Will decentralization be cost effective to organizations?

Author: Iloka Benneth Chiemelie

Published: 16/12/2013

Basically, even without consulting the framework, it is clear that decentralization as you suggested will not be cost effective. This is because it will result to divergence and lack of uniformism in the system – which will definitely require extra investment on training and development as compared to when the company adopts a crossvergence or convergence approach.

The transactional solution (Bartlett et al., 2003) is based on the understanding that national subsidiaries will have diverse but independent roles within the MNEs network and these roles will depend on their country-specific location advantage (significance to overall MNE strategy and performance) and internal competence (management) that will determine their charter and relative autonomy.

Meyer et al. (2011) made known that the location advantage is most likely in big market and technologically advanced markets.

Based on your points, it was made known that Hungary is a small market and less technologically advanced, which means that they will not likely be suitable for the transactional solution. This can also be analyzed from the understanding presented above that such benefit will mean that the subsidiary have high power to influence decision making and strategy of the MNEs and I personally don’t see that applicable in the case of Tesco and Vodafone as the Hungarian culture is different from the British – thus reducing the chances of a Hungarian influence strategy in Britain.

references

Bartlett, C. A., Ghoshal, S. and Birkinshaw, J. (2003). Transnational Management: Text and Cases, 4th edition. Boston, MA: Irwin/McGraw Hill.

Meyer, K. E., Mudambi, R. and Narula, R. (2011). ‘Multinational enterprises and local contexts: the opportunities and challenges of multiple embeddedness’. Journal of Management Studies, 48, 235–52.