CH APTER

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MNEs confront two sets of pressures: Cost reduction – calls for global integration. Local responsiveness – calls for local adaptation.

Integration Responsive Framework

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International division: Typically used when firms engage home replication strategy

Geographic Area Structure: appropriate for localization strategy.

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Global product division structure: Highly responsive to pressure for cost efficiency; Reduces

inefficient duplication in multiple countries.

Global matrix: Designed to be both cost efficient and locally responsive; Difficult to deliver in

practice.

Institution-Based Considerations

External relationships

Internal relationships

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External relationships:

•MNEs are subject to frameworks erected by governments Informal• institutions dealing with host and home countries.

Internal relationships:

•Organizational structure specifies scope of various parties’ responsibilities.

Organizational norms, values, and networks

Resource-Based Considerations

Does a structural change add value?

Strategy must be rare.

Inimitability – formal structures are easier to observe, making informal structures more popular.

Organization of MNEs, formal and informal.

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Knowledge management:the structures, processes, and systems that actively

develop, leverage, and transfer knowledge.

Two categories of knowledge: Explicit knowledge – codifiable. Tacit knowledge – non-codifiable. Transfer requires hands-on practice.

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“The differences in knowledge management in MNEs stem

fundamentally from the interdependence between the

headquarters and foreign subsidiaries, and among various

subsidiaries”.

Subsidiary control:Subsidiary initiatives may inject a spirit of entrepreneurship throughout the larger corporation.

Corporate control: Hard to distinguish between good-faith subsidiary initiative and opportunistic empire-building. Subsidiary initiatives are not necessarily compatible with corporate-wide goals.