Vous êtes sur la page 1sur 6

Headquarters- Subsidiaries Relationships: Strategic

Interdependent Relationships Now Trending

Literature Survey

Abstract

Traditionally, the headquarters- subsidiary relationship has been viewed as a superior-


subordinate relationship with headquarters (HQ) issuing orders and overseeing its subsidiaries
as subordinates. HQ is termed as parent company that strongly implying the dependent type
relationship. However, due to changes in business environment and emergence of globalization
firms have changed their views. A new strategic interdependent relationship is trending now.
However, as it is a literature survey, the purpose of this study is not to test or prove empirically
any of the relationship types (traditional and trending) above but to present what literatures,
both old and new, tell about the inherent relationship between MNC Headquarters and
subsidiaries.

Keywords: Headquarters-subsidiary relationship, Dependent relationship, Interdependent


relationship.
1. Introduction

Traditionally, the inherent relationship between HQ and subsidiaries has been characterized as
control relationship. HQ was considered as parent company. Meanwhile, the perspectives have
changed and new realization has come into effect. Control relationship replaced by
interdependent relationship. Researchers contended that such relationship is not only
necessary but also adding value and even mandatory for the survival (Hoffman, 1994) (Ambos &
Mahnke, 2010). In this study we systematically represent such literatures that emphasized on
new interdependent relationship as well as traditional control relationship to show the varying
effects of these twos.
2. Definitions

Control Perspective is characterized by superior-subordinate relationship. The control


perspective emphasizes the use of bureaucratic, social and performance controls by the MNC in
seeking to direct its subsidiaries. The control perspective assumes there is only one role for the
subsidiary, that is, a dependent one. In this, headquarters (HQ) issuing orders and overseeing
its subsidiaries as subordinates and subsidiaries carries out it and is responsible for
nonconformity. However, it creates bureaucracy and brings conflict and inefficient for the
present context of business climate.

As companies now choose to drawn up location and ownership advantages, the emergence of
interdependent is more likely to be obvious and firms now follow so.

Interdependent Perspective The current strategic perspective stresses that MNCs need to
develop competitive advantage by being responsive to different strategic requirements such as
product and market diversity and economic efficiency (Doz & Prahlad, 1980). Thus, today's
MNCs pursue a wide variety of strategies. These range from global strategies in which the firm
uses a standardized approach, in all of its national markets to multidomestic strategies in which
the MNC adopts a differentiated approach in each national market (Hout, et al., 1982).
3. Trending Interdependent Relationship

The events of the past decade reveal that subsidiaries perform different functions for their
MNCs (as noted earlier), yet there appears to be no clear set of roles to guide future practice.
Thus, a classification or model of generic subsidiary strategies is proposed to clarify those
strategies which are applicable to a wide variety of organizations, industries and nations. Such a
classification should reduce the number of variables a strategist need consider (Hambrick,
1984)by providing a general model of the situation and indicating broad guidelines for action
under varying circumstances (i.e., a contingency model) (Herbert & Deresky, 1987). The starting
point for the development of the model was to identify a small but powerful set of critical
factors or dimensions which define the situation in which a subsidiary is likely to operate, thus,
defining its strategic context. Hoffman (1988) has demonstrated the utility of strategic
management concepts for managing MNC subsidiaries. Both streams of literature suggest that
one needs to consider three critical factors in developing organizational strategies. The MNC-
subsidiary literature indicates the need to consider the following in determining the strategic
function of MNC subsidiaries: the degree of integration of subsidiary activities with the rest of
the MNC; the configuration of the subsidiary's resources and skills; and the characteristics of
the subsidiary's local environment. Alternatively, strategic management theory indicates that
setting the strategic direction for any firm involves a consideration of the firm's existing
strategy, its internal skills and resources, and the external opportunities and threats in the
firm's environment. As noted previously, most earlier models of subsidiary strategies were
based on two critical factors. However, by combining the critical factors from both streams of
literature an expanded three-factor model is presented here. The three factors include: the
MNC's strategy, the subsidiary's capabilities (i.e., skills and resources), and local environmental
features. Together these three factors or dimensions help define the various strategic situations
or contexts a subsidiary is likely to confront and form the basis of the model presented here.
Each strategic factor is described below, after which they are all combined to describe the
different strategic situations and strategies of MNC subsidiaries.
4. Conclusion

Traditionally, the inherent relationship between HQ and subsidiaries has been characterized as
control relationship. HQ was considered as parent company. Meanwhile, the perspectives have
changed and new realization has come into effect. Control relationship replaced by
interdependent relationship. Researchers contended that such relationship is not only
necessary but also adding value and even mandatory for the survival.
Bibliography
Ambos, B. & Mahnke, V., 2010. How Do MNC Headquarters Add Value?. Management
International Review, 50(4), pp. 403-412.

Doz, L. & Prahlad, C., 1980. How MNCs cope with host government intervention. Havard
Business Review, pp. 149-157.

Hambrick, D., 1984. "Taxonomic Approaches to Studying Strategy: Some Conceptual and
Methodoligical Issues. Journal of Management, 10(1), pp. 27-41.

Herbert, T. & Deresky, H., 1987. 87. "Generic Strategies: An Empirical Investigation of Typology
Validity and Strategy Content. Strategic Management Journal, 8(1), pp. 135-147.

Hoffman, R. C., 1994. Generic Strategies For Subsidiaries Of Multinational Corporations. Journal
of Managerial Issues, 6(1), pp. 69-87.

Hout, T., Porter, M. E. & Rudden, E., 1982. How Global Companies Win Out. Havard Business
Review, 60(5), pp. 98-108.