Review of article

  • Category:
    Management
  • Document type:
    Assignment
  • Level:
    Undergraduate
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Multinational Organizations

Multinational Organizations

Introduction

Management of organization can be broken down into two parts that can be identified as simple management practice and sophisticated management practice. Simple management practice can apply to small-scale organizations that may have one or few branches. On the other hand, complex management practice is evident in a large-scale organization that has established branches
all over a region or other parts of the world. Such organizations
are referred to as multinational corporations. Most multinational organizations have headquarters and several branches distributed in other nations. Multinational organizations often develop a unique network that links up the substituent of the primary
organization. Typically, the headquarters are responsible for setting the general standards that the other branches emulate. The headquarters produce a template that the other branches use, and the trend is the same to include vision and mission. Management for such organizations is often complex, and strategic decisions often take a longer time to be attained. The general way in which management is effected in such organizations has created a network-like business environment. Distribution of power, structure and organizations are identical and linked to the headquarters. The nature of multicultural organizations has created a notion that they can be termed as an inter-organizational network.

Summary of article

The article by Ghoshal and Bartlett attempts to establish if multinational corporations can also be referred to as an inter-organizational network. The authors have used an example of an organization with its headquarters in Holland and many branches around the globe. N.V Philips has several organizational units that also exhibit several inter-linkages. The chart has been used to indicate how these inter-linkages form a network that connects all the organizations under N.V Philips despite the country in which the organizational units are located.

The article highlights the number of theories that relate to the existence of inter-organization and a multi-national corporation. Most organizations that have been highlighted by the authors are not under the same ownership. It has been established that there is a link between ownership and the existing power vested in the hierarchy. Different contexts have been provided that relate to inter-organizational interactions. The authors further provided the relevant constructs and terminologies applicable to multinational as a network. The terminologies include external network, within density and across density.

The configuration of resources in the multinational networks has
been discussed. The authors suggest that identical resources can be traced in different organizational units. The term dispersal has been used to describe the nature in which resources of organization units are differently allocated. It has been established that the national organizational units experience some effects ‘within density.’ Examples have been provided in the petrochemical industry to elaborate these effects. Further, the authors delved into the effects of across density that affects the external networks of multinational corporations. Other critical points in the article include the centrality of power within these organizations, ‘within density’ effect on national organization units and ‘across density’ effects on external networks. The authors have also plotted a graph to represent the centrality measure that exists among the three network structures. Before conclusion, the authors predict the implication of their research and recommend an option for developing the MNC network theory.

Discussion

Several authors have discussed the concept of multinational corporation’s networks with some corresponding and other not corresponding to the article by Ghoshal and Bartlett. For instance, Rioux (2014) have acknowledged that the multinational corporations (MNC) are playing an important role in revolutionalizing the modern global economy. The MNC have not taken over important roles of the states in controlling the economy. However, these MNC have been singled out to cause a serious problem in the social, political, cultural and legal environments. This idea has not been brought out in the article written by Ghoshal and Bartlett. On the other hand, the negative effects have not provided a reason strong enough to kill the existence of the MNC (Rugraff and Hansen, 2011). MNC become stronger and even recombine to form networks that resemble a corporate economic powerhouse. This coincides with the information presented by Ghoshal and Bartlett.

According to both articles, the multinational corporation networks that have been studied by most scholars are made up of organizational units with different ownership. These organizational units come together to increase their economic power in the markets within which they participate. The International political economy plays an important role when the organizational units form networks. According to Rioux (2014), multinational corporations started to come into existence in the nineteenth century. The article further elaborates how this whole idea developed to gain so much fame in the world economy as well as world political economy. The entire idea has been a major challenge to the international trade theories relating to inter territoriality. Such ideas have not been discussed in the article written by Ghoshal and Bartlett. It is important to understand the background of the MCN and MNC to understand the entire concept of networks.

