International Trade and Finance: A North American Perspective

By Khosrow Fatemi | Go to book overview
areas were mostly headed by local nationals. Besides long-term assignment of parent-company personnel, short-term visits (1-2 weeks) by this staff with the subsidiary also helped to establish global integration. Our findings show that on the average parent-company officials visited the subsidiaries seven times a year. The main objective of the visits was given as planning and coordinating subsidiary activity within global strategies.It is evident from these results that German SMFs resort more to personnel changes than to structural means for implementing global competitive strategies. On the other hand, personnel-oriented strategic control of this type puts a lot of strain on small businesses' human resources. Hence, one can suggest that from this point of view, SMFs are bound to restrict global integration to some really essential aspects of management. As shown, this was the case where managing firms' specific advantages are concerned. In other areas, it seems feasible to give relatively high priority to local responsiveness strategies.
SUMMARY AND IMPLICATIONS
This chapter analyzed some specific problems of direct investment of German SMFs in the United States. The aim was to show whether and to what extent strategy formulation and strategy implementation of SMFs could be discussed within the context of existing direct investment theory. The results can be summarized as follows:
1. Direct investment strategy formulation of small and medium-sized firms can be best based within the theory of oligopolistic advantage. Direct investments of firms with specific advantages like specialized products are likely to have a higher success potential than firms without such competitive traits. Only such firms should be encouraged to go in for foreign direct investment. The theory of internationalization has explanatory power in as much as internal control is restricted to functional areas that are directly concerned with oligopolistic advantage. Beyond that the resources of SMFs pose limitations, especially with respect to strategy implementation.
2. Means of strategy implementation must be directed toward realizing the success potential, with due consideration of SMFs' resources. Two issues are important: subsidiary structure and subsidiary management.
3. Regarding structure, subsidiary ownership and market entry strategy are two basic means. SMFs opt for 100 percent ownership and joint venture strategy. These options may not always be compatible with the resource situation. However, they seem to be the effective modes in view of safeguarding global competitive advantage. Since the central problem is the adequate control of firms' specific resources, SMFs may attempt to find acceptable patterns by other means. For instance, even minority ownership of the subsidiary may be acceptable when by contractual agreement control of crucial areas is guaranteed.
4. The pattern of subsidiary management must also be in tune with safeguarding the firm's specific interests. In the first place, this means more global integration in crucial areas like product policy and production. In other areas like personnel,

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