IM 0.1

Assessment

Exam One 20% Short Presentation 10% Long Presentation 20% Exam Two 20% Project 30%

Bartlett and Ghoshal

MNC as a company that : makes substantial investment in foreign countries ; actively manages operations in foreign countries ; and regards them as strategic and integral to the organization.

Traditional motivations to invest abroad

1. Secure key supplies

(e.g. minerals

and resources)

2. Seek new

markets (e.g. Nestlé, Bayer, Ford)

3. Access low-cost

factors (e.g. government

subsidy, lower cost

labour)

5

Spatial Clusters in the World Economy

Flexibility and home base concepts

converge in spatial clustering

Interlinked firms/activities

exist in the same local and regional

setting

AKA clusters, networks, centers of

excellence, and industrial districts

6

Spatial Clusters in the World Economy

First noticed in Silicon Valley in the United States, in what is now known as the Third Italy, in Southern Germany, and in East Asia

Much productive knowledge cannot be codified into explicit forms Rather, communicated via a highly social process of

face-to-face interaction over a relatively long period of time

Consequently, innovation and learning is a spatially-located, social and collective process among a group of firms

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Spatial Clusters in the World Economy

Why do spatial clusters

contribute to the productivity of

firms?

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Spatial Clusters in the World Economy

Concentrated communication made possible by a cluster increases learning and innovation

Contributes to the dynamic, technological efficiency of firms in the cluster

Trust increases over time which facilitates contracting and exchange among firms

Common business culture develops which reduces uncertainty

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Cluster exists within a milieu

Cluster’s firms

Knowledge embedded within

the cluster

Institutional environment

Ties of the cluster’s firms to

customers, research

institutions, educational

institutions, and government

Milieu supports cluster with rules

and norms for business activity, social cohesion, business culture, and government

support

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A Value Chain Within a Spatial Cluster

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Spatial Clusters and Milieus

In its home base, a MNE obviously has the possibility of

contributing to the local cluster and

milieu

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Spatial Clusters and Milieus Also it is possible that a MNE can tap into

selected foreign clusters and milieus In the local milieu where the (MNE) controls full-fledged

operations Can be characterized as an insider Linked to other firms in both formal and informal networks Typically maintains close linkages to local research and

education facilities, governmental bodies, etc. Provide channels for rapid dissemination of knowledge and

information Provide a basis for co-operation leading to a continuous stream of

improvements

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Spatial Clusters and Milieus

• in both the home base and

• in the foreign operations of MNEs

Spatial clusters are important

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Multinational Management: The Local-Global Paradox

Ownership advantages offset the extra costs of doing business internationally

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Multinational Management: The Local-Global Paradox

As a firm globalizes its production system it must decide upon Location of the components of the

multinational value network Coordination among these components Summarize some issues raised in book

Managing Across Borders: The Transnational Solution by Bartlett and Ghoshal (2002) A recurring theme relating to a creative tension

between the local and the global—local-global paradox

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Strategic challenges faced by MNEs

• Obtained from economies of scale and scope

Global efficiency

• Involves using local facilities and personnel to tailor goods and services to the needs and preferences of local consumers

Local responsiveness

• Refers to the combined and complementary use of innovations from many parts of the multinational value network

Global innovation

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Bartlett and Ghoshal 2002: “Multinational” Firm

Subsidiaries are distinct entities allowed to be very

responsive to their local environments

Traditionally associated with European MNEs

Good at delivering local

responsiveness, but lacking global

efficiency and innovation

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Bartlett and Ghoshal (2002): Global Firm

Subsidiaries are little more than

means to deliver uniform goods and services to local markets

Home office of the global firm is very important in planning the realization of

global economies of

scale and scope

Traditionally associated with Japanese MNEs

Good at delivering global efficiency; less effective in the areas of local

responsiveness and global innovation

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Bartlett and Ghoshal (2002): International Firm

Pursues a strategy concerned with disseminating the parent company’s knowledge to the foreign marketsParent retains considerable influence and control, but less than in a classic global companyTraditionally associated with US-based MNEs

Good at delivering global innovation but not local responsiveness and global efficiency

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Bartlett and Ghoshal (2002) Argue in favor of a transnational model of global

management

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Bartlett and Ghoshal (2002) Argue in favor of a transnational model of global

management A “flexible centralization/coordination” or an “integrated

network” Role of subsidiaries is differentiated throughout the

multinational value network, differing among countries One subsidiary might only be involved in sales, while another is

involved in R&D Coordination of the multinational value network is achieved

using multiple methods Flows of goods are coordinated through centralization Flows of resources are coordinated through formalization Flows of information are coordinated through socialization

Bartlett and Ghoshal advocate the rotation of personel throughout the network

Disparate elements of the MNE are tied together in a coherent mission through the use of vision and innovative human resource development policies

22

Bartlett and Ghoshal (2002) Argue in favor of a transnational model of global

management A “flexible centralization/coordination” or an “integrated

network” Role of subsidiaries is differentiated throughout the

multinational value network, differing among countries One subsidiary might only be involved in sales, while another is

involved in R&D Coordination of the multinational value network is achieved

using multiple methods Flows of goods are coordinated through centralization Flows of resources are coordinated through formalization Flows of information are coordinated through socialization

Bartlett and Ghoshal advocate the rotation of personel throughout the network

Disparate elements of the MNE are tied together in a coherent mission through the use of vision and innovative human resource development policies

23

Bartlett and Ghoshal (2002) Argue in favor of a transnational model of global

management A “flexible centralization/coordination” or an “integrated

network” Role of subsidiaries is differentiated throughout the

multinational value network, differing among countries One subsidiary might only be involved in sales, while another is

involved in R&D Coordination of the multinational value network is achieved

using multiple methods Flows of goods are coordinated through centralization Flows of resources are coordinated through formalization Flows of information are coordinated through socialization

Bartlett and Ghoshal advocate the rotation of personel throughout the network

Disparate elements of the MNE are tied together in a coherent mission through the use of vision and innovative human resource development policies

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Examples of Multi-Home-Based MNEs