Action in Heterarchies

– New Approaches to
Managing the MNC
- Gunnar Helund and Dag Rolander

Presented by Joyz Sim

It all started from..

The vibrant business environment that

eventually had most experienced MNCs
wrestling to strike a balance between
simplistic (straight-forward) structures or
sophisticated (unwieldy) ones.
 The dominating archtype –
the Global Product Division
(formal organization structure)
is
WEAK…
Re-assessments of current notions…
Two suggestions for new approaches:

1) Shift towards a model known as

‘Heterarchy’ (pg 15)
2) Frames of reference for the
understanding of the MNC’s relationship to
its environment.
Stronger emphasis on LEARNING &
SEARCH for OPPORTUNITIES,
and an ACTION
to RESHAPING
THE ENVIRONMENT.
So what is SSP? (Chandler 1962)

Changes in the environment of the

firm → → leads to changes in the
firm’s strategy → →→
in turn generates changes in the firm’s
internal structure →→
→→ →→ →→ →→
… Long lag time… (sometimes too long to secure survival)
What is STRATEGY… the 4
dimensions…

What is STRUCTURE… the dual

aspects… the dual focus…
 Not forgetting the ENVIRONMENT
DEVELOPMENTS…
(refer pg 16 of the article)
What was Chandler highlighting here?

1.Definite sequence in time – that

I C!
I
environment leads strategy, which S Tleads
structure. E A L
UN R
2. Significant time Y
lags in adapting to new
realities.ALL
I C
3. R AD developments.
Uniform
4. Assumed strategy dimension are
‘expansionary’.
5. Formulated archtypes of structure.
 These are related to the
‘contingency school’ →
Too restri
“… management ctivsystems
e as thinand
gs are
corporateto o compledo
structures x! and should
depend on environmental & strategic
contingencies”
(refer pg 18, first liner)
SSP PROBLEMS
Author illustrated some problems of SSP:
(pg 19-22)
SSP approach leads to contradictory
contingencies
Dimensions of strategy & structure do not easily
capture important aspects of the reality of the
MNCs.
Empirical research indicated a less
determination in the choice of structural
solutions than rigid adherence to the SSP.
SSP implies a passive & reactive approach on
the part of the manager.
The Alternative Framework

Refer pg 22-23 - figure 1.1

Environment is not a constraint and not
common to actors in the given field.
Strategy emerges as deduced action
programmes.
Structure is a logical response to the
demands for action, and conceived of as
alternative hierarchical structures, with
other coordinating mechanisms
subordinated to the selected basic
structure..
The Alternative Framework

REALISTIC
USEFUL
Symbiotic potential of the
Environment
– the firm defines, select and creates it
– can be unique to the firm.
The Alternative Framework

Where Structure almost becomes the

Strategy…
Structure as heterarchy –
Refer pg 25-26 for the 9 main characteristics
The Alternative Framework
Three types of Action programmes:
(pg 27, Nordstrom 1986)

a) Market creation
b) Exploitation of comparative
advantages & coordination of
activities
c) Exploiting relatively short-run
differences in prices between
locations and actors.
The Alternative Framework

Strategy as action: heuristic search

orientation and exploitation of current
potential.
The Alternative Framework

STRATEGY

=
Action Patterns over Time

Exploitation Experimentation
(aims at capturing (aims to change
current potential) future potential)

Not to be confused with Innovation and Entrepreneurship …

this is to be done throughout the whole organization…
The Alternative Framework

“The degree of deviancy – setting the

balance between exploitation of the
known environment and the
investment in search of new fields.”
 Why bring all these up in analysis of
MNCs?
Refer pg 30 for the three mains reasons.
Environment as the creative utilization of
symbiotic potential
Take on a more ambitious aim of the environment.
Not only information processing but also
information creation.
Focus NOT on what competitors are doing BUT on
your own novelties/ potentials that are
complementing your firm.
Structuring of industrial progress in ‘development
blocks’/ ‘growth poles’.
Building a human and social infrastructure enabling
realization of such synergies.
The relationship between
environment, action and structure
Refer pg 32-36 for the 7 main
differences between a new model and
the traditional one.
Conclusion
Elements in the revisions in the MNC context:
Building strategy on global advantages.
‘Structure’ is a complex heterarchy
(geographically diffused but globally co-ordinated
core functions, tied together primarily through
normative integration)
Everyone in the organization is well communicated
& informed. (Holographic quality in information
processing & storage)
Of opportunities, experimentation & exploitation
+ Quick learning
Not passive but an active player in the
environment
Conclusion

Increasingly crucial - the modern MNC

has to select what environment to be
in and discover what to do, and
intelligent design and use of the
structure of the firm.