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Richard Mead
Salient Points
9-2
Options
Options like licensing / franchising , turnkey arrangement, JV , Acquisition , Subsidiary Right option to be in line with perceived risk v/s envisages gains
Risks
Environmental
9-3
Environmental Risks
Competitive risk
Change in technology / obsolescence New strong entries Change in supply / demand structure
Political risk
Economic risk
Unsatisfactory economic condition Local resources , infrastructure Taxation , tariffs can be discriminatory Restriction on repatriation
9-4
Operational Risks
Industry type
Banking
telecom
Subsidiary operations
Young
9-5
Culture Risks
HQ need for high uncertainty avoidance High culture distance Tendency towards centralised control accentuated for an un established operation
9-6
Control
Control costs
Insufficient control loss of profits Over control forgoing new opportunities , high people turnover
Nature / extent of control will vary for different subsidiaries Mechanisms of control
Structural relationship Organisational culture Budgetary control Technology ( transfer ) Staffing policy ( Ethno/ Geo / Poly )
9-7
Structural control
domestic
Global
The world is one market place . All processes including production , marketing are standardised
Combines global scale with local responsiveness . Aims at flexibility & integration HO decisions on R& D , production , investments Greater independence on functions like Marketing , HR
9-8
Transnational
Control Mechanisms
Organisational culture
Philosophy
: Ethno / Poly / Geo Informal control via values , beliefs Extent of control depends on trust relationship
Budgetary control
Annual
budgets , strategic plans Pre approval on resources , authority limits Regular reporting
9-9
Empowerment
A function of management philosophy Knowledge based , customer oriented businesses need greater decentralisation Depends on
Skills at Subsidiary level HO confidence in local operations Impact of empowerment on employee morale , efficiency Cost / benefit of empowering subsidiary
Empowerment is localisation of control may not mean local staffing Empowerment is two ways : Earned , given May not be 100 % . HO will need some control
9-10
HR management should contribute to strategy especially on people Advise on skill, knowledge gaps & need to supplement HR management to build capacity to prepare organisation for :
Knowledge transfer / leveraging across operations Flexible , culture sensitive , mobile managers Managers capable of handling empowerment with maturity & efficacy
9-11