- Research Highlight
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Multinationals are finding it increasingly important to match the strengths of their subsidiaries' host economics to their strategic needs.
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As entrepreneurs are considering international expansion earlier and earlier, it is crucial that they structure their ventures to anticipate and mitigate the tensions that can arise from the ongoing need to match perceived opportunities to available resources.
Although large-scale risks garner media attention, it is the everyday, small-scale risks associated with a lack of transparency in countries’ legal, economic, regulatory and governance structures that can confound global investment and commerce. New research identifies the causes and measures the effects of this phenomenon.
For multinationals, it is increasingly difficult to maintain competitive advantage on the basis of the traditional economies of scale and scope. Future advantage will go to those that can stimulate and support interunit collaboration to leverage their dispersed resources.
A decade ago, multinational companies seemed poised to dominate in China. Today that picture has changed. Whereas IBM, HP and Compaq had quickly won more than 50% of the personal computer market, for example, Chinese company Legend Group Ltd. is now the number one supplier. Research in 10 industries over the last 10 years reveals a pitched battle of competencies between multinational and local players and points to five strategies that can help multinationals regain the edge.
To confront competitive discontinuities, managers must lead their organizations from the zone of comfort to the zone of opportunity.
In a global supply chain, managers must plan for longer lead times, expensive air freight, higher inventory levels, poor sales-forecasting accuracy, and significant delays in resolving technical problems. However, the reduction of defects and engineering change orders associated with lean production can stabilize the supply chain.
Gray market goods -- brand name products sold through unauthorized channels -- are an increasing threat to multinational companies. The authors present a framework to help select the right approach to coordinating price-setting decisions on the basis of a subsidiary's local resources and the complexity of a product's market. Examples of price coordination methods are provided.
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