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Abstract
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
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.