Tnc/ Mnc Future Final Project

7/28/2019 Tnc/ Mnc Future Final Project

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IIIrd Geneneration of MultinationalOrganizational Design & Structures and

Strategic intents.Sustain or Extinct?

FINAL PROJECT- Arooj Sajjad

TRANSNATIONAL MANAGEMENT


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Many have seen Firms Restructureand Downsize Many firms have tried Re-Engineering

Problem: There are Diminishing Returns onOperational Effectiveness. Will accelerate in medium

to long term. Less countries & more regions andshifts.

You cant Save your way to Success

Successful Firms do Not Just Over-Execute, i.e.Japanese Firms 1970-1980s

they also Out Think and Out Innovate their Peers- trendwill Re-visit and stay for a while.


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Value Created Left: What value you

provide Bottom: At what cost

Constantly movingoutward.. New technologies New management

approaches

This cannot continue

indefinitelywithoutcreating a new breed ofconsumers rather thancustomers.


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Operational Effectiveness Higher Quality

Higher Speed

Higher Productivity

Lower Defects

Lower Costs Lower Inventory

Performing similar activitiesbetter than rivals

Perform differentactivities thancompetitors

Perform similar activities indifferent ways

Choosing a different set ofactivities to deliver a

unique mix of value

Strategic Positioning

100s of activities

required to create,

produce, sell and deliver

products/services.

A firm can outperform

its competitors only if it

can establish a difference

that it can preserve.


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Fit as Consistency Are the resources internally consistent (match) Avoid Resource Acquisition and Management

Inconsistencies

I.E. Wal*Mart focuses primarily on those activities andresources that contribute to its position of costadvantage

Dell Computer specializes in those activities that

contribute to its cycle time, operations cost and priceadvantages. Refinement in such models would be onethe pillars. Market reseach will be replaced by HardCore Business intellegence to monitor daily shifts inbuying patterns.


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Do resources in one area reinforce resources inanother area to build competitive advantages? Location facilities reinforce distribution skills Information processing resources complement

inventory control Location and Distribution along with IT skills reinforce

inventory management competencies

Classic WalMart Example:

EACH STRENGTH IS SYMBIOTIC TO EACH OTHER


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SW Airlines: Exclusive use of 737sMaintenance (Cheaper), Parts (Cheaper)

Flight Crew Training/Availability (Cheaper)

Airport gate options , more flexible

Airport gate crews, more flexibility, backup

Food Catering: Simple Box

= Lower costs system wide, each decision isrelated and benefits spread to other processes/costs.

Low Cost Structure allows them to attack markets by bringing

down prices through greater utilization/efficiency of resource set.


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Focus attention on Key resources that possess amajority of desirable characteristics I.e. Low Imitability, High Transferability) Maximizing

lead time & minimum stock levels. Time basedmanufaturing and deliverability. Zero waste, recycled

technology & very high speed innovation & associatedimprovization. High level technical staff (much less

workforce).

Deploy resources that conform to strategy, eliminatethose that don't Fit. Rethink Value Contribution / Process GEs Work Out Program is the best example.


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Global firms are faced with a clear set of ContradictoryForces:

The need for Global Rationalization Scale and Scope Economies on a global basis The need for Local Responsiveness

Adaption to local governments, markets, standards and tastesand similar consumer precieved values but differenciation in

buying patterns. Speed of responsivness and change. Brand re-engineering on continious basis.


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1. Asset Intensity: more capital needs (eats) more volume2. Global Competitors: expansion, dont be left out fear3. Global Customers (if you cant supply me everywhere, you

cant anywhere)

4. Global Suppliers: enabler, since supply is global, you canpurchase globally also5. Technology Intensity (R&D): Needs to be spread around

the world; economics6. Universal Needs, Preferences, Tastes

1. Real needs (washing machines, cellular phones, internet)2. Created needs (McDonalds, Coca Cola, Starbucks in Brazil, China)


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Unique local needs, preferences, service

Government Intervention, Licensing

Industry Standards (sizes, protocols)

Lack of Global Competitors (open door) Limited Economy of Scale Opportunities

Locally Specific Marketing Tastes

Marginal Incremental Benefit to Economies of Scale


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Need for Global Rationalization High Costs, Centralized, Big Factories, Heavy Costs

Komatsu (high need) Phillips Electronics

Need for Local Responsiveness Decentralized, market driven, power in local

markets.

Locally tailored products, little need forcollaboration


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Most Firms are on one side or the other

Boeing (high centralized) iPhone (more local)

WhirlpoolA note on acquisitions

Work better in Local Responsive Organization, Just aname change.

Global/Centralized firms find employees/tacitknowledge rarely moves to HQ.


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Need for Global Rationalization Global Firms need massive economies of scale Customers accept a standard product

Boeing (high need) Phillips Electronics (low need)

Need for Local Responsiveness Multi-Domestic firms offer locally tailored

products Benefits of local responsiveness outweigh the

inefficiencies


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High Global RationalizationGLOBAL Tight, hierarchical integrated chain of activities that span multiple markets

Production is standardized across all countries same platforms

Global scale economies are stressed

Company will have one approach to markets irrespective of country location

REGIONAL Operation's are integrated within a region Regional decision making for production/marketing and sales functions

Country differences within region are downplayed

Company may have several regional strategies

MULTI-DOMESTIC High degree of responsiveness to national markets

National subsidiaries enjoy a high degree of autonomy

Efficiency emphasized on country by country basis Company will have multiple Country Strategies

High Local Responsiveness


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Organizational Structure should be constructed tofacilitate the Strategy

