Strategy and Structure of Multinational Companies

Chapter 2, International Human Resource Management MGT 670I Dr. Hennessey

Differences Between Domestic And Multinational Firms (Adler, 1983)

Multiculturalism
the presence of people from two or more cultural backgrounds within an organization

Geographic dispersion
the location of various subunits of the parent firm in different countries

Both are significant, but both create increased complexity in organizations

Differences Between Domestic And Multinational Firms

Complexity
In comparison with domestic organizations, complexity is greater in multinational organizations because of
the need for multinational corporations to be more sensitive to government, labor, and public opinion concerns (91.7%) and regulations (62.5%); home-country philosophies and practices that are inapplicable in foreign locales (83.3%); the impossibility of implementing uniform personnel practices (83.3%) and performance standards (70.8%) (Adler, 1983: 15). Factors cited point to the significance of international HRM in addressing them, by their nature.

Differences Between Domestic And Multinational Firms

Potential Benefits of Multiculturalism and Geographic Dispersion

Sources Of Competitive Advantages And Strategic Objectives

Strategic objectives Linking means and ends: four different strategies for multinational companies
Multi-domestic International Global Transnational

Competitive strategies and ownership, location and internalization advantages

Strategic Objectives
Bartlett and Ghoshal (2000) argued that MNCs must satisfy three strategic objectives:
Global efficiency Global integration of activities is the usual path Multinational flexibility Managing the risk and volatility of the global environment Worldwide learning Develop diverse resources, then learn from them

Linking means and ends: four different strategies for multinational companies
Table 2.1
Strategic Objectives Global Efficiency Sources of competitive advantage National Differences
Exploiting differences in factor costs and national preference Managing risks and opportunities arising from national differences

Scale Economies
Expanding and exploiting potential scale economies in each activity Balancing scale with strategic and operational flexibility

Scope Economies
Sharing of investments and costs across markets and businesses Portfolio diversification of risk and creation of options and side bets Shared learning across organizational components in different products, markets, or businesses

Multinational Flexibility

Worldwide Learning

Learning from societal differences in organizational and managerial processes and systems

Benefiting from experience cost reduction and innovation

Structuring Multinational Companies

Strategy and structure: the early studies Strategy and structure: recent developments
Multi-domestic organizational model International organizational model Global organizational model Transnational organizational model

The integrationresponsiveness framework

An Empirical Test Of Typologies Of Multinational Companies

Typology elements
Organizational design Interdependence Local responsiveness Control mechanisms

In summary: three ideal-type multinational companies

Global companies Multi-domestic companies transnational company

Human Resource Management In MNCs

Perlmutters international states of mind
Ethnocentric Polycentric Geocentric

The transfer of HRM practices across borders