Organizing for Effectiveness HQ-Subsidiary Relationships

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Presentation transcript:

Organizing for Effectiveness HQ-Subsidiary Relationships Nathan Washburn Associate Professor Jon M. Huntsman School of Business Utah State University

International Strategy Assignment Teams represent the geographic locations of two different MNCs. Teams A, C, & E are Company 1. Teams B, D, & F are 2. The assignment for each company is to design and fabricate a product for their top customer: Use every part given and only the parts given Product must be a closed loop (don’t want any leaks) Product must be exactly the same regardless of the location it was made (copy exactly) Each company is following a different strategy: Company 1: One location designs and then communicates to the other locations. Company 2: All THREE locations simultaneously work to find a design All coordination across subsidiaries must be done by phone (no pictures) You have 50 minutes to complete this task and check back into the classroom with your products.

Exercise debrief What are the benefits and costs of centralized management? What are the benefits and costs of localization?

Different strategies have inherent tradeoffs Responding to local needs suggests that you cannot sell the same product globally (Philips, Nokia) Selling the same product globally suggests a lack of local responsiveness (Matsushita, Apple) High Global Strategy Trans-national Strategy Need for Global Integration Multi-domestic Strategy Low High Need for Local Responsiveness

Think global act local Create worldwide perspective (think global): centralize resources and responsibilities Create national competence (act local): decentralize resources and responsibilities Become transnational (think global and act local): create interdependence of resources and responsibilities across business units Shared decision making (resources, strategic options, responsibilities) Transfers across function, divisions, regions

Finding meaningful roles for national subsidiaries Strategic importance of local environment High Low Competence of local organization High Strategic Leader Contributor Implementer Black Hole Low