Limitations of the Traditional Organizational Structures
/// Filed in: MNEs
As we
pointed out in the previous posting, each of these organizational
structures has limitations to compete in a global economy. Briefly,
the international exporter (low global integration/low
localization) is not well positioned to compete in situations where
either economies of scale or local responsiveness are critical. The
traditional multidomestic (low global integration/high
localization) is not well positioned to exploit competitive
interdependencies and global efficiencies, and consequently it is
in significant disadvantage in situations where economies of scale
and scope are critical. Additionally, their inability to extract
value from its center headquarters significantly limits their
competitive advantage in global setting where corporate strategy,
global integration, coordination, and knowledge transfer play a
significant role. Finally, the global company (low
localization/high global integration) is not well positioned to
compete in situations requiring critical local adaptation. Perhaps
even more important is the fact that it does not extract value from
their subsidiaries including knowledge transfer, coordination, and
business strategy, enabling them to make good strategic and
tactical decisions.