Summary - Tap Your Subsidiaries For Global Reach.Doc

Summary of the Article – Tap Your Subsidiaries for Global Reach (Christopher A.Bartlett and Sumantra Ghoshal)


After a study that covered nine companies in three industries and a dozen secondarycompanies from a more diverse industrial spectrum, from the United States, Europe, and Japan, the authors of the article identified two common assumptions on how the companies organize theirinternational operations: The United Nation Model (U.N model) and the Headquarters hierarchy syndrome (HQ hierarchy syndrome).
The U.N model means that multinationals treat their foreign subsidiaries in anuniform manner, evaluating them with a standardized criteria beside their differences in importance and responsibilities, however when national units are operationally self-sufficient and strategicallyindependent, multinationals could be more flexible and the uniform treatment may allow each to develop a plan for dealing with its local environment.
The HQ hierarchy syndrome is reinforced by theU.N model assumption. The company tend to establish two roles for the organization, one for headquarters and another for the national subsidiaries. Headquarters tend to coordinate key decisions andcontrol global resources, and the subsidiaries implement and adapt the global strategy in their localities.

Country managers try to retain their independence, flexibility, and effectiveness while theheadquarters act as administrators to try to control and influence the global strategy. So, this dispute and strain affect the relationship between parts and could become adversarial.

The effect ofthese two assumptions (U.N model and HQ hierarchy syndrome) limits the organizational capability of an international company in three important ways:
First, Symmetrical treatment results in anovercompensation for smaller market and a simultaneous under-responsiveness to the needs of strategically important countries.
Second, treating some subsidiaries as local implementers and adapters...