The Management Challenge of Transnational Management

How should we then Manage? u Given rate of globalization, pace of technology, and PLC, the nature of international management is changing. u No longer sufficient to gain competitive advantage in one area. u Three prong approach to success u Present situation call for “new roles and responsibilities for managers”

Corporate level managers and their responsibilities u They are top level managers at the HQ u building a vision- setting direction for MNC, must be clear, simple, and relevant u leveraging corporate performance- proactive, effective delegation, little interference, and giving top mgmt support

u continuous renewal- preventing inertia. initiate continuous change as the environment changes.

Generalists at the HQ u Involved at the HQ level to capture various scope and scale economies, in worldwide setting u Have global perspective, and ability to coordinate activities across national boundaries to capture potential benefits u allocation of resources among different organization subunits, e.g... plant locations decisions and allocation of capital.

u Cross-border coordinator - coordination of flows of materials components and products across national boundaries.

The Functional Manager u They must perform more than just a staff role u Serve as intelligence scanner - highlighting new trends, new requirements and new regulations. establishing contact with other functional managers across boundaries.

u must cross-pollinate new ideas and development across boundaries. Help reduce the tendency of NIH u encourage transnational innovations. Help MNC to locally leverage and the same time globally link innovative activities.

The Country Manager u Bicultural interpreter - integrating the national and corporate culture, sensing of local environment and communicating it to to HQ u National defender and advocate - balance the tendencies to centralize with those forces pushing for localization, defend national needs and advocate national role

u Implementer of corporate strategy, dealing with diverse constituents, local government, unions, and at the same time maintaining trust of the HQ.

What are the new challenges facing big MNC nowadays? u Are present days MNC’s too big to survive in a more complex and nimble environment

Evolution of Transnational Company Is there a need for more agile smaller companies? Some argue that large MNC are better prepared for present day environmental complexity and uncertainty.

The New Emerging Model of Management u New management model is characterized by 3 core processes rather than formal structure as defined by different types of organizational units u The three processes are entrepreneurial process, integration process, and renewal process.

Entrepreneurial Process u Ability to open new markets and create new businesses. u Unlike in the past, market growth rate has slowed so opportunities are getting limited. u Specialized skills and knowledge are replacing capital as sources of competitive advantage.

u Relevant sources of competitive advantage are no longer accumulated at the top of the organization. u As a result entrepreneurial function is not necessarily at the top of the organization. u An entrepreneurial organization is built around a core entrepreneurial process that drives what the organization does.

u Managerial roles are now defined as : entrepreneurs who create and pursue new growth opportunities, Coaches, senior managers who review, and support the front-line initiatives and Corporate leaders who establish strategic mission and performance standards.

u Companies that are driven by the entrepreneurial process tend to have four common attributes, organizations are built around relatively small units, that are interdependent (not SBUs), they use multistage resource allocation process, with a highly structured rigorous financial control system, and a shared definition of where the company is headed.

u While there is latitude for creativity, there are also boundaries to make sure that activities fall within the mission of the organization.

Integration Process u The second of the core process -- linking diverse assets and resources to build competencies and leverage those competencies in new markets u The autonomous units created by the entrepreneurial corporation must be integrated in order to avoid inconsistencies, conflicts, and fragmentation.

u There is the need to hold the different parts together using normative integration, i.e... a set of clear and motivating organizational values. u It is the job of the corporate managers to nurture and embed the values in the organization.

The Renewal Process u Companies must challenge internalized wisdom and traditional ways of doing things u The renewal process must be designed to challenge the underlying assumptions of present strategies, and focus on creating new competencies to meet the challenge of the future.

u Managers must realize that changes in the environment are not necessarily linear or incremental. changes may be turbulent. u Strategic renewal has two components, rationalization, and revitalization. u Rationalization focuses on the efficiency and effectiveness of present resources and continuous improvement. Making the best of resources available in hand.

u Revitalization, is the creation of new competencies that will help the company get to the next level of ambition, e.g. G.E moving into the service industry, consulting division of big four accounting firms.

u Rationalization and revitalization are not mutually exclusive, they build on each other. There must be a balance between short term performance and long term goals. Managers must build the organizational flexibility that is required for the renewal process.

u For MNCs to survive the turbulent environmental conditions, managerial roles must be different. First line managers must assume entrepreneurial role, mid level level managers will assume the role of inspiring coaches.

u The top management must create the internal environment with the organization to facilitate the entrepreneurial, integration and renewal processes.

Role of the Government Role of the Government u Is there a need for industrial policy? u Private /public partnership u Cross-national alliances u Regional and Worldwide cooperation.