Chapter 6
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Questions and Answers

What type of pressures require a local adaptation to the market for competitiveness?

  • Integrating pressures
  • Standardizing pressures
  • Globalizing pressures
  • Fragmenting pressures (correct)

What aspect does competitiveness NOT include when evaluated?

  • Skills and capabilities
  • Market size (correct)
  • Know-how
  • Profitability

What does integration refer to in the context of multi-national corporations (MNC)?

  • Global standardization processes
  • Local market adaptations
  • The independence of subsidiary operations
  • Activities reliant on other units of the MNC (correct)

Which of the following best describes localization in MNC operations?

<p>Adaptation to local market needs (C)</p> Signup and view all the answers

How does the balance between integration and localization typically get analyzed?

<p>On a global scale, varying by country (A)</p> Signup and view all the answers

What is crucial for maintaining the competitive advantage of an MNC?

<p>Knowledge creation and dissemination (C)</p> Signup and view all the answers

What does the position of subsidiaries within the knowledge network of an MNC determine?

<p>Access to knowledge developed by others (B)</p> Signup and view all the answers

What is considered an evolving factor in the understanding of a subsidiary's competitiveness?

<p>Skills and capabilities of the subsidiary (B)</p> Signup and view all the answers

What is the primary characteristic of a foreign subsidiary according to Birkinshaw (2001)?

<p>It is a business unit that operates overseas and is owned by a multinational corporation. (B)</p> Signup and view all the answers

According to Pla Barber (2016), what is the minimum percentage of shares that a parent company must hold in a foreign subsidiary?

<p>At least 50-51% (D)</p> Signup and view all the answers

Which type of subsidiary focuses primarily on the commercial area and post-sales activities?

<p>Commercial subsidiary (C)</p> Signup and view all the answers

In the context of classifying subsidiaries, what are the two dimensions mentioned?

<p>Market and value reach (D)</p> Signup and view all the answers

What characteristic is most common among execution subsidiaries?

<p>They are mostly found in global and transnational approaches. (B)</p> Signup and view all the answers

What is a key element in the appointment of differentiated roles within subsidiaries?

<p>The type of market strategy employed (B)</p> Signup and view all the answers

Which of the following best describes a foreign subsidiary?

<p>A business unit that is part of a larger holding company operating in a foreign country. (A)</p> Signup and view all the answers

What type of strategic focus is common for commercial subsidiaries?

<p>Global and transnational modes (A)</p> Signup and view all the answers

What is a characteristic of a local subsidiary in the multidomestic approach?

<p>Has high autonomy within the domestic market (B)</p> Signup and view all the answers

Which of the following best describes the role of executive management in a local subsidiary?

<p>Usually held by local personnel (D)</p> Signup and view all the answers

What is a key feature of a qualified subsidiary under the transnational approach?

<p>Develops strategic activities of high added value like R&amp;D (A)</p> Signup and view all the answers

Which of the following defines the strategic importance of a local market for a subsidiary?

<p>How critical the market is to the global competitiveness of the MNC (C)</p> Signup and view all the answers

What influences the localization strategies of products in a multidomestic approach?

<p>Adapting products to local market and consumer needs (A)</p> Signup and view all the answers

What defines the capacity of a subsidiary to contribute to MNC success?

<p>Resources, capabilities, or innovation strength (A)</p> Signup and view all the answers

Which of the following strategies would a qualified subsidiary most likely utilize?

<p>Engage in research and development with global implications (A)</p> Signup and view all the answers

What is the primary aim of Barlett and Goshal's framework regarding subsidiaries?

<p>To determine the strategic roles subsidiaries should undertake (A)</p> Signup and view all the answers

Flashcards

Foreign Subsidiary

A business unit operating in a foreign country, owned by a multinational corporation (MNC), and generating value-added activities.

MNC

A company with operations in multiple countries.

Commercial Subsidiary

A subsidiary focused on sales and post-sales support.

Execution Subsidiary

A subsidiary focusing on tasks like manufacturing or product development, part of global or transnational businesses.

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Value reach

The extent to which a subsidiary is involved in the value chain of the parent company, from raw materials to final sales.

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Market reach

The geographic scope or coverage of a subsidiary, and potentially the markets it serves.

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Subsidiary's ownership

The parent company usually holds at least 50-51% of a foreign subsidiary's shares.

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Internationalization of Businesses

The process of expanding business operations to other countries.

