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 competitiveadvantage over domestic companies.

Then as we learn more about the local market (in a sense the high marginssubsidize 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

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 aregion from a single country

Reverse evolution often associated with old established MNC’s, that now find economic, political, technological environment has changed so that oldpatterns 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