investing in china: reflections on the role of subsidiaries rolv petter amdam marco workshop, jets,...
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Investing in China:Reflections on the role of subsidiaries
Rolv Petter AmdamMarco workshop, Jets, 7 June 2011
My Marco question
• To what extent do foreign investments in area with high relevant competence act as a resource for strengthening the cluster or for moving out of the cluster?– The degree of local embeddedness– Local embeddedness as a source of reverse
knowledge transfer– Local embeddedness as a pressure for moving
headquarter function out of the cluster
The China case
• Interviews in Shanghai / Ningbo– Tingstad– Jets– Ulstein Ningbo– Ulstein Engineering– “Maritime service”
Agenda
1. Map the firms according to international strategy prototypes
- and embeddedness
2. Suggest some hypotheses
International strategyBartlett & Ghoshal 1989
Need for localizationLow High
Low
High
Economies of global
standardizationand size
International exporter
Global Transnational
Multidomestic
International strategyBartlett & Ghoshal 1989
Need for localizationLow High
Low
High
Economies of global
standardizationand size
International exporter
Global Transnational
Multidomestic
-Value creation in home country-No subsidiary, use of agents-Competence in home country
International strategyBartlett & Ghoshal 1989
Need for localizationLow High
Low
High
Economies of global
standardizationand size
International exporter
Global Transnational
Multidomestic
-Dominating HQ, strong control-Subsidiaries follow routines-Competence in home country-Expats
International strategyBartlett & Ghoshal 1989
Need for localizationLow High
Low
High
Economies of global
standardizationand size
International exporter
Global Transnational
Multidomestic
-Subsidiary autonomy-Subsidiaries adjust-Local competence-Local general manager
International strategyBartlett & Ghoshal 1989
Need for localizationLow High
Low
High
Economies of global
standardizationand size
International exporter
Global Transnational
Multidomestic
-Competence and power are dispersed
Implied subsidiary roles following from different strategies
International exporter
Global Transnational
Multidomestic
(Null)
Receptive Active
Autonomous
(Jarillo & Martinez 1990)
Tingstad in China
International exporter
Global Transnational
Multidomestic
Provider of commodities for shipyardWarehouse and purchasing
Very small organization. Chinese/Taiwanese general manager
Strategy = International exporter
Degree of embeddedness: Very low
Customers: Follow the Norwegiancustomers
Suppliers: 20-30 % Chinese, 70-80 % Global
Tingstad in China
International exporter
Global Transnational
Multidomestic
Pressure and alternatives
1
2
1. Follow the customer• Few customers• Loosing customers due to new
networks• Invest in bwarehouse and logistics• Stronger control from HQ
2. Approach the Chinese market• Chinese or international customers• Need for new relationship• More autonomy
Maritime service
International exporter
Global Transnational
Multidomestic
Provider of commodities to shipsWarehouse, agents, salespersonsGlobal network with several Chinese offices
Small/medium size organizationSingaporean general manager
Strategy = Global
Degree of embeddedness: Low, partial
Customers: Global and Chinese
Suppliers: 20-30 % Chinese, 70-80 % global
Maritime service
International exporter
Global Transnational
Multidomestic
Pressure and dilemmas
1
2
1. Preparing for new global competition• New global actors may enter• End of the first mover advantage• Standardization of logistics• Need for global expertise• Third nation manager
2. Entering the Chinese market• An existing target• The challenge of state own companies• Need for new networks• Need for local competence
• New local marketing manager
Jets
International exporter
Global Transnational
Multidomestic
Provider of equipments to ship and land marketOne subsidiary for production; Agents for sale
Small size organizationChinese-Norwegian general manager
Strategy = International exporter/global
Degree of embeddedness: Low
Customers: Global and Chinese
Suppliers: Norway and global
Jets
International exporter
Global Transnational
Multidomestic
Pressure and alternatives
1
2
1. Entering new markets• Brazil ++• Expertise and control in HQ• Centralized systems
2. Entering new business areas• From ships to buildings etc• Chinese railways • Need for networks – guanxi• Need for local expertise• The challenge of having parallel organizations in China
Ulstein Group
International exporter
Global Transnational
Multidomestic
Ship designDesign, sales, on-site following up+ Electrical products
Two small organizations. Norwegian generalmanagers (?)
Strategy = Multidomestic / internationalexporter
Degree of embeddedness: Low/medium
Customers: Global and Chinese
Suppliers: Partial local
Ulstein Group
International exporter
Global Transnational
Multidomestic
Pressure and alternatives
1
2
1. Standardized design• World wide market
2. Entering the Chinese market• New customers• New networks
Comparative
International exporter
Global Transnational
Multidomestic
Tingstad
Maritime service
Jets
Ulstein group
Challenges and hypotheses
• How to create synergies between contradictory tendencies of pressure?– H1: The less diversified, the easier it to
combine– H2: The stronger local presence, the
easier it is to combine
Challenges and hypotheses
• The origin and the organizational embeddedness of the international strategy– H3:The more planned and embedded the
strategy is, the more difficult it is do withdraw from a foreign market
Challenges and hypotheses
• Embeddedness in local clusters– Depends on:
• Strategic choices and organizational anchoring
• Degree of state-ownership (in China)• The degree of guanxi (in China)• Local managers and middlemen
– Question