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Subsidiary Competitiveness

A subsidiary's ability to succeed in a foreign market, considering profitability, skills, capabilities, and know-how. It's dynamic and can change over time.

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Integration Pressures

Pressures to create global efficiencies, such as through standardization, economies of scale, and international development.

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Localization Pressures

Pressures to adapt to local markets, focusing on local competition and customer needs.

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Transnational Approach

A focus on achieving efficiency through a balance of integration and local adaptation within a multinational corporation.

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Subsidiary Integration

The degree to which a subsidiary relies on other parts (business units) of the multinational corporation (MNC).

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Subsidiary Localization

The degree to which a subsidiary operates independently, or how its activities in a foreign market differ from if it was a local company within the same business.

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Knowledge Dissemination

Sharing knowledge and best practices across a multinational corporation's (MNC) units.

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Knowledge Network Position

A subsidiary's access to and influence within the knowledge network of a multinational corporation (MNC).

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Local Subsidiary Function

A subsidiary focused on the domestic market, adapting products to local needs, usually managed by local personnel. Has high autonomy but limited global impact.

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Qualified Subsidiary Focus

A subsidiary specializing in high-value activities like research and development (R&D), influencing other subsidiaries, and building strategic innovation capabilities.

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Export-Oriented Subsidiary Function

A subsidiary producing a narrow range of products primarily for export, with limited decision-making autonomy, and operating within a global value chain.

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Subsidiary Strategic Importance

A measure focusing on how crucial a subsidiary's market is to a multinational corporation's global success.

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Subsidiary's Global Network Contribution

An assessment of how effectively a subsidiary can contribute to strengthening global network influence and resource strength for an organization.

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Multidomestic Approach

A global strategy where subsidiaries operate relatively independently, adapting products and services to each local market.

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Subsidiary Executive Management

The management of a subsidiary, frequently reflecting the nationality of the parent company, or the local personnel of the target market.

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Study Notes

Section 3: Unit 6 - Foreign Subsidiary Strategy

  • The presentation focuses on the strategy of foreign subsidiaries, part of a larger course on Internationalization of Businesses.

Contents

  • The presentation outlines three main topics:
    • Definition of a foreign subsidiary
    • Typologies of subsidiaries and key elements for differentiated roles within the company
    • Development and evolution process of a subsidiary

Definition of a Foreign Subsidiary

  • Birkinshaw (2001): A business unit operating overseas, owned by a multinational corporation (MNC), that produces added value in a foreign country.
  • Pla Barber (2016): A company linked by ownership and capital to a larger company (holding company), operating overseas and generating added value for that entity.
  • A company operating overseas, often part of a larger corporation headquartered elsewhere (parent or holding company). The parent company generally owns at least 50-51% of the subsidiary's shares.

Typologies of Subsidiaries and Key Elements

  • The presentation classifies subsidiaries based on two dimensions:
    • Market reach (local or global)
    • Value reach (low or high, toward the MNC)
  • Four types of subsidiaries are outlined:
    • Commercial subsidiary: Focused on sales and post-sales activities. (Examples: HP, Xerox, Canon)
    • Execution subsidiary: Concentrates on producing and exporting a limited range of products/components. Low autonomy, execution driven. (Example: Ford)
    • Autonomous/local subsidiary: High autonomy, focusing on the domestic market and adapting to local consumer needs. (Example: L'Oréal)
    • Qualified subsidiary: Develops high-value activities like R&D, acts as a center of excellence, and can become a sub-headquarters office. (Example: Bayer)

Development and Evolution of a Subsidiary

  • Birkinshaw and Hood (1998/1997) present a dynamic approach to the foreign subsidiary's evolution.
  • Factors influencing evolution include internal and external pressures:
    • Head office (HQ) assignment of roles and decisions based on competitive and/or global pressures.
    • Local conditions (competence, suppliers, and government regulations)
    • Evolution fostered by the parent or the subsidiary itself, or by the host country.
  • The presentation emphasizes the relationship between foreign subsidiary strategic role and the overall strategy of the holding company. It also focuses on how external conditions, from the local context to global forces, influence the evolution of the firm's strategic role.

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Unit 6: The Strategy of the Foreign Subsidiary PDF

Description

This quiz explores the strategy of foreign subsidiaries within the framework of international business. It covers definitions, typologies, and the development process of subsidiaries. Test your knowledge on how multinational corporations operate and manage their overseas units.

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