• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The role of MNC headquarter

Extracts from this document...

Introduction

FSM - Finance & Strategic Management SCIENTIFIC PAPER 'The role of MNC headquarter' Author(s) of paper: Simon Hansen Table of contents Table of contents 2 Problem formulation 3 The story of Multinational Corporations 4 Responsibility 4 Governance mechanisms 5 The role in the past 6 The role now 7 Headquarter tasks 8 Transfer of international managers 8 The future strategy for multinational corporations' headquarters 9 Conclusion 11 Bibliography 12 Problem formulation Globalization is placing production where it is most cost-effective, selling where it is most profitable, and getting capital from where it is cheapest. That is why multinational corporations exist. Globalization and the development of multinational corporations go hand in hand, with technology as main driver of this combined development. Company strategy has evolved over time, from the first multinational corporations. But what are the differences, and what is the main purpose of company headquarters today. That leads to the following questions to be examined in this scientific paper: - How to define the role of the headquarter? - What was the role of the MNC headquarter previously? - What is the role of the MNC headquarter today? - What is the main difference? - How will the role of the MNC headquarter evolve over time? The story of Multinational Corporations As globalization become more and more important for each day, multinational corporations are becoming more interesting. ...read more.

Middle

A strict hierarchy was the norm, with the headquarter at the top of decision making. By doing this, the corporation more or less neglect local behavior, needs, law and culture. Centralization moves every single important decision to the headquarter, who obviously can not be aware of every single movement in a local market as the local subsidiary is able to. The formalization removes any identity of the local subsidiary and replace it with the identity of the headquarter. This is because of the standardized procedures, which comes from the headquarter, and therefore removes any initiative and impression. The role now As when analyzing the role of the headquarter in the past, we will look at the elements to see how the current role is different. Role Where the headquarter before wanted both the local and global responsibility, corporations nowadays moves towards the global responsibility and thereby leaves the local responsibility to the local subsidiary. By focusing on the global responsibility only, the headquarter better can react to movements in the global market. Thus letting the local subsidiaries care about movements in the local market. But the corporation does not want to give up power in the decision making, and of course wants the local subsidiaries to act in a way that does not collide with the goals, values and beliefs of the headquarter. Therefore they need a set of governance mechanisms to control that, and that is looked at in the following. ...read more.

Conclusion

This might be a temptation to some leaders, as this gives them the opportunity to be present, virtually, in every part of the world. But this is dangerous, as the decentralization is the right way towards a corporation that is able to react and adapt to changes in the global and local market. Conclusion The relationship between headquarter and its subsidiaries can be described by governance mechanisms, centralization, formalization and normative integration. These describe how headquarters acts towards the subsidiary and thereby what role headquarters has in the organization. Previously multinational corporations was very centralized and formalized, thus giving headquarters a very important role in the corporation. The HQ was at the top in decision making, which had the effect that the corporation was not in a condition where it easily can react to changes in local markets. Corporations are going towards a more normative integration-approach towards headquarters role in the organization. The main difference between previously and present is that corporations nowadays are more capable of reaction to changes in local markets. Instead of directly making the decision in headquarters, now international managers are trained and socialized with common goals, values and beliefs. This creates an indirect decision making by the headquarter, as they have trained the managers who now makes decision according to local needs and changes. Corporation will be even more decentralized, thus giving the subsidiaries more responsibility and the ability to react to local changes. Furthermore technology, specifically communication, will move corporations towards the virtual organization. Here decision making can be coordinated across borders, due to instant communication throughout the organization. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Strategic Business Management - Cadbury

    Grades - 1 to 3 express threats and weaknesses. Grades - 4 to 6 express neutral impact. The swot analysis is presented on the following chart, stating graphically its position / placement. PORTER'S MODEL Analyse of Cadbury through Porter's model. Treat of new entrants - High entry barriers in terms of economics of scale, capital requirements, but low in

  2. Old IB Questions

    methods other than price, which typically include product development, advertising and branding. This applies to firms under both collusive (the type of oligopoly where firms agree to restrict output and fix the price, in order to limit competition, increase monopoly power and increase profits)

  1. Heritage Management

    at all levels to improve the deliverable product; marketing responsibly to end users to enhance customer satisfaction and increase respect for socio cultural environment and finally undertaking continual research and data analysis to resolve problems and to bring benefits to end tourist destinations and overall tourist industry.

  2. The future of Eli Lilly

    First of all, it is important to notice that Eli Lilly more or less was forced into this Joint Venture. A lot of international pharmaceutical companies were present, so to be competitive world wide Eli Lilly needed to respond. Furthermore the then restricted pharmaceutical business prohibited Eli Lilly establishing their own 100% owned India-based Eli Lilly subsidiary.

  1. Risk management

    Auto insurance is a put option. In the event of loss, the insurance company pays you a portion of the value of your car. The premium on the put is insurance premium. b. You are a college senior evaluating possible job choices. One job promises that if you accept, it will guarantee your bonus for the next three years.

  2. Should the government take an active role in the management of national economies?

    Moscow, 1992, in Soviet Russia, it seemed as if Van Mises predictions were coming true. There was an economic disaster. Lennie abolished what he saw as chaos of free markets. The state controlled everything. Wages and prices were fixed.

  1. Discuss The Need For Ethical Business

    However, setting ethical objectives also causes some disadvantages to firms. These obstacles are considered as opportunity cost when they decide to go with ethical objectives. The first disadvantage might be the cost that they pay for modern technology and machinery that help them to remove bacteria from food.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    Voltaire?s sociological and political insights simply reinforced Copernicus?s notion of minimal government. Voltaire?s policies included freedom of religion, freedom of expression, free trade and separation of church and state. These revelations changed the face of cultural and political thought. The people of Europe began to imagine a better way of

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work