National Subsidiaries of Multinational Companies



Global business is constantly evolving and competition across businesses has led to a surge in companies expanding across domestic borders. Multinational companies and their subsidiaries have become an increasingly important part of the global business landscape. How the business is conducted is dependent on the relationship between the headquarters of the MNC and its subsidiaries. Various factors affect this relationship and in turn, determine the ultimate positioning of power in the organization.&nbsp.Organization structure affects communication patterns and information flows within the MNC. Organization structure facilitates control and improving structural fit with organization strategy serves to bring the goals of the subsidiaries and the MNC on par with each other.&nbsp.The aim of the paper will be to show that national subsidiaries of multinational corporations are powerless and are totally dependent on their parent company or the host government. The paper starts with some information on MNC-Subsidiary relationship and moves on to discuss the organization structure and the various control mechanisms that are required to ensure that goals of subsidiaries and the headquarters are in parity with the organizational goal. Centralization and decentralization in MNCs, and how it affects the level of control and decision making in the organization is discussed. Moreover, the paper discusses the effects of the language barrier, geographical distance, and human resource management practices on the headquarters-subsidiary relationship and sheds light on the level of autonomy in each situation. The choice of entry as an investment in foreign markets is explained and how the two choices affect the level of control exercised by the headquarters is discussed. The paper ends with a conclusion.