International Human Resource Management-MJ Version

subsidiaries. Differences in consumer preferences and high communication
barriers led to a decentralization of decision-making, so that the foreign sub-
sidiaries were relatively independent of their headquarters. Even now, many
industries have multidomestic characteristics. A prime example of a multi-
domestic industry is the branded packaged products industry (e.g. food and
laundry detergents). Companies in these industries preferably follow a
multidomestic strategy, which gives primary importance to national respon-
siveness. Products or services are differentiated to meet differing local
demands. Responsiveness to the differences that distinguished national
markets led multidomestic companies to decentralize organizational assets and
decision-making. This resulted in a configuration that can be described as a
decentralized federation. The decentralized federation is organized by area,
that is by geographical region. This kind of structure – which is comparable to
the area division structure of Stopford and Wells – was particularly compatible
with the management norms of the mainly European companies that sought
international presence in this particular era. Family ownership had been the
dominant tradition and therefore organizational processes were built on per-
sonal relationships and informal contacts rather than formal structures and
systems. Operational decisions were simply delegated to trusted parent com-
pany nationals who were assigned abroad. The main approach to controlling
and coordinating foreign subsidiaries was a rather informal one: direct personal
contact between headquarters and subsidiary managers. Some simple financial
control systems often supplemented this informal coordination.

International organizational model
The post-war years were characterized by a worldwide boom in demand.
Consumers were making up for the years of scarcity and soberness. The United
States was in a predominant economic position during this period. Most
European companies were preoccupied with the reconstruction of their domes-
tic operations, while American companies were almost untouched by the war.

46 International Human Resource Management

Environment, strategy, structure, systems and processes in MNCs

Environment: Environment: Strategy Structure Systems and

Historical Industry processes

Changes in Pattern of Company’s Company’s Company’s

international international strategic organizational control

environment competition response structure mechanisms

Source:adapted from Martinez and Jarillo, 1989

TABLE 2.2