Think Global ... Act Local - Glocal!"
Individual Presentation Text
The group delivered a PowerPoint presentation which outlined the management of strategic responsibility in the Multi-National Companies (MNC's) (Hamel and Prahalad, 1983) based upon the reformulated theories, of the Integration-Responsiveness (I-R) framework, by Prahalad and Doz (1983, 1987.) For reference, the PowerPoint presentation is included in the Appendices (Appendix I.)
The management of strategic responsibility in the MNC's is not without conflicting views. This conflict arises from an attempt to determine at what level in the company is, or should, strategic management decisions be made. Hamel and Prahalad argue that the responsibility depends upon the strategic imperatives that are imposed upon MNC's through two conflicting requirements of global integration and the responsiveness to local environments (Hamel and Prahalad, 1983.)
Albeit the presentation was a considerably abridged version of Hamel and Prahalad's work, it covered the key areas such as the many diverse and conflicting environmental pressures, which companies face as they expand globally, through the I-R framework and briefly outlined alternative perspectives upon the I-R pressures which confront MNC's. The alternative perspectives are based upon the literature review undertaken by Venaik, Midgley and Devinney (2002) and it is these new perspectives upon which this text will focus. The text will not discuss the methodology of the literature review, as this is too detailed and lengthy for the purposes of this text presentation, however, it will identify key areas which were reviewed, draw upon conclusions and recommendations for future study. However, reference, for further reading, will be provided.
As presented, the I-R framework, in its simplistic form, examines the pressures that companies are faced with, when they adopt an integrated approach to their global activities, thus enabling them to achieve maximum efficiency and a competitive advantage against others. These pressures are assumed from managerial responses to these pressures. Venaik et al (2002) argue that whilst the I-R framework has been successfully applied for over a decade, "... many theoretical and empirical studies have focused on the consequences of these pressures rather than the pressures themselves" (Venaik, Midgley and Devinney, 2002.) They continue that there is a wide assumption that companies choose different paths based upon their own reactions to the underlying pressures. Arguably, this is quite limited, as it does not identify what constitutes a good response, nor does it deal with how companies compete across strategies and structures.
The I-R framework was first conceptualised during the 1960's and early 1970's, around the time of the development of MNC's. Notable scholars such as Perlmutter et al, (1969) and, although popular, they provided a relatively one-dimensional approach to complex problems multinational organisations faced. Bartlett (1986) supports this and asserts that this was mainly because the focus was not on the global business environment for example, the technological, market, competitive and governmental factors that impact on the firm (Bartlett, 1986.) Consequently, Prahalad and Doz (1975, 1976, 1983, and 1987) reformulated the framework which exists today.
From the literature review, Venaik et al suggest that different companies may react differently to the same pressures; this diverse nature, or heterogeneity, often confuses the relationship between firm responses and underlying pressures (Venaik, Midgley and Devinney, 2002.) The study attempts to further demonstrate the need for a much deeper understanding of the "conceptualisation and measurement of I-R pressures ..." further, they acknowledge that Prahalad and Doz's work is "... is of undoubtedly scholarly value and practical significance ..." (Venaik et al, 2002.) The phrase, "Think global, act local" is synonymous with the classification of MNC's and their international
strategy and organisation (Bartlett and Ghoshal, 1989;) however, Venaik et al, (2002) imply that this suggests firm and managerial responses, and not the pressures underlying them and that less attention has been given to the nature of the pressures themselves (Venaik, Midgley and Devinney (2002.) Based upon the premise that the I-R framework asserts that the 'fit' between strategy and environment mattered most to firm performance there was little need to distinguish between pressures and firm response because the firm chooses the most appropriate response to the pressures it is opposed (Burns and Stalker, 1961; cited in Venaik, Midgley and Devinney, 2002.) An example is whereby a firm that faces low pressures for global integration and high pressures for local responsiveness would choose a multi-domestic strategy and structure (Venaik et al, 2002.)
From their study, Venaik et al (2002) infer that there is a difference in agreement, from the literature, as to how the pressures for integration and responsiveness should be defined, conceptualised and measured; they argue that they are considered by some as either environmental pressures or as firm responses. Further, they attest that there is no agreement on the definition of domain, and that there may be some concern around Prahalad and Doz's explanation as to whether the original twelve pressures are a broad enough expression of the domain itself.
The study undertaken by Venaik et al, examined the definition of domain in a much broader context, and they argue that more than two dimensions are required to describe the domain - either three pressures plus two firm response dimensions, or four pressures and three firm response dimensions (Venaik, Midgley and Devinney, 2002.)
This presentation text, which is an interpretation of the study conducted by Venaik et al (2002), can only draw conclusions which are assimilated by the findings of that study. Clearly, the study, with its in-depth methodology, does provide alternative 'schools of thought' and leaves the door open to much broader research for the future. Venaik et al (2002) suggest that future research should focus upon the development of scales and measures that represent more clearly and accurately the environmental pressures which firms are opposed and in operating in international business. Furthermore, they argue that there should be a deeper understanding of how organisations react to the pressures and decide on specific strategic course of action and perhaps there should be a hybrid I-R framework.
It is widely acknowledged that the I-R framework is paramount to gaining an understanding of international, strategy, structure and environment and which remains critical to international business. The most important part of modern business strategy is to think on a global scale; however this doesn't mean that businesses can afford to ignore their local market. The world is continually evolving - over the past few decades this has changed considerably. Businesses are able to operate on an international scale fairly easily, but that doesn't mean that they can lose touch with their local customers. Given this assertion it would appear proper to use the phrase - "Think global ... act local."
References and Bibliography
- Bartlett, C. (1986) Building and Managing the Transnational: The New Organizational Challenge. In Porter, M.E., (Ed). Competition in Global Industries. Boston. Harvard Business School Press. 367- 401.
- Bartlett, C and Ghoshal S. (1989) Managing Across Borders: The Transnational Solution. Boston. Harvard Business School Press.
- Beamish, P, Morrison, A, Inkpen, A and Rosenzweig, P. (2003) International Management: Text and Cases. 5th Ed. Pubs: McGraw-Hill
- Hamel, G and Prahalad, C. (1983) Managing Strategic Responsibility in the MNC. Strategic Management Journal, Vol. 4, No. 4 (1983), pp. 341-351
- Perlmutter, H. (1969) The Tortuous Evolution of the Multinational Corporation. Columbia Journal of World Business, 4 (January - February, 1969) pp. 9-18
- Venaik, S, Midgley, D and Devinney, T. (2002) A New Perspective on the Integration-Responsiveness Pressures Confronting Multinational Firms. A Working Paper. INSEAD R&D. Revised Version: 2002/93/MKT
- Appendices Appendix I Red Bull Group PowerPoint Presentation - Managing Strategic Responsibility in the Multi-national Companies.