TRANSNATIONAL MANAGEMENT: Lecture 2

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TRANSNATIONAL MANAGEMENTLecture 2

• Bartlett Ghoshal typology of the generic MNC
• 30th November 2009

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Todays course agenda

• Looking at the brief history of the MNC
• What is actually a MNC?
• The study of MNCs through time
• The 3 strategic goals of the generic MNC
• The Bartlett Ghoshal typology
• Case example

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1. A brief history of the MNC

• First mentioned MNC activity Birth of the
  Multinational (1999) by Moore Lewis
• Long before their (Assyrian) armies marched up
  and down the Tigris and Euphrates to terrorize
  the ancient world, groups of talented Assyrian
  traders peacefully took up residence in foreign
  countries hundreds of kilometers away from home,
  being welcomed by the princes of Babylon, Aram
  and even distant Anatolia... the business
  operated by the ancient Assyrian colonists
  constituted the first genuine multinational
  enterprises in recorded history (Moore, Lewis,
  1999, pp. 27).
• The first contemporary MNC The British East
  India Company (1600 AD) The Dutch East India
  Company (1602 AD) - both imperial corporations
  with monopoly power on trading with India and Asia

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The British East India Company
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2. What is actually a MNC?
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The distinguishing characteristics of MNCs

• Differences in social, political, economic, legal
  and technological contexts not WHERE, but HOW
  it takes place!
• The drivers of difference (from lecture 1)
• Key distinguishing characteristics
• Issue of sovereignty (role of the national state)
  political risk
• Difference in competitive strategy (single vs.
  multiple markets)
• Prevailing level of complexity and coordination
• Unit of measure for performance (single vs.
  multiple units)
• Organizational structure and management systems
  (domestic product and functional diversity MNC
  geographical diversity)

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Some definitions of MNCs

• Bartlett Ghoshal substantial FDI and active
  management
• OECD UNCTSC an enterprise that engages in
  foreign direct investments (FDIs) and owns or
  controls value-adding activities in more than one
  country
• Hymer (1979) The multinational corporation has
  become the dominant organizational form of modern
  capitalism. It now commands tremendous influence
  and power over the economic, social, political,
  and cultural lives of many nations and people
• Zanfei (2005) ultimate carriers of progress and
  development opportunities, or as the extreme
  expression of predatory behavior, based on the
  systematic appropriation of rents
• Morgan, Kristensen Whitley (2003)
  trasnanational communities and spaces of social
  relationships

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Impact of MNCs on the world economy

• There are today some 70,000 MNCs
• With over 700,000 units (affiliates)
• Top 500 MNCs account for almost 70 of world
  trade
• Lead agents of the globalization process
• Industries some examples
• 85 of the global automobile industry
• 70 of the computer industry
• 35 of the toothpaste industry
• 65 of global soft drinks industry
• Etc

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What about size?

• We have seen the emergence of the so called SME
  type MNCs
• Powered by new technology advances
• Liberalization and integration forces

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You dont have to be big.
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to be better!
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A look at a SME type of MNC
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3. Study of MNCs trough time
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Development of MNC literature
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4. Three strategic goals of the MNC
3 strategic goals of the generic MNC
GLOBAL EFFICIENCY in existing activities
INTERNATIONAL FLEXIBLITY / LOCAL RESPONSIVENESS
WORLD-WIDE LEARNING from diversity exposure
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I. Global efficiency

• Efficiency relation between value of INPUTS and
  OUTPUTS
• Reaching
• Economies of scale (standardization)
• Economies of scope
• Economies of skill
• Modularity

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II. Local responsiveness

• Adaptation issues (standardization vs.
  adaptation)
• Ability to detect changes in the environment,
  which may represent risks or opportunities
• Better risk management
• Speed and adaptability
• Building competitive advantage on diversity
• Flexibility vs. efficiency

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III. World-wide learning

• Understanding local responsiveness provides
  opportunity for learning
• Not just learning but information flow and
  knowledge transfer
• Learning from mistakes and best practices of
  others
• Being able to use local specifics and differences
  is a competitive advantage
• Companies must develop appropriate mechanisms and
  organizational structures, which facilitate
  learning and knowledge transfer

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Example How do companies learn?
In their internal magazine, 3M has a special
Uuups section, where they discuss failed
projects. A special adhesive, that is used today
in Post-its was one of them and was adopted by
another employee in the company!
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Example Google
http//www.youtube.com/watch?vb59Jc3n0xHQfeature
related
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Example The iPod story
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5. The Bartlett Ghoshal typology

• 1989 Bartlett Ghoshal ? Managing across
  borders the transnational solution (one of the
  50 most influential economic and business books
  of the 20th century)
• Any internationally active company must fulfill 3
  important strategic goals
• GLOBAL EFFICIENCY in existing activities
• INTERNATIONAL FLEXIBILITY and LOCAL
  RESPONSIVENESS (appropriate management of risks
  and opportunities)
• WORLD-WIDE LEARNING thought its exposure to local
  contexts
• 4 company mentalities
• INTERNATIONAL COMPANY
• MULTINATIONAL COMPANY
• GLOBAL COMPANY
• TRANSNATIONAL COMPANY (a revolutionary new form
  NEW MANAGEMENT MENTALITY!)

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Mentality focus
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I. Global strategy - pros
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(No Transcript)
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I. Global strategy - cons
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Ideal strategy?
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The other strategies (mentalities)
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Understanding transnationality

• An idealized concept
• A new revolutionary form of organization
  mentality
• Each company has its degree of transnationality

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6. Company case Danfoss (Trata)

• A globally present family company from Denmark
• Denmarks biggest industrial organization
• Some 28,000 employees world-wide
• Over 70 companies in 25 countries and with over
  115 sales organizations
• Over 75-year long tradition

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Danfoss organization structure
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Example World-wide learning
http//www.youtube.com/watch?vlLU2LDqPlWM
http//www.youtube.com/watch?v2GAGFHt4zNEfeature
related
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By next time

• Please read the Danfoss Trata case by Wednesday
• Be prepared to discuss it
• Look for clues on its transnational mentality?
• Global efficiency
• Local responsiveness
• World-wide learning