The level of competition in the global and domestic markets has substantially increased over the years. Improved funding mechanisms have made it easier for new market entrants to compete for positions in the market with already established organizations. Globalization has provided an incentive for companies to increase their market share by enabling entities to occupy new markets in different countries other than just that one occupied by the parent company. Multinational enterprises have a greater advantage compared to other organizations due to the huge market share and economies of scale. However, such organizations still face strategic and management challenges.
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One of the challenges faced by such organizations is attaining a balance between local responsiveness and the pressures of global efficiencies. Such a challenge arises when the company has to ensure that it meets standards set at the global market. At the same time, the entity has to ensure that it meets the needs and preferences for local stakeholders. Pressures to attain global efficiency include global management and integration challenges. MNEs always face the challenge of ensuring that they meet the global standards and local needs. This study assesses this challenge and the role of international human resources in attaining an effective balance between the two needs.
Local responsiveness challenges
Generally, local responsiveness calls for autonomous MNE subsidiary to commit all its resources towards ensuring that the needs of the local market is met in a bid to respond to competition. According to Hill (2005), when a MNE addresses the concept of local responsiveness, it has to look at it in four dimensions. The first dimension is the impact of history and culture on consumer needs. Differences in culture and history have greatly contributed in variations in consumer preferences and needs. Therefore, when settling in a market, a company has to ensure that its products suit the respective consumer profiles if it intends to attract a huge number of consumers. The concept of centralization makes it harder to develop products that suit the needs of the respective foreign markets fully. This calls for a change in global integration strategies to address the issue of varying consumer needs and preferences (Phatak, Bhagat & Kashlak, 2005).
Another dimension that local responsiveness takes is traditional practices and infrastructure. The fact that a company operates in different regions makes it important to develop products and services that suit the market’s infrastructural and traditional makeup. Lack of proper product or service planning may result to lack of proper synchronization between the product or service and the available infrastructure. Other than just the infrastructure, the MNE has to ensure that the marketing and management strategies are in line with the traditional practices of the market. Switching distribution channels and other modes of operations could be vital in ensuring that products and services are in harmony with the market’s traditional practices and infrastructure (Harrison, 2010).
Another dimension that local responsiveness takes is the respective governments’ legal and economic policies. Such policies include taxation, national goals and protectionism. In order to operate in a new market effectively, an MNE has to ensure that it takes account of all these policies in its business activities in such a country (Ohmae, 1994). Depending on the type of company, an MNE may be forced to comply with financial reporting and corporate governance rules. In the event that a company does not follow these regulations, it is likely to face prosecution hence increasing the reputation risk faced by the respective multinational entity (Anderson, 2004). Such a damaged reputation impedes the entry and subsequent performance of the entity in the foreign market.
Competition and local responsiveness
Rivalry among suppliers and the struggle by producers to acquire new consumers in the market also increases the need to focus more on local responsiveness. MNEs established in one market and offering identical goods and services, increase the pressures to ensure that the needs of the consumer group are adequately addressed. The presence of such companies increases the market’s control over product or service quality and prices. Accordingly, an MNE has to work within the market’s price parameters if it really wishes to maintain a good competitive advantage (Harrison, 2010).
Several factors increase pressure for local responsiveness. One of the factors affecting various industries is a persistent excess capacity. The need to ensure products are delivered to consumers at the correct time and at their convenience has a great effect on the firm performance (Phatak, Bhagat & Kashlak, 2005). MNEs are forced to stretch its employees in order to attain the consumers’ expectations. Other than just consumer needs and preferences, another factor affecting pressure for local responsiveness is the presence of low cost competitors. The presence of such competitors poses a pricing challenge for MNEs. This is because they have to offer products on competitive prices (Ekaterina 2007).
Global efficiency challenges
A company that chooses to ‘go global’ faces the challenge and need to bring together all its subsidiaries. An MNE faces the pressure of needs and costs to ensure that all its subsidiaries are well connected. One of the major advantages of global integration is that the company gets to enjoy economies of scale. The company is able to offer uniform products and services throughout the globe. This means that, global integration translates to globalization. However, it will have to endure challenges such as variation in culture, consumer preferences and government directives (Tamney & Chiang, 2002). Global integration involves harmonizing research and development activities and commodity prices in the different markets. The company has to do this by ensuring that it protects its position in respective global markets. On the other hand, an MNE has long-term goals that involve long-term protection of its competitive advantage. Therefore, a company has to ensure that the needs of different consumer markets are met. In the event that the company fails to meet any of the consumer needs, then it is likely to lose its competitive advantage (Anderson, 2004).
