International Business Strategy

This chapter explores Bartlett and Ghoshal's idea that large MNEs are making a mistake when they adopt the two simplifying strategies of homogenization (treating all their subsidiaries the same) and centralization (making all their strategic decisions at central headquarters). According to Bartlett and Ghoshal, this is poor strategy: by selectively decentralizing elements of strategic decision making and control, these companies could instead optimize the deployment and exploitation of their present FSAs and support the development of new FSAs in their multinational subsidiary network. Bartlett and Ghoshal offer a model that helps senior corporate managers differentiate among their subsidiaries and decide which subsidiaries should do more than merely implement centrally determined strategy. These ideas will be examined and then criticized using the framework presented in Chapter 1.

Significance

In 1986, Chris Bartlett and Sumantra Ghoshal wrote an important article in HBR on how MNEs should manage their subsidiary network. The substance of this paper was included three years later in their now classic book on the socalled ‘transnational solution’. The paper discussed here is actually the most important part of the book, as it contains a practical tool for senior managers to allocate specific roles to subsidiaries.

The authors suggest that many MNEs mistakenly view host country subsidiaries simply as recipients and distributors of company knowledge and products. These MNEs do not recognize their subsidiaries’ potential to develop unique strengths in their own right and to augment further the MNE's existing FSA bundles.