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MNC's Structure & Relatn Bet Head Quertr and Subsidery

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he dynamics of structural relationships between the headquarters and subsidiaries or branches, and the other types of organizational structures for the entire global corporate group and the roles of the SBUs (such as “National Units”, or “subsidiaries”, or “foreign operations” include! # Decentralized Federation $ost %uropean companies e&panding abroad faced local competition, so they needed to build local production facilities, and these National Units became increasingly independent# 'h
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  he dynamics of structural relationships between the headquarters and subsidiaries or branches, and the other types of organizational structures for the entire global corporate group and the roles of the SBUs (such as “National Units”, or “subsidiaries”, or “foreign operations” include! # Decentralized Federation $ost %uropean companies e&panding abroad faced local competition, so they needed to build local production facilities, and these National Units became increasingly independent# 'his form suited %uropean management tastes, where theinternal culture emphasized personal relationships rather than formal structures, and nancial controls more than operational)technical details# National Units had more operating independence and strategic freedoms from *+, and were managed more as a portfolio of oshore in-estments rather than a single international business# .t *+, strategic decisions were decentralized, with loose, simple controls o-er subsidiaries, and subsidiaries mainly too/ capital out and sent di-idends bac/, focusing on its own local mar/et# 'his type of organization ga-e the company a multinational strategy with a decentralized federation#0# Coordinated Federation .merican companies -aried from %uropean companies in this de-elopment, with an international strategy with a coordinated federation# *+ pro-ided mainly formal system controls such as planning, budgeting, replicating parent company administrati-e systems, and subsidiaries pro-ided mainly /nowledge 1ows bac/ to *+ in technology products, processes, and systems# 'his was also an “old boys2 networ/”, particularly powerful after 3orld 3ar 44, where companies le-eraged the U#S#2s strengths in technology, nancing, and sheer size# Newly independent nationsand reconstructions created built in demand for these .merican companies# .lthough the management systems were sophisticated (management consulting rms such as $c5insey and Bain did quite well during this period, foreign operations often felt they weren2t accorded a le-el of respect as they felt they deser-ed, with the amount of responsibility they managed# 4nstead, they were treated as e&tensions of *+2s plans, carrying out formal plans and sub6ect to controls by *+#7# Centralized Hub  'he typical 8apanese company forayed into the international mar/et mainly in the 9:;2s, and faced a dierent en-ironment than .merican and %uropean companies#  'rade barriers were falling, and its plants were new, e<cient, and scale=intensi-e#  'he 8apanese culture also contributed to this form, where competiti-e strategy emphasized cost ad-antages and quality assurance, and required tight central control of product de-elopment, procurement, and manufacturing# . centrally=controlled, e&port=based internationalization strategy represented a perfect t# >roup=oriented management practices came into play, communications=intensi-e, and people=dependent# . global strategy with an e&port focus was the norm for  these $N?s, with *+ maintaining tight, simple controls in /ey strategic decisions made centrally, and subsidiaries mainly managed the 1ow of goods#@# Integrated Network Model  'his type de-eloped for the transnational corporation, dierent from multinational, international, or global corporations! 4t builds and legitimizes multiple di-erse internal perspecti-es able to sense the comple& en-ironmental demands and opportunitiesA its physical assets and management capabilities are distributed internationally but are interdependentA and it has de-eloped a robust and 1e&ible internal integrati-e process# 3ith transnational corporations, *+ doesn2t need to centralize acti-ities for which global scale or specialized /nowledge is important# 4t gi-es National Units)subsidiaries the ability to become the company2s world source for a product)e&pertise# Being local, these Units can ha-e their thumbs on the local pulse in trends and de-elopments# Units become interdependent, and distributed, specialized resources and capabilities are shared# 'here are large 1ows of components, products, resources, people, and information amongst the Units# *+ has a comple& process of coordination and cooperation in an en-ironment of shareddecision=ma/ing#  2. Organization of Multinational Corporations  'he national srcins of the multinational corporationinuence their subsequent organizational e-olution#4n the United States, the great post=3orld 3ar 44e&pansion of multinational corporations coincidedwith the diusion of their adoption of the