Business Strategy: The Modern MNE - Assignment Example

Business Strategy The organisation of the modern MNE is more complicated than the old models of Global, multi-domestic and translational suggest? Explain and discuss. Introduction The modern multinational enterprise is not a simple body since there are hundreds of elements which make up a company which is spread across the globe (Segal-Horn & Faulkner, 1999). The basic reason for the increased complication is the growth in the concept of globalisation and the operations of business without boundaries (Johnson et. al., 2005). While it might have been possible in the past to create and operate a giant company which has all inputs as well as outputs located in one country, it is certainly not the case for many businesses today (Edwards & Kuruvilla, 2005). In today’s world, a company can have its head office in London, the main production facility in China, the research laboratories in Germany and the support centre in Pakistan. At the same time, the individuals working for the company in different locations are likely to come from different cultures, have different logistical needs and they may even require different management policies (Hollinshead and Leat, 1995). While it may seem complicated, these elements are just some of the basic concerns of a modern MNE (Johnson et. al., 2005). However, it must be noted that the functioning of the company may be much simpler than comparative companies in the past and the size of the company can actually be tiny compared to the global organisations of the past. The Modern MNE The internet is certainly a great tool which allows relatively miniscule companies to come face to face with big players in the market. A company can have less than ten employees, work only with a capital of a few million and yet have a logistics and supply chain system which works better than giants such as BP. Margulius (2006) presents several examples of how companies can use information technology to improve their position in competing with larger companies on the basis of their created supply chains. This certainly complicates the organisation of the company since every individual is a key decision maker but at the same time, it lets the MNE be more agile in terms of conducting business across the world. For example, a very small company such as Oriel wines was the subject of the cast study by Chozich (2005) who showed that a producer and supplier of wine could used the internet to give their clients an image of a company which seems to be much larger than it actually is with a supply chain that runs from California to Germany and as far as Japan. The company is simple in structure, but the organisation of such an effort depends on several very complicated technologies which work together to make the modern MNE possible (Johnson et. al., 2005). Chozich (2005) tells us that Oriel Wines which sells more than twenty varieties of wines from around the world with offices in Europe and in America. In reality, they employ only a staff of six people. What they use to get the advantage of size is the creative use of technology which gives them better footing overall (Segal-Horn & Faulkner, 1999). They can do this because even a team comprising of one person can use tools like PayPal, yahoo merchant stores and eBay to ensure that they are a part of the business world and can have their share of the global business pie if they are dedicated to creating an image of their brand. Companies like Oriel Wines use email services that can automatically make Amazon like recommendations to clients, in effect making them appear more on top of things and larger in size. Deliveries, supply levels, shipping procedures and various other things which require control over the supply chain are automated with various services. Similarly, distribution lists and related information can be handled by outsourcing to services like Constant Contact who maintain mailing lists and provide email services for monthly fees allowing the company to focus on its core competencies (Chozich, 2005). With the use of IT, the organisation of the company can become more complicated but it also allows for better management and remote handling of most situations which global companies of the past could not. However, Chozich (2005) is careful to note that the core idea behind the use of IT is not simply to use it as something which has to be used because it is there. IT must be used judiciously in order to save time, money and effort as well as to improve the organisation of the company. The economies of scale are not important in some cases because many of the advantages of size can be mitigated especially when it comes to being an internet based business (Johnson et. al., 2005). Of course, modern companies often take the lead in having abnormal cultures as exemplified by Apple which was the first company in the 1970s to redefine what a ‘cool’ corporate culture should be. Unlike old global companies, Apple is flat instead of being hierarchical and it is mostly casual rather than formal in terms of attire and work timings. Executives can walk about the company campus barefoot in shorts and short sleeved shirts. Anyone wearing a suit is looked at with surprise even though Apple has been a long time member of the Fortune 500. Most importantly, even though the company has seen several different CEOs, it has essentially remained close to its original roots. This does not mean that the organisation of the company is simplified since Apple had to work hard towards not becoming a company which resembled their competitors in any shape or form (Wikipedia, 2006). Burlingham (2003) argues that the culture of a company can go a long way towards making the company act like a small business or act like a large bureaucratic organization. Small business being the better of the two since that is what a modern MNE is recommended to act like. Welch (2005) correctly recommends that the modern company should not have a bureaucratic system because it leads to inefficiencies when it comes to decision making and the empowerment of employees. Burlingham (2003) gives a detailed review of the culture at Zingerman’s Community of Businesses which includes everything from the hippie sandals and casual clothes worn by the CEO to the financial figures of the company showing a huge margin of profits and more than fifteen million dollars in total sales. Keeping the financial information aside (since the company is doing very well as a small business) the focus is on the culture of the company which has built a strong sense of belonging and ownership for the employees, a trust relationship with the owners, excellent management practices and a zeal to provide customers with the best possible service. Such a culture only comes with complex relationships that evolve with time between the customers and the company as well as between the owners and the employees (Burlingham, 2003). Throughout the history of the company, it was able to adapt and change to the business requirements simply because it had an entrepreneurial