Traditional Global Model
Sep/14/07/20:48 Filed in: MNEs
The
traditional global company is the antithesis of the traditional
multidomestic company. The traditional global model is used to
characterize MNEs with globally integrated operations designed to
take maximum advantage of economies of scale and scope by following
a strategy of standardization and efficient production
(Yip.97,Yip.96,YYip.96a,Yip.98). By globalizing operations and
competing in global markets these companies aim to: 1) reduce cost
of R&D, manufacture, production, procurement, and inventory; 2)
improve quality by reducing variance, 3) enhance customer
preference through global products and brands, and 4) obtain
competitive leverage (Segal-Horn.99). The power center, corporate
strategy, resource allocation, and knowledge generation and
transfer resides in the corporate headquarters. In terms of the
global integration/local responsiveness matrix, the pure global
company occupies the position of extreme global integration and low
localization. Examples of pure global structures are found in
Japanese MNEs during the 1970s (e.g. Sony, Hitachi, Sharp, Toyota)
and US companies (i.e. Intel, TI, Coca-Cola, Gillette). As in the
case of the international exporter and traditional (pure)
multidomestic model, the traditional (pure) global company
represents an extreme ideal and an early organization structure. In
summary, the traditional (pure) global model can be characterized
as follows:
- Matrix Position: high global integration / low localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: minimal, distribution and operations
- Center Role: Global integration, corporate strategy, competitive strategy.
- Management Decisions: top--down (from corporate headquarters to subsidiaries).
- Technology & Knowledge Transfer: kept at the headquarters, minimal knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Japanese (i.e. Sony, Hitachi, Shap, Toyota) and US companies (Intel, TI, Gillette).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies fit perfectly the pure global structure, inability to compete in environments requiring high local responsiveness and adaptation.
- Matrix Position: high global integration / low localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: minimal, distribution and operations
- Center Role: Global integration, corporate strategy, competitive strategy.
- Management Decisions: top--down (from corporate headquarters to subsidiaries).
- Technology & Knowledge Transfer: kept at the headquarters, minimal knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Japanese (i.e. Sony, Hitachi, Shap, Toyota) and US companies (Intel, TI, Gillette).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies fit perfectly the pure global structure, inability to compete in environments requiring high local responsiveness and adaptation.