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National Subsidiaries of Multinational Companies - Essay Example

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National Subsidiaries of Multinational Companies

Multinational companies and their subsidiaries have become an increasingly important part of the global business landscape. How the business is conducted is dependent on the relationship between the headquarters of the MNC and their subsidiaries. Various factors affect this relationship and in turn, determine the ultimate positioning of power in the organization.
Organization structure affects communication patterns and information flows within the MNC. Organization structure facilitates control and improving structural fit with organization strategy serves to bring the goals of the subsidiaries and the MNC on par with each other.
The aim of the paper will be to show that national subsidiaries of multinational corporations are powerless and are totally dependent on their parent company or the host government. The paper starts with some information on MNC-Subsidiary relationship and moves on to discuss the organization structure and the various control mechanisms that are required to ensure that goals of subsidiaries and the headquarters are in parity with the organizational goal. Centralization and decentralization in MNCs, and how it affects the level of control and decision making in organization is discussed. Moreover, the paper discusses the effects of language barrier, geographical distance and human resource management practices on the headquarter-subsidiary relationship and sheds light on the level of autonomy in each situation. The choice of entry as an investment in foreign markets is explained and how the two choices affect the level of control exercised by the headquarters is discussed. The paper ends with a conclusion.

In the last two decades a substantial number of studies have focused on the role of subsidiaries in Multinational corporation (MNC) network. MNC is defined as "a group of geographically dispersed and goal disparate organizations" (Younes, 2003, p.2). The key aspect of the headquarter-subsidiary relationships is the way in which the headquarters ensure that the subsidiaries are working towards common organizational goals. Control mechanisms and centralization/decentralization level are major pointers for the nature of relationship between headquarters and ...Show more


National subsidiaries of multinational companies are largely powerless to direct their own destiny, being, instead, dependent on decisions taken by the parent company or the government of the host country.
This paper attempts to uncover the Headquarter-Subsidiary relationship in multinational corporations and argues that subsidiaries of multinational corporations are powerless in terms of decision-making and autonomy and that they are largely influenced by the decisions of the headquarter…
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National Subsidiaries of Multinational Companies essay example
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