multidi-isionalstructure# 4ndeed, the reCnement of Dorganizational technologiesE permitted .mericanCrms to manage their rapidly growing operations on aworldwide basis# 'he young .merican multinational corporationbegan with little /nowledge and e&perience of theforeign mar/et# 4nitial foreign sales are e&portse&ecuted within the e&isting organizational structure# 'hese structures could be functional (e#g#, organizedby production and sales or di-isional (e#g#, organizedby geographic area or product di-ision# .s foreignsales increased, an international di-ision was createdto ma/e the sale and to pro-ide customer support# 4nconsequence, the domestic organizational unit wouldsell to the international di-ision its products at aninternal Dtransfer price#E .s this price was set by thedomestic mar/et, it was unli/ely to reect the competiti-econditions in the foreign country# $oreo-er,the products were often not designed to the tastes of foreign demand# Because of this internal conict, the.merican multinational corporation would replacethe international di-ision by transferring responsibilitiesto area di-isions (e#g#, %urope, .sia, South.merica or to product di-isions (Stopford and 3ells 9:0# 3hile these structures diminished the internalconict, they ran the hazard that the di-isionalmanagers across areas did not cooperate or thatmanagers across product di-isions tended to fall bac/upon focusing on the home mar/et#%uropean Crms grew up in a dierent en-ironment#%urope was a highly unstable continent during thetwentieth century, with signiCcant political and economicconicts# Borders sometimes changed, and theyalso mar/ed the necessity to pay commercial duties# 'he gradual creation of the %uropean Union in thelast third of the twentieth century eliminated tarisand lessened national dierences# 'his history mar/edtheir Crms# 'he organizational technologies in most of these countries were quite dierent to those found in theUnited States# *olding company structures werecommon, ban/s or other Cnancial institutions playedpowerful roles in ownership and cross holdings, andCrms were tied together in comple& Cnancial webs# 'hese structures, often called DmotherFdaughterEorganizations, reect the linguistic terms used innorthern %urope to describe headquarters and subsidiary# 'hese motherFdaughter structures consistedoften of a headquarters that held a portfolio consistingof ownership control o-er dozens of companies, manyof them in the same sector but located in dierentcountries# Geporting relationships among thesecompanies and headquarters was less formal than  found in .merican companies, and control was oftene&ercised through the mo-ement of managers whowere lifetime employees# 'hese structures were oftenseen as ine<cient, especially compared to the size andorganization of .merican multinationals that werein-esting rapidly in %urope at this time# %uropeancritics called for the restructuring of %uropean Crmsand industry along .merican lines# 'he structure of 8apanese companies reected alsotheir historical srcins# 4n 8apan, the trading companyperformed an e&traordinary role in the e&ports duringthe Crst two=thirds of the twentieth century# 'hesecompanies started primarily as wholesalers, but o-ertime de-eloped their own industrial companies locatedin 8apan and e-entually o-erseas# 'hough the forcedimposition of .merican antitrust law after 3orld 3ar44 disrupted these patterns, trading companies andother a<liated company networ/s, called keiretsu ,reconstituted the earlier pattern of constellations of domestic companies competing in home and, throughtheir trading companies, in foreign mar/ets# .s in the.merican and %uropean cases, 8apanese Crms -ariedin their internal structures, with functional and e-enfactory=based organization being the predominantstructures# Still, a dominant trend emerged o-er timeas the role of trading companies declined, especiallyfor the e&portation of industrial and high technologygoods# 'his trend consisted of the appendage of aninternational di-ision to the e&isting structure (Suzu/i 99 # 'hese dierent national structures confronted anincreasingly more globally integrated en-ironment inthe course of the twentieth century# 'his en-ironmentposed the classic organizational problem of balancingintegration and dierentiation# Hor the multinationalcorporation, this problem posed itself as meeting thedemands to achie-e global scale against the needs of national mar/ets and go-ernments# >i-en dierentnational principles of organizing the acti-ities of multinational corporations, there was not a rapidcon-ergence to a global structure# 'he growth of multinational corporations, especially in %urope, wasstymied by these traditions# ?ontinuing nationaldierences and the failure to de-elop harmonized%uropean corporate law deterred the emergence of pan=%uropean multinational corporations# $any of the most important cross=%uropean mergers in the 9:;s failed within a decade# 4nstead, .mericanmultinational corporations, less bound by these separatenational traditions, were able to create integrated%uropean strategies#Ne-ertheless, it was in %urope where new organizational
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