Current Global Economic Conditions and Organizational Forms - Essay Example

of the of the Concerned 8 March 2009 Current Global Economic Conditions and Organizational FormsTo survive in a globalized business environment, the big multinational enterprises of today need to inculcate an evolutionary tendency (Pethoukoukis 24). In fact the very word multinational is almost anachronistic in the current global scenario (Pethoukoukis 24). To ensure sustainability in the contemporary interdependent world, enterprises need to alter and refabricate the basic paradigms by which they analyse, perceive and conduct themselves (Pethoukoukis 24). Their primary thrust should not be on extension, but integration. Thus this calls for utterly innovative and customized structures and frameworks (Pethoukoukis 24). In fact this is what the reputed multinational enterprises like IBM, GE and Sony are doing. It was a long time back that GE started establishing its subsidiaries in the opening up Asian markets like India and China that literally exuded a vast potential for growth (Slater 42). The management at GE understood well in advance that they do not need the experts and technocrats frantically commuting between Asia and the US, when the selected nations already harboured an indigenous pool of highly skilled workers and managers (Slater 42). The modern multinational enterprising is not as simple as about establishing dependent appendages all around the world and retaining all the powers within the company headquarters (Parker 54). Actually it is about creating the self sufficient yet naturalized replicas of company headquarters throughout the world that eventually metamorphose as centres of excellence, well equipped to meet the requirements of the local and global challenges (Yip 61). In addition to the pressing managerial and technological issues, the multinational enterprises of today have to grapple with the social and cultural issues raised by their foray into the foreign climes (Jiatao 3). The cultural distance between a multinational corporation owned subsidiary from the home country, not only enhances the levels of uncertainty prevalent at all the levels in the organization, but is in itself a critical factor that needs to be aptly managed (Brikinshaw 37). The contemporary global economy is dominated by consumer preferences, which tend to differ from country to country and from one part of the world to other. Besides, the global managers are required to contend with cultural specific preferences and the issues raised by variegated time zones (Desai 62). Hassle free and seamless communication is the very foundation of any multinational enterprise and thus the deficiency of or proficiency in language skills is one other issue that truly global organizations need to address (Desai 62). Hence the next generation of multinational enterprises need to deal with and soften the language, preferential and cultural barriers, so as to ensure business effectiveness sans boundaries (Desai 63). This necessitates an enquiry into the various forms and frameworks that the multinational enterprises of today affiliate to ensure sustainability. Only then can a relevant decision as per to the efficacy of organizational forms and their comparative effectiveness can be made. As is evident from the above mentioned challenges, the framework and form of contemporary multinational enterprises unexceptionally need to be more complex and intricate as compared to the organizations of the yore. The traditional forms and structures long ago failed to serve the purpose and requirements of the modern globalized scenario that necessitates the integration and clumping of the businesses with the local economies, while at the same time being sensitive to the indigenous concerns, sentiments and interests (Higgot and Payne 66). Yet, the fact is that the conventional forms and frameworks pertaining to multinational enterprises have not lost their usage and relevance, especially during the initial and early phases of global expansion and diversification. The secret to adaptability lies in discerning well in time when the old models have lost their effectiveness and timely fabricating and adapting to the more contemporary paradigms and frameworks. The traditional models pertaining to organizational forms and structures tend to be an utter failure, when it comes to handling scenarios that involve economies of scale. Besides they pathetically give way before the need to customize organizational strategies to be in tandem and harmony with the local specialities, expertise and nuances (Porter 79). To grapple with the intricacies of the current global economic conditions, the multinational enterprises of today have engineered various form models like multidomestic, global and transnational enterprises. “The traditional multidomestic model is used to characterize multinational enterprises with a portfolio of independent subsidiaries operating in different countries as a decentralized federation of assets and responsibilities under a common brand name (Mateo Aboy, Ph.D).” The companies fabricated around traditional multidomestic form models customize their strategies as per the country of operation while caring little for global cooperation or the transfer of expertise and knowledge from the company headquarters to the globally scattered subsidiaries (Mateo Aboy, Ph.D). Thus it means