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The Golden Triangle for MNCs: Standardization toward Headquarters Techniques, Standardization towards Global Guidelines and Localization

Markus Pudelko Anne-Wil Harzing

Version 12 , 2007

Acknowledged for Organizational Dynamics

Copyright laws В© 2007 Markus Pudelko and Anne-Wil Harzing. Most rights appropriated. Prof. Anne-Wil Harzing University of Melbourne Department of Management Faculty of Economics & Commerce Parkville Campus Melbourne, VIC 3010 Down under Email: [email protected] com Net: www.harzing.com

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The Glowing Triangle to get MNCs: Standardization towards Head office Practices, Standardization towards Global Best Practices and Localization

Markus Pudelko, Anne-Wil Harzing

EXEC SUMMARY Probably the most complex difficulties that multinational corporations (MNCs) face is usually harmonizing the opposing pushes of standardization versus localization. Based on a large-scale review of headquarters (HQs) and subsidiaries of American, Japanese and German MNCs, we provide data that MNCs can no longer afford to define standardization simply since the throughout the world adoption of HQ methods. Standardization can take place towards two distinct poles: HQ practices and global best practices, wherever they originate from. Even as we believe taking care of the challenge of localization vs standardization towards either HQ or global best practices is vital to MNC success we all call it the Golden Triangular for MNCs. We also argue that it is usually standardization to global guidelines that is more relevant than either standardization towards HQ practices or perhaps localization. Consequently our study supports what have been known as geocentric or perhaps transnational business models, in which worldwide learning and know-how transfer can be paramount, regardless of where the knowledge showcased originates. Advantages Globalization and MNCs happen to be two carefully interlinked phenomena. On the one hand, the growing need for MNCs is regarded as a key component of the the positive effect process. On the other hand, MNCs need to become more and even more competitive in order to survive within an increasingly globalized world overall economy. As the value of MNCs continues to grow, and so does the significance of perhaps the most central debate around the management of MNCs: the perpetual issue between global integration and native responsiveness, or to use an additional dichotomy, between standardization and localization. two

The integration vs responsiveness terms is most frequently employed to characterize MNC approaches in general because, for example , in the seminal contributions of Prahalad & Doz and Bartlett & Ghoshal in the late eighties. It identifies the level of central coordination simply by headquarters (HQ) to strongly integrate operations worldwide to be able to achieve global efficiency through scale and scope economies, versus the effect of subsidiaries in proper and functional decisions to make sure responsiveness to local circumstances in terms of merchandise and tactics. Many Western companies – such as Toyota, Canon, and Matsushita – have traditionally emphasized global integration and efficiency, even though the main proponents of local responsiveness were European companies – including Unilever, Philips and Nestlé. Standardization versus localization is the terminology recognized employed to refer to functional areas such as marketing and human resource management (HRM), the latter being the focus of our interest in this conventional paper. Standardization of MNCs from this context is usually defined as standardization of international subsidiaries' management practices towards HQ procedures. Global franchises such as McDonalds and Starbucks have standardized both products (though a lot of local deviation is allowed) and managing practices across the globe. In contrast, localization refers to the adoption simply by overseas subsidiaries of those management practices frequently employed by domestic companies in the respective host countries. Most MNCs will certainly for instance localize promotion and...

Bibliography: For information on the the use versus responsiveness controversy within an overall tactical context, we all suggest the next readings: C. A. Bartlett and S. Ghoshal, Handling Across Region. The Transnational Solution (Boston: Harvard Organization School Press, 1989); C. K. Prahalad and Y. L. Doz, The Multinational Mission: Handling Local Demands and Global Vision (New York: The Free Press, 1987); A. Morrison, D. Ricks and K. Roth, " Globalization versus Regionalization: Which Method for the Multinational? ”, Organizational Dynamics, 1991, 3, 17-29. Texts that inform about the standardization-localization debate inside the specific context of human resource management are: G. M. Rosenzweig " The Dual Logics behind Intercontinental Human Resource Management: Demands for Global Integration and native Reponsiveness”, in G. Stahl and I. Björkman (eds), Handbook on Research in International Human Resource Management (Cheltenham: Edward Elgar, 2006, 36-48); A. Ferner, " Country of Origin Effects and HRM in Multinational Companies”, Human Resource Management Journal, 1997, several, 19-37. With regards to the modernization of the Japanese as well as the German management models, make sure you see: Ur. Dore, Currency markets Capitalism: Well being Capitalism. The japanese and Indonesia versus the Anglo-Saxons (Oxford: Oxford University Press, 2000); T. Yamamura and W. Streeck (eds), The conclusion of Selection? Prospects intended for German and Japanese Capitalism (Ithaca: Cornell University Press, 2003). Especially on Japanese HRM, find: M. Pudelko, " Japanese Human Resource Management: From Being a Miracle to Requiring One? ”, in Ur. Haak and M. Pudelko (eds), Western Management: The Search for a Fresh Balance between Continuity and alter (Houndmills: Palgrave, 2005, 184-212). Specifically on German HRM, see: M. Müller, " Unitarism, Pluralism, and Human Resource Management in Germany”, Management Worldwide Review, 1999, special issue 3, 125-144; H. Wächter and M. Muller-Camen, " Co-determination and Strategic The use in The german language Firms”, Hrm Journal, 2002, 3, 76-87. Finally, information on the American management system as a role style for the two Japan and Germany can be acquired from: Meters. Pudelko and M. Mendenhall ”The Japanese people Management Evolution: What Traditional western Executives Have to know about Current Japanese Supervision Practices”, Company Dynamics, 2007, 3, 274-287; C. Dörrenbächer, " Running or Exporting the German Model? – The Internationalization of The german language Multinationals in the 1990s”, Competition and Change, 2005, 8, 443-456.

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Bios Markus Pudelko is Reader in Worldwide Business on the University of Edinburgh Management School. He earned a Masters in operation Studies in the University of Cologne, a Masters in Economics in the Sorbonne College or university, a Masters in Foreign Management from your European university or college network ‘Community of Western Management Schools' (CEMS) and a PhD from the University or college of Perfume. His current research is on headquarter-subsidiary human relationships, comparative HRM, Japanese managing, management analysis in Cina and cross-cultural management. His latest co-edited book newsletter is Japanese people Management: The Search for a New Balance among Continuity and alter (2005, Palgrave). Anne-Wil Harzing is Teacher in Foreign Management with the University of Melbourne. She has a BA in Business & Languages from your Hogeschool Enschede; a MUM in Business Operations & Foreign Management by Maastricht School, both in the Netherlands and a PhD in International Managing from the University of Bradford. Her research interests include international HRM, expatriate managing, HQ-subsidiary associations, cross-cultural managing and the part of terminology in international management. She gets published about these topics in journals just like Journal of International Business Studies, Journal of Organizational Behaviour, Strategic Management Log, Human Resource Management, and Organization Studies. Since 1999 she also maintains an extensive site (www.harzing.com) with resources for intercontinental and cross-cultural management. (Tel: +61 3 8344 3724, email: [email protected] edu. au)

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