Globalisation. Essay

1738 words - 7 pages

What are the major factors affecting the autonomy of foreign subsidiaries, and the ways that head offices control them, in international firms?The autonomy of foreign subsidiaries in large internationalised organizations differs among different organizations. To be specific, the major factors affecting the autonomy of foreign subsidiaries are forces for global integration, forces for local responsiveness, and administrative heritage of the company.Forces for global integration reflect the need for global efficiency. The major incentive is to achieve manufacturing economies of scale worldwide. In industry where asset and technology are intensive, where there are common needs across the international markets and predominance of multinational customers demanding standard input, it's important to gain global efficiency. Low trade barriers and low product weight/value ratio, and stable group of global competitors are other factors encouraging companies to gain global integration.Local responsiveness requires companies' ability to deal with particular local demands. Companies are encouraged to emphasize on local responsiveness when the local market demands are diverse, products have to be tailored to local tastes so there are few scale economies in R&D, manufacturing and purchasing. Local market availability of company's product substitutes and diverse distribution channels are other factors that encourage local market responsiveness.Administrative heritage refers to various historical and structural factors in the company, such as the configuration of assets and capabilities, distribution of responsibilities, dominant management style, and ingrained organizational values. The administrative heritage of a company is shaped by its leaders, the national culture, and the company history. It is built over time and cannot be easily undone or changed. A company's administrative heritage influences its organizational form and capability, which constrain its ability to build a new, more complex and dynamic structure to adapt its organization to the international environment.The strategy and structure of a company is determined by the nature of the industry, the company's perception of the environment, and its administrative heritage. The environment - strategy - structure paradigm will help us understand why companies chose the strategies and structures as they have. For the environment - strategy link, the forces in international market affect companies' strategy. While for the strategy -structure link, companies' administrative heritage, ingrained culture, and entrenched norms have a great impact on companies' structure and management mentality.There are three distinct types of organizational model with different structural configuration, administrative processes, and management mentality. Foreign subsidiaries have very different level of autonomy in these three types.The first type is the multinational organization model. Multinational companies assume...

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