Entrepreneurial Thinking in Multinational Organizations - Essay Example

Entrepreneurial Thinking in Multinational Organizations: A Study Introduction The dynamic and volatile marketplace has necessiated the use ofoptimal and effective strategies to combat competition in the market. The decisions in companies at both strategic and tactical levels as well as those at the transactional levels are governed by tradeoffs about the structure (brick, mortar, machinery) as well as infrastructure (people, systems, procedures) so that it can develop capabilities for profit, growth and ultimately wealth. " An optimist sees an opportunity in every calamity while a pessimist sees a calamity in every opportunity" These famous words of Sir Winston Churchill determine the various patterns observed in the organizational culture of multinational companies across the globe. While entrepreneurial organizations seek to identify opportunities and tend to actively seek out change that can create new initiatives, traditional organizations look at the external environment for threats to their core business, rather than for new opportunities. 2 Observations Many multinationals are resorted to entrepreneurial thinking to formulate tactics for consolidating their positions in the market, making a dent into unexplored markets as well as maintained a steady growth rate. The term 'entrepreneur' comes from the French word 'entreprendre' which means 'to undertake.' It signifies a person who undertakes or operates a new enterprise or venture, while also taking responsibility for the risks involved in setting-up a new operation. Entrepreneurs are not limited to any one field, nor are they limited to the for-profit world. (Arti Pandey, 2006) Entrepreneurial organizations differ from the traditional organizations in the following ways: External environment: While entrepreneurial organizations seek to identify opportunities in the external environment, traditional organizations look at the external environment for threats to their core business, rather than for new opportunities. (Hornsby, 1993) Strategy - Proactive strategic positioning is adopted by entrepreneurial organizations whereas traditional organizations take a more defensive position focusing to protect their core business. (Hornsby, 2002) Control Systems: Control Systems at traditional organizations underlined by expense-based budgets whereas entrepreneurial organizations look at longer-term business planning and forecasting to guide their business. (Guth, 1990) Structure and Communication: Traditional organizations are hierarchical, centralized and formal, while entrepreneurial organizations are more decentralized and have informal communication flow.(Dess, 1999) Observations: Changes in entrepreneurial culture of Audit Big 4 firms Market trends in the financial markets such as Sarbanes-Oxley Act and other variations in the regulatory environment have necessitiatd corporates to modify their strategies to face these changes as well as remain competitive in the market environment. Some of the observations made in the changes in the entrepreneurial culture of the Audit Big 4 Firms are as detailed below: 3.1 Deloitte In the early ninties Deloitte was growing at a sedentary 11%/year, when it set itself the goal of doubling this rate. It realized that achieving this goal from a business-as-usual strategy was impossible, it therefore established a team known as the Strategic Business Development (SBD) team to look for new revenue-generating opportunities. With little bureaucracy to slow them down, the Strategic Business Development (SBD) team produced a clutch of initiatives: a customer relationship management business; an ethics and fraud hotline, Tip-Offs Anonymous; a joint venture with Citadel to establish Deloitte Private Client Advisors; and Deloitte Human Capital Corp. By creating these businesses to serve emerging and established markets, the unit contributed more than R300m to Deloitte's top line within three years. (Deloitte, 2006) In 2002 the Deloitte Innovation Programme was launched. The Innovation Zone was established and staff had incentives to submit their ideas. In just three years, 11 new global service lines were launched. Deloitte's global property management business was one; generates US$400m/year of revenue in 1996 for the partnership. (Deloitte, 2006) 3.2 KPMG The global skills shortage, like many professional services firms, is a very real business issue for KPMG. That is why attraction and retention programs have Diversity is a key area of focus for KPMG. The firm believes it is essential for business growth and innovation to encompass a broad and diverse mix of people from differing backgrounds, gender and cultures who have varying thinking styles and qualities. (KPMG, 2007) The firm developed a number of initiatives to ensure the attraction and retention of employees in addition to many other proactive measures regarding people management. The refreshed approach to diversity within the firm began with the inception of the People, Performance & Culture (PPC) structure in 2005. This structure encourages the