Evolving Multinational We are taking a dynamic point of view Firms evolve along three basic dimensions: - geography - line of business - functional migration 1. Geographic expansion direction governed by proximity - geographic ` - cultural - similar level of economic development 2. Line of Business - (not well researched) Evidence suggests we start with a line of business that has a strong competitive advantage over domestic companies. Then as we learn more about the local market (in a sense the high margins subsidize our learning) we can move into less competitively distinctive markets

3. Functional migration - Scope of functions performed by local subsidiary increases over time Exporting -almost none Foreign subsidiary -sales -accounting -assembly - design - procurement -business planning -strategic leadership Evolution can be either - continuous - goes through all the stages or punctuated (discontinuous) - skips some steps, e.g. entering one EEC country to do business in them all

1. Identifying opportunities for scale and scope economies Reverse evolution - (same as restructuring, re-engineering in domestic context) Problem: We’ve got too big to be efficient, we need to reduce, simplify e.g. go from a country-by-country approach to regional - serve all countries in a region from a single country Reverse evolution often associated with old established MNC’s, that now find economic, political, technological environment has changed so that old patterns of structure and doing business no longer work. Outcome is often an asymmetric mix of - functions - sets of lines of business - irregular (dissimilar) set of international subsidiaries Task for the MNC: 1. Identifying opportunities for scale and scope economies 2. Actively leveraging knowledge and experience across dimensions