MNC Typologies and Social Computing
Multi National Companies (MNC) use a vast array of typologies to distribute their products, services, and ideas throughout the world. There are seven main typologies that MNCs use to conduct business around the world which include ethnocentric, polycentric, geocentric, multidomestic, global, international and transnational. Each typology has unique characteristics that help leverage a company’s business model overseas. What’s even more interesting these typologies can be directly related to strategies that organizations use with social computing.
Through studies the first three typologies (ethnocentric, polycentric & geocentric) are used more as a generic terms to describe MNCs. Ethnocentric organizations manage overseas operations directly primarily to protect the company’s competitiveness in the home market. “Communication and information is top down and all strategic decisions are steered from corporate headquarters. Subsidiaries sell products design and manufactured by parent companies with little or no local control.” (Odell, 2006) Ethnocentrism allows such organizations to streamline manufacturing processes while protecting their intellectual capital. This method is also used with organization sin how they release information throughout social computing platforms. Intellectual capital can constrain organizations ability to reach out and touch people through social computing. In contrast to an ethnocentric company polycentric organizations take more responsibility to adapting designs while customizing products to meet local needs. Unlike the ethnocentric management model a polycentric organization manages their subsidiaries as independent units with minimal influence from headquarters. According to Odell geocentric organizations define global markets and technology is transferred rapidly to sell more or less the same product worldwide maximizing economies of scale both in production and R&D. Organizations that are thriving right now in social media are using this tactic allowing community managers, social marketing strategist and their employees to operate more independently allowing greater transparency and relevancy of information to be transmitted through social channels.
Through many efforts to define types of MNCs four terms have been used across a variety of researchers to better define the typology of MNCs. These include multidomestic, global, international and transnational. Within these four typologies they have been broken into three subsets to weigh the pros and cons of each. These subsets are organizational design, local responsiveness and interdependence.
Organizational design varies from all typologies. According to Harzing a decentralized network was most commonly seen in transnational strategies however the major difference of decentralized and centralized networks only seemed significant between transnational and global companies. Meaning that multidomestic, international and transnational use intersubsidiary organizational designs to pipeline their products or service while Global companies are quite the opposite. However common multidomestic, international and transnational companies set up their subsidiaries transnational organizations are vastly different from the other typologies because they have no specific allegiance to one country.
To further distinguish these typologies local responsiveness is taken under consideration. Looking at all four typologies the major differences where between multidomestic, transnational and global MNCs. “Conforming to our expectations, however, adaptation of marketing was higher for subsidiaries of Transnational and Multidomestic companies than for subsidiaries of Global companies” (Harzing, 2000) This seems to be pretty straight forward since global companies interject their products and ideas with little concern with the local communities. They simply believe in the idea that the consumers will either like the product or not. Even though this might seem like a harsh business practice it allows global companies leverage economies of scale within their operations.
Interdependence is the final subgroup that Harzing uses to differentiate the multiple typologies for MNCs. “Further, as predicted, the level of dependence, that is dependence on headquarters for purchases and sales, is highest for subsidiaries of Global companies and lowest for subsidiaries of Multidomestic companies, while subsidiaries of Transnational companies fall between these two extremes” (Harzing, 2000) Dissecting the interdependence of the subsidiaries with their headquarters give crucial insight to the typologies of MNCs. Understanding the type of relationship that international subsidiaries have with their headquarters allows opens up a MNC to how their operations are really conducted. These typologies and help an organization make conscious decisions on how they interact with people throughout social computing. Social computing has opened up the world for consumers and companies to interact. It is no longer massive conglomerates that can touch the other side of the world. Small, mid to large companies are now playing on a world wide level and assessing your organizational structure and strategy to interact with an eclectic market needs to take place to leverage social computing.
