Academic journal article Management International Review

Keeping the Global in Mind: The Evolution of the Headquarters' Role in Global Multi-Business Firms

Academic journal article Management International Review

Keeping the Global in Mind: The Evolution of the Headquarters' Role in Global Multi-Business Firms

Article excerpt

Abstract:

* This paper proposes a new model of the multinational firm, the Global Multi-business Firm (GMBF), with strategic loci on resource assembly and organizational animation. The demands of technology, globalization of customers, and competitive evolution do not permit haphazard local pursuit of either markets or capabilities, but require the GMBF to offer a broad global, multi-business perspective.

* The headquarters has a newly delicate, complex yet limited role of providing a global approach to strategic management. At the same time, the headquarters cannot hold tightly to its units, lest they become trapped in "managing for the last struggle", rather than the future. We summarize this challenge as "command without control".

Keywords: Globalization * Multi-business. Strategic objectives * Headquarters' role * Co-evolution * Multinational corporation

Introduction

The nature of strategy in a multinational firm may take many forms, driven by external forces, internal competencies, and the perspectives and horizons offered by top management. Today's model of global strategy is that of a firm that assembles a world-wide network of differentiated affiliates and subsidiaries in order to exploit the best source of each value adding activity to deliver a superior combination of 'value for money' and customer responsiveness to a variety of markets through assorted means of entry, and that is motivated to consistently explore for new models that will improve processes, products, and the company over time. This definition clearly draws from Bartlett and Ghoshal's (1989) transnational model, Nohria and Ghoshal's (1997) network MNE, and Levitt's (1983) model of demand convergence, and goes significantly beyond earlier models that restricted consideration of international scope to markets or locations of wholly owned, or even jointly owned, assets (Rugman 2005). Global strategy in this sense is as much a perspective as a pattern of asset ownership, sales, direct investments, or networks--and a dynamic perspective at that. We extend this approach by arguing that the role of the headquarters has co-evolved with the form of the multinational. We introduce the concept of the Global Multi-business Firm (GMBF), an organizational form uniquely adapted to the new global environment, and we argue that the role of headquarters and the top management team is to envision and execute the processes of assembly and animation of the GMBF in pursuit of globally competitive products, processes, and locations.

The concept of the multinational firm as an organization has undergone a series of transformations over the last several decades, as has the assigned role of the corporate headquarters. Originally seen as a bureaucracy with a strong central command and control authority managing a geographically dispersed but organizationally unified structure, the multinational has been consistently democratized (1) over time. Multi-domestic (Porter 1986) or multinational (Bartlett and Ghoshal 1989) forms, with largely independent national subsidiaries, were distinguished from global forms with closely held, tightly controlled continent-spanning operations. Bartlett and Ghoshal (1989) added international forms that were less tightly managed, but which ultimately worked to deliver centrally developed technology to 'foreign' markets. They further described a "Transnational", or integrated organization form, that was locally responsive, globally efficient, and capable of rapid international transfers of knowledge.

This latter direction also was developed by Ghoshal and Nohria (1989), among others, into the concept of the 'network multinational', and by Hedlund (1986) into the "heterarchy", in which differentiated subsidiaries took over many of the functions of the old central headquarters, leading to central control on a product-by-product or action-by-action basis, but downplaying the role of the corporate top management. …

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