Management structure in multinational enterprises. Responding to globalisation
| Published date | 01 February 2002 |
| DOI | https://doi.org/10.1108/01425450210416933 |
| Date | 01 February 2002 |
| Pages | 69-85 |
| Author | Peter J. Kidger |
| Subject Matter | HR & organizational behaviour |
Responding to
globalisation
69
Employee Relations,
Vol. 24 No. 1, 2002, pp. 69-85.
#MCB UP Limited, 0142-5455
DOI 10.1108/01425450210416933
Received July 2000
Revised August 2001
Accepted August 2001
Management structure in
multinational enterprises
Responding to globalisation
Peter J. Kidger
The School of Management, University of Salford,
Salford, UK
Keywords Multinationals, Globalization, Human resource management, Management structure
Abstract A study of the impact of globalisation on the structure and management of
multinational enterprises, based upon research into twenty-four manufacturing MNEs. Three
research questions, developed from the literature, were used as the basis for an investigation into
structure, control, knowledge transfer and culture in MNEs. The results confirm that there is a
widespread move towards global integration, and that this is accompanied by changes in the
relationships between managers from corporate and country units, and a tendency to encourage
the development of best management practices across national boundaries.
Introduction
The perspective on almost all aspects of life has become more international in
the second half of this century as the world has begun to resemble a global
village. Almost all firms are now competing in international markets as
barriers to the movement of capital, and tariff walls, have been reduced. This is
the age of globalisation, a term which is capable of a variety of meanings
(Dunning, 1997), but generally refers to a process of ``tighter international
linkages on a world-wide scale'' (De Wit and Meyer, 1998, p. 720). At the
extreme it conveys the picture of a globalised world, in which global
corporations that are more powerful than nation states, provide standardised
products to world markets (Dicken, 1998, p. 3).
The extent and consequences of globalisation are still a matter for debate , but a
major area of interest is the impact of global integration on the management of
multinational enterprises (MNEs). This article is intended to contribute to the
understanding of what is happening by reporting results from a study of structure
and management processes in a range of MNEs. The purpose of the investigation
was to add to the body of knowledge on how multinationals from different
backgrounds are seeking to maintain competitiveness in a changing world.
The scope of the paper is as follows. The first part is a review of the
literature on the development, strategy and structure of international firms to
draw out some major themes and issues for investigation. There then follows a
description of the research study, which consisted of qualitative interviews
with senior managers from 24 multinational enterprises of American, British,
European and Japanese, origin. The paper discusses the findings of the study in
relation to organisational structure, learning, management, and culture. A final
section presents some conclusions.
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Employee
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24,1
70
The internationalisation of firms
According to Dunning (1993), the multinational enterprise is:
... an enterprise which engages in foreign direct investment and owns or controls value-
adding activities in more than one country
The MNE can therefore be distinguished from an exporter that may trade
internationally but is not a foreign investor. An additional feature of a
multinational enterprise is that it employs people in more than one country.
A widely used conceptualisation of becoming an international and ultimately
a global company has been to describe this as a development process through a
series of stages (Johanson and Wiedersheim-Paul; 1975, Ohmae, 1994; Adler,
1997). Although research has shown that the organisational life cycle concept
does not hold good in all instances, it provides a useful framework for
considering the implications of internationalisation (Turnbull, 1987; Bell and
Young, 1998). The typical progression of a firm starts with exporting from the
home country,moves on to setting up local salesand distribution centres, then to
local assembly/packaging, and finally to establishing full manufacturing and
associated activities in foreign locations.This may be by greenfield development
or by acquisition, and may includea variety of joint ventures.
In all organisations, managers have to establish structures that provide a
basis for the co-ordination and control of activities, and one of the most
significant issues for multinational firms is the relationship between the
corporate centre and country based subsidiaries (Kamoche, 1996). As MNEs
expand their operations into different environments, they increase the level of
uncertainty associated with their investment, and face complex issues of
organisational control in order to ensure that the different parts of the enterprise
are contributingas required to the overall goals(Chang and Taylor, 1999).
Structure and control should be consistent with strategy. In a simple model of
the issue, multinational firms choose either a multidomestic or a global
orientation (Porter, 1990; Roth et al., 1991). A multidomestic strategy emphasises
local responsiveness with a structure that gives a great deal of autonomy to local
subsidiaries, whilst a global strategy emphasises efficiency and requires a
structure thatprovides varying degreesof co-ordination of policyand operations.
The choice willbe strongly influenced by the industrythe firm is in, but the effect
of globalisation may be to strengthen the case for integration. According to De
Wit and Meyer (1998), a growing international similarity in product demand will
allow firms to reap global scale economies through standardisation. Greater
standardisation will, in turn, facilitate the international integration of operations,
and encourage the pursuit of further economies through the centralisation of
production at fewer locations. Global companies seek global suppliers and are
thus a cause of further global convergence. Firms operating in such global
markets realise that they must be able to co-ordinate their strategyand activities
across nations. The demands of standardisation, centralisation and strategic
alignment arebest met by a global orientation, witha strong centre, ratherthan a
multidomestic orientationwith fairly autonomous nationalsubsidiaries.
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