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ROLE OF NETWORKING FOR MULTINATIONAL CORPORATIONS

ROLE OF NETWORKING FOR MULTINATIONAL CORPORATIONS. Ekaterina Buzulukova ebuzulukova@hse.ru National Research University Higher School of Economics Strategic Marketing Department Russia. Introduction. MNC’s quantity close to 82000 and number of foreign subsidiary is about 810000.

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ROLE OF NETWORKING FOR MULTINATIONAL CORPORATIONS

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  1. ROLE OF NETWORKING FOR MULTINATIONAL CORPORATIONS Ekaterina Buzulukova ebuzulukova@hse.ru National Research University Higher School of Economics Strategic Marketing Department Russia

  2. Introduction • MNC’s quantity close to 82000 and number of foreign subsidiary is about 810000. • Revenue 31 billionUSD, 52% of Global GDP, 2/3 of World trade, 90% FDI (UNCTAD, 2010) • Since 90s the amount of interorganizational interactions has increased significantly (financial and non financial forms): • M&A1990s - 99 billion dollars, in 2008 - 707 billion dollars. With the beginning of world financial crises the number of M&A dropped to 250 billion dollars • more than 20,000 new alliances were formed in U.S. between 1987 and 1992 (Keeley G.W.) and now the growth rate is about 25%

  3. Literature review Network approach (Johanson,1994 Peppers, 2001, Achrol, 1997, Miles et all, 1992 ) Relationship based approach (Christopher et al, 2002, Hakansson, 2004, Sheth, 1995) MNC and networking MNC research (Kraats, 1998 Bartlet, Ghoshal, 2008 Tsai, 2002)

  4. Why networking? • Environmental factors: • Globalization • Growing competition • Development of world trade • Information technologies • Customization • Internet trade • Government support • High R&D costs • Growth of innovation necessity Reasons for Networking Network attraction factors • Cost reduction • Decrease in transaction costs • Reduction of production costs • Risks diversification • Allocating of investment, R&D and marketing expenses • Increase in company values • Knowhow, innovation enrichment • Access to additional resources • Growth of effective usage of assets • Quality improvement, Flexibility • Rapid entrance to the new market

  5. Types of networks and MNC Internal networks (Miles, Snow and Coleman, 1992) General Motors • Strategic Alliances • (Stuart,1998) • Extending range of goods (Nokia & Yahoo) • Risk diversification (Alcatel & Zucotto Wireless) • Innovations (GlaxoSmithKlein) • Joint production and marketing (Hyundai&Kia) External networks Stable networks BMW, Chrysler, Toyota • Focal Supply chains • Long term relationship with core suppliers • Transactional with others • Volkswagen, Siemens Dynamic networks Reebok, Dell, Motorola Not in the list: virtual corporations, dynamic focal networks, Value creation networks

  6. Partners for MNCs’ relationships Subsidiaries Customers Suppliers MNC SME Government

  7. Disadvantages of networking Share of unsuccessful alliances is about 60-70% (KPMG, 2001) Only 30% of MNC’s relationships provides positive effect (Parise, Casher, 2003) Factors of network failure • Partners’ opportunism • Risks in core competence and knowhow losses • Complication in management procedures • Overspecialization and unhealthy dependence on partner • Antagonisms among whole network goals and individual goals • Slowing down the speed of management decisions due to excessive network widening • Difficulties in blurring of network bounds • Rise in relation maintenance costs

  8. Successful relationships and type of industry Method: case studies secondary data analyses

  9. Interest in relationships Business relationsturnover Readiness to adapt Social bonds Relationships Atmosphere STABILITY Knowledge bonds Technical bonds Economic bonds Building successful relationships • Method: case studies of 6 Finnish MNC on the Russian market (31 interviews) • Common factors: trust, honesty, willingness to conduct open dialog, readiness to adapt, great wish to work, activeness • Specific: professional level, continuously improvement process, personnel relationships, to be in schedule, give all needed information in time Clients firm turnover

  10. Summary & Managerial application • Networking is very important for MNC • But it is not appropriate strategy in any situation and for any company • Factors of networking attractiveness are: environmental changes, cost reduction, growth in company’s value • Factors of network failure are risks in core competence and knowhow losses, overspecialization, slow process of decision making, profit division • Crucial factor of relationship stability is increase in revenues turnover

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