Traditional Multidomestic Model
Sep/12/07/20:45 Filed in: MNEs
The
traditional multidomestic model is used to characterize MNEs with a
portfolio of independent subsidiaries operating in different
countries as a decentralized federation of assets and
responsibilities under a common brand name
(Bartlett.87,Bartlett.87b,Bartlett.88). The old or pure
multidomestic form models companies that adopt country--specific
strategies with little international coordination or knowledge
transfer from the center headquarters. The power center, business
strategic decisions, resource allocation, decision making,
knowledge generation and transfer, and procurement reside with each
country subsidiary and the center adds very little value. In terms
of the global integration/local responsiveness matrix, the pure
multidomestic organizational structure represents the extreme case
of local responsiveness and localization, and low global
integration. Similarly to the international exporter form, the
traditional multidomestic organizational structure is sometimes
described as a historically early only, since this structure is not
well--positioned to compete in a post--globalization environment
where standardization, global integration, and economies of scale
and scope are critical. However, the pure multidomestic structure
is still viable in situations where local responsiveness, local
differentiation, and local adaptation are critical
(Douglas.87,Douglas.73,Wind.89,Wind.74,Wind.73), while the
opportunities for efficient production, global knowledge transfer,
economies of scale, and economies of scope are minimal
(Bartlett.87, Segal-Horn.99). As in the case of the international
exporter form, given the trends towards the globalization of
markets (Levitt.84,Levitt.83), the pure multidomestic company may
be considered a transitory organizational structure in most cases.
An example of this structure and its limitations is Philips during
the 1960 where its multidomestic organizational model made the
autonomous country subsidiaries unable to effectively compete
against global Japanese companies such as Sony, Sharp, and Hitachi.
In summary, the traditional (pure) multidomestic model can be
characterized as follows:
- Matrix Position: low global integration / high localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: competitive strategy, tactical decisions.
- Center Role: minimal, cash dividends, global brand.
- Management Decisions: bottom--down (from subsidiaries to corporate headquarters).
- Technology & Knowledge Transfer: kept at the subsidiary level, little knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: UK companies during post-war, Philips (1960s).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies are pure multidomestic, inability to exploit competitive interdependencies and global efficiencies, duplication of resources.
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- Matrix Position: low global integration / high localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: competitive strategy, tactical decisions.
- Center Role: minimal, cash dividends, global brand.
- Management Decisions: bottom--down (from subsidiaries to corporate headquarters).
- Technology & Knowledge Transfer: kept at the subsidiary level, little knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: UK companies during post-war, Philips (1960s).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies are pure multidomestic, inability to exploit competitive interdependencies and global efficiencies, duplication of resources.
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