Evolving Multinational

1
Evolving Multinational We are taking a dynamic
point of view Firms evolve along three basic
dimensions - geography - line of
business - functional migration 1.
Geographic expansion direction governed by
proximity - geographic - cultural -
similar level of economic development 2. Line of
Business - (not well researched) Evidence
suggests we start with a line of business that
has a strong competitive advantage over domestic
companies. Then as we learn more about the local
market (in a sense the high margins subsidize our
learning) we can move into less competitively
distinctive markets
2
3. Functional migration - Scope of functions
performed by local subsidiary increases over
time Exporting -almost none
Foreign subsidiary -sales -accounting -assembly -
design - procurement -business planning -strategic
leadership
Evolution can be either - continuous - goes
through all the stages or punctuated
(discontinuous) - skips some steps, e.g. entering
one EEC country to do business in them all
3
Reverse evolution - (same as restructuring,
re-engineering in domestic context) Problem
Weve got too big to be efficient, we need to
reduce, simplify e.g. go from a
country-by-country approach to regional - serve
all countries in a region from a single
country Reverse evolution often associated with
old established MNCs, that now find economic,
political, technological environment has changed
so that old patterns of structure and doing
business no longer work. Outcome is often an
asymmetric mix of - functions - sets of lines
of business - irregular (dissimilar) set of
international subsidiaries Task for the MNC 1.
Identifying opportunities for scale and scope
economies 2. Actively leveraging knowledge and
experience across dimensions