Multinational Corporations and IT Strategies

Multinational corporations (MNCs) or multinational enterprises (MNEs) are defined as organizations operating in several countries with decentralization of strategy and management decision making to overseas subsidiaries, little coordination of activities, and subsidiaries across national boundaries.

Depending on the business strategy, MNCs refer to (a) networks of subsidiaries with a corporate structure to enable high coordination, (b) global arrangements of activities with world-scale volume and the flexibility of arbitrage, or (c) firms with product diversity and worldwide distribution systems to enable cross-subsidization among products and markets. MNCs can be seen as (a) corporate structures that coordinate the activities of different subsidiaries, (b) flexibility of arbitrage and global arrangements of activities, or (c) organizations with various products and global distribution systems to facilitate transfer of products and markets between subsidiaries.

Although MNCs generally refer to a cluster of for-profit organizations, various scholars have simply seen them as complex forms of organizations that operate across products and markets, nations and cultures, and face problems far more diverse than those faced by the largest domestic enterprises.

Taxonomy of Multinational Corporations

Different measures have been applied to assessing the degree of globality of MNCs. These measures have been led to different formulations of differences in strategies among firms. The suitability of each strategy varies with the unit of analysis (headquarters or subsidiaries), the dyadic headquarters-subsidiary relationships, and the dimensions of analysis. The dimensions identified are geographic, product, and value-added scopes, strategic importance and capabilities, integration and responsiveness, resource inflows and outflows, decision making and autonomy, centralization, configuration, coordination, integration, and strategic alliances, and cost reductions and local responsiveness.

Various scholars proposed several taxonomies and topologies of MNCs based on the dimensions described above. They used, for example, five dimensions (centralization, configuration and coordination of value chain activities, integration of markets, and strategic alliances) to identify four varieties of MNCs labeled as export-oriented, global, parent-child, and portfolio corporations. Bartlett and Ghoshal identified four forms of organizations used to manage international business based on local responsiveness and extent of pressures for cost reductions (global integration-local responsiveness framework).

Recent conceptualizations, drawing upon organizational topology of Bartlett and Ghoshal, proposed four types of organizations that operate in the international business environment: (a) multidomestic corporations (MDCs), which build a strong local presence through sensitivity and responsiveness to national differences, (b) international corporations (INCs), which exploit parent company knowledge and capabilities through worldwide diffusion and adaptation, (c) global corporations (GCs), which build cost advantages through centralized global-scaled operations, and (d) transnational corporations (TNCs), which try to achieve cost and differentiation advantages.

Information Technology Strategies

IT strategies (or IT strategic planning) refer to activities associated with setting objectives for information systems, operationalizing these objectives, developing a long-term plan for achieving them, and implementing this plan. The strategic use of IT depends on the ability of corporate IT and business managers to appreciate the IT business value and use it as a competitive tool. Information technology is fundamental to effective multinational operations because it enables coalitions and provides a coordination mechanism for geographically dispersed activities.

Information technology isa disruptive phenomenon for MNCs because of its capacities of changing the competitive landscape and of enabling new organizational structures, products, processes, and ways of communication. Prior research identified six issues to address for the support of multinational competitive success: (a) ability to interconnect across borders, (b) ability to reach across markets, (c) synchronization of policy and technology, (d) suitability of the technology platform, (e) application locations, and (f) common systems.

MNCs-IT Correspondence Model

I draw upon Bartlett and Ghoshal’s forms of organizations to categorize IT strategies in MNCs into global information strategies (GIS), international information strategies (INS), multidomestic information strategies (MDS), and transnational information strategies (TNS). The criteria of this categorization are the need for multinational integration and local responsiveness. The assumption is that the various forms of multinational information strategic planning correspond to the different multinational IS strategies.

The figure below depicts the correspondence between the forms of MNCs (global, international, multidomestic, and transnational) and the types of multinational IS strategies based on the global integration-local responsiveness framework.

MNCS-IT Correspondence Model

I use various strategic areas to classify multinational information systems by highlighting the degree of centralization and configuration of IS activities. These IS elements are (a) IS planning practices, (b) applications, (c) communications, (d) IS human resources, (e) technology, (f) standardization, (g) knowledge (including data and information), (h) business processes, (i) management practices, and (j) implementation.