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Feb. 4, 2004

PREPARING FOR THE FUTURE:

 

EVOLUTION OF THE TRANSNATIONAL

SUMMARY AND ASSOCIATED CURRENT DEVELOPMENTS

Prepared By:  Stephen Shank and Scott Stiverson

Professor:  Dr. Nabarun Ghose

Global and Transnational Management

MGT614 (90)

Tiffin University

Spring Term I - 2004

February 4, 2004

Tiffin University Identification Numbers:  3108 / 0862

SECTION I – CHAPTER SUMMARY

        

INTRODUCTION

In the 17th century, English dramatist and novelist Henry Fielding quoted “Now, in reality, the world have paid too great a compliment to critics, and have imagined them to be men of much greater profundity then they really are.”  This statement applies to critics of Multinational Corporations (MNCs) who have been quick to point-out the difficulties companies had during the recessionary period of the late 20th and early 21st centuries.  American giants such as Ford and Boeing as well as established European firms (ABB, Olivetti, and Philips) and even Japanese firms (Mazda, Yamaha, Toshiba) have struggled mightily and have been vulnerable targets for critics.  These critics contend this trend will continue, and MNC’s will eventually collapse to the hands of more “agile” corporate structures that are better suited to keep pace with continuously-evolving markets and technological advances.  However, as writers of this paper we are in concurrence with the text authors that MNC’s are not in jeopardy of becoming extinct.  In fact, it is their experience in multiple global environments that give MNC’s the edge to flourish.  It is precisely this global experience (along with access to world-wide markets and resources) that allows MNC’s to deal with evolving multinational environments and technological advances.  These competencies integrate into the corporate structure of MNC’s to build them into a strong organization capable of dealing with an ever-evolving and dynamic world operating environment.  It is the intent of this paper to provide you with current developments and trends in the evolving organizational structure of MNC’s.

        Traditionally, the criteria to define the management model of an MNC were dependent upon the formal corporate structure of the company.  This corporate structure typically consisted of business, geographic, and functional units that often slowed the MNC’s ability to effectively and efficiently react to the quickening pace of environmental change.  Although some MNC’s engaged in decentralization of resources to keep pace with the changing environmental conditions, they had no true organizational model suited for the 21st century.  While there is no true “utopian” model to cover all variances, there are organizational transformations (or trends) that have led to the formation of a new management model designed to handle these new challenges.  This new management model is based on processes instead of functional units and consists of the entrepreneurial process, integration process, and renewal process.  

THE ENTREPRENEURIAL PROCESS

Our discussion of the entrepreneurial process will begin with a definition of the nature of the process, followed by historical context leading up to this portion of the new management model.  In its simplest sense, the entrepreneurial process involves using “front-line” personnel who are focused on exploring new opportunities for the MNC.  The key here is that “front line” indicates that the personnel seeking the new market and business opportunities are at the bottom of the organization hierarchy.  This directly conflicts with the historical organizational structure where only top management would perform the entrepreneurial duties.  The reason behind this abrupt change is due to a transition in the market environment from a high-growth international market to a slow-growth knowledge-driven market.  Prior to the 1980’s, there was tremendous potential for growth in international markets that required companies to choose which opportunities were the most worthy of their financial resources.  Hence, financial resources constituted a dominant competitive advantage during this period of market growth.  

However, as market growth slowed the impetus for competitive advantage shifted from finance-based to knowledge-based.  Knowledge and specialized skills became necessary components in the new entrepreneurial process to identify and act upon opportunities in this new fast-paced, low growth environment.  This is precisely why “front-line” personnel are used to explore new opportunities.  They are equipped with the knowledge and specialized skills necessary to deal with a world full of diverse marketing opportunities.  It would be naive to think that a few top managers would possess the specialized skills and knowledge necessary for this diverse environment.  

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It is essential that the efforts of front-line entrepreneurs be woven into the company’s organizational structure.  An integrated effort between the entrepreneurs and the company is necessary to capitalize on profitable opportunities as they arise.  This allows the company to use its worldwide resources to assist the efforts of the entrepreneurs.  Hence, the opportunity-seeking function of the front-line entrepreneurs is the driving force behind the efforts of the entire company.  The advantage with this arrangement becomes evident when the company’s global resources provide a competitive advantage to the entrepreneur, allowing them to aggressively compete for profitable opportunities in highly ...

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