The MNE Subsidiary Challenge: Adapting global strategy to the local cultural context Two Cases in Argentina
A doctoral dissertation by
Dora Inés Rizzuto
A Thesis submitted in partial fulfilment of the requirement for the degree of Doctoral Business Administration ISBN: 978 1 911218 22 7 Copyright© Dora Inés Rizzuto Licence to publish granted to Academic Conferences and Publishing International Limited, 2016 For more information see www.academic conferences.org
The MNE Subsidiary Challenge: Adapting global strategy to the local cultural context Two Studies in Argentina
A Thesis submitted in partial fulfillment of the requirement for the degree of Doctoral Business Administration
By Dora InĂŠs Rizzuto
Henley Business School, University of Reading March 2016
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Declaration of original authorship
I confirm that this is my own work and the use of all material from other sources has been properly and fully acknowledged.
Dora InĂŠs Rizzuto
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Abstract
The purpose of this research is to study a key aspect of International Business (IB) as is the need for MNE subsidiaries to adapt their headquarters’ strategy to local requirements of the host country business context and culture. Argentina, with its intrinsic uncertainty and pendulum-like political cycles’ fluctuations, makes an ideal setting for the study. In line with the purpose, the research takes a high context perspective (Child, 2000) encompassing the worldview that 'local counts’.
The polycentricity (Ostrom, 2005) terminology and framework in the form of institutional polycentricity (Bartjargal et al. 2012; Xu & Hitt, 2012; Hitt et al. 2012) have been adopted and applied to institutions and business strategy concepts. The subsidiary organisation is the action arena and its strategic choices are the outcome within the context of exogenous variables ‘formal institutions’ (i.e., political, economic and regulatory) and ‘informal institutions’ (i.e., specifically, societal culture). Informal institutions construct is analysed in the light of three dimensions (Globe Project 2004, 2008): future orientation, power distance and uncertainty avoidance, and their impact on subsidiary business strategy.
From the methodology perspective, this research is qualitative under social constructionist philosophical stance. The approach is multiple case-studies where semi-structured interviews with senior managers of two organisations are the main source of evidence. Data analysis takes the form of interpretive sensemaking (Stake, 2005). The objective is particularisation and not statistical generalisation. The two organisations belong to significantly different industries, but share belonging to the
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Anglo cluster and being embedded in the Argentine context. The structure of the dissertation is aligned with the tradition in which it is rooted.
The findings are a theoretical conjecture that supports a significant adaptation of headquarters strategies to the host country, and a framework that assists in visualising how to perform this adaptation. The main implication is that the framework offers a platform that should help to improve formal communications on strategy between MNE subsidiaries and their headquarters.
A weakness of the study is that it reflects solely the subsidiary executives' worldviews. However, this limitation was partially mitigated by validating the findings with managers of other MNE subsidiaries in Argentina, and a regional HQ officer of another Anglo cluster MNE.
