Paper Analysis Twenty Hubs and No Hq

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This article tries to propose advantages of an alternative strategy of global business management for MNCs. According to the authors the previous strategies of management from the Head Quarters (centralized) or Head Quarters for most functions with regional offices and country managers (decentralized) are not as efficient as management without any Head Quarters and twenty strategically placed hubs. There are compelling reasons to follow this strategy. Firstly developing countries account for a much larger chunk of the net revenue. Secondly there are untapped markets in the form of economically weaker sections in these countries and the full potential of these can not be exploited with the prevalent management strategies. Thirdly there is a huge cost saving advantage with manufacturing in low cost countries and outsourcing is just one way to realize it. The basic concept of this strategy as given by the authors is to have 20 hubs in 20 different countries – 10 developing and 10 developed which account for 70% of the population of the two worlds in each case and on the whole and much of the economic activity. According to the authors having hubs in these 20 countries MNCs can serve all the markets in the whole world more efficiently than using any of the previous strategies. These hubs will serve as a gateway for these MNCs in these regions. As such all management and manufacturing functions required by the region can be shifted to these gateway countries. This will allow the MNCs to serve customers on every level of the income pyramid. Also it will reduce the sourcing cost by 20% and corporate overhead cost by 2/3rd. The gateway hub structure can be flexible with new countries becoming hubs as and when they reach the requisite level of development and each hub sourcing goods manufactured in other hubs. According to the authors in the gateway hub model risk can be spread over 10 or more locations with manufacturing and R&D in multiple locations. This...
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