement a consistent international strategy.
The national subsidiaries are subordinates that implement the global strategy.
To decide how much authority to give a subsidiary, Bartlett and Ghosal decided that subsidiary autonomy depends on:
The strategic importance of each market, which should be assessed by the senior corporate management.
How strong are the subsidiaries’ resources like labor, technology, marketing achievements, R&D. Senior management should rate the resource base of each subsidiary.
What are the 4 subsidiary classification systems from Bartlett and Ghosal
Black hole
Implementer
Strategic leader
Contributor
Black hole
Weak in resources, but located in a strategically important market.
Being used to maintain a presence in this key market to keep ahead of new innovations by competitors.
In the long run this unit wants to commit more resources to build up.
Implementer
Weaker in resources and low in the strategic importance of the market with respect to long-term survival, growth and profitability of the MNE. Most subsidiaries fit in this type.
This unit is the key to a firm’s overall success, because it
generates a steady stream of cash flow and it may help to build
competitive advantage by contributing to company-wide scale and scope economics
Strategic leader
High in resources and high in the strategic importance of the market.
The role of this unit is to assist the headquarters in identifying industry trends and developing new FSAs in response to emerging opportunities and threats.
Contributor
High in resources, but low on importance of strategically local market. This unit is typically for developing new FSAs.
Its subsidiary specific, specialised resource base might benefit other units, if the headquarters understand its potential economic value for the entire MNE
Due process (procedural justice) implies that decision making involves five principles
1 The familiarity of the corporate headquarters with the local
situation at the subsidiary level. Senior managers understand the implications of the decisions for the subsidiary.
2 Effective two-way communication between subsidiaries and
corporate headquarters.
3 Consistency in decision making across subsidiaries. There must be a clear and transparent routine when making decisions across all subsidiaries.
4 The possibility for managers of subsidiaries to challenge the
dominant perspective at corporate headquarters.
5 A transparent explanation of final decisions made by corporate headquarters.
Five main problems of Japanese MNEs
1 Japanese MNEs adapt a centralised, autocratic approach for their foreign subsidiaries. This approach is adopted without evidence of a consensus-based management style.
2 Japanese MNEs have little confidence in the ability of non-Japanese managers in subsidiaries in host countries.
3 Relationships of trust that are established between corporate
headquarters and foreign subsidiaries are usually specified to a few key managers.
4 Japanese staffing policies are often ethnocentric.
5 Japanese MNEs often avoid unions and discriminate against women and minorities. While they are very sensitive to host government regulation and the rule of law.
