Traditional Multidomestic Model
2007/// Filed in: MNEs
The traditional multidomestic model is used to characterize MNEs with a portfolio of independent subsidiaries operating in different countries as a decentralized federation of assets and responsibilities under a common brand name (Bartlett.87,Bartlett.87b,Bartlett.88). The old or pure multidomestic form models companies that adopt country--specific strategies with little international coordination or knowledge transfer from the center headquarters. The power center, business strategic decisions, resource allocation, decision making, knowledge generation and transfer, and procurement reside with each country subsidiary and the center adds very little value. In terms of the global integration/local responsiveness matrix, the pure multidomestic organizational structure represents the extreme case of local responsiveness and localization, and low global integration. Similarly to the international exporter form, the traditional multidomestic organizational structure is sometimes described as a historically early only, since this structure is not well--positioned to compete in a post--globalization environment where standardization, global integration, and economies of scale and scope are critical. However, the pure multidomestic structure is still viable in situations where local responsiveness, local differentiation, and local adaptation are critical (Douglas.87,Douglas.73,Wind.89,Wind.74,Wind.73), while the opportunities for efficient production, global knowledge transfer, economies of scale, and economies of scope are minimal (Bartlett.87, Segal-Horn.99). As in the case of the international exporter form, given the trends towards the globalization of markets (Levitt.84,Levitt.83), the pure multidomestic company may be considered a transitory organizational structure in most cases. An example of this structure and its limitations is Philips during the 1960 where its multidomestic organizational model made the autonomous country subsidiaries unable to effectively compete against global Japanese companies such as Sony, Sharp, and Hitachi. In summary, the traditional (pure) multidomestic model can be characterized as follows:
- Matrix Position: low global integration / high localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: competitive strategy, tactical decisions.
- Center Role: minimal, cash dividends, global brand.
- Management Decisions: bottom--down (from subsidiaries to corporate headquarters).
- Technology & Knowledge Transfer: kept at the subsidiary level, little knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: UK companies during post-war, Philips (1960s).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies are pure multidomestic, inability to exploit competitive interdependencies and global efficiencies, duplication of resources.
\end{itemize}
- Matrix Position: low global integration / high localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: competitive strategy, tactical decisions.
- Center Role: minimal, cash dividends, global brand.
- Management Decisions: bottom--down (from subsidiaries to corporate headquarters).
- Technology & Knowledge Transfer: kept at the subsidiary level, little knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: UK companies during post-war, Philips (1960s).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies are pure multidomestic, inability to exploit competitive interdependencies and global efficiencies, duplication of resources.
\end{itemize}