Ways of striking a balance between global efficiency and local responsiveness
Trying to ensure that consumer needs are adequately addressed is a very complex and challenging task. The task is also costly and may affect the performance of a company negatively. Therefore, MNEs have to use the most efficient and cost effective methods to try and ensure that the needs of the local market are adequately addressed. The first step in doing this is establishing consumer needs. One way of doing so is through interactive marketing. Interactive marketing allows consumers to communicate directly with the business entity. Consumers are offered the opportunity to give their views on how services and products can be changed in order to address consumer needs. Depending on the type of business and the marketing channels available, the entity can choose which ways to approach interactive marketing. Interactive marketing is an important strategy when it comes to increasing market share and increasing consumer loyalty. Other than just ensuring that there is constant communication between the entity and consumers, the business should also ensure that adequate information about products and services is availed to consumers.
The marketing technique selected by a business plays a critical role in determining the success of the campaign. Management has to ensure that the market is adequately analyzed to determine the right marketing channels. This is because, different consumer groups can be found effectively via different channels. For example, the best channel to reach the youth will be through online social networks or mobile phones. However, there are other channels which a business may not be able to get to the youth. Therefore, the marketing channel to be used entirely depends on the targeted market segment.
One critical channel that multinational enterprises can make good use of is the internet. The internet offers resources such as websites, blog sites and online social networks. All these resources can be used to conduct interactive marketing strategies. Online resources keep changing day in day out to accommodate activities such as interactive marketing and even e-commerce (Dwyer, 2006). An entity can utilize online resources to carry out interactive marketing since they allow for two channel communication and at times the business can communicate with its consumers on a real time basis in the case of online social networks. The main focus of this marketing technique is to ensure that consumer needs are determined and addressed quickly. In case of a service, interactive marketing gives the entity a chance to respond to consumer questions on a real time basis or within the shortest period of time (Harrison, 2010).
Having an easy time when it comes to determining consumer needs gives the organization to dedicate extra resources and time towards other organizational activities. This includes planning for the global market and ensuring that the best employees are recruited. Local responsiveness is not the only challenge faced by MNEs and therefore, the extra resources and time can be used to address pressure to attain global efficiency. Managing at the global level is not an easy task and therefore the organization needs to dedicate enough time and resources towards the activity in a bid to ensure efficiency. The first step when it comes to ensuring success at the global level is integration of global activities (Ohmae, 1994).
An MNE has to ensure that all its dispersed activities are centralized to ensure proper decision making and planning. It takes resources and time to ensure that this task is effective. However, if the organization focuses more on addressing local responsiveness this will be a complex task (Phatak, Bhagat and Kashlak, 2005). Therefore, using techniques such as interactive marketing to solve the troubles an MNE goes through in trying to solve local responsiveness challenges gives the entity the time and resources to address integration issues. This plays a critical role in helping an organization strike the balance between local responsiveness and global efficiency (Dwyer, 2006).
This is the act of distributing organization planning and strategizing power to respective regions or countries. Major decisions affecting a given market unit should be handled by employees in the unit. This eliminates the challenge of integrating management to a central position. On the other hand, this makes the process of decision making quicker and more efficient. This is because; employees who know more about a given market will have enough information to make a decision. On the other hand, it avoids the negative effects associated with bureaucracy an aspect that is normally in play when all company activities are integrated at one position.
The process of decentralization does not only make it easier to make decisions at the global level but it also enhances local responsiveness. This is because; company leadership will be closer to the market, which makes it easy to establish consumer needs which is an important aspect when it comes to trying to ensure that consumers are satisfied by meeting such needs. Local responsiveness is also enhanced since employees will be encouraged due to their involvement in the decision making process. This is an act of motivation hence improving the performance of staff members (Phatak, Bhagat and Kashlak, 2005).