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Table of Contents Page List of figures
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List of tables
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Acknowledgements
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Chapter 1. The Introduction
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1.1. Introduction
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1.2. The Context
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1.3. Conceptual framework
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1.4. The Research Question
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1.5. The approach
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1.6. The Contribution
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1.7. Limitations
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1.8. Connections with Management Practice
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1.9. Thesis Structure
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1.10. Summary
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Chapter 2. Business Context in Argentina
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2.1. Introduction
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2.2 The institutions in Argentina
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2.3.Prevailing management styles
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2.4. Existing trends
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2.4. Summary
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Chapter 3. Literature Review
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3.1. Introduction
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3.2. Overview of High Context perspectives, Polycentricity and Institutional Theory
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3.3. High and Low Context Perspectives
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3.4. Introduction to Polycentricity
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3.4.1. Concept
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3.4.11. Polycentricity critique
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3.4.2. Institutional Polycentricity
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3.5. Institutional Theory
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3.5.1. Types of Institutions
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3.5.2. Institutional Distance
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3.6. Societal Culture
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3.6.1. Overview
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3.6.2. Selected Cultural Dimensions
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3.6.2.1. Uncertainty Avoidance
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3.6.2.2. Power Distance
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3.6.2.3. Future Orientation
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3.7. Business Level Strategy
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3.7.1. Overview
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3.7.2. Miles and Snow’s view: Strategic Types
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3.7.2.1. The four types of organisational adaptation
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3.7.2.2. Reasons why Miles and Snow has been adopted in this study
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3.7.3. Liabilities versus Advantages of Foreignness
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3.8. Outcome of the literature
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3.8.1. Synthesis of the literature
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3.8.2. Interpretation: Linking the concepts
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3.8.3. Proposing a Framework of Analysis
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Chapter 4. Research Methodology and Design
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4.1. Introduction
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4.2. Research Strategy
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4.3. Research Design
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4.4. Selection of the cases
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4.4.1. The selected organisations
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4.4.1.1. IBM Argentina
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4.4.1.2. BAT Subsidiary in Argentina: Nobleza Piccardo
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4.5. Access to companies
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4.6. Informant selection: Purposive sampling
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4.7. Evidence collection
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4.7.1. Semi-structured interviews
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4.7.2. Traslation and back-translation
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4.7.3. Pilot study: Problems found at the initial stages
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4.7.4. Other evidence collection
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4.8. Evidence Analysis
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4.9. Building theoretical conjecture and model
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4.10. Validity
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4.10.1. Credibility
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4.10.2.Transferability
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4.10.3. Dependability
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4.10.4. Confirmability
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4.11. Work plan
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4.12. Strengths and weaknesses of the design
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4.12.1. Strengths
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4.12.2. Weaknesses
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4.13. Summary
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Chapter 5. Data Analysis
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5.1. Introduction
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5.2. IBM subsidiary in Argentina: IBM Argentina
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5.2.1. The relationship with the Argentine environment
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5.2.2 Societal culture duimensions analysis
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5.2.3 Business level strategy
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5.2.4. The strategic choice and the cultural dimensions
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5.2.5. Liabilities or advantages of foreignness
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5.2.6. Conclusions
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5.3 BAT Subsidiary in Argentina: Nobleza Piccardo
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5.3.1. The relationship with the Argentine environment
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5.3.2. Societal culture dimensions
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5.3.3. Business level strategy
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5.3.4. Strategic choice and the cultural dimensions
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5.3.5. Liabilities or advantages of foreignness
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5.3.6. Conclusions
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5.4. Closing paragraph
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Chapter 6. Cross-case Analysis and Theoretical Conjecture
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6.1. Introduction
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6.2. Cross-case analysis
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6.2.1. Similarities
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6.2.1.1. Conclusions on Similarities
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6.2.2. Differences
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6.2.2.1. Conclusions on Differences
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6.3. Discussion
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6.4.Theoretical conjecture
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6.5. Validity of findings
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6.6. Closing paragraph
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Chapter 7. Conclusions. Contribution to the Body of Knowledge.
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Limitations. Future Research Opportunities. 7.1. Introduction
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7.2. Conclusions
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7.3. Contribution to the Body of Knowledge
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7.4. Limitations
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7.5. Future Research Opportunities
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References
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Appendices.
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Appendix 1. A. Societal Culture "As Is" and "Should Be" in
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25/61 Globe Countries. Dimension: Uncertainty Avoidance
Appendix 1. B. Societal Culture "As Is" and "Should Be" in
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25/61 Globe Countries. Dimension: Power Distance
Appendix 1. C. Societal Culture "As Is" and "Should Be" in
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25/61 Globe Countries. Dimension: Future Orientation
Appendix 2. Semi-structured questionnaire 2009-2010
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Appendix 3. Interview guidelines 2012-2013
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Appendix 4. Argentine British Chamber of Commerce
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Questionnaire for participants.