leaders of the firm to take responsibility for people management and to continue to create an environment in which KPMG's people flourish and realize their full potential. (KPMG, 2007) 3.3 PWC PWC has announced a global restructuring initiative aimed at its corporate proposal of "building on ten years of highly successful client service and revenue growth" and is reflective of the connected global world the firm's clients operate in. After the introduction of this initiative, its member firms would become more closely aligned and more responsive, would continue to be locally owned and managed, preserving the high level of accountability to its stakeholders and regulators, while encouraging the entrepreneurial spirit that has been the foundation of their success (CIMA, 2008). These changes are aimed at preserving PWC's approach of a global service delivered locally and would also increase the geographic mobility. 3.4 Ernst& Young In 2000, Cap Gemini Ernst & Young launched a new entrepreneurial venture called "Darestep"; which was aimed at which provides creative and interactive solutions helping to turn businesses into E-Businesses. DareStep, a Cap Gemini Ernst & Young unit, combined the creativity and entrepreneurial spirit of a start-up with the resources, knowledge and reliability of a major corporate. Fully integrated within Cap Gemini Ernst & Young, it offered a different culture to the more traditional consultancy. The DareStep model was already well established within E&Y employing over 400 people in the USA, Canada, Italy and the Netherlands prior to its launch to external clients. (E &Y, 2000) 4.0 Entrepreneurial organization: Capability to engage entrepreneurially in a global context With rapid change in technological and rise in global opportunities created, it has become imperative for the world's largest firms to think and behave entrepreneurially in terms of strategy and organisation in order to remain competitive in the market. This would mean provide opportunities for innovation and entrepreneurship to its employees on a daily basis to enable a platform for the diverse, flexible and globally networked employee to feel motivated enough to continue working in the organization rather than to move on and set up businesses by themselves. Policy makers, in the developed world also face challenges of ensuring that they maintain and develop workforce skills to compete with the rapidly improving skills base of the emerging economies while ensuring the flexibility to work in an entrepreneurial setting. (Inder P. Nijhawan, 2007) Organizations are can engage entrepreneurially in a global context by adopting (Chris Pavlides, 2007): Passion for the Business: Change people's lives. Critical for investors. Product/Customer Focus: Must satisfy customer needs. Perseverance: Persevere through setbacks and failures. Execution Intelligence: Translate creativity into action & measurable returns. 5.0 Integration of innovation at the corporate/ strategic level and determination of impact in terms of the needed changes in terms of the modes and means to be utilised in achieving this objective. Entrepreneurial thinking at organizations needs to be supported by a culture for innovation and entrepreneurship efforts. Very few organizations have been able to change to a more entrepreneurial culture, however it is difficult for companies with a large business to make such a fundamental transformation. (Jeff Cornwall, 2008) Entrepreneurial and strategic actions are oriented towards searching for new markets or competitive places for firms to create wealth. Both strategic management and entrepreneurship are related to decisions made by general managers who have the responsibility for a business as a whole. While strategic management is concerned with factors affecting the firm's performance (e.g., strategy, environment, and the sources of sustainable competitive advantage); entrepreneurship (considering independent firms and corporate entrepreneurship) is concerned with processes leading to venture creation. Moreover, entrepreneurship focuses on growth and innovation, while strategic management focuses on competitive advantage. However, the most important objective of integrating entrepreneurship and strategic management is to create wealth (Ireland, Hitt, Camp, and Sexton, 2001). Ireland, Hitt, Camp, and Sexton (2001) recommended six domains that are critical to firms' efforts to create wealth, namely, innovation, networks, internationalization, organizational learning, top management teams and governance, and growth. The changes required in organizations for the integration of entrepreneurship at the strategic level are as follows: Exercise strategic leadership for integrating entrepreneurship at all levels in the organization: The key decision makers in the organization exist at the strategic management level. These leaders encounter significant challenges in their attempt to navigate the firm in the new competitive landscape. They must act as visionary as well as transformational leaders. In other words, they must develop a vision for the organization and obtain the