Other than decision-making, the company should also decentralize the process of product and service development. This is because, the local employees understand the market best and it will be easier to determine consumer preferences. The products are not only developed according to consumer preferences but also the traditional practices and infrastructural capabilities of a given foreign market. In decentralization, it is important ensuring that employees who work in a given country or region are citizens in the area since they understand traditional practices and consumers’ cultural preferences best (Stacey, 1996). Having such employees will make it easier for the company to adapt to the governments’ political demands and economic policies since they have been operating within that framework. This makes it easier for an MNE to address the issue of local responsiveness.
The role of international employees in attaining a balance between global efficiencies and local responsiveness
Employees and decentralization
MNEs have different subsidiaries which exhibit varying consumer profiles. Therefore, employees at the respective subsidiaries will be responsible for handling local responsiveness issues such as consumer demand and monitoring the distribution channels. These employees will be responsible for detecting and processing consumer needs and coming up with the right mechanisms that can be used to ensure that such needs are addressed (Ulrich & Smallwood, 2006). In order to ensure employees carry out these tasks effectively, it is important to ensure that every subsidiary is autonomous. This gives managers and employees at subsidiary level the power to make decisions that affect the market that they are responsible for (Gubman, 1998).
Different organizations have different reason for pursuing talent management. When it comes to multinational enterprises, entities have to ensure that all employees have the ability to steer the organization towards the set organizational goals. Therefore when it comes to attaining company milestones with regard to local responsiveness and global integration it is vital for a multinational entity to create a ‘talent pool’ aimed at attaining such milestones (Becker, Huselid & Ulrich, 2001).
An example of this can be employing ambitious and young individuals who are then natured in line with organizational needs and goals. These employees are then given a chance to work in larger positions in the company to help attain the set goals and standards (Phatak, Bhagat and Kashlak, 2005). The organization should focus on training such employees towards attaining the set globalization goals. This ensures that employees have adequate knowledge when it comes to managing the organization at global level.
Employees are also the major stakeholders in determining the success of an enterprise initiative such as interactive marketing and consumer interaction. Therefore, ensuring that employees are focused towards such goals plays a critical role in attaining success at global level (Ulrich & Smallwood). Multinational enterprises can use international employees to attain a balance between local responsiveness and global integration by ensuring that they are well natured and trained in line with enterprise goals. McGarrity (2007) holds that employee development and training is a critical part of talent management. Perfecting on the strengths of an employee is very important. Development and training is vital when it comes to establishing strengths and weaknesses of an employee and building on them.
Employee development and training is important when it comes to improving their abilities. The most important aspect of training is that it helps employees improve in their weak areas and ensure that they develop the required skills to attain the set organizational goals. However attrition is an issue that has a negative effect on the way organization treat employee development and training. However, proper training and incorporation of employees into company strategies helps in ensuring that the employees stick to the company and focus on assisting the management to attain the set corporate goals. On the other hand, sharing training costs between the employees and the company helps reduce the impact of attrition. Employee development and training is another sacrifice that MNEs must make in order to ensure that they succeed (Cappeli, 2009). Therefore, proper talent management techniques can be used by MNEs to ensure that entity retains employees who have specialized skills who facilitate global integration and other efficiencies (Dessler 1993).
Securing new markets is important for every organization that wishes to ensure long term success. In recent years, the best option available for investors and organizations ‘going global’. However, there are several challenges associated with the choice of being a multinational entity. One of the challenges is striking the balance between local responsiveness and global integration. With regard to local responsiveness, an organization has to ensure that the needs of the local market are met in order to maintain their competitive advantage or even stay in business. The needs of the local market include differences in consumer taste and preferences, traditional practices, infrastructure and government directives. On the other hand, the challenge that such organizations face when it comes to pressures from global efficiencies is global integration. This is the need to ensure that all company subsidiaries are integrated into one and can be viewed as one organization at the global stage. There various methods which managers can use to reduce the challenges posed by the existence of these two aspects. The first solution is decentralizing the task of managing the organization. The second method is trying to ensure that subsidiaries know consumer needs as soon as they arise in order to enhance local responsiveness and make it more efficient and successful. Such methods would better align the entities operations with local needs while allowing the entity to maintain some level of international standards in its products or service provision.
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