1.

Administrative Heritage Companies are a captives of their past, therefore any type of organizational transformation stems from where the company is coming from (its administrative heritage) (317). For any particular company, administrative heritage can be one of the companys greatest assets underlying its core competencies because it resists change and thereby prevents realignment (317). Despite belonging to the same industry, MNEs originating from different regions around the world may exhibit different heritages, which would inevitably lead them to adopt different types of strategic and organizational models. a. Decentralized Federation In a decentralized federation most key assets and resources are decentralized and they are loose personal controls where financial capital flows out and dividends flow back. Corporate management treat subsidiary as independent national businesses. Most companies with a multinational strategy are managed through a decentralized federation / organizational model. b. Coordinate Federation Coordinated Federations are organized with many assets and resources decentralized but controlled from the center. There are type formal systems based control and knowledge flows from the parent technology and expertise is locally adapted. Corporate management treats subsidies as foreign extensions of domestic operations. c. Centralized Hub In an organization managed through a centralized hub most key assets and resources are centralized. There is tight strategic and operational control through centralized decision-making, and the goods flow from the center parent out to subsidiaries. Corporate management treats subsidiary as delivery pipelines to the global market. 2. Transnational Organization There are three important characteristics, which differentiate transnational organizations from multinational, international, or global organizations: it develops and legitimizes multiple diverse internal perspectives, its physical assets management capabilities are distributed internationally but are interdependent, and it has a robust and flexible internal integrative process (321).

a) Multidimensional perspectives - Transnational organizations must be equipped with the skills to sense and strategically analyze the numerous and often conflicting opportunities, pressures, and demands it faces worldwide (321). - An effective national subsidiary management is required to understand and filter the changing needs of local consumers and the increasing pressures from host governments (321). On the other hand, an efficient global business management is also required to track the strategy of global competitors and provide the coordination necessary to respond appropriately (321). On a global scale, a capable worldwide functional management is helpful to focus on corporate knowledge, information, and expertise (321). - In transnational companies, biases in the decision-making processes are often balanced out by building up the capability, credibility, and influence of the less powerful management groups, while still protecting the morale and expertise of the dominant group (322). The main task is to build a strong multidimensional organization whereby power is equally and efficiently distributed to all three management groups. b) Distributed, Interdependent capabilities - It is very important for transnational organizations to be able to make decisions among the diverse opportunities and demands it faces and respond in a timely and effective manner (322). - In transnational organizations, management strategies breaks away from the restricted rule that assumes it must centralize the activities for which a global scale or expertise is important (322). Instead, this type of management places importance on national units to achieve global scale by specializing their activities and giving them responsibility of becoming the companys world source for a given product or expertise (322). Chapter 5 1. Making local innovations efficient a. Empowering local management The most important factor supporting local innovation is the dispersal of the organizational assets and resources. Also the authority that occurs so easily in decentralized Federation Company. It is important to build national organization with substantial degree of autonomy and self-

sufficiency. b. Linking local managers to corporate decision making process Whereas local resources and autonomy make it feasible for subsidiary managers to be creative linkages to corporate decision making processes makes it necessary to become more effective for company as a whole. c. Integrating subsidiary functions The local innovativeness of decentralized federation is enhanced because of the strong cross-functional integration that typically exists within each national operation. 2. Making transnational process feasible Instead of seeking organizational clarity by basing relationships on dependence or independence transnational companies build and manage interdependence amongst different units of the company. Instead of considering control or key tasks corporate managers search for complex mechanisms to coordination and co-opt the differentiated and interdependent organizational units into sharing a vision of the companys strategic task.