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Sunday, February 15, 2015

Global Management | Explain the differences between a multidomestic corporation, a global company, and a borderless organization.

Explain the differences between a multidomestic corporation, a global company, and a borderless organization. Include examples of companies for each of the types of organizations discussed.

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  1. Answer:

    a. A multidomestic corporation is a multinational corporation (MNC) that decentralizes management and other decisions to the local country. This type of organization doesn't attempt to replicate its domestic successes by managing foreign operations from its home country. Instead, local employees are hired to manage the business and marketing strategies are tailored to that country's unique characteristics. This type of globalization reflects the polycentric attitude. Many consumer companies manage their global businesses using this approach because they must adapt their products and services to meet the needs of the local markets.
    For example, Switzerland-based Nestle can be described as a multidomestic corporation. With operations in almost every country on the globe, its managers match the company's products to its consumers. In parts of Europe, Nestle sells products that are not available in the United States or Latin America.
    b. A second type of MNC, called a global company centralizes its management and other decisions in the home country. These companies treat the world market as an integrated whole and focus on the need for global efficiency. Although these companies may have considerable global holdings, management decisions with company-wide implications are made from headquarters in the home country. This approach to globalization reflects the ethnocentric attitude.
    Some examples of companies that can be considered global companies include Sony, Deutsche Bank AG, and Merrill Lynch.
    c. Other companies are going international by eliminating structural divisions that impose artificial geographical barriers. This type of MNC is called a transnational or borderless organization, and reflects a geocentric attitude. Managers choose this form of international organization to increase efficiency and effectiveness in a competitive global marketplace.
    For example, IBM dropped its organizational structure based on country and reorganized into industry groups. Spain's Telefonica eliminated the geographic divisions between Madrid headquarters and its widespread phone companies. The company will be organized, instead, along business lines such as Internet services, cellular phones, and media operations.

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