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Strategy and Structure of Multinational Companies

Chapter 2, International HumanResource Management

MGT 670I – Dr. Hennessey

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Differences Between Domestic AndMultinational Firms (Adler, 1983)

Multiculturalism

the presence of people from two or morecultural 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

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Differences Between Domestic AndMultinational Firms

Complexity In comparison with domestic organizations,

complexity is greater in multinational organizationsbecause of… 

the need for multinational corporations to be moresensitive to government, labor, and public opinionconcerns (91.7%) and regulations (62.5%);

home-country philosophies and practices that areinapplicable 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 HRMin addressing them, by their nature.

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Differences Between Domestic AndMultinational Firms

Potential Benefits of Multiculturalismand Geographic Dispersion

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Sources Of Competitive AdvantagesAnd Strategic Objectives

Strategic objectives

Linking means and ends: four differentstrategies for multinational companies

Multi-domestic

International

Global

Transnational

Competitive strategies and ownership,location and internalization advantages

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Strategic Objectives

Bartlett and Ghoshal (2000) argued thatMNC’s must satisfy three strategicobjectives:

Global efficiency Global integration of activities is the usual path

Multinational flexibility

Managing the risk and volatility of the globalenvironment

Worldwide learning Develop diverse resources, then learn from

them

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Linking means and ends: four differentstrategies for multinational companies

Table 2.1 Sources of competitive advantageStrategic

ObjectivesNational

DifferencesScale

EconomiesScope

Economies

Global

Efficiency

Exploitingdifferences in factorcosts and national

preference

Expanding andexploiting potentialscale economies in

each activity

Sharing of investments and

costs across

markets andbusinesses

MultinationalFlexibility

Managing risks andopportunitiesarising from

national differences

Balancing scale withstrategic andoperationalflexibility

Portfoliodiversification of 

risk and creation of options and side

bets

WorldwideLearning

Learning fromsocietal differencesin organizationaland managerialprocesses and

systems

Benefiting fromexperience – cost

reduction andinnovation

Shared learningacross

organizationalcomponents in

different products,markets, orbusinesses

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Structuring MultinationalCompanies

Strategy and structure: the early studies

Strategy and structure: recentdevelopments

Multi-domestic organizational model

International organizational model

Global organizational model

Transnational organizational model

The integration–responsiveness framework

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An Empirical Test Of Typologies Of Multinational Companies

Typology elements

Organizational design

Interdependence

Local responsiveness Control mechanisms

In summary: three ideal-type multinationalcompanies

Global companies

Multi-domestic companies

transnational company

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Human Resource Management InMNCs

Perlmutter’s international states of mind

Ethnocentric

Polycentric

Geocentric

The transfer of HRM practices across

borders