Appendix 5. 1. Log of interviews 2009/2010
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Appendix 5.2. Log of interviews 2012/2013
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Appendix 5.3. Log of interviews about the context. Both periods
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Appendix 6. Conceptual underpinning of the research method
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and design
Appendix 7. Pilot Study. The importante of culture in FDI initiatives (questionnaire)
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Appendix 8. Argentine British Chamber of Commerce. 18/09/13
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Questionnaire for participants. Summary of results.
Appendix 9. Corroboration with regional HQ officer
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Appendix 9.1 Questionnaire for regional HQ officer
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Appendix 9.2 Regional HQ officer’s responses
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Appendix 10. IBM subsidiary in Argentina: IBM Argentina
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Appendix 11. BAT Subsidiary in Argentina: Nobleza Piccardo
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Appendix 12. First round of interviews
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List of figures
Figure 3.1. 'The focal level of analysis and action arena' borrowed from Ostrom (2005), p. 13
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Figure 3.2. Three Adaptive Problems
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Figure 3.3. Framework of Departure
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Figure 4.1. High level Work Plan
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Figure 5.1. Scheme for analysis of the relationship of the subsidiary
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with the context Figure 5.2. IBM Argentina Perspectives about Formal Institutions
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Figure 5.3. IBM Argentina. Perspectives about Rules of the Games
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Figure 5.4. IBM Argentina Strategic Choice
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Figure 5.5. Nobleza Piccardo. Perspectives on Formal Institutions
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Figure 5.6. Nobleza Piccardo. Perspectives on Rules of the Game
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Figure 5.7. Nobleza Piccardo’s Strategic Choice
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Figure 6.1 The Subsidiary Strategy Adaptation Model
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List of tables Page
Table 1.1. Ostrom terms equivalence in this thesis
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Table 1.2. Thesis Structure
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Table 4.1. Interpretive sense making Approach
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Table 4.2. Similarities related to general characteristics in organisations
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Table 4.3. Differences in company characteristics
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Table 4.4. Content of semi-structured interviews
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Table 4.5. Selected themes on Framework of Departure (figure 3.2)
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Table 4.6. Analogy between Quantitative and Qualitative Approaches
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Table 5.1. Centres where Case Study interviews were carried out
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Table 5.2. IBM Argentina. Strategic Problem Solutions
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Table 5.3. IBM Argentina Advantages and Liabilities of Foreignness
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Table 5.4. Nobleza Piccardo (BAT) Solutions to Strategic Problems
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Table 5.5. Nobleza Piccardo (BAT). Advantages and
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Liabilities of Foreignness Table 6.1. Similarities in terms of Institutional Polycentrity,
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formal institutions and rules of the game Table 6.2. Similarities on Societal Culture dimensions
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Table 6.3. Business level topics common to both subsidiaries
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Table 6.4. Similarities on Strategic Choice
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Table 6.5. Similarities on Liabilities and Advantages of Foreignness
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Table 6.6. Differences in Institutional Polycentrity
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and formal institutions Table 6.7 Differences on how rules of the game affect each company
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Table 6.8. Differences on Societal Culture dimensions
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Table. 6.9. Differences in Solutions to Strategic Type problems
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Table 6.10. Business level differences
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Table 6.11. Differences in Liabilities and Advantages of Foreignness
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Acknowledgements
First of all, I want to thank my late husband Nino who is part of this project.
Professor Bernard Taylor who in 1995 welcomed me to Henley Management College and opened my eyes to the possibility of starting an MBA and later the DBA.
David Price who at the time believed in me as a prospective DBA candidate.
Abby Ghobadian, who supervised my final DBA thesis.
My gratitude to Paul Griffiths, whose patience and guidance allowed me to complete this DBA journey.
David Faulkner, who supervised my DBA at the initial stages.
My especial thanks to Dan Remenyi who had faith in me in the last and important steps of my doctoral journey.
Claire Collins, DBA director at HBS and her team at the doctoral office Veronica Clarke, Louise Hillier and Becky Kite.
James, my English language teacher, who takes care of the ‘quality’ of my English and acts as proof-reader.
