Welcome to class of evolving multinationals by dr satyendra singh www uwinnipeg ca ssingh5
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Welcome to class of Evolving Multinationals by Dr. Satyendra Singh www.uwinnipeg.ca/~ssingh5. Objective. Identical Role of Subsidiaries Traditional Affiliate CEO ≈ Parent CEO Affiliates do what parents do Internally Differentiated Form Different capabilities from different affiliate

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Welcome to class of evolving multinationals by dr satyendra singh www uwinnipeg ca ssingh5
Welcome to class ofEvolving MultinationalsbyDr. Satyendra Singhwww.uwinnipeg.ca/~ssingh5


Objective
Objective

  • Identical Role of Subsidiaries

    • Traditional

    • Affiliate CEO ≈ Parent CEO

    • Affiliates do what parents do

  • Internally Differentiated Form

    • Different capabilities from different affiliate

    • Optimize its worldwide operation

    • Gain efficiency – Global structure

    • Achieve network flexibility

    • Develop capability  Evolve


Dimensions of evolution
Dimensions of Evolution

  • Geographic Expansion

    • Geographic proximity

    • Cultural similarity

    • Similarity in economic development

  • Line of Business Diversification

    • Liability of foreignness

  • Functional Migration


Geographic expansion
Geographic Expansion

  • Geographic Proximity

    • 1st enter neighboring country/countries

    • Sequential move to farther places

  • Cultural Similarity

    • 1st in a country with similar culture (eg language)

    • ↑ effective communications

    • ↑ understanding of local customs and markets

  • Similarity in Economic Development

    • 1stcountry similar to home country/PPP

    • Similar buying habits as home market consumers

    • Product adaptation is modest

    • Learn 1st, develop capability, then go diff. country


Example geographic expansion
Example – Geographic Expansion

  • HO: USA (Colgate-Pamolive)

  • Geographic expansion

    • 1st Canada 2nd Mexico …

  • Culturally similar Anglo-Saxon

    • 1st Australia, NZ, UK…

    • Modest adaptation – language

    • Learn  more culturally different market

      • Latin America (different language, trade barrier)

  • Relative importance of the factors

    • Internet, economic development…


  • Line of business diversification

    Competitive advantage versus local firms

    LOB 1

    LOB 2

    LOB 3

    LOB 4

    Time

    Liability of foreignness

    Line of Business Diversification

    • 1st add strongest single LOB  profitable

      • Profit can offset unfamiliarity of local market

    • Then add 2nd LOB with less comp adv

      • Learn how to compete in local environment

    • Then add with no comp adv

      • Learn from IJV/acquisition from superior partner


    Example line of business
    Example – Line of Business

    • HO: Japan (SONY)

    • Enter US with TV

      • Enjoy competitive position over US

      • Good profit  justifies greenfield operation

    • Then AUDIO, then Magnetic Tape

      • Took advantage of favorable exchange rate

      • New LOB, if benefits offset disadvantage in mkt

    • Then, wished to develop capability in Data Storage System

      • Began to make acquisitions


    Functional migration

    Strategic

    Leadership

    Business Planning

    Local Design and Procurement

    Assembly

    Marketing and Distribution  only is not enough

     Good for local knowledge

    Time

    Functional Migration

    • Development of activities performed by lines of business within a country

    • Greenfield (demand > supply)

    • Acquire for vertical integration

    • Acquisition accelerates

    • functional migration

     worldwide


    Example functional migration
    Example – Functional Migration

    • HO: Japan (SONY), Enters US with TV

      • But all manufacturing was in Japan  SONY wanted

      • SONY got accused of dumping

      • SONY made FDI in US  assembly only

      • Product and Process knowledge transferred from Japanese exec to US exec

      • SONY generated resources in US

        • Began full manufacturing

      • Plant was monitored initially by Japanese

    • SONY is not replicating functions abroad, but shifting abroad  highest being strategic leadership worldwide


    Mnc evolution integrated process
    MNC Evolution – Integrated Process

    • Accelerated Evolution

      • MNC evolves along all the dimensions at the same time

    • Punctuated Evolution

      • Discontinuous skips steps  no duplication

      • Share functions

        • b/w existing LOB Finance, legal…

        • Across countries within a single LOB  R&D, Mrf Common in trading blocks  EU, NAFTA…

      • Skip functions where more efficiently performed

      • Efficient evolution  Economies of scale and scope

  • Reverse Evolution

    • Restructuring of operations

    • Consolidation of lines of business and shutting down subsidiaries  examine multidomestic structure