The terms of engagement have changed for many multinationals in recent years. Increasingly, competitors that still only function at a national level simply do not have the resources to offer any real challenge a global player. Rather, multinationals now go head-to-head with whichever rivals are comparable in scope, global market position and access to international resources.
INSEAD Associate Professor of Entrepreneurship Morten T. Hansen and Prof. Nitin Nohria of the Harvard Business School offer a broad and detailed analysis on how multinationals can best move away from their reliance on traditional means of gaining the upper hand. Which have primarily been based on economies of scale and scope. Giants in their fields can no longer rely on the methods that let them expand in the past. These usually involved realising economies of scale by utilising physical assets, and by exploiting their company brands. Today, the biggest players in sectors as diverse as pharmaceuticals, IT, or even retailing have reached near-parity in these areas at a worldwide level.
The authors have determined that in the new environment, economies of scope are largely based on the ability of a corporation's business units and subsidiaries to be able to function as a collaborative unit much more thoroughly than is usually the case at present. This will enable them to leverage their various resources and capabilities to maximum advantage across their global operations.
Naturally, this is easier said than done. Hansen and Nohria surveyed senior executives in 107 companies in seven different major industrial sectors. Their findings helped them to elaborate what they see as the four most common main barriers to interunit collaboration:
· Unwillingness to seek input and learn from others
· Inability to seek and find expertise
· Unwillingness to help
· Inability to work together and transfer knowledge
The authors also describe the potential "management levers" that should be used to promote collaboration and minimise these barriers. These fall into three broad categories: leadership, values and goals, human resources procedures, and lateral cross-unit mechanisms.
However, caution is also advised regarding the potential downsides of such collaboration. The most obvious is also probably the most common: scheduling too many meetings that fail to produce results. Hansen and Nohria give examples as to how the management levers they describe can be counterbalanced with performance management of each of a corporation's business units, or even of each individual.
MIT Sloan Management Review, 2004