Ghoshal and Bartlett have not provided enough evidence to prove that the intellectual capital measurement faces some issues when it comes to MNC’s. However, Kevin (2009) has indicated that these procedures of measuring and reporting face number of challenges. One of the reasons that might lead to such challenges includes the fact that the MNC often operate in competitive, complex environments. Therefore, one of the major challenges is to attain a balance in both international and local economic environment. Any mNC that can be able to exhibit such flexibility stands a higher chance of enjoying economic power across many nations. Another challenge is the idea of a business universal model the is meant to apply to business environments in different economies. Ina addition, there may also be different international markets that present a broad range of needs, and this may also be a challenge. The idea of coping with a different language, culture, and political environment may not be an easy one for the MNC.

These social aspects are very essential in the market, yet they tend to vary within and across markets. The variations may also include government regulations, management approaches and the nature or distribution of skilled labor. In addition, there may also be a series of issues that may cause local tension or global tension which might be a great challenge too. There are incentives to report that relate to both the internal and external firm activities. For internal firm activities, it is important to consider the effect of capital markets and improved access to labor within the market. International firm activities are affected by incentives such as allocation of resources, efficiency, communication enhancement, personal motivation and the reputation of an organization. It has also been established that some firms can report while others do not report. However, Kevin (2009) admits that it is difficult to explain why the difference in reporting occurs. Also, the difference does not imply that a certain management is ignorant or adamant to produce a report.

According to Navaretti et al. (2004), multi national corporations have proven to have several implications for trade policy. This factor has been highlighted by the authors of the main article used for this paper. The presence of inward FDI may have a serious impact on the real income economies that host the MNC’s. The effect may be felt regarding rent paint by the MNC’s, output effects and lastly the spillover effect. It has been established that in some cases rent is paid to a foreign firm and not local firms. For this reason, the trade policy of an economy may not be in line with the approach used by the multinational corporations. While building a network theory, Ghoshal and Bartlett should have considered these important factors. A good theory
should be able to create a clear image of what the multinational organizations operate. All the four articles used in the discussion have relevant information to confirm that multinational organizations develop a network environment that links headquarters and the organizational units in various parts of the globe.

Conclusion

Management is a unique topic and presents learners with broad ideas as well as situations where management is applied. Organizations may vary in size and may exhibit variations regarding the regions in which they operate. Organizations that have several branches in other nations are referred to as multinational organizations while those that only operate within national boundaries are known as national organizations. Multinational organizations have proven to be linked in a network manner despite the fact that some of the organizational units may fall under different ownership. The article by Ghoshal and Bartlett was out to prove that the multinational organizations could also be called inter-organizational network. The systems exist with several theories developed to explain their nature. The baseline of the entire issue is that multinational organizations exist and develop strong networks that protect their interest and existence. These strong networks have been established to have serious impacts that include trade policy. This paper also established that the inter-organizational networks also face some challenges despite their efforts to attain economic power.

Bibliography

Goshal, S., & Bartlett, C.,1990, The Multinational Corporation as an Interorganizational Network. Retrieved from Academy of Management Review, 1990, Vol. 15, No. 4, 603-625.

Kevin, O., 2009, Strategic Intellectual Capital Management in Multinational Organizations: Sustainability and Successful Implications: Sustainability and Successful Implications. IGI Global.

Navaretti, B. G., Haaland, J., & Venables, A., 2004, Multinational Corporations and Global Production Networks: The Implications for Trade Policy. Retrieved from Report prepared for the European Commission Directorate General for Trade: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.674.8497&rep=rep1&type=pdf

Rioux, M., 2014, Multinational Corporations in Transnational Networks: Theoretical and Regulatory Challenges in Historical Perspective. Retrieved from e Creative Commons Attribution International: https://www.researchgate.net/file.PostFileLoader.html?id=54eb0da7cf57d7c91b8b4569&assetKey=AS%3A273711746224129%401442269373165

Rugraff, E., & Hansen, M., 2011, Multinational Corporations and Local Firms in Emerging Economies. Amsterdam: Amsterdam University Press.