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?

Adaptation to local market needs Signup and view all the answers

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

On a global scale, varying by country Signup and view all the answers

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

Knowledge creation and dissemination Signup and view all the answers

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

Access to knowledge developed by others Signup and view all the answers

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

Skills and capabilities of the subsidiary Signup and view all the answers

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

It is a business unit that operates overseas and is owned by a multinational corporation. 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?

At least 50-51% Signup and view all the answers

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

Commercial subsidiary Signup and view all the answers

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

Market and value reach Signup and view all the answers

What characteristic is most common among execution subsidiaries?

They are mostly found in global and transnational approaches. Signup and view all the answers

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

The type of market strategy employed Signup and view all the answers

Which of the following best describes a foreign subsidiary?

A business unit that is part of a larger holding company operating in a foreign country. Signup and view all the answers

What type of strategic focus is common for commercial subsidiaries?

Global and transnational modes Signup and view all the answers

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

Has high autonomy within the domestic market Signup and view all the answers

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

Usually held by local personnel Signup and view all the answers

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

Develops strategic activities of high added value like R&D Signup and view all the answers

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

How critical the market is to the global competitiveness of the MNC Signup and view all the answers

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

Adapting products to local market and consumer needs Signup and view all the answers

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

Resources, capabilities, or innovation strength Signup and view all the answers

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

Engage in research and development with global implications Signup and view all the answers

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

To determine the strategic roles subsidiaries should undertake Signup and view all the answers

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.

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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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.