members' commitment to achieve that vision. At the same time, they must be a catalyst for the integration of entrepreneurship with strategies. The chief executive officers (CEOs) have to maintain a balance between designing and implementing dramatic transformation and integration of entrepreneurship, while simultaneously implementing short-term projects that show achievable results. The CEO's role includes development of human resources beginning with the top management team. In the dynamic and complex new competitive landscape, a heterogeneous and diverse top management team is necessary to develop the appropriate strategies (Finkelstein & Hambrick, 1996). Develop dynamic core competencies: Dynamic core competencies are unique sets of sources that are built into skills and capabilities to give a firm competitive advantage over its rivals. They must be continually evolving and developing. Dynamic core competencies help firms remain flexible and able to respond quickly to unpredicted and thereby unexpected changes in the environment. If firms do not continue to invest in and develop their core competencies over time, the competencies might become outdated, and limit future strategic alternatives for the firm (Hitt, Keats, & DeMaire, 1998). Focus on developing human capital: It is imperative to develop strategic flexibility in this era of competition, by focusing on human capital in areas most important to the firm, outsourcing activities in other areas, and employing contingency workers for non-core tasks. Two popular means are contingency workers and developing employee skills. However, contingency workers and outsourcing must be used carefully otherwise firms might experience static rather than dynamic flexibility. In regard to developing employee skills, firms need to invest significantly in the development of human capital, because such investment is necessary to have dynamic core competencies (Pfeffer, 1994). Effectively use new technology: Although new technology is being developed in many areas, perhaps the most significant developments have occurred in manufacturing and information technologies. Manufacturing technology provides the ability to implement flexible and modular production set ups, and rapid changeover of tools used in the production process. Investment in advanced manufacturing technology expands the firm's strategic flexibility because it provides opportunities for future technological growth (e.g., through new product designs). Engage in valuable strategies: While there are various strategies, the two that have the most impact on strategic flexibility and competitive advantage over time are exploiting global markets and the use of cooperative strategies. One way of exploiting global markets is to diversify into international markets. Firms that diversify into international markets often outperform domestic competitors, and tend to be more innovative. A popular form of cooperative strategies is using strategic alliances, which are becoming more common in both domestic and international markets Develop new organization structures and culture: Implementing international and corporate strategies and its integration with entrepreneurship requires an organizational structure that facilitates coordination and collaboration across country borders. Vertical structure is the traditional structure that tends to be slower in developing and implementing decisions and less facilitative of innovation. As a result, firms are developing flatter and more horizontal structures to enhance innovation and speed up strategic actions (Woodman, Sawyer, and Griffin, 1993). Horizontal structure facilitates strategy implementation and increases strategic flexibility. Moreover, developing dynamic core competencies and building human capital requires a culture that emphasizes organizational learning. A culture that values organizational learning will increase the use of new technology and improve strategic flexibility. Organizational learning helps firms to continuously develop and change core competencies. Finally, managing firms as bundles of assets provides greater strategic flexibility (Kiernan, 1993). 6 Conclusions & Recommendations. Rapid globalization of markers due to the fall of trade barriers and other legal barriers to trade combined with hormonization of business practices and trade, advancements in technology which have further reduced communication and transportation costs for small for small firms and increasing use of alliances and the changing nature of firms which make internationalizing from inception not only an option but also a strategic necessity for new ventures have led to the entrepreneurship by leading multinationals across the globe. 7 References: Arti Pander, Building an Entrepreneurial Culture, Education Development Center, Inc., 2006 Chris Pavlides, Executive Director, Innovation & Entrepreneurship Institute, 2007 CIMA, http://www2.cimaglobal.com/cps/rde/xchg/live/root.xsl/1630_11502.htmitemid=18743228&categoryname=Accountancy%20Profession, 2008 Dess, G. G., G. T. Lumpkin, and J. E. 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