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Monica Mesz, executive director of the Argentine British Chamber of Commerce, for her support.
Manuel Sbdar, colleague and friend who introduced me into IBM.
Participant companies, managers and directors, who generously gave their time and shared their insights, as well as others who took part in the Pilot Study.
Helena Herrero, Citi Bank Latin American Human Resources vice-president.
Hector Masoero, Chairman, Arturo Lisdero, Vice-Chairman, and Universidad Argentina de la Empresa (UADE) for their unstinting support for my project.
The management of Artear - Canal 13 - Buenos Aires who provided teleconference facilities throughout my studies and for the Viva Voce.
Everyone else involved not explicitly mentioned but without whose help this undertaking would not have been completed.
My mother and her invaluable love and patience.
My British Mastiff dogs who gave me their complementary presence along my DBA.
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Chapter 1. The Introduction
1.1. Introduction
The purpose of this chapter is to articulate the aim of the thesis. The chapter starts by providing a context in which the research was carried out and explaining the conceptual framework within which the research was placed, and then moves on to describing the research question. The theoretical approach is subsequently discussed, followed by a description of its contribution. Finally the limitations of the research are presented and an overview of the structure of the thesis is set out.
1.2. The Context
The international business literature is divided into two broad camps - high context and low context (Child 2000). The proponents of high context argue that firms need to adapt to the requirements of the host country (Boissot & Child 1988, 1996; Chhokar et al., 2008; Graham, 2009; Hofstede, 1991, 2001; House et al., 2004; Tallman and Yip, 2009; Trompenaars & Hampden-Turner 1993, 1998, 2000), while the proponents of low context argue that there is no need for adaptation as globalisation prevails (Barlett & Ghoshal, 1989; Biggart, 1997; Chandler, 1977; Kerr et al., 1960; Toffler, 1971; Yang, 1994; Williamson, 1975; Williamson, 1985). The fact that these two opposing views co-exist suggests that there is more research needed in this area.
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This work is situated in the high context camp in response to the fragile nature of institutions in Argentina. This characteristic of the country requires MNE subsidiaries to be sensitive to local conditions in order to operate effectively. Peng (2009) describes institutions as being formal or informal, and he posits that culture is an informal institution. Formal institutions, in the form of political, economic and regulatory institutions; and informal institutions (Bartjargal et al. 2012; Hitt et al. 2012; Holmes et al., 2011; Ostrom, 2005, 2010, 2011; Xu & Hitt, 2012) constitute the exogenous context where an organisation carries out its operations.
A gap that has been detected in the literature is the nature of the pressures that compel MNEs to develop adaptation mechanisms. The reason for these pressures may lie in the inherent instability of an emerging country like Argentina. Ostrom’s Polycentricity (2005, 2010, 2011) and Miles & Snow’s strategic adaptation (1978, 2003) models may offer some guidance as to the mechanisms that explain how MNEs develop adaptive techniques. This thesis draws on their work in an effort to identify the ways in which companies adapt to conditions in Argentina.
This research is important not only because it addresses the issue of high versus low context but because it is the first time that this type of research has been carried out in Argentina. In this respect and following Lee (1999), this study is contextually grounded and has been conducted following a qualitative case study approach (Bamberger, 2008; Bartlett, 1979; Birkinshaw et al., 2011; Brannen and Doz, 2010; Cresswell, 2007; Crozier, 1965; Eisenhardt, 1989; Griffiths, 2004; Pettigrew, 2013; Piekkari, Welch, and Paavilainen, 2009, Stake, 2005; Yin, 1994, 2009; Welch et al., 2011).
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The work is also relevant because it may throw a light more generally into the adaptation process operated by MNEs from industrialised countries operating in emerging economies. The adaptation process affects business strategy and this dissertation looks into the qualitative impact of such strategic adjustment.
