Parent-Subsidiary Relations Flashcards
What is affinity?
Developing relationships, social networks with other businesses and important stakeholders such as the gov essential
How can Amazon enter and succeed in Africa?
- Pay on delivery
- Gov relationships
- Intermediaries
- Internet penetration
- Sourcing locally
- Catalogue and interface
- Joint venture
- Inefficient address systems - no house number, nameless street
How is Jumia Africa’s no.1 online retailer?
Used pick up locations, own fleet and branded fleet to overcome distribution problems and poor address systems
Pay on collection to overcome capital market voids: online payment, fraud
What is corporate strategy and how does it relate to subsidiary relations?
How the business is going to run, what markets to enter. Focused control and guidance of subsidiaries - relationships between HQ and subsidiaries.
What does organisational infrastructure consist of?
- Information and resource flow systems
- Coordination and control mechanisms
- Essential to coordinate cross border business
What are the different MNE control approaches?
Essential due to volatility in EMs
1) Market - reward through resources for good behaviour, take away for bad
2) Culture - value system, norms, make subsidiaries follow this culture and regulation
What are the different control mechanisms?
Input controls - feedback and advice before action (small orgs)
Output controls - feedback after something (large orgs)
Resource allocation - changing the distribution of resources
Why is MNE structure important?
- Essential to monitor and evaluate effectiveness of subs
- Basis for organising strategy
- Functional, international division, global: product/area, division
- Careful not to treat subsidiaries as places to get resources
Why are existing structures inadequate for EM subsidiaries?
- Now seen as centres for R&D and innovation, not just markets
- Intellectual leadership now comes from EMs as well as advanced
- Subs need to be linked to other subs in EMs and western markets
- Linkages are very important
What is a t-shape structure in terms of linkages?
Linkages across countries and linkages within each country. HQ moving functions closer to EMs
How does the t-shape structure break up the operations of MNEs into two parts?
Front end (customer facing)
- Greater autonomy to EM units
- Localisation of decision making
Back end - distribute parts of functions across countries based on expertise (use EMs for globally segmented innovation)
Why are there control challenges in EMs?
- Language and cultural differences - HQ staff limited in foreign skills
- Geographic distance: time
- Institutional duality
- Legal differences - HQ control within law constraints
- National interests - host sovereign power to reduce control
- Centralisation vs decentralisation; locus of decision making
What is obsolescing bargain?
A bargain between an MNE and a host country gov that favours the MNE but over time due to increase of fixed assets, the bargaining power shifts to the gov
What is obsolescing legitimacy?
Foreign firm’s gradual loss of legitimacy from local society due to association with previous political regime
What should an MNE consider when entering emerging markets via acquisition?
- Institutional conditions: similar or different: market characteristics, voids
- Level of diversification - similar to existing units/products
- Level of interdependency
