The multilocal challenge: managing cross-border functions
Ghislanzoni, Pentinnen & Turnbull
- Companies are learning to adapt their organizational design to capture cross-border
synergies and to protect sources of profitability.
- Multilocals: companies with strong roots in national or regional companies, but that
often expand abroad because they have the resources to pursue M&As, but only
limited growth potential at home. They hope to take advantage of the opportunities
provided by changing regulation and converging consumer tastes.
- Challenge facing executives at multilocals: manage dual local-international focus.
- Companies must first identify their sources of local and cross-border value and then
grasp and address the barriers that may hinder the level of integration they desire.
- At the same time, they must learn to manage the complexity of the multilocal
approach by grouping businesses in geographic clusters where appropriate, fine-
tuning management’s accountability, and introducing a common culture in locations
where it would have a positive impact.
Pushing across borders
- The surge of cross-border acquisitions by businesses that serve individual, as
opposed to business, customers gives the local dimension critical significance.
- Several forces have spurred international expansion:
o Previously national players have expanded by acquiring similar companies
elsewhere as home markets became saturated.
o More liberal government policies in Europe have made it easier and more
lucrative for companies to operate across borders in previously-fragmented
- Although local tastes find preferences remain a reality for many multilocal
companies, the expectation of greater convergence among customers has also
fueled many deals.
- While not nearly as geographically diverse as long-established multinationals in for
example oil and gas or consumer goods, companies in sectors such as banking and
power now operate in a rapidly growing number of countries.
- Their need to protect sources of local value jealously means that they are developing
fresh solutions to an issue that more established multinationals may have had longer
to address yet continue to find difficult.
Bringing multilocal organizations to life
- Centralizing accountability for a function at HQ may be an obvious solution to the
problems of operating in more than one country, but it isn’t always the right one.
- Two elements of particular importance for multilocals to capture value abroad while
protecting the benefits of a national organization:
o Establishing an organizational design that strikes the appropriate local-global
o Countering complexity and ambiguity.
Designing a balanced organization