Value chain UK

According to Howard Perlmutter (1969), Multinational companies may pursue policies that are home country-oriented or host country-oriented or world-oriented. Perlmutter uses such terms as ethnocentric, polycentric and geocentric. (www. iastate. edu – 'Multinational Corporations) An ethnocentric multinational is one that will adapt their local strategies to the international market, as we saw from the HSBC example. Subsidiaries play an operational role rather than one of autocracy.

The multinational's flagship will specialise in the upstream, or dynamics of the operation, whilst the subsidiary focuses on the downstream activities. A polycentric firm is one that is further down the spectrum of development. The foreign business has become more dominant and we see collaboration in efforts from the subsidiaries and the flagship. The firm becomes more host-nation oriented in terms of management style. A geocentric enterprise is one that is a stage further in its development. It allows for interdependence between the subsidiaries and the firm.

The strategy focuses on competitor behaviour and the search for strategic alliance. The centralised control of the flagship is noticeable, however, subsidiaries are "parts of a whole whose focus is on worldwide objectives as well as local objectives, each part making its unique contribution with its unique competence" ('The Hypermodern MNC – a heterarchy? ' , Ghauri P. and Prasad S. (1995)). Therefore, between subsidiaries, there is specialisation in upstream and downstream activities along the value chain.

As for the implication of the management, it is about implementing the knowledge correctly. They don't have the same autonomy as Global firms. Nonetheless, those in an international firm act as key points of contact between the parent and its subsidiaries. Some see this group as a mechanism for, solely, spreading the technologies or products. This can have unwanted effects with the locals with regard to national responsiveness. 4. The Transnational Form. Bartlett and Ghoshal argue that this typology is the 'solution' to the never ending competing pressures.

Although a decentralised method of operating, each periphery has a distinct role. The use of networks allows for true global integration and the movement of knowledge and expertise. The two argue that this is the only model in which all the prevailing pressures can be beaten. The implications for the management are that practices in the plant will reflect innovations in other parts of the network, not just those of the home country. Knowledge will be passed on by free moving managers.

Characterised by five dimensions, this framework of networks is to increase the competitive advantage in any way possible. Creating a new breed of learning organisation seems to be the aim. A firm's strategy is firmly embedded in its particular economic and social context, also known as its 'Administrative Heritage'. These are the 'existing organisational capabilities as shaped by various historical and structural factors'. It preserves the role of the founders in the history of the firm.

The further along the spectrum of development we go, we find that the level of influence from the origin declines. Referring back to Perlmutter, we can see that when a geocentric multinational is created, there is a loss of influence from the multinational's origin. Is there a convergence to a single global strategy, as Bartlett and Ghoshal argue? To argue in favour of this would be naive. There is a host of complicating factors that will never subside; political, cultural and social. What we find instead is a mixture of the home practice with that of the host nation.

Pauly and Reich are probably correct in observing that although multinationals originate from different home bases they "appear to adapt themselves at the margins but not too much at the core". The strategy will always be effected the enterprises place of origin, the extent in the only variable factor. Depending on the stage of the company, it will either be completely autonomous or on a falling level of autocracy.


Tayeb, M. (2000) International Business, London: Prentice Hall, pp 423-435. Dicken, P. (2003) Global Shift, London: Sage, pp 212-236 – 4th edition.