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Strategy
 &
 International
 Business
 

 

 

 

Assignment 3: Case 5.1 – Nestlé
MSc Strategic Management Strategy & International Business Lisa Chen Tessa Trlaja Sergey Sargin Putra Kostermans Martina Korudova Date: 9-10-2012 Words: 1578 336815 319268 353289 321976 331437

 

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Strategy
 &
 International
 Business
 

 

 

Over the years, many typologies of multinational companies (MNCs) have been developed. As such, Bartlett and Ghoshal (1989) provided the most extensive typologies regarding MNCs. Besides, Harzing (2000) uses a different division of the multinational companies and separates them in relation to organizational design and subsidiary role, local responsiveness and interdependence. The identified types are: Multidomestic, Global and Transnational (Harzing, 2000). Multidomestic typology combines high national responsiveness and domestic competition, implying that the company responds to national differences and has a decentralized structure, although scores low on global competition and economies of scale. In contrast, Global typology characterizes high global competition, economies of scale, and low national responsiveness, as companies tend to build cost advantages through economies of scale. Finally, the Transnational cluster combines both typologies focusing on economies of scale as well as national responsiveness. Verbeke (2009) describes four archetypes of administrative heritage, namely the ‘centralized exporter, ‘international projector’, ‘international coordinator’, and ‘multi-centred MNE’ which regard to a specific routine of internationally transferring FSAs. In comparison to Harzing’s (2000) typology, these four archetypes of administrative heritage describe how a company’s FSAs are internationally transferred and its location advantages, while Harzing’s typology discusses the types of MNCs and its measurement to various elements. In 1986, Bartlett and Ghoshal developed another model describing how MNCs should manage its subsidiary network. Firstly, the ‘United Nations model’ where the MNC management treats each subsidiary equally thus there is either complete subsidiary independence or complete dependence. Second is the ‘Headquarters hierarchy model’ where the organization consists of two levels, a dominant level, which decides on the strategy, and a subordinate level adapts accordingly. The strategies consist of homogenization and centralization, which characterizes Harzing’s (2000) Global MNC type. As mentioned before, Global MNCs have low national responsiveness as it follows a centralized rationale. Furthermore, it focuses on economies of scale, which can be associated with homogenization. The four different types of subsidiaries according to Bartlett and Ghoshal (1989) can be distinguished through two characteristics: the strategic importance of the local market and the resource base of the subsidiary (Verbeke, 2009). The Black Hole and the Implementer represent weak resource bases; however the first one is related to a key market while the latter suggests a less strategically important market (Verbeke, 2009). On the other hand, The Strategic Leader and the Contributor entail high resource bases in a key market and a strategically less important market, respectively (Verbeke, 2009). The role of Strategic Leaders as discussed by Barlett and Choshal (1989) is ‘to assist corporate headquarters in identifying industry trends and developing new FSAs in response to emerging opportunities and threats’ (Verbeke, 2009). Therefore it could be characterized as Multidomestic in Harzing’s (2000) typology, where a decentralized network is present and the company adapts its products and marketing to the local environment as well as it engages in innovation and high-performance activities with low level of dependency on the headquarters. In addition, The Contributor subsidiary usually generates new FSAs, which are facilitated by ‘the...
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