culture that appreciated change and flexibility. While such situations can be difficult to create, there is no reason why an old fashioned organisation could not develop the same work and social environment in which belonging and ownership are a part of the regular work ethic (Burlingham, 2003). Zingerman encourages entrepreneurs to come and work for the company with their ideas so they can be invested in and eventually turned into new companies under the same umbrella. Any employee who has an idea for a product can start selling it as their own project, manage it, develop it and if it takes off they can turn it into a new company altogether (Burlingham, 2003). This is how one small company manages to keep itself fresh and young since it is constantly increasing in size with the inflow of new ideas created by the brightest entrepreneurs who are lured to work for Zingerman’s Community of Businesses. Not only the employees, but the community is also happy with the company since 10% of their operating profits always go to charitable causes within the community (Burlingham, 2003). This simply goes to show that keeping the culture and the organisational advantage of ‘small businesses’ will help a company even though it may employ hundreds of people and have a huge budget to deal with. In effect, as suggested by MoreBusiness.com (2006) it is the complicated process of business thinking which needs to be changed to be more inline with the concept of the modern MNE rather than to seek changes with the company itself. GE as a global company pushes the idea of thinking globally while acting like a small company which is able to move with the times (Welch, 2005). A significant cultural issue which is faced by companies spread across the globe is the difference in the standard of living to which people in different nations are used to (Bean, 1994). Workers in Britain as well as many other western countries tend to place great value on their leisure time and have enjoyed a relatively high standard of life in the past while the majority of Chinese workers have lived in comparative poverty (Clark, 1996). Being sensitive to this difference is important because it can certainly affect the way individual salaries, increments and time based bonuses are handled by a company (Kidger, 1991). At the same time, it must be noted that such situations may not remain true in the long term. Even in China, the trends of living with less could be on a downward slope as the population gets used to having more than their predecessors. A twenty year differential study for the economy of china shows that between 1981 and 2001 the percentage of working class individuals living on less than one US dollar per day decreased from almost eighty percent to less than thirty percent (Bardhan, 2006). Therefore, a company which is based in the UK would have to carefully evaluate the cultural basis of salary structures when they wish to work in nations where the social setup is similar to China. Porter’s Diamond Model is certainly applicable to the way modern multinational companies are structured and this model helps in explaining why Asia in general and China in particular has long been attractive to some of the world’s best companies. The last decade has shown us a broad flowering of entrepreneurship throughout Asia in the face of different challenges. Factors attributed to this trend include a huge wave of private equity and venture capital funding, but more importantly, regulatory laws for financing and capital acquisition were eased and the less stringent rules governing the listing of young companies at the various stock markets helped in many companies getting the money they need for business (Robinson, 2005). This has meant a huge influx of capital for countries which are ideally located for being the production houses of the world. Companies such as Apple, BMW and GE have used Chinese manufacturers or have established manufacturing bases in china to get a better position in the market by lowering their production costs. Since the overall cost of production in China is much cheaper than it would be in other countries, products are designed, developed and heavily marketed in the regions where they are to be consumed while they are assembled and produced in locations where the cost of production would be the lowest (Robinson, 2005). Conclusion A modern MNE is not the same as the old global enterprises which ruled with the power of simple authority and a word from the CEO. It is clear that a global enterprise has come a long way from the times of the East India Company and it is no longer possible for a company to impose its dictates on others as it might have done in the past. In fact, the main objective of even the largest companies in the world is to act and behave like small companies with global architectures so that they can gain the benefit of being agile and smart. On the other hand, small companies can use modern technology and the wealth of resources which are made available to them through the use of the internet to come to an almost equal footing with their larger brethren. While the organisation of business and the way companies behave in the world may have changed significantly, the ideals which support good business practices and the methods of making profit by keeping customers happy have not. Finally, it seems that no one way of handling or having a multinational company in the times when small companies can act as big ones and big companies are trying to become more like small enterprises. However, the attraction of certain locations and certain attributes of having a presence at different locations in the world or across a country will mean that trans-national and global companies will continue to become more complicated than the older structures which have existed in the past. Works Cited Bardhan, P. 2006, ‘Does Globalization Help OR Hurt the Worlds Poor?’, Scientific American, vol. 294 no. 4, pp84-91. Bean, R. 1994, Comparative Industrial Relations: an introduction to cross-national perspectives, Thomson Business Press. Burlingham, B. 2003, ‘The Coolest Small Company in America’, Inc,. vol. 25, no. 1, p. 64-72. Chozich, A. 2005, ‘Managing Technology; Appearances Are Deceiving’, Wall Street Journal. 19 Sep, p. R7. Clark, T. 1996, European Human Resource Management, Blackwell Publishing. Edwards, T. and Kuruvilla, S. 2005, ‘International HRM: national business systems, organizational politics and the international division of labour in MNCs’, International Journal of Human Resource Management, vol. 16, no. 1, p. 1-21. Hollinshead, G and Leat, M. 1995, Human Resource Management: An international and comparative perspective, FT Pitman Publishing. Johnson, G. et. al. 2005, Exploring Corporate Strategy, Prentice Hall Kidger, P. 1991, ‘The emergence of international human resource management’, International Journal of Human Resource Management, vol. 2, no. 2, pp149-163. Margulius, D. 2006, ‘Fine-Tuning Your Supply Chain’, InfoWorld, vol. 28, no. 17, p. 18-19. 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