Managing Companies in the Global Marketplace Aguide to managing complexty, diversity and change in worldwide organisations ‘Ghoshal, respectively directors ofthe global leaaersnip programme at Harvard Business School and ofthe strategic leadership programme at London Business Schoo, frst ulished Managing Acres Borders. The ransnatignal Solution in 198, This was well received atthe tine, and folowing further reseatch for ther later bestseller, The Indiviuaiced Corporation, was updated and a new edition published in 1888, Cost Bartlett and Sumantra "The world’s largest companies are in fox, New pressanns ave Fransfarmed the glahal competitive game, forcing these companies to rethink thee traditional worldwide stratogic approaches," say Bartlett and Ghoshal, With the fmorgonce of now roplonal wading bloc, ‘hanging technology (which in turn affects the underlying economic structure a industries), and new competitive dynamics, companies ‘across national borders. Yet they also need 10 ‘retain their sensitivity Co difering national characteristic. “The various ways in which companies have responded strategically and organisationally to these conflicting pressures have Ted to radically Afferent degrees of success even within the same industry, The reason why some have ‘succeeded while others failed isthe focus of the authors work. Core Concept ‘Tho trend for companies tobecome more clabaly competitive. while at Hn same Hn responding to national differences, has given. ‘se to transnational companies. These transnationals not only gain competitive advantage through combining global eiicency with local responsiveness, ut they’ also learn and inmovate on a worldwide scale, specially over the lst three decades, managers have been trying to find ways of ‘operating effectively in overseas markets ‘any have looked to organsanonal structure co provide them with the necessary strategic ‘capabilities, and soen structural reorganisation asa welcome tool to redefine responsibilles and relationships. One 1970s model, enthusiastically adopted by many management ‘consultants, attempted to answer the CCenralisation versus Decentralisation, Product versus Geography debates, Itpropated specific structures acoonding wo the degree of diversity ft the foreign product range and the relative {importance of foreign sales. as a proportion of ‘otal sales. So a company with a narrow product range and small international sales should have an international division, whilst a global matrix ‘as proposed for internationally dependent companies with diverse product ranges. ‘Worldwide podine Aoicinne ae area division completed the atematives, However, the concept ofthe global matrix (one 2F tho olation® which wae ravch oopowed) simply did not work, being expensive, ponderous and conflictual In the event, ‘structural solutions were found ta be simplistic snd isuicterdy Rene, ad te reorganisations that accompanied the ‘harmful. In particular, they failed to take ‘account of what the authors refer to as “administrative hentage’, a company’s exsting ‘organisational atributes that have been developed sometimes over many years ‘Three types of organisation Lage companies, the authors say, vary widely in their approach to strategic positions, organisational structures, and manaeement processes. They idently three types ‘* Midrinationais, whose primary attribute is their saneitivty an reapaneivonnas ta dlifering national environments. They tend {oconsist of a porto of national companies usualy operating independently of each other Global companies, which teat the woeld market asan integrated whole, and are driven by considerations of global efficiency and cost advantage "Theis dexisgershin, tends ta be more centralised * International companies, which fllbetween the two extremes, th the parent transferring ‘ana adapring ts knovrledge and expertise 0 foreign markers, and exercising substantial lniluence and control, National units retain some independence and autonomay,nO ‘Multinational International Global Co-rdinalion of asses | Decale federation ‘coordinated tederaton ‘Cents hub esourees,resporsbiiies | Fuly seceiaseo ‘St deceased ut corto by HO. Fulycowares and decisions Form of cotol Personal ‘aia Operational Inorral eters wth Foal manages pling and Tigh eaten! simple rencalcomois | conolsitems creat tomer nlane beeen HO an subsitiy ‘meray wary oma ae ripe ‘overseas operations Sten as gag ot ewes a appanage toa ‘Tre 5 ary conut nee usnasses ‘tl domes opeaton ‘oa uted gota marae Figure 1 Mluswates the principal ‘that company was markedly more | # The multinationals were responsive differences that existbetween the | successful han its competitors for | but in some respects inefficient, es cua, Unilever s susie lal vad io gid trae ig market orientation ina market knowledge Historically each ofthese three characterised by national differences, | # The global companies, athough approaches has proved effective in|. Matsushita’ global approach toa efficient lef their national parucularmdustnes, where tere was | market which scale weverything, | subsidiartes with insufficient stack ‘agnod match between the'strategic | or Ericsson's ability to transfer torespond to local needs. And Iimpotative’of that industry -iscritical | knowledge in a markerplace where while they were good at managing ‘success factors and the international | large co-ordinated research, Innovation, they didn’t understand ‘sructure chosen, Bu, the auchors programmes are needed! Jocal marktts well enough o avoid argue, in today's increasingly complex pitialls (uch as over-specification) ‘world, no one approach can bring long- | Conversely, frinstancs, the global Kao | and often squandered the chanoe to term saccess, Anew oreanisational | wasunable to transfer home market take advantage of overseas learning solution is needed that wall enable Sscess and expertise into overseas International companies tended to ‘companies to achieve “global markets through itslack ofabity to | suffer from the drawbacks ofboth competitiveness, multinational Appreciate national cifferenoes~ and | the other types. Rendrty, and welded leaning | Pha raninaronal TPT energy capability, simuliancously" Thissthe | unable cp ordinate the RED efforts | Emerging Transnational trameational mentality. ofits stronglocal companies on an ‘The wansnational approach cifers It economic worldwide basis. sats the focus from global efficiency to Companies researched lobal competitiveness. Itremoves ‘The auchoredrew the bulk oftheir | Bardet¢and Ghoshal found that while | preoccupation with local research fiom nine companies (see | the companies understood the need | responsiveness and instead stresses its Foe} ttrsangeeticeney teonstones | welt anemamedtecicrty Perper cere resign | et reer tl EE Ngvoncimenyhdped omen | Gesecbjectvesnthot proofs rng ta i commmertage eguromene._| conpremiangtie aber Tepes oy arb conn orion Sse Regaremes nay ‘The tasnatonl companys more a cae session screener someday va |) | Steatham pices a a bi i Gamble: which best dispersed. Centralisation eee can sometimes be undertaken not at a ‘home but in a particular subsidiary, oe vane | ‘in | comet |] | eases ean i tere coatbournatke or esar nan Seay ‘poropas cohol enennent : Sine esses ae pve one amar cn cy wes vn |) | SEs Senare ‘ald Sone minor Tiponieas —Biapay —Taama— || lnetclece arora, br ‘amma etaay |] Smt er oes Gives || Spread tokand tobe ‘organisational capability Fenty Requrements and Goma Cnabies emvetamtlate co ah The Andtetrm SBS 2000 ise 25,“The result isa complex configuration of assets and capabilities that ae Aistbuted, yet specialized.” Digpcrood renowrece are inicgratea through strong interdependence, which ar often "specifically designed tobuild slfenforcing cooperation ung inerdependera uss, So dhe ‘wansnational can be thought ofasan Integrated network, which has the inherent ilexilty to optimise resource lows and handle unexpected changes in exchange "ates, tases and technologies. ‘The transnational builds systematic differentiation of roles and responsibilities into different parts of its orvanization say the authors. This dlifferentation can be a major souroe ‘of competitiveness, flexibility and responsiveness. The management of innavation, particulady, isa major “success of the transnational approach, Managers willingly exchange: information, and onable the benefits ‘of global Ienonledge anal aeale to be ‘ombined with ehe localised opportunities and breakthroughs Figure 3 summarises the wansnanonals Giaraveersues Managing the transnational lorganisation is no easy tas iit is not tobecome too dispersed m be ‘competitive, too interdependent to be flexible, and too complex to develop br Teverage its learning capabili’ Figure 4 shows the key management challenges, and underlines how imporeant isto ensure that all perspectives are represented. ‘The co-ordination processes of centralisation, formalisation and to deal with “shortterm shifis in Organizational Strategic Capability Characteristics ‘Management Tasks ‘lona compemveness— uispersea ano Lagumzng overse interdependent assets perspectives and and resources capabilties Mutinationalfsibity iterates wna Developing motile and spedaized subsfiry _—_‘fiexibecoortinabon tes processes Wend taming Joint avatopment ane Baling enara vieion worldwide sharing of a invidual knowledge commitment Figo Bldg nd aging te Trrsratonl specificrole assignments and long | Operationsare specialised, though (erm realionments of asic sometimes duplicated in oer responsibilities" But because those co- ‘ordination mechanisms are so varied and are applied differently, confict can anise unless everyone has bought ‘nto the overall corporate agenda and vision. Inthe authors’ words, the integrative effects [of co-option| often [Powre tobe more powerRl than those Ofany structure or system, however sophisticated, The vision and the valuesbecome the global glue." An integrated network ‘So what sort of structure does a ‘transnational organisation need? This ts shown in gure 5. Assets are widely spersed, not so ‘much to improve response to ‘market needs (because these are ‘ending to converge nowadays acta sensors af new consumer, ‘competitor and technological Additionally, dispersion enables achieve some economies of sale. Flexible manufacturing