scarce and negligible value addition from the company headquarters and the thrust is primarily given on local responsiveness, customization and improvisation (Mateo Aboy, Ph.D). Thus, “this structure is not well positioned to compete is a post globalization environment where standardization, global integration, and economies of scale and scope are critical (Mateo Aboy, Ph.D).” Hence, pragmatically speaking, the traditional multidomestic model seems to be utterly in disharmony with the realities of the contemporary flat global economy, which especially exploiting the digitalization of processes and procedures, readily facilitates value addition and the transfer of knowledge from headquarters located anywhere in the world. Truly, never before the world was so integrated as it is today. Still the traditional multidomestic form model is very convenient and effective in the areas where there exists a high scope and need for adaptation to local requirements and the necessity for local differentiation supersedes over the need for global integration (Angwin 85). The global multinational enterprises ought to be understood as a historical phenomenon unfolding in a strictly chronological context that finally bloomed in the late 80s and early 90s (Jones 13). The trend towards the fabrication of a global model was first initiated by the US based service sector enterprises (Jones 130). In the post cold war era, the American management consultancy companies assumed a new found importance and clout in the Europe and Japan in particular and in the rest of the world in general (Chandler 41). It was at this time that the US based consultancies like Booz Allen & Hamilton, Arthur D. Little and McKinsey developed and established a sound clientele base in Europe (Jones 14). The American neo-global multinational enterprises enjoyed a distinct advantage, courtesy a debilitating lack of transfer of expertise, data and information rampant on the world stage. The role of the global multinational enterprises over the years gradually expanded from mere consultancy to the shifting of the manufacturing facilities in Asia and Latin America (Clement 51). This was accentuated by the information revolution and digitalization of economies that streamlined the sharing of knowledge and information. This necessitated the quest for functional and geographical integration (Jones 21). The 80s saw the MNEs opting for more open policies and the shifting of knowledge based R&D facilities and delegation of decision making powers to their foreign subsidiaries (United Nations 130). Still the so called global MNEs retained their predominantly nationalistic character and an apprehension for knowledge sharing that is one big impediment to the modern economies (Jones 25). Transnational MNEs are peculiarly characterized by their predilection for achieving optimum global integration, while maintaining the requisite sensitivity to local expertise and issues. While doing so they aspire to transcend the flaws and lacunas in the multidomestic and global frameworks. “This organizational structure follows the N-form (network) as opposed to M-form (multidivisional) since it focuses on integration, combination, multiplication of resources and capabilities; and managing assets and core competencies as a network of alliances, as opposed to functional and geographical division (Mateo Aboy Ph.D).” Transnational model is most conducive to the current global economic conditions defined by an advanced stage of internationalization, crisscrossing of interests, digitalization and interdependence. This stands even truer for consulting companies that are often required to furnish locally customized solutions that enhance the integration of their clients with global economy. The consulting companies operating in the present era must be apt at drafting broad based yet region specific strategies, which calls for collaboration and a sharing of the knowledge and resources at all levels. In fact, such an approach accentuates the understanding of the local markets and their specific and global aspects (Quelch 22). Transnational model is the unavoidable option for the modern consulting companies, which accrue a major proportion of their revenues from offshore clients. The world today is facing a special situation and the current economic meltdown calls for innovation and ingenuity that is only possible through the sharing of resources and ideas. The technological options in the current scenario are most apt for the introduction of the organizational forms that are open to sharing of data, solutions and expertise. Being a stickler for multidomestic and global models will never succeed in turning the clock back. The collective sustainability of the world economy necessitates a transnational approach. Total Words: 1,506 Works Cited Angwin, D. Mergers and Acquisitions. Oxford: Blackwell, 2007. Chandler, A.D. Scale and Scope. Cambridge: Harvard University Press, 1990. Clement, Wurm. Business, Politics and International Relations. Cambridge: Cambridge University Press, 1995. Desai, Deepak. “Globalization and the English Skills Gap”. Chief Learning Officer. 7.6 (2008): 62-63. Higgot, R. and Payne, A. The New Political Economy of Globalization. London: Edward Elgar, 2001. Jiatao, Li. “Mimetic Diffusion, Knowledge Spill Overs, and Expatriate Assignment Practice”. 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