Highly responsive to pressures for cost efficiencies bc allows for

Highly responsive to pressures for cost efficiencies

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Highly responsive to pressures for cost efficiencies b/c allows for consolidation on a worldwide basis and reduces inefficient duplication in multiple countries o E.g. Unilever reduced # of soap-producing factories in Europe from 10 to 2 after adopting this structure This strategy is on the rise globally Main drawback local responsiveness suffers o Global Matrix Alleviates disadvantages associated with both geographic area and global product division structures, especially for MNEs adopting a transnational strategy Hallmark coordination of responsibilities b/w product divisions and geographic areas in order to be both cost efficient and locally responsive E.g. country manager in charge of Japan (i.e. Japan manger) reports to Product division 1 and Asia Division both of which have equal power in theory supports the goals of transnational strategy, but in practice it is often difficult to deliver
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reason while managers usually find dealing with one boss headache enough, they don’t appreciate having two bosses who are often in conflict this matrix may: add layers of management slow down decision speed increase costs while not showing significant performance improvement no conclusive evidence for the superiority of the matrix structure when things went well didn’t know whom to reward when things went bad didn’t know whom to blame ABB recently withdrew from the matrix structure (they were the poster child for this structure) The Reciprocal Relationship between Multinational Strategy and Structure o Relationship between strategy and structure is reciprocal o Three key ideas stand out: Strategy usually drives structure Fit b/w strategy and structure is crucial Misfit, i.e. combing global standardization strategy with geographic area structure = may have grave performance consequences Relationship is not one way Strategy drives structure, but structure also drives strategy Withdrawal from the unworkable matrix structure at MNEs such as ABB has called into question the wisdom of transnational strategy Neither strategy nor structure is static Often necessary to change strategy, structure or both In effort to move toward global standardization strategy many MNEs adopted global product division structure while de-emphasizing the role of country HQs o But unique challenges in certain countries (CHINA) pushed some MNEs to revive country HQs to more effectively coordinate numerous activities within a large, complex and important host country 12-2 How Institutions and Resources Affect Multinational Strategy, Structure, and Learning Exhibit 12.8: Institution-Based Considerations: o MNEs face two sets of rules of the game: formal and informal institutions governing: External relationships Subject to formal institutional frameworks erected by various home-country and host-country governments
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o E.g. to protect domestic employment, British gov’t taxes the foreign earnings of British MNEs at a higher rate than their domestic earnings Host-country gov’ts often attract, encourage, or coerce MNEs into undertaking
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