ISSUES AND CHALLENGES

An MNC is a corporation headquartered in one country and having operations in more than one country

EMC = Emerging markets MNC = MNCs headquartered in an emerging market and having operations in more than one country, i.e. Malaysian MNCs

Three types of headquarters attitude/orientation towards subsidiaries in an MNC:• Ethnocentric• Polycentric• Geocentric

Organization design

Ethnocentric Polycentric Geocentric

Complexity of organization

Complex in home country, simple in subsidiaries

Varied and independent

Increasingly complex and interdependent

Authority; decision making

High in headquarters

Relatively low in headquarters

Aim for collaborative approach between headquarters and subsidiaries

Evaluation and control

Home standards applied for persons and performance

Determined locally

Find standards which are universal and local

Organization design

Ethnocentric Polycentric Geocentric

Rewards and punishments

High in headquarters, low in subsidiaries

Wide variation, can be high or low rewards for subsidiary performance

International and local executives rewarded for reaching local and worldwide objectives

Communication; information flow

High volumes to subsidiaries, orders, command, advice

Little to and from headquarters; little between subsidiaries

Both ways and between subsidiaries; head of subsidiaries part of management team

Recruiting; staffing development

Recruit and develop people of home country for key positions everywhere in the world

Develop people of local nationality for key positions in their own country

Develop best men everywhere in the world for key positions everywhere in the world

Environmental Intra-organizationalEconomic nationalism in host and home countries

Management inexperience in overseas markets

Political nationalism in host and home countries

Nation-centered reward and punishment structure

Military secrecy associated with research in home country

Mutual distrust between home-country people and foreign executives

Distrust of big MNC by host-country political leaders

Resistance to letting foreigners into the power structure

Lack of international monetary system

Anticipated costs and risks of geocentrism

Growing differences between the rich and poor countries

Increasing immobility of staff

Home-country political leaders’ attempts to control firm’s policy

Linguistic problems and different cultural background

Dwindling global supply of resources Rising inflation Stag-deflation (combination of

stagnation/recession/depression) Great depression? Rising unemployment rate People-government expectations Political tension

End. Discussion Thank you.