Limitations of the Traditional Organizational Structures
2007/// Filed in: MNEs
As we pointed out in the previous posting, each of these organizational structures has limitations to compete in a global economy. Briefly, the international exporter (low global integration/low localization) is not well positioned to compete in situations where either economies of scale or local responsiveness are critical. The traditional multidomestic (low global integration/high localization) is not well positioned to exploit competitive interdependencies and global efficiencies, and consequently it is in significant disadvantage in situations where economies of scale and scope are critical. Additionally, their inability to extract value from its center headquarters significantly limits their competitive advantage in global setting where corporate strategy, global integration, coordination, and knowledge transfer play a significant role. Finally, the global company (low localization/high global integration) is not well positioned to compete in situations requiring critical local adaptation. Perhaps even more important is the fact that it does not extract value from their subsidiaries including knowledge transfer, coordination, and business strategy, enabling them to make good strategic and tactical decisions.