Lecture 9

Question 1

Polycentrism

Answer 1

• Polycentrist management
  
  • Is so overwhelemed by national differences that it won’t introduce workable changes
  • Polycentric Orientation occurs when the culture of the country in which the strategy to be implemented is allowed to dominate a company’s international decision-making process.
• Advantages
  
  • Decentralized control
  • International businesses are autonomous form home office
  • Response to cultural diversity
• Disadvantages
  
  • Lose overall control of subsidiaries
  • shy away from certain good practices from home country or else where
  • Extensive deleagtion of decision making
  • Extensive imitation of prove succesful host country practices

Question 2

Ethnocentrism

Answer 2

‘Overlook national differences and:

• ignores important factors
• Believes home country objectives should prevail
• thinks change is easy’
• Mistake 1
  
  • Overlook important cultural factors abroad
• Solution:
  
  • refer to cheklists of cultural variables
• Mistake 2
  
  • Recongnize cultural differences but still focuses on achieving home-country rather than foreign or worldwide objectives
• Solution:
  
  • Decrease of long-term competitiveness

Ethnocentrism not entirely bad what works at home will work abroad, but excessive ethnocentrism can be costly& lead to business failure

Question 3

Geocentrism

Answer 3

Uses business practices that are hybrids of home & foreign norms

Based on informed knowledge of home & host-country needs, capabilities, & constraints

Preffered approach to business dealing with another culture

• Increases innovation
• Decreases likelihood of failure

Question 4

Roles of subsidiaries

Answer 4

• Two common, wrong assumptions made by senior MNE management

1. Unit Nations model of mulitnational management: Treat each subsidiary in a similar manner. Implies either subsidiary indepence or domplete depence
2. Headquarters hierarchy syndrome: Corporate headquarters rule (only valid in case of complete depence of sybsidiaries)

Question 5

Dysfunctional effects on the MNE

Answer 5

• First assumption: important markets and subsidiaries are treated in the same way as unimportant ones, and therefore the opportunities the provide are not optimally exploited
• Second assumption: subsidiaries with a distinct, specialiezed resource base are unable to escape from an implementer role, and loose their entrepreneurial motivation
• Solution
  
  • An organizational model of differentiated rather than homogenous subsidiary roles and of dispersed rather than concentraded responsibilities
  • Simple normative model as a response to differentiated subsidiary role requirement:
    
    • Assess each market according to its stategic importance
    • Rate each subsidiary’s resource base in terms of sales and marketing achievements, production capabilities, research and development, or any other strength contributing to competitiveness

Question 6

Subsidiary role

Black Hole

Answer 6

Weak unit in terms of specialized resources, but it is located in a strategically important market.

Maintain presence in a key market

Longterm: Build up their subsidiary, or they may want to engage in acquisitions or strategic alliances in order to access complementary resources and improve market success

Question 7

Subsidiary role

Implementer

Answer 7

Subsidiary with weaker or absent speicalized resources, and located in a market of lesser importance with respect to the MNE’s long-term survival, profitability and growth.

Common MNE subsidiary

Contribute to company-wide scale and scope economies

Steady cash flow

Question 8

Subsidiary role

Strategic leader

Answer 8

Highly compentent local subsidiary in a strategically important market

Assist corporate headquarters in identifying industry trends

Develops new FSAs in presonse to emerging opportunities and threats

Question 9

Subsidiary role

Contributor

Answer 9

Highly competent national subsidiary, but one located in a less important market

This subsidiary type has typically developed new FSAs, often as the result of an entrepreneurial host country management team.

Subsidiary specific, specialized resource base might then benefit other units in the firm if corporate headquarters understands its potential economic value to the entire MNE.

Question 11

Five simple principles of precedural justice

Answer 11

1. Corporate headquarters familiarity with the local situation at the subsidiary level
2. Effective two-way communication between corporate headquarters and subsidiaries
3. Consistency in decision-making across subsidiaries
4. Possibility for subsidiary managers to challenge the dominant perspective at corporate headquarterrs
5. Transparent explanation of final decisions made by corporate headquarters

Question 12

Emerging markets