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To what extent and in what ways are the strategies of multinational companies influenced by the country of origin?

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Introduction

To what extent and in what ways are the strategies of multinational companies influenced by the country of origin? Kavi Choitram, 0109072. 10-11-03 International Business Tony Edwards Words: 2489 A multinational/ transnational company, according to Peter Dicken, is "...a firm which has the power to co-ordinate and control operations in more than one country, even if it does not own them". (Peter Dicken, Global Shift) Most of these companies are essentially capitalist organisations. As such they behave on the basic principles and rules of capitalism; the quest for profit. With academics such as, acclaimed economist and Nobel Prize winner, Milton Friedman and Adam Smith philosophising in their favour, why would they act in any other way. Although, profit, as Friedman argues, is the only responsibility that a company has, there are other driving factors for an enterprise wanting to multinationalise; growth, increase market share, or sheer dominance. Acknowledging that there are other factors, one can deem that it is the notion of competition that has spurred on these, now multinational, companies. It is these corporations that have spawned this sound-bite of "Globalization". While globalization is thought of by many as having the potential to make societies richer through trade and to bring knowledge and information to people around the world, there are many others who perceive globalization as contributing to the exploitation of the poor by the rich, and as a threat to traditional cultures as the process of modernization changes societies. ...read more.

Middle

There are three main levels at which advantages can be identified down the 'value chain'. 1. The 'downstream level', considers the relationship between the firm and its customers where ability to win price wars, superiority of products, reputation and supplier service provision are examples of advantages possessed by the firm. 2. The 'intermediate' level focuses on the increased levels of a firm, including its skills, attributes, assets and internal and external relationships. 3. The 'upstream' level reflects on dynamic advantages such as being a learning organisation, innovation and the ability to take a long-term view. Therefore, industries involving rapid technological progress will have multinationals with dynamic advantages whereas; stable business environments will focus on downstream advantages. (Yao-Su Hu, The International Transferability of the Firm's Advantages). Further to this, enterprises that succeed at a local level, often feel they can use the same strategy at a global level. Unfortunately, this is not the case, as seen from the example below; HSBC (Hong Kong Shanghai Banking Corporation). HSBC is very much a leading bank in Asia. Although it came up against severe losses when trying to expand west, HSBC managed to acquire Midland Bank. Only 31 percent of its assets are based in Hong Kong, yet, 45 percent of its pre-tax profits originate in Hong Kong, too. This illustrates that HSBC's operations are still more successful in Hong Kong. It does lean weight to the level to which strategy is based from the origin. ...read more.

Conclusion

Knowledge will be passed on by free moving managers. Characterised by five dimensions, this framework of networks is to increase the competitive advantage in any way possible. Creating a new breed of learning organisation seems to be the aim. A firm's strategy is firmly embedded in its particular economic and social context, also known as its 'Administrative Heritage'. These are the 'existing organisational capabilities as shaped by various historical and structural factors'. It preserves the role of the founders in the history of the firm. The further along the spectrum of development we go, we find that the level of influence from the origin declines. Referring back to Perlmutter, we can see that when a geocentric multinational is created, there is a loss of influence from the multinational's origin. Is there a convergence to a single global strategy, as Bartlett and Ghoshal argue? To argue in favour of this would be naive. There is a host of complicating factors that will never subside; political, cultural and social. What we find instead is a mixture of the home practice with that of the host nation. Pauly and Reich are probably correct in observing that although multinationals originate from different home bases they "appear to adapt themselves at the margins but not too much at the core". The strategy will always be effected the enterprises place of origin, the extent in the only variable factor. Depending on the stage of the company, it will either be completely autonomous or on a falling level of autocracy. ...read more.

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