Managing Across Borders: New Organizational Responses
IN A COMPANION ARTICLE (Summer 1987), we described how recent changes in the international operating environment have forced companies to optimize efficiency, responsiveness, and learning simultaneously in their worldwide operations. To companies that previously concentrated on developing and managing one of these capabilities, this new challenge implied not only a total strategic reorientation but a major change in organizational capability, as well.
Implementing such a complex, three-pronged strategic objective would be difficult under any circumstances, but in a worldwide company the task is complicated even further. The very act of “going international” multiplies a company’s organizational complexity. Typically, doing so requires adding a third dimension to the existing business- and function-oriented management structure. It is difficult enough balancing product divisions that bring efficiency and focus to domestic product-market strategies with corporate staffs whose functional expertise allows them to play an important counterbalance and control role. The thought of adding capable, geographically oriented management— and maintaining a three-way balance of organizational perspectives and capabilities among product, function, and area—is intimidating to most managers. The difficulty is increased because the resolution of tensions among product, function, and area managers must be accomplished in an organization whose operating units are often divided by distance and time and whose key members are separated by culture and language.
From Unidimensional to Multidimensional Capabilities
Faced with the task of building multiple strategic capabilities in highly complex organizations, managers in almost every company we studied made the simplifying assumption that they were faced with a series of dichotomous choices.1 They discussed the relative merits of pursuing a strategy of national responsiveness as opposed to one based on global integration; they considered whether key assets and resources should be centralized or decentralized; and they debated the need for strong central control versus greater subsidiary autonomy. How a company resolved these dilemmas typically reflected influences exerted and choices made during its historical development. In telecommunications, ITT’s need to develop an organization responsive to national political demands and local specification differences was as important to its survival in the pre- and post-World War II era as was NEC’s need to build its highly centralized technological manufacturing and marketing skills and resources in order to expand abroad in the same industry in the 1960s and 1970s.
When new competitive challenges emerged, however, such unidimensional biases became strategically limiting.
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1. The findings presented in this article are based on a three-year research project on the organization and management of multinational corporations. A description of the three-phase study and of the nine American, European, and Japanese MNCs that made up the core of the clinical research stage is contained in the companion article, “Managing across Borders: New Strategic Requirements” (Summer 1987). Complete findings will be presented in the forthcoming book, Managing across Borders: The Transnational Solution (Boston: Harvard Business School Press, forthcoming).
2. This global integration/national responsiveness framework was first applied to the analysis of MNC tasks by Prahalad. See C.K. Prahalad, The Strategic Process in a Multinational Corporation” (Boston: Harvard Business School, unpublished doctoral dissertation, 1976).
