Summary of The Tortuous Evolution of the Multinational Corporation By Howard V. Perlmutter.
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Summary of The Tortuous Evolution of the Multinational Corporation By Howard V. Perlmutter Submitted by Stephanie Breuer (9503) and Jim Bennett (8302) MGT 614: Global & Transnational Management (Section 90) Spring 2004, Term I Dr. Ghose January 21, 2004 Reading Summary Ask four different people and you will get four different answers as to what a multinational company is. Some companies will think that they are multinational because their products are marketed in many different countries, have manufacturing located around the world, or even because they have executives who are non-American. But what is the big deal with a company being multinational? This is because many companies regard being multinational with prestige and respect. Executives of firms have different criteria in which they rate if their firm is multinational or not. They have different reasons for wanting their firm to be multinational. The first is that they see a company that is multinational as having a great long-term lookout. Another reason is that this is seen as a different type of company. It is seen as a different type of company for a few reasons. The major reason is that this type of company is seen as one that will bring together the world. What makes it so difficult to define whether a company is multinational or not? There are three primary characteristics that set companies apart from each other in regards to how they are multinational. These characteristics are as follows: * Ethnocentric * Polycentric * Geocentric A company will never express one of these characteristics fully, but will end up having all of these characteristics, but there will be one that will dominate.
This way when it is time to impact the larger departments many of the obstacles have already been over came and the employees are looking froward to the change. Associated Current Developments As we began our research of associated current developments, we assumed it would be relatively easy to find stories of companies that had successfully completed the journey from being ethnocentric to being geocentric. Howard Perlmutter's work is not new. His ideas date back to at least the 1960's. Yet, our Google(tm) search did not turn up many companies laying claim to this successful transition. One company, Delphi, stood out as an enterprise that is working toward becoming geocentric. We will discuss the history of Delphi and examine its journey toward becoming geocentric. We will then draw some conclusions and examine its outlook for the future. Delphi was originally a division of General Motors. According to Bellamy, Danielsson-Murphy, and Murphy, its core business was "automotive parts, including lighting, chassis, environmental systems, batteries, engine management, and seats (1998)". The company wanted to increase its business with companies other than General Motors and therefore pursued a strategy that established an identity separate from that of its parent company. In other words, if Delphi wanted to do business with other automobile companies, it could not be seen as General Motors. This led to an organizational structure where most of the decisions for Delphi were made within the division and not by General Motors (Bellamy et al, 1998). Delphi established a goal of having over half of its total sales from customers other than General Motors' North American Operations.
It is interesting to note that our textbook states: "Perlmutter's (1969) concept of ethnocentric, polycentric, and geocentric multinationals is an interesting but different one. It takes the firm, not the industry, as the unit of analysis and is decoupled from industry structure. It focuses on management attitudes, the nationality of executives, and other aspects of organization. Perlmutter presents ethnocentric, polycentric, and geocentric as stages of an organization's development as a multinational, with geocentric as the goal. A later paper (Wind, Douglas, and Perlmutter 1973) tempers this conclusion based on the fact that some companies may not have the required sophistication in marketing to attempt a geocentric strategy. Products embedded in the lifestyle or culture of a country are also identified as less susceptible to geocentrism. The Perlmutter et al. view does not attempt to link management orientation to industry structure and strategy. International strategy should grow out of the net competitive advantage in a global industry of different types of worldwide coordination. In some industries, a country-centered strategy, roughly analogous to Perlmutter's polycentric idea, may be the best strategy irrespective of company size and international experience. Conversely, a global strategy may be imperative given the competitive advantage that accrues from it. Industry and strategy should define the organization and approach, not vice versa (Bartlett et al, 2004, p.314n)". We conclude that Delphi is close to being geocentric and that it is an appropriate goal for the company. As stated above, not all organizations should move toward a geocentric goal although many would benefit. We also note that the effort to be geocentric takes considerable time and effort.
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