Chapter 4Multi-National

Corporation

Multi-National Corporation

An MNC operates across products, markets, borders and cultures, and it pursues activities that are influenced by both its internal conditions and its environment. It attempts to minimize the uncertainty imposed by the environment by gathering and processing information.

MNC 4 Basic Organizational Structures

Worldwide functional divisionsreport to the functional areas of the parent

company.International divisions

operate separately from domestic divisions.

Geographic regions contain subsidiaries within their borders and

maintain communication lines with the parent.

Worldwide product divisionsGive the divisions the authority to run their own

operations on a worldwide scale, like separate companies.

Global Business Strategies

Multinational StrategyGlobal StrategyInternational StrategyTransnational Strategy

COORDINATION

-brings a long list of advantages.

-can be achieved by employing various global business strategies.

Multinational Strategy

- features decentralization

- The firm gave their subsidiaries much leeway in meeting the needs of the customers inside their own boundaries.

- It was a type of “hands-off” strategy in which the parent allowed the subsidiaries to develop their own products and practices

Figure 4.2 Multinational Strategy

Shows that the information flows are primarily from the subsidiaries to the parent in the form of financial report.

HQ

Financial Reporting Flows

Loose Controls, strategic decisions remote

Global Strategy

-features centralization- Localizes control within the parent.

- The firm seeks to meet the needs of its worldwide customers with standardized products.- The products for all of the world markets are manufactured centrally and shipped to the subsidiaries.

Figure 4.3 Global Strategy

Shows product and information flows between the parent and the subsidiaries travel in one direction- toward the subsidiaries.

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Tight controls, centrally driven strategy

One-way flows; goods, information, and resources

International Strategy

- Features relatively autonomous subsidiaries that apply expertise from the parent.

-is a blending of the centralized control of the global strategy and the decentralized control of the multinational strategy.- The international strategy calls for a management team at the parent location that is knowledgeable and skilled at penetrating global markets.

- The subsidiaries use this expertise to adapt the firm’s products, processes, and strategies to their own markets.

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Formal Control Systems

International Mentality

Assets, responsibilities decentralized

Figure 4.4 International Strategy

Shows the two-way flow of information between the parent and the subsidiaries.

Transnational Strategy

- It is the most complex strategy because it features joint participation by the subsidiaries and parent in planning and then in carrying out the plans.

- The parent and all of the subsidiaries work together in formulating strategies and operating policies, as well as in coordinating the logistics of getting the products to the right markets.

- The firm seeks to achieve global integration and efficiencies yet provide for flexibility at the local level.

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Distributed capabilities, resources, and decision making

Heavy flows, materials, peoples, information, technology

Complex control, high coordination skills, coordinated strategic decision process

Figure 4.5 Transnational StrategyShows the information-processing capacity that is made available at the subsidiary level.

GLOBAL BUSINESS DRIVERS ( GBD )

- Are set by involving top executives, aiming the analysis at the business unit level, and recognizing differences that exists within the firm and between one subsidiary and another.

GLOBAL INFORMATION SYSTEMS (GISS)

- The concept of a global information system is somewhat new in the computing field.

- A GIS can be defined as a system that consists of networks that cross national boundaries.

- Is an entity that benefits from global economies of scale and scope and thus contributes to the global business strategy.

SEVEN DRIVERS

o Joint resourceso Flexible operationso Rationalized operationso Risk reductiono Global productso Scarce supplieso Corporate customers

Figure 4.6 Importance of Some Global Business Drivers by Industry

PROBLEMS IN IMPLEMENTING GLOBAL INFORMATION SYSTEMS

Politically Imposed Constraints

Restrictions

Restrictions on Hardware Purchases and Imports Restrictions on Data Processing Restrictions on Data Communications

TRANSBORDER DATA FLOWS (TDFS)

the movements of machine-readable data across national boundaries.

Technological ProblemsLack of Support from Subsidiary Managers

FOUR TYPES

1. Operational data, such as transaction data used in accounting information systems

2. Personal data that identifies specific individuals.

3. Electronic funds transfers from one country to another.

4. Technical and specific data.

GIS IMPLEMENTATION STRATEGIES

Four types of issues that relate to the GIS

Business Strategy

The development team should address these issues early in the project. The team should:

1. Work closely with the firm’s executives to gain an understanding of the potential impacts of the GIS on global business strategy.

2. Understand each business unit’s global business strategy.

3. Determine the global GIS strategy that is appropriate for each unit’s global business strategy.

4. Define objectives for each GIS strategy.

5. Identify applications necessary to achieve each GIS strategy and prioritize them.

6. Assign responsibilities for implementing the applications.

Information Resources

The GIS will employ all types of information resources – hardware, software, personnel, data and information, and facilities.

Key task of development team

1. Determine the number and location of regional data centers.

2. Identify vendors who can provide products and services for each subsidiary site.

3. Specify standard hardware and software that can be used at all sites.

4. Make plans for one or more help desks to assists subsidiaries on a 24-hours-a-day, seven-days-a-week basis.

5. Be prepared for implementation delays that are not experienced in the parent country.

Data Sharing

Task involved in setting up a system for data sharing

a. Develop a global data model that supports the global business objectives.

b. Form a group consisting of representatives from both the parent and the subsidiaries for the purpose of establishing data standards to be applied through-out the MNC.

c. Study legislation in the various countries of operation to define limitations on processing and telecommunications.

d. Determine whether to transmit data across country borders or process it in the subsidiary countries.

e. Implement the databases.

Cultural Environment

a. Be alert to cultural differences that exist among subsidiary countries and formulate systems solutions that are mutually acceptable to all concerned.

b. Conduct a skills survey of information specialists within the subsidiaries for the purpose of making maximum use of those skills during implementation.

c. Provide educational and training opportunities to the subsidiaries so that their personnel can acquire skills in areas where they are deficient and sharpen skills in areas where they have strength.

d. Establish formal programs for preparing managers at the parent location to work with managers in the subsidiaries, and vice versa.