Katarzyna Korona M10221806 MNE is a very complex organization and it is supposed to be of considerable size and to have a highly differentiated

structure. MNE is often dispersed around the globe, hence it is facing diverse environmental issues. There is an obvious importance of well-planned intraorganizational relationships and control of foreign entities in MNEs, however they are very difficult to describe, because the headquarter-subsidiary relationships are not only static, structural arrangements but dynamic processes of decisions and exchanges. Headquarters need to outline a framework for the analysis of headquarter-subsidiary relationships in their MNEs. According to Leksell (1981), there are three main components of such framework: 1. Consideration of contingency theory of organizations As some major forces are identified behind organization structure and processes, headquarter should should be familiar with the analysis of the environment of the MNE and how environmental factors may influence the structure and the intra-organizational relationships of the MNE. The following factors should be considered: the impact of technology, the impact of size, the importance of organizational inter-dependence, the influence of environment on organization structure, process and effectiveness, and the coordination and control under uncertainty 2. Consideration of business growth and the strategic and organizational consequences of this growth. To make the management process easier, the business strategy and the impact of growth must be specified. It is to analyze the strategic factors which may influence the design of control systems and management of head- quarter-subsidiary relationships. This analysis helps to identify and conceptualize the environmental and strategic context of the intra-organizational relationships, as well as the requirements for coordination and control in the MNE. To complete this step of creating the framework, the headquarters should answer the following questions: what should be the organization structures in MNE? How will look the evolution of multinational matrix structure?
1

3. Forming the organizational control. Defining the organizational control allows to identify different coordination and control instruments. Organizational specialization, vertical and horizontal differentiation, centralization, formalization, and standardization have all been considered as important control instruments. The formal structural characteristics of the organization are a control instrument in themselves as may reduce the variation and increase the predictability of behavior and performance levels. To facilitate the analysis, the various coordination and control instruments have been grouped into three major control systems. These systems are designated herein as organizational, administrative and social systems for the management of headquarter-subsidiary relationships. The importance of a formal and informal communication Intra-organizational communication has been divided into informal and formal communication flows. The formal flows are in general structured as to channels, timing and format. The financial reporting system is a typical example of a formalized communication system used to structure headquarter-subsidiary information flows. For more continuous exchange of information, as well as necessary "dialogues" in strategic and operative matters, more informal tools are generally used. Non-routine coordination and control are not easily managed through standardized instruments, for they require information which cannot be pre-specified and pre-structured. Emerging countries are the rapidly growing and volatile economies of certain Asian and Latin American countries. They promise huge potential for growth but also pose significant political, monetary, and social risks2. Challenges of international business in emerging countries Entering emerging markets can be a challenge. Companies will need to reorient their perspective, because what works in the U.S. and European markets might not work in Asia for example. Companies entering the emerging markets for the first time, without a full understanding of the business landscape and localization needs awaiting them in these markets, are not as likely to enjoy business success4.

One challenge is that the business models in emerging markets differ from those in Europe and the U.S. Companies must localize their business and marketing approach in different country with agility (in a pick-and-play fashion), within the global brand guidelines and code. When doing business in Asian markets, MNEs need to have input on the business and IT strategy from people who are already in Asia and understand the markets. Consumers in Asia have different expectations and preferences about how and where they purchase goods, depending on where they live. For example, many of the customers VF is going after in China are in a younger demographic, so the company has made sure to leverage platforms such as e-commerce and social media to reach them. Company cannot succeed in emerging market without finding ways to create new categories4. Opportunities of international business in emerging countries Speed of execution and a flexible business model are key differentiators. For many MNEs the key to success would be to partner with a systems integrator and outsourcing provider that thoroughly understands these markets and the challenges they present. Successful MNEs will find ways to create new categories, manage various channels and build local leadership to grow exponentially in emerging markets. Companies should innovate their products in terms of supply chains, in terms of how they sell or market to those customers. They should be able to predict the buying behavior and target the right set of consumers4. Expansion of supermarket chain in India As an example of a real case, the expansion of supermarket chain in India is described, the opportunities and challenges are of diffusion in this emerging market are as follows. According to the research Emerging Economies New challenges for international cooperation and development (2008) 3, India is the most attractive country for global retailer to expand into. Modern retail grew between 25% and 30% in India and it is expected to grow at the same rate in the following years. Despite this bright economic outlook, only two international retailers entered the Indian market so far: Metro Group and Wal-Mart. This can be caused by the fact that Indian government places tight restrictions on foreign companies wanting to enter the Indian market. Before 2006, foreign food retailers were forbidden to enter the market, a bid to protect local businesses. Whereas Metro with its Cash& Carry self-service
3

wholesale stores profited from the new regulation (Metro Cash & Carry 2007), Wall- Mart had to launch a 50:50 joint venture with Indian retailer Bharti Enterprises in order to enter into India (Ethical Corporation 2007). In conclusion, India represents a country where supermarket expansion is still in its infancy, with market opportunities and changes in retail structure rapidly emerging.

References: 1.Leksell Laurent (1981). Headquarter-subsidiary Relationships in Multinational Corporations. Ekonomiska Forskningsinstitutet, International business enterprises. 2. Business dictionary: http://www.businessdictionary.com/definition/emergingeconomies.html#ixzz2poVXR6sQChallenges 3. Manhart, A., Schmitt, K., Stahl, H., Griehammer, R. (2008). Emerging Economies New challenges for international co-operation and development. Berlin. 4. Wipro Industry Outlook (2012). Capturing the Opportunity in Emerging and Growth Markets. http://www.wipro.com/Documents/Capturing_the_Opportunity_in_Emerging_and_Growth_Mar kets.pdf