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Wednesday, October 2, 2013

Managing the Complex Web of Global Subsidiaries


Global firms often work with a number or partners in order to move their products into multiple markets. Global firms use subsidiaries to help them promote and distribute their products. Research by Homburg, et. al. (2012) seeks to categorize the varying types of firms available on the market to help multinational organizations do a better job at managing across countries, cultures, and markets.  Their research finds five different types of firms that have their own benefits and detractors.

Global firms attempt to maintain competitiveness by using subsidiaries to create effective international reach. These firms are more aligned with regional and local differences in market characteristics. Problems result when global marketing loses a level of efficiency and effectiveness in the development of methods of managing these multiple distribution fingers. 

Drawing from configuration theory of organizations it is possible to use subsidiary archetypes to understand the varying nature of firms.  The majority of marketing researchers have advocated for additional customization but this can create difficulties in global management and in turn impact sales.  Global marketing requires a different way of viewing subsidiary management. 

It is possible that moving beyond subsidiary characteristics to find value-added functions helps to create efficient archetypes. These archetypes enhance the effectiveness of decision-makers to make strategic considerations due to their ability to conceptualize complex information. Knowing how each type of firm can help in the branding and distribution of products is helpful in developing efficiencies.

The research used three steps to categorize firms:

-Conceptual Domains: Value-added scope, influence, and competence are common.
-Core Domain Constructions: Structure, subsidiary size, value-added scope, strategy, strategic influence, strategic competence, strategic importance, etc…
-Cluster Descriptive Variables: Performance, environment, communication, coordination, etc…

In this study they used surveys and random samples of multinational companies across various service sectors. They were able to categorize a variety of different market clusters to help define each type of company. Knowing cluster characteristics should encourage managers to think more strategically about which types of firms they are using and why they are using them for global and regional marketing. They are as follows:

Saturated Administrators:  These are the larger firms that have done well in the beginning of the globalization process. They are moderately effective but maintain name brand and strong purchasing power. They have difficulty effectively making their way into local markets and are relied on by a majority of companies seeking a global presence. 

Universal Champs: These are high performing firms that focus on certain industries in which they can maximize profits. They are seen as effective and seem to do well with high value added products/services.  Due to the nature of the customers they seek wealthier nations where the economic system is stable and maintain purchasing power. 

Important Dependents:  They are strategically important but small. They exist in a number of Asian countries and are relatively passive but have high value-added services. They provide local access to markets other firms may have a hard time reaching. 

Promising Aspirants:  These are small firms that are self-sufficient and work out of an entrepreneurial approach. They are beneficial in terms of their ability to work in fast growing markets that require cognitive flexibility. They offer generally low value-added services but work well in risky markets.

Flexible Implementers:  Small and young clusters. Very few value added activities with low influence and low competence. They move products and services along to local markets with high standardization.

Homburg, C., et.al. (2012) Ensuring international competitiveness: a configurative approach to foreign marketing subsidiaries. Journal of the Academy of Marketing Science, 40 (2).

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