Ib2 Grpb L3 New Approaches To Managing Mnc - Joyz Sim

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 ! C I T environment leads strategy, which leads S I L A structure. E R UN 2. Significant time Y lags in adapting to new realities.ALL C I 3. R Uniform AD developments. 4. Assumed strategy dimension are ‘expansionary’. 5. Formulated archtypes of structure.

These are related to the ‘contingency school’ → Too restri ctivsystems e as thinand “… management gs are o compledo corporateto 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 (aims at capturing current potential)

Experimentation (aims to change 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.