Nurture

Facilitate

Expedite


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Regional

Centralized: HQ, Finance

Controls and Portfolio & Core

R&DDecentralized: Product Choices,

Sourcing, Production, Marketing,

Sales and HRM, R&D

Globally Integrated

Centralized: R&D, Production,

Marketing, Planning, Resource

mgmt, HRM, and Finance

Regional/Local: Sales &Distribution

Multi-Domestic/LocalCentralized: HQ, Finance

Controls and Portfolio Choice

Decentralized: Product Choices,

Sourcing, Production, Marketing,Sales, R&D and HRM


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Coordinated World Strategy

Global Organization and Management

Global Management of Cash Flows

Global Resource Mgmt & Allocation Focus on Core Competencies

Global Transfer of Learning


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In global industry, more firmscoordinate their activities on a

worldwide bases

3 or 4 bosses, both product and

geographic markets

Results on a 3 or 4 dimensionalmatrix within the company

Strategy and Tactics must beconsistent to each other ANDacross all major product andgeographic markets

The Strategic position of a globalfirm in a single geographicmarket may be substantiallydetermined by the firms overallglobal position May be defensive Strategy may dominate, easy

economic decision.

L.M. Ericcson: all employees speak English because it is difficult to find good

international talent willing to learn to speak Swedish.


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Build and sustain a global organization structure Create formal reasons to think globally(meetings, events, awards) Track your competition on a global basis

Encourage Communication across formal boundaries Good ideas can originate almost anywhere Cycle time also applies to implementation of new ideas

Reinforce the need for Cultural Awareness and Sensitivity

You need to understand all significant markets and players A successful multicultural team can be a competitive advantage


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Build and Sustain Global Cost Advantage Scale, Scope or Experience Advantages Low (total) Cost Locations

Build and Sustain Profit Sanctuaries or Market Fortresses Geographic Region Home Country

Strategically coordinate international cash flows

International Cross Subsidiaries Minimize tax Obligations


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Will expenditure further firms broad corporate goals? You need to send consistent signals over time Continually re-calibrate environment/goals/behavior combination

Dont Rely solely on Financial Returns Need time to build profit sanctuaries May need presence in a specific geographic center of research

Some manufacturing flexibility is important; Hedge currency flow with capitalassets To offset government or FX pressures To learn techniques or processes from others

Define Human Resources Broadly (Globally) Human resources should f low through organization Cultural Biases will emerge, Long term planning is essential here


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Core competence at the heart and soul of a firm Consist of collective organizational learning in a critical area Core products, business units and end products flow from them Few firms will have more than a few of these such competencies

Traditionally originate from Asia Honda Engines, Canon Imaging

Dominating an area of core competence may offerunforeseen benefits to unseen consumers continiously. Should lead to domination of core products

May shape evolution of applications and end markets and new setof common cosumerism.

Get in or Start the Standards Body and you are:

Google / Bill Gates / Garmin (GPS)


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Organizations Learn: Basic Principle of CoreCompetence Local Knowledge Bases within the firm are real assets Measurement systems do not capture them (I.e income statement,

balance sheet)

Knowledge, like money has Velocity The more the user gets it, the greater the effect Unlike physical assets, use may enhance this asset

A global firm needs to transfer learning from around the

world Real economies of scope are possible Cycle Time is important here also

Learning's from Brazil must flow to Mexico, Thailand, US, Japan

Otherwise, Whats the advantage of being Global?


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Debates with managersfrom other countries

Fewer total basic products More variants on basic

products More worldwide products Foreign exchange rates are

often an issue Global managers must

understand the idea of FX

risk

Increased interaction withmanagers from othercountries

Increased travel time; moretime in field

More discussion aboutcustomers, competitors,technology and suppliers

with counterparts in othercountries

Multiple reportingrelationships

Life in the 21

st

Centuryand beyond..!


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Fit: its the unique way we put together our resourcesto deliver our product/service

Global / Local Strategic Choices'

People are incentivized to collaborate, shareknowledge across firm 24x7, continuously


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Appendix

A Si lifi d Vi f Di t ib ti A t


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A Simplified View of Distributing Autonomy

Corporate

Headquarters

Regional

Centers

National

Units

WorldProduct

Regionallybased orAdaptedproduct

Nationbased oradaptedproduct

Productcharacteristics

Strategicpositioning vs.operationalimplementation

GlobalStrategy

RegionalStrategy

NationalStrategy

Considerations

Strength ofglobalizationdrivers


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Global Business

Management

Commercial Operations

Western Hemisphere

Commercial Operations

Eastern Hemisphere

Responsible for alltrade marketing and

sales in North Americaand Latin America

Responsible for alltrade marketing andsales in Europe, Asia,

Africa, Oceania

Responsible worldwidefor all product lines:ManufacturingR&DStrategic Marketing

MNC/TNCS


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I want my business in Brazil to be run by Brazilians,the business in Japan by Japanese, the Germanoperation by the Germans

Senior VP, Dow Chemical Company


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From the early 1950sthrough the late 1970s,Caterpillar placedthousands of employeesabroad. As a result, fiveout of six top managershave had internationalexperience and are wellequipped to deal withglobal competition.

Recently, however, there hasbeen a marked reductionin the use of expatriates.How will the futuregenerations of Caterpillarmanagers gain theexpertise that is, and willcontinue to be, a key factorin the companyscompetitive success?

Lee Morgan

Retired CEO and Chairman

Caterpillar Corporation

Tnc/ Mnc Future Final Project

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