Since the inception of the field of international business (IB), scholars have argued how firms might address the tension between local adaptation and global interconnectedness in their strategy to compete in a global setting effectively. In today’s complex and competitive landscape, many multinational corporations (MNCs) are subjected to a multitude of logistics in their strategic initiatives, resulting in three major tensions: the coordination of multiple markets, local adaptation–global integration, and social–commercial pressures.
Following these stretches, there are generally various competing needs relating to the integration of multiple markets, such as adjustment or independence, which must be met. The basic conflict between these local and global tendencies might be defined as contradictory in the respect that it is related to aims that are at odds with one another but are interdependent. Some subsidiaries accept tensions and respond with differentiation or integration methods, but others reject tensions and respond with activities such as rejection, challenging, or attacking the parent organization.
Multinational companies are mainly focused on diversifying their operations by investing in multiple markets. For this purpose, a corporation established different subsidiaries to operate in its several investment regions. One of the key roles of the subsidiaries entails opening different operation centers in their regions. Cultural, economic, and political variations exist between markets, posing a significant challenge to executives in subsidiaries in coordinating business operations in multiple markets.
This creates tension since the headquarter (HQ) places targets on each subsidiary demanding continuous growth and multi-market operations. Market analysis and resource allocations play an important role in this tension. While the HQ may have a superficial idea of the market conditions, subsidiaries working on the ground are faced with limitations on allocating the given resources to multiple ventures, given the market constraints. This conflict can be addressed by improving HQ-subsidiary communication and giving subsidiaries more power to decide which markets to operate in.
Some conflicts involving local integration and global adaptability seem counterintuitive, but the majority of them present themselves in interactions between corporate headquarters and subsidiaries. For example, there are conflicts in the domains of freedom and control, knowledge production and sharing, connection and isolation, creativity and compliance, and internal and external inclusion.
These conflicting points revolve around the requirement placed on subsidiaries to advance HQ goals and missions in their regions of operation. To meet this managerial issue, it is necessary to create an integrated network that is decentralized, specialized, and interconnected. The contribution of subsidiaries to the competitive advantage might be significant if the headquarters are dynamic in the modification of roles and duties in accordance with external conditions and internal capabilities.
Recently, various studies have called for multinational corporations (MNCs) to play dual business and social growth roles. Among these are the involvement of multinational corporations (MNCs) in poverty reduction and the supply of collective goods, understanding that these contributions to social wellbeing can be accelerated by managerial action. Part of this conflict arises from the business requirement to support the global sustainable development goals (SDGs).
Since social conditions differ in different regions, this conflict can be handled by fostering inter-organizational collaborations. These collaborations will help subsidiaries to understand and effectively address societal challenges while maintaining their connection to the HQ. Although subsidiaries better understand local conditions, their operations are limited by HQ control, denoting the importance of effective communication and HQ-subsidiary collaboration.