For successful entry and domination of new global markets, companies have acknowledged the need to join strategic national and regional alliances. These joint ventures play a crucial role in facilitating market entry through minimized costs and improved research through collaboration. However, these alliances may limit a company’s autonomy through shared decision-making and increased communications and product development regulations.
For this reason, there is a need for companies to consider ways of maintaining full control of their business operations and innovation plans while remaining accountable to global partners. The decision-making power in multinational companies is a vital element as it determines how subsidiaries relate with the HQ and the influence of joint ventures on company operations.
To maintain decision-making power, MNEs can adopt a centralized decision-making model. Centralized decision-making is crucial for addressing resource transference in MNEs. It aids in eliminating bias and reducing competition among subsidiaries of the same company. With this method, companies can standardize their products to meet market demands while benefiting from joint alliances.
Since every company has its stakeholders, adopting a centralized decision-making model helps MNEs foster fruitful relations with stakeholders to ensure future success and maintain corporate social responsibility. In addition, MNEs are continually faced with the challenge of a dynamic global economic environment.
For this reason, MNEs can capitalize on centralized decision-making to facilitate Ad Hoc strategies. In summary, MNEs need to maintain healthy operations in all subsidiaries while ensuring that they remain competitive on a global scale. With a centralized decision-making system, a company retains its control over the production process and can establish a firm position in the global market through innovation.
The type of organizational structure determines how well a company operates in terms of management, human resource, and production. It defines the powers and responsibilities given to different leaders and how they work together for the company’s benefit. An MNE has to foster effective communication in all its subsidiaries globally and ensure collaboration in all its alliances.
Considering the complex nature of MNE operations, a matrix organizational structure is the best option for an MNE with multiple alliance partners. Individuals are categorized based on two different operational viewpoints that are held at the same time. Using this arrangement, personnel are distributed across multiple supervisors, divisions, or units. A person that works for a matrixed organization, for example, may be responsible for both marketing and customer support tasks.
Unlike in domestic operations, an MNE structure has to factor in the complex business environment attributed to changing global conditions. In global operations, there is a need to empower leaders to take on different roles as circumstances dictate. While each subsidiary is a complete unit of operation, it is expected to maintain communication with the headquarters and remain accountable to all its alliance partners.
Therefore, a matrix is most suited for MNEs to facilitate innovation and compliance with global standards. Supporters of this structure argue that a matrix structure is more dynamic than functional management because it allows employees to interchange information more quickly across work boundaries.
In addition, it leads to specialization, resulting in a greater depth of knowledge and insight. In the case of multiple alliances, matrix structure enables partners to communicate effectively and share technical knowledge, from which each company can base its innovation strategies and therefore improve its position in the global market. MNEs should adjust their operations to allow strategic leaders to take on multiple roles, and, therefore, training should be prioritized.