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TRANSNATIONAL MANAGEMENT : Lecture 2

TRANSNATIONAL MANAGEMENT : Lecture 2. Bartlett & Ghoshal typology of the “generic” MNC 30th November 2009. Today’s 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

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TRANSNATIONAL MANAGEMENT : Lecture 2

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  1. TRANSNATIONAL MANAGEMENT:Lecture 2 Bartlett & Ghoshal typology of the “generic” MNC 30th November 2009

  2. Today’s 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…

  3. 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

  4. The British East India Company

  5. 2. What is actually a MNC?

  6. 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)

  7. 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

  8. 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…

  9. What about size? • We have seen the emergence of the so called SME type MNCs • Powered by new technology advances • Liberalization and integration forces

  10. You don’t have to be big….

  11. …to be better!

  12. A look at a SME type of MNC

  13. 3. Study of MNCs trough time

  14. Development of MNC literature

  15. 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

  16. I. Global efficiency • Efficiency: relation between value of INPUTS and OUTPUTS • Reaching: • Economies of scale (standardization) • Economies of scope • Economies of skill • Modularity

  17. 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

  18. 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

  19. 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!

  20. Example: Google http://www.youtube.com/watch?v=b59Jc3n0xHQ&feature=related

  21. Example: The iPod story

  22. 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!)

  23. Mentality focus

  24. I. Global strategy - pros

  25. I. Global strategy - cons

  26. Ideal strategy?

  27. The other strategies (mentalities)

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

  29. 6. Company case: Danfoss (Trata) • A globally present family company from Denmark • Denmark’s 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

  30. Danfoss organization structure

  31. Example: World-wide learning http://www.youtube.com/watch?v=lLU2LDqPlWM http://www.youtube.com/watch?v=2GAGFHt4zNE&feature=related

  32. 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

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