echnalogies, now materials science and new process technologies note rake this paste Relatonshipsbetween operating units are interdependent, and it becomes snecoamany for product functional and ongraplic groupe to callaborste i they fare toachieve their own ines, iiterertatny subsidies tn large organisations, there is fails enormous pressure to manage all lunits ina similar way. This approach the fe ofthe comple companies confront in teyingto build the three strategic capabilites, The cal transnational approach allows different responses to diferent s).butto | situations. Butbefore you can tailor your approach according a strategic frends. | needs. vou need tobe able to aves ‘companies to take advantage of {international diferences in the eost of topoltca and economic risk the capabilities ofthe subsidiaries Bartlett and Ghoshal suggest chat the nlee and meepomthitine neraen by overseas subsidiaries fall into four Organizational Gharacteristies Multinational Biobat International Transnational Coniurton ot assets Deena and Canaleesane Sources of ore Disgerce, interdependent, and capabilites rata satsuticent iba sca eompelecis centrale, and peiaed| ‘mes opentaans ote of restos Sersngandevloting —_mplemening pant Aptngdleweagrg _Oieretted cantons perains loc appoais comes satis pase comp ty national nits ‘imrtences lata wards erations Development nd Krovioge developed _Krovedge ewoned —Kowiage deveonsd_—_—Knomdge developed Asian etiwatetge—andrearat wth Pelratmedattncertr —ttheceterondtentared—_jtipand hard tacnune Toone uss wrote Figure Organizational aracesss oe Varsatona ‘sue 25 2000 The Aneto CSB. ww teanbeoDstt, specaluad resus ‘Spaoines Largetons of resources, people, and Cole proces of Inorrater among corSaaton and caogeraion —_ieréenendet nts ban ervnmonta shana escent igre erates Netware Lateyunes, ase we Focileatng tear, Importance of te local market and | A company’s sucess is chiely the capabilites of the corresponding | dependent on its ability to innovate Tocal organisation. See Figure 6 “The two historic processes of central "mavaton and lca werevaton are no ‘They identify the following roles: joinod by two categories of ‘ strategicleaders, who are legitimate | ‘ranmnational innovation. The authors partners with headquarters in label these cay ieveragad and Geveloping and implementing ‘ontrally inka. Just a central strategy innovation carries the risk that the * contributors, whose capabilities can] results are insensitive to the needs of be useful tothe whole oreanisation | the markets for which thev were ‘+ implementers, who often take the | intended, and local innovation runs ‘cash cow role the tsk of needless differentiation, so «black holes, where resources must | transnational innovation cariesits Ise apn ta mei a ras vay averaged unacceptable aratgtc position immovations may be rejected due tothe “notinvented here’ syndrome, ‘The wansnational management task | Centrally linked innovations can {o not just identify the aubsidiarioo | funder onthe expense of complicated and manage them differendly ‘coordination mechanisms. According to their categorisation, but to raise organisational effectiveness | ‘The key tosuccess seems to lie in the ferent it ie less vapale uues 9051 | Creal Oa ewetally Uierendlted tvoanylow ofmorle Moreore, | Syaniaton in which each operating the authors highlight the trap of ‘company can "participate in the assuming the home market's innovation process to which could | poratcee goat sete: ‘make te greatest contrenscon". NOt rmightbe beter managed as an ‘only must companies improve their | impiementeror contributor. ably innovate through any one of the four processes described, but they ‘must be ale to operate those processes simultaneously. Linking and leveraging diverse perspectives and capablites ithe managerial tas Referee, Srna Chaska ond Caper Se sare sone uses Boks, 18, ISBN 07125906 2409, Hard aus oh 8, 1958, COMMENT ‘Managing overseas operations has. rover boon an caay ta, though in ‘he more distant past twas certainly simpler. The earliest ‘types, the internationals and lator as Gee ere, were a reflection of their time and place ~ problems of distance and speed of communication meant that high degrees of autonomy were essential. As these problems shrank and the global mode! made ins appearance, competition quickened ‘and compantes began to starch in eames fora new, winning formula (Global competition has now become fierce and o agit, Sexblity, responsiveness and the ability to innovate are esential weapons in, ‘hey ae, only hey ca know. "Transnational organisations ~ as Aesaribed by Bartlet and Ghoshal ~ are complex t organise and mg bu fey wuooed that Stamler Strategic Importance ot Local Environment fru Low i rset val Resuaives ro ‘an Capbities| must jst the effort volved in meeting these challenges. The trouble is tha! the more complex things get the greater the sk of ‘ings going wrong It would pay handsome dividends, therefore, to save ea fa cine Bart and Ghosha’sfllowsap Work in The indiitulcd Corporation (se sue 1, pages ier. c Figure 8: Gener Roos of National Organization sewouk The Anta SBS 2000 ise 25