Strategic Management Essay
The idea of LMD competence centers is very much in touch with the literature on CoE. The cases clearly show how the subsidiaries can evolve into CoE by building on their core competencies and thus, this represents a shift away from the impression that subsidiaries are merely fulfilling the roles of implementers and adapters of parent company strategies (Forsgren et al, 2000). The new role of the CoE contains global or regional responsibility within certain designated competence areas.
By looking at the matrix by Bartlett & Ghoshal (Reading 4-1, 2003) it becomes evident that LMD is positioned in the top part, due to their high engineering skills and competence. The other variable – strategic importance of local environment – would place LMD on the right hand side – as contributors – due to the limited size of the Danish market. However, the fact that LME has traditionally perceived the Danish market strategically more important than the size would suggest, due to the high customer sophistication, does legitimize some inroads to the left hand side of the matrix. This is also acknowledged by LME in the fact that they have given LMD a ‘strategic leader’-role in some of the cases used here.
This paper has presented the main factors that influenced the evolution of the subsidiaries of Multinational Corporations. The environment is changing on three broad levels; countries and global regions have changed in terms of politics and legal systems; communications have changed the intra-relationships within MNCs; and finally, the logistical improvements have made some subsidiaries positions more uncertain.
The transnational strategy adopts a multidimensional approach by integrating the positive elements of each of the three traditional archetype configurations. Nevertheless, the administrative heritage will remain deeply embedded in the MNC. Often the success of the MNC can be contributed to this heritage, but on the other hand, it can be the MNC’s greatest obstacle on the way towards evolution and necessary change. Here, it should be emphasized that there is no universal method of adopting the integrated network mentality since all MNCs come from different backgrounds, and thus have different administrative heritages.
Subsidiary- and parent-based drivers work complementarily in the evolution of subsidiaries, depending both on local environmental factors and the internal opportunities. The case of Ericsson’s competence centers was used to demonstrate this. Furthermore, it illustrated the growing importance of centers of excellence. By building on their core competencies these CoE now play a crucial role with the responsibility of the entire MNC in certain specified areas. This is in contrast to the past, where the primary focus was often limited to serving the subsidiary’s own local market. The case also shows how globally linked innovation pools can be used to the benefit of the entire MNC and to disperse ideas and innovation.
The role of the subsidiary has become much more specific and simultaneously more integrated into the overall structure of the MNC. Subsidiaries have a very specialized function as scanners of their local environments; scanning for resources and/or valuable information for the overall MNC. The four cases concerning LMD confirm that these developments are occurring in the current business environment. Moreover, it illustrates that Ericsson is in the process of adopting the transnational mentality and thus, moving towards an integrated network structure.
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