Académique Documents
Professionnel Documents
Culture Documents
Factor Demand
endowments conditions
Risk and
Returns FDI Related Umbrella company
Wholly owned subsidiary
Equity joint venture
Trade-related
Contracting
Exporting
Resource commitment
High Consumer
electronics, Telecommun
cameras etc ication
Pressure for localisation
Synthetic fibre Steel, food,
Low cement, movies, clothing
Global matrix
High Multi domestic
structure;
strategy; global
transnational
product structure strategy
Pressure for localisation
International Global strategy-
strategy and global geographic
Low structure structure
Global
MNC or multi-
domestic
International
domestic
Globalizati
Globalisation of on
supply chain markets
Globalisation
of mind set
Globalizati Globalization of
on of designs,
resources knowledge,
Capital, HR information
• GLOBAL EXPNSION THROUGH STRATEGIC
ALLIANCES
• One of the most popular ways companies get involved in
international operations is through international strategic
alliances. The average large U.S. Corporation, which
had no alliance in early 1990s, now has more than 30
alliances globally. Companies in rapidly changing
industries, such as media, entertainment,
pharmaceuticals, biotechnology and software might have
hundreds of these relationships.
• Typically alliances include, licensing, joint ventures,
and consortia. For example, pharmaceutical companies
such as Merck, Eli Lilly and Pfizer cross license their
newest drugs to one another to support industry-wide
innovation and marketing to offset the high fixed costs
incurred on research and distribution.
• Companies often seek joint ventures to take advantage
of partner’s knowledge of local markets, to achieve
production cost savings through economies of scale, to
share complementary technological strengths, or to
distribute new products and services through another
country’s distribution channels.
• A type of consortium, ‘the global virtual organization’, is
increasingly being used and offers a promising approach
for meeting worldwide competition. The virtual
organization refers to a continually evolving set of
company relationships that exist temporarily to exploit
unique opportunities or attain specific strategic
advantages. A company may be involved in multiple
alliances at any one time.
• Oracle, a software company, is involved in as many as
15,000 short-term organizational partnerships at any
time. Some executives believe shifting to a virtual
approach is the best way for companies to be
competitive in the global market place
• Subsidiaries Roles
• Subsidiary roles play a key part in balancing global
integration and local responsiveness.
• In an autonomous role, the subsidiary performs most
activities of the value chain independently of
headquarters, selling most of its output in the local
market.
• In a receptive role, most subsidiary functions are highly
integrated with headquarters or with other business
units, for example, exporting most of the subsidiary
production to the parent company or to other
subsidiaries, while importing multiple products or
components from them.
• In an active role, many activities, like R&D, are located
locally but carried out in close coordination with other
subsidiaries. The autonomous role is typical of MNC,
employing a multi-domestic strategies.
• Receptive role is typical of MNCs, following global strategies and
active role is often assigned to subsidiaries by MNCs, following
transnational strategies with strong mandate from headquarters
along with considerable autonomy for local adaptation.
• Among different subsidiaries of the same MNC, however, the level
of autonomy may vary due to the different roles and mandates
among them.
• It is possible, for instance, that most subsidiaries in a firm (using a
global strategy) be receptive while a subsidiary serving as the centre
of excellence in design is active or autonomous
• Another way of looking at subsidiary role is, from the
perspective of flow of knowledge across the MNC
units. The expertise transferred, can be purchasing skills
or marketing knowledge (product or packaging design or
distribution expertise etc. Subsidiaries can be classified
by the extent to which each
• (a) receives knowledge inflow from the rest of the
corporation and (b) provides knowledge outflow to the
rest of the corporation.
• Four subsidiaries roles get generated: global innovator
(high outflow and low inflow), integrated player (high
outflow and high inflow), implementer (high inflow and
low outflow) and local innovator (local outflow and local
inflow).
• In the global innovator role, the subsidiary is the fountain
- head of knowledge for other units. The integrated
player role implies creating knowledge that can be
utilised by other subsidiaries. In this role the subsidiary
exchanges knowledge with headquarters and with other
subsidiaries on an on-going basis. In the implementer
player role, the subsidiary engages in very little
knowledge creation and relies very heavily on knowledge
inflow from headquarter or peer subsidiaries. Finally the
local innovator role implies that the subsidiary has
complete local responsibility for the creation of relevant
expertise. However, this knowledge may not be useful or
relevant to other subsidiaries
Subsidiary classifications on Knowledge creation basis.
High
Knowledge
Global Innovator Integrated Player
Outflow
Local Innovator Implementer
Low
Low High
Knowledge Inflow