Chapter 09

Key Work feature: The importance of multidomestic strategies

There are many aspects of multidomestic strategies that are relevant to a multinational corporation competing in many nations. Of particular importance is the human resource management aspect of whether workforce practices prevalent in the domestic nation of the multinational corporation should, or can, be exported verbatim, or whether local conditions dictate a more flexible approach. Indeed multinational corporations have internalised diversity management initiatives as part of becoming a learning organization.

Diversity management refers to initiatives that capitalize on the personal diversity in a firm's workforce. This may involve such characteristics as race, ethnicity, national origin, gender, and age, for example. In addition, it can also include characteristics such as different learning styles. The idea is to use this diversity as part of an organization's strategy to achieve its organizational goals.

In researching firms in the United States Egan and Bendick (2003) found that many of the organizations with diversity management programs in their U.S. domestic operations are multinational corporations which are involved in international markets and operating subsidiaries in many nations. In the area of diversity management, as in other areas, multinational corporation are faced with a dilemma. On the one hand it is widely reported that multinational corporations try to adopt consistent operating policies and practices worldwide. This allows better centralized control of local operations and tends to promote cooperation among different subsidiaries. In addition, it helps formulate a share corporate culture which works to limit the impact of local differences.

However, on the other hand, human resources is an area of policy where attempts to enforce some kind of global uniformity is often difficult to implement. This is because what may constitute an issue of diversity within a multinational corporation’s domestic country, for example the USA, will vary when it is raised in a foreign subsidiary. Therefore initiatives for dealing with these issues must take account of a myriad of different legal, political, and cultural environments. As a result of this complexity even established multinational corporations operating in many nations may not be sufficiently knowledgeable about the range of issues they are faced with. Therefore Egan and Bendick argue that ‘…firms' control relationships between their headquarters and their operating arms may differ between their domestic and international operations.’

Egan and Bendick suggest that the most complex issue in addressing diversity management initiatives is that of standardization. This poses questions such as: how uniform should the diversity activities of a multinational corporation be in operating in many different nations? How much independence should a firm allow its overseas subsidiaries to develop their own diversity initiatives rather than requiring detailed conformity to corporate-wide goals and practices? Although these issues are not easy to solve they suggest that multinational corporations need to develop an organizational structure that allows their subsidiaries sufficient independence to manage and exploit local differences, and therefore maximise their local profit potential. At the same time the organizational structure needs to be sufficiently flexible to ensure that foreign subsidiaries remain firmly embedded in the overall corporate structure. This approach provides flexibility but also keeps foreign subsidiaries connected to the corporate strategy to maximize their contribution to overall corporate performance.

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Oxford University Press, Online Resource Centre, Chapter 09.

Chapter 09