oGiven a worldwide/global mandateCharter to be responsible for one MNE function throughout the worldE.g. Huawei’s Sweden sub has worldwide mandate in network consultingThis strategy makes great sense in industries where pressures for cost reductions are paramount and pressures for local responsiveness are relatively minor
Particularly commodity industries such as semiconductors and tiresoTransnational strategyAims to capture the best of both worlds by endeavoring to be both cost efficient and locally responsiveIn addition to cost efficiency and local responsiveness, a third hallmark is global learningand diffusion of innovationsTraditionally diffusion of innovations in MNEs is a one-way flow from the home country to various host countriesoUnderpinning this is the assumption that the home country is the best location for generating innovationsoBut no guarantee that home country will generate highest quality innovationsMNE’s with this strategy promote global learning and diffusion of innovations in multiple waysInnovations flow from home country to host, but also flow from host countries tohome and flow among subs in multiple host countriesDisadvantage organizationally complex and difficult to implementLarge amount of knowledge sharing and coordination may slow down decision makingTrying to achieve cost efficiencies, local responsiveness and global learning simultaneously places contradictory demands on MNEsFour Organizational Structures:oInternational DivisionTypically used when firms initially expand abroad, often engaging in a home replication strategyE.g. Starbucks:Starbucks has international division and the four divisions that primarily focus on the USThis structure leads to two problems:Foreign sub managers (whose input is channeled through int’l division) are not given sufficient voice relative to the heads of domestic divisionsInt’l division serves as a silo whose activities are not coordinated with rest of the firm (which is focusing on domestic activities)Many firms phase out this structure after their initial stage of overseas expansionoGeographic area structureOrganizes the MNE according to different geographic areas (countries and regions)Most appropriate structure for localization strategyUsually area can be country or region led by a country/regional managerEach area largely stand-aloneCountry/regional managers carry a great deal of weight in a geographic area structure (in contrast to international division structure)Both the strengths and weakness found in its local responsivenessBeing locally responsive can be a virtue, also encourages the fragmentations of the MNE into fiefdoms.
oGlobal Product Division StructureOpposite of geographic area structureSupports global standardization strategy by assigning global responsibilities to each product divisionThis structure treats each product division as a stand-alone entity with full worldwide responsibilities
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