Five multinational corporation structures and their organizational strengths

MNCs

Multinational Corporation Structures

The intent of this analysis is to evaluate five different multinational corporation (MNC) structures, citing examples of corporations using them and the strengths and weaknesses of each. The five structures include corporations with a domestic structure plus export department, domestic structure plus foreign subsidiary, global structure, global functional structure and global product structure.

Domestic Structure plus Export Department

This form of MNC structure is common in nations who rely on exports for the majority of their revenues and Gross Domestic Product (GDP). Japanese companies often have deep expertise in this area, with Panasonic, Toyota, and Toshiba having extensive export departments that deal with such critical process and strategy areas as compliance, pricing and warranty claims by nation (Voisey, 2010). The advantages of this approach are that deep expertise on individual nation's requirements are captured as tacit knowledge within an organization, there is often greater control over pricing and compliance costs, and the ability to coordinate multinational product introductions is enhanced. The weaknesses of this structure include the time to respond to rapidly changing market requirements, the lack of cultural awareness in export offices where employees may have not spent time in the countries being sold to, and lack of trust between the export offices and local governments due to infrequent contact. This structure has been very effective for Japanese companies in the last fifty years.

Domestic Structure plus Foreign Subsidiary

IBM has successfully pursued this strategy first throughout Europe and later through Asian nations where each subsidiary has profit & loss responsibility and the decision of which products to sell (Bramante, Frank, Dolan, 2010). The advantages of this approach include having a centralized base of support and service globally, the ability to tailor products and services to individual market requirements by hiring experts in each subsidiary location, and lower costs over time of tailoring products to individual market needs. The disadvantages of this approach include lengthy time to launch new products, lack of global coordination across subsidiaries, and the potential for partnerships at a regional or national level to be uncoordinated to global product and marketing strategies.

Global Structure

Retailers often rely on a single global structure to provide for economies of scale, greater coordination of supply chain costs and timing, and greater development of global distribution channel selling relationships (Wang, Chan, 2010). High-end clothing retailers with short product lifecycles on fashions, including the top clothing designers rely on this approach to organizing their operations as it provides control of the shopping and customer experience globally. The disadvantages of this approach is that can be exceptionally expensive to keep coordinated and synchronized over time, lacks per-country visibility of performance in certain instances, and takes away the potential for companies to negotiate effectively with in-country suppliers on specific programs.

Global Product Structure

Often Consumer Packaged Goods (CPG) manufacturers rely on a global product structure approach to gain economies of scale, encourage and promote the experience effect of learning about new products through the organization globally, and have greater synchronization of new product introductions. P&G has gone through many re-organizations over the last thirty years, and the most recent as been a global product structure that seeks to gain cost and time-to-market efficiencies globally through this approach to organizing their company (Ambos, Andersson, Birkinshaw, 2010). The downsize of this is P&G has lost the speed of response when they had country subsidiaries, lost visib ility into new market growth at a more immediate level and have had to plan production around a single, global product platform, spending time and money to customize it for specific market needs.