Managing in MNEs

Lisa Smirnova

Lisa Consulting

"Structuring" in MNEs

International Structures

International Division

Advantages

International Structures

International Division

Disadvantages

International Structures

International Structures

  • Functional Structures
  • Disadvantages
  • inter-functional rivalry and competitiveness

    difficulties of communication

    conflicts could be repeated through subsidiaries

    International Structures

    • The Geographic Division
    • Advantages
    • regional economies of scale

      effective where regions can be treated as whole markets

    International Structures

    • The Geographic Division
    • Disadvantages
    • Lack of co-ordination over product lines

      rivalry between regions could deflect attention from corporate strategy

      Problem of allocating resources

    Control System Characteristics

    • Accuracy
    • Timing
    • Objectivity
    • Acceptability
    • Understandability
    • Cost effectiveness

    International Control Mechanisms

    • Accounting and Auditing Controls
    • Control through plans, policies and procedures
    • Bureaucratic v corporate culture control
    • Centralization v decentralization
    • Information systems
    • Performance evaluation issues

    Managing International Operations

    • Relationships with host governments and agencies
    • Staffing and personnel issues - policies, training, compensation, health and safety.
    • Recruitment and management of subsidiary management.
    • Corporate and business unit strategy and control
    • Strategic imperatives such as innovation synergies and reduction of lead times.
    • Sourcing, production and logistics issues

    Global/Local Dilemma

    The global/local dilemma is a problem that "conventional organizational theory cannot solve"

    Peter Drucker, Management: Tasks, Responsibilities, Practices (1973)

    Global/Local Dilemma

    Think Globally

    Act Locally

    Global/Local Dilemma: Competition

    Pressure to Globalize Pressure to Localize
    Presence of multinational competitors Local competitors requires speed and flexibility
    Uniform products (ball bearings) Non-uniform products demanded (packaged foods)

    Global/Local Dilemma: Marketing

    Pressure to Globalize Pressure to Localize
    MNC customers want multicountry uniformity of service Differences in distribution channels, pricing, positioning

    Global/Local Dilemma: Manufacturing

    Pressure to Globalize Pressure to Localize
    Economies of scale Protectionism
    Economies of scope tariffs, performance requirements

    Global/Local Dilemma: Technology Transfer

    Pressure to Globalize Pressure to Localize
    Facilitates transfer of proprietary technologies Need to adapt technologies to local conditions

    "Staffing" in MNEs

    The ways in which multinationals hire, educate, post and promote the corps on whom they rely to manage and lead the organization

    European multinationals have emphasized staffing with long-time associates for overseeing international affiliates

    "Shared Values" in MNEs

    The means by which multinationals develop the shared governing ideas affecting what employees believe about their organization--its mission, vision and 'how we do things around here'.

    Japanese multinationals have used cultural bonding to exert hegemony over international operations

    Operational Distance

    Loose/open Tighter/closed
    generally more independence generally more 'hands on'
    planning decentralized planning more centralized
    oversight: advise and assist detailed directing and controlling
    minimal/flexible standards complete/detailed standards
    less frequent meetings more frequent meetings

    Forces affecting multinational enterprises

    Industry Factors: Petroleum

    Industry Factors: Motor Vehicles

    Industry Factors: Electronics

    Industry Factors: Food/Packaged Goods

    Multinational Mission

    from Prahalad and Doz

    Examines businesses:

    Dynamics of Global Competition

    P&D: Managing Cash Flows

    Factors determining net cost

    P&D: Manufacturing Systems

    P&D: Creating Strategic Infrastructure

    Portfolio of manufacturing locations

    Constant attention of technology and productivity improvements

    Multimarket presence

    Global brand and distribution presence

    Product family