ms-97 mba assignment july dec 2010 Question 2

2. Briefly explain the mechanisms adopted by MNEs for achieving flexible coordination in different countries. Give examples.

FLEXIBLE COORDINATION

MNEs had traditionally developed either autonomous national units to respond to the local environment or had the decision making centralized at the headquarters for strategic direction and operational support. In recent years, due to increased complexity. MNEs have adopted several mechanisms.

Mechanisms

Three mechanisms originating in different countries have emerged among MNEs:

·         Centralization (Japanese)

·         Formalization (American)

·         Socialization (Europe)

As the Japanese MNEs expanded overseas, the managers of parent company managed the subsidiaries. The centralization, by leveraging corporate resources, led to rapid decision making. With the growth in size and complexity of overseas business, the centralized coordination however became difficult. The subsidiaries started sending information, asking for guidance, support and decisions. This led to increased dependence of subsidiaries and overloading of the central process.

American MNEs adopted formalized system for coordination purposes. This process reduced costs. The authority is distributed between headquarters and subsidiaries. Most of the decisions are The company's established `way' of doing/accomplishing a certain task is considered the best. P&G had `Proctor way' of marketing. This involved exhaustive product and market testing before launching a product. The pre launching activities sometimes helped the competitors in launching imitative products. Further the attention of managers may be focused in meeting the requirements of the systems rather than meeting the consumer needs.

The system enacted by European MNEs was influenced by founding families. The coordination relied on close personal relationships. This involved careful recruitment, development and acculturation of key managers which essentially meant socialization. This system overcame the headquarters overload problem arising from centralization and inflexibility formalization. The system relied on shared values and objectives. Unilever had internalized this system from the beginning. The system work effective till it started facing problems by 1980s due to environmental changes.

Integrating Multiple Tools

As many existing coordination mechanisms proved inadequate to meet the environmental changes, MNEs started integrating different tools. This involved building coordination capabilities and allocating responsibilities.

Firstly, the issue of coordination relates to the value and intensity of task due to diffused assets and resources. Secondly, the need fps- using diverse tools was felt because it was believed that flexibility was necessary in the face of fast changes taking place. 41 Strategic Considerations for international operations, While Americans tried to revive the informal processes and value systems in their firms, European firms tried to centralize some functions such as Philips which created product divisions to coordinate the worldwide policy. In all these the tools used to change are self-regulating and managed. The self regulatory means are adopted, e.g. P&G in creating Euro Brand Teams, and Matsushita to internal `bidding' by product divisions for R&D allocations, In addition to the self-regulation, some systems are managed by integration.

Allocating Responsibilities

There are two issues involved in coordination: the flows between units and the strategic roles of units. The flows are of three kinds: goods, resources and information. The flow of goods involves integrating the network. of interdependence of units with respect to components, sub-assemblies and finished goods. The second flow relates to resources-financial, technical and human. Many of these were managed centrally. The third flow is that of information. Information flows are mostly achieved through the socialization mechanism. Matsushita used the socialization as a leveraged learning in its foreign units by arranging. `block meetings' of subsidiaries in regions to highlight the `best practices.'