ORGANIZATION

Transnational Organization

Transnational Organization

The transnational corporation simultaneously pursues global efficiency, national responsiveness and knowledge development and exploitation on a worldwide basis.

The most successful global corporations have found a way to manage these dynamics successfully, interdependently and interchangeably.

Absent this balance companies typically operate internationally either as multi-domestics - providing a high degree of strategic freedom and organizational autonomy to subsidiaries or as mega-nationals - retaining tight control of strategic decisions and information at the global hub (worldwide facilities typically centralized in the parent country, products standardized, and overseas operations considered delivery pipelines to access international markets).

The problems with these models are:

The mega-national may fail by blindly applying home country rules and practices to the new environment (under adaptation). Local entities increasingly act independently, redundancies and conflicts abound and the benefits of global reach erode.

The multi-domestic firm can fail by playing entirely by the local rules (over adaptation). Increasing this model becomes out of touch with customers and employees and fails under its own inflexible weight.

A hybrid that attempts to balance both dynamics - often called a matrix - works in concept more than reality - the matrix may fail due to complexity and procedural confusion (over-engineering).

New transnational (and some incumbents) continue to experiment with alternative organizational forms and BCG highlights many that are at the cutting edge of architectural design. Often flexible networks replace more conventional designs. The challenge is that organizational performance doesn't happen by osmosis and is planned and orchestrated and an adhocracy ultimately will prove problematic to sustainability. The balance of global and local will still be necessary.

Global Integration

Global integration means centralized control over key resources and operations that are strategic in the value chain; decisions are made from a global perspective. Global integration can provide a firm operating internationally with a number of important benefits derived from a worldwide optimization of resources:

Economies of scale

A company can lower its unit costs by centralizing critical value chain activities, such as manufacturing or logistics. This may involve having a small number of large facilities to make products for export, or creating a network of specialized and focused operations spread around the world that are tightly controlled by the central hub.

Value chain linkages

Sometimes competitive advantage comes from tight linkages between value chain activities - between R&D, manufacturing, and marketing in the home country which is a technological leader (for example Silicon Valley in the Internet equipment business); or between manufacturing and ...