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Transcript

What happened?

Siemens HQ sent managers to Telefongyár subsidiary to build up new middle management

CASE STUDY

CASE STUDY

GM decided to reorganise its european production & announced 12,000 jobs would be cut in Europe.

Problem HQ faced?

Their objective was to stimulate intra-firm competition among subsidiaries

  • Telefongár progressed at a slow pace
  • Production costs were much higher then they could have been in other subsidiaries of Siemens.

However this plan

However...

Rather than competing they stood together

A senior manager was closely tied to top management in MATAV.

This contact was therefore invaluable and couldn't be replaced.

Telefongyár

and...

Telefongyár possessed RDpower and could therefore:

started a strike. It led to a production halt in three other factories in Germany, the UK, and Belgium

Slow down the downsizing of the subsidiaries workforce

The systemic power of the subsidiary forced general motors to accept their demands because...

Gain Siemens most modern & advanced technologies

Eventually..

GM's HQ could not afford to completely halt production

Siemens HQ ties were established with MATAV

Therefore the strike only lasted 1 week!

The resource dependency vanished

In the end:

The employees of the affected subsidiary secured good termination packages for those laid off.

SYSTEMIC POWER

Systemic power stems from subsidiary activities related to production

RESOURCE DEPENDENCY POWER

It is the power to disturb the proper functioning of the value chain by halting production

What do we know about resources?

Subsidiaries always have systemic power if they are responsible for a specific function of the intra-firm division of labour

Resources are a basis of power

Organizations depend on resources that are often in the hand of their subsidiaries

Power & resources are linked

QUICKTIME EXAMPLE

Burger joint business cannot function without bread!

Subsidiary's power

HQ dependance

=

So business will adopt countervailing strategies

HQ

Subsidiary's resources

& so...

will associate with more bread suppliers

riding itself of the risk of...

Resource dependency power

TRUE or FALSE

MPBP is inherent to communication in MNCs

HQs can efficiently operate without the subsidiaries local knowledge

BARGAINING POWER

Who uses the power and how it is used has no influence over HQ decisions

Subsidiary managers personalities impact the use of the 4 powers!

CONTEXT &

RELEVANCE

THE ROLE OF SUBSIDIARIES

Common assumption:

HQ always has tight control over subsidiaries

INSTITUTIONAL POWER

Increased economic freedom

Dominance of global capital

Improved communication and transportation means

Increase in cross border mobility of MNCs

Persistent openness of national governments to FDI

Increasing shareholder involvement

Increased influence of MNCs HQ in policy making

Decreasing power of national governments

and local actors

THIS ARTICLE EXPLORES...

In reality

The initial roles assigned by the HQ are soon forgotten.

4 TYPES OF POWER

MICRO POLITICAL BARGAINING POWER

Systemic

Institutional

Resource dependency

Micro Political Bargaining

MPBP plays a role when other sources of power are used

Relies on the institutional structures of the host country

Does not require strong embeddedness in the economy/society of the country.

Different strategies to use Institutional power:

  • Proactive use of institutional resources.

  • Use institutional structures as a shield against the introduction of undesired company-wide practices and policies.

The three other types of power need to be enacted in a politically sensitive way with the help of MPBP

Subsidiaries need to investigate the extent to which they can use the power resources they possesses without the risk of headquarters’ retaliation.

The use of power can be communicated in different ways. E.g. Politically sensitive information

WHAT IS BARGAINING POWER?

Resource-dependency and Systemic power are subject to erosion over time. Not sustainable.

MICRO POLITICAL BARGAINING POWER

Bargaining power is the relative ability of parties in a situation to exert influence over each other.

What happened?

CASE STUDY

Why was it a problem?

Introduction of company-wide HRM practices in the German subsidiary of GB-Pharma

GB-Pharma generally follows a local approach to HR management.

Constant reminder of German labour law to the HQ and that the introduction of those standards would lead to legal problems.

Usually the warnings were respected

by the HQ.

How was institutional power used?

What happened?

CASE STUDY

DHL Pakistan persuaded HQ to move towards a standardised IT system to make operations more efficient

  • Need to find the correct balance of MPBP.

  • MPBP is needed to be taken seriously by headquarters.

  • Poorly performing / foreign subsidiaries need to engage in lobbying and PB in order to overcompensate / be taken seriously.

  • Effectiveness of MPBP depends on:

- How crucial the object of the bargain is

- The strength of HQ's bargaining skills

Problem HQ faced?

Pakistan's DHL subsidiary was unable to

respond promptly to software adaptation problems

However...

Depends on subsidiary manager’s personality:

If feared of being penalized if it used institutional power, it will not work.

Entire DHL operations became very inefficient and relied heavily on DHL Pakistan

Therefore...

DHL Pakistan reputation and importance diminished as:

Pakistan

Most subsidiaries went back to their previous software packages

Eventually...

DHL Pakistan lost their MPBP as their failed IT system was replaced by an entirely new one

Power vs Sustainability

Strong

Power

Strong

Weak

Sustainability

Thanks for listening!

Any questions?

Comments?

Subsidiary power in multinational corporations: the subtle role of micro-political bargaining power

Marie LIETARD-MONTIGNY

Joseph ASH SAKULA

Eid ALBORDAINI

Systemic

Resource dependency

Institutional

Micro political barganing

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