1.3. Conceptual framework
Based on the specific and non-traditional business environment of Argentina for foreign companies that makes it not easy to understand its rules of the game, this thesis adopts Ostrom’s (2005, 2010, 2011) Polycentricity framework. Polycentricity states that institutions at several levels (i.e. national, state/provincial and local authority) are systems with multiple centres, whereas monocentric systems have single-centred hierarchies (McGinnis, 2011; Ostrom, 2011; Ostrom 2010; Ostrom 2005; Polanyi, 1951). The polycentricity notion encompasses the existence of multiple decision making centres within an accepted set of rules. As will be developed in Chapter 2 Argentina appears to have a monocentric political system with weak formal institutions which are run under a semi-democratic mode. Based on the Polycentricity concept, Institutional Polycentricity has been developed and connected to business matters (Batjargal B., Hitt M. A., Tsui A.S., Arregle J-L., Webb J. W. and Miller T. et al. 2012; Hitt, 2012; Hitt M. A., Sirmon D.G., Li Y., Ghobadian A. and Arregle J-L., 2011; Xu & Hitt, 2012) and its application in a multinational enterprise (MNE) environment becomes the theoretical perspective being followed in this dissertation.
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Institutional Polycentricity is the outline under which the research is carried out. Institutional Polycentricity is a concept that suggests that a country’s institutional system is made up of diverse institutions of multiple characteristics, which coexist and influence the shape that the MNE subsidiary adopts in the local environment (Bartjargal et al. 2012; 2012; Hitt et al. 2012; Xu & Hitt). As mentioned above, institutions are classified into formal and informal institutions (Bartjargal et al. 2012; Hitt et al. 2012, Ostrom 2005, 2010; Peng, 2009; Sirmon et al., 2011; Xu & Hitt, 2012). Moreover formal institutions at national level are categorised as regulatory, political and economic institutions (Hitt, 2012; Sirmon et al., 2011; Bartjargal et al. 2012) while informal institutions take forms such as culture (Holmes et al., 2011; Ostrom 2005, 2010; Peng 2009).
Institutional Polycentricity thus requires a high context approach because nations have their own specific characteristics in terms of social, political and economic institutions, and it is their rules that prevail. Thus high context perspectives consider local conditions to have a significant influence on the constructs being researched. Therefore, this research is pursued under a high context perspective (Child 2000) in the International Business (IB) field as an encompassing component applicable to MNEs.
One of the central questions in this research is how have the MNEs under study managed to operate successfully in Argentina for more than nine decades. Moreover this study concentrates mainly on informal institutions in the form of societal culture as it helps understand the local mindset (Hofstede, 1991, 2001). The interaction of the MNE subsidiary –the action arena as per Ostrom (2009) terms – with formal and
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informal institutions – exogenous variables (Ostrom, 2005) generate a strategic behaviour that adapts to host country changing conditions. Likewise considering that formal institutions are weak, informal institutions in the shape of societal culture become relevant (Bartjargal et al. 2012; Hitt, 2012; Holmes et al., 2011).
The adaptation of MNE subsidiaries emerges from being deeply embedded in the Argentine context and understanding local rules of the game which shows the link with the high context perspective. Consequently choosing the high context view in turn leads the research to consider institutional theory with an examination of host country formal institutions. Moreover informal institutions in the form of local culture are also examined under societal culture in connection with the subsidiaries’ strategy implementation. Societal culture (House et al., 2004, 2008) describes the ways in which the members of a social grouping react to significant events, these conform values and behaviours that are transmitted across generations. These conducts are also reflected in organisational behaviour. In this regard societal culture theories become highly relevant. Moreover, the concept of institutional distance between MNE home and host country is analysed, as the distances involved are significant. This requires the MNE subsidiary to adapt to the local environment in order to thrive.
Adaptation is examined in terms of culture, to what extent practices selected at the behest of the MNE reflect host country or MNE head office national culture. This is assessed by means of three dimensions, Future Orientation, Power Distance and Uncertainty Avoidance. Globe project (House et al., 2004, 2008) takes a novel approach to the measurement of cultural dimensions by measuring behaviours in
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terms of "as is" (practices) and "should be" (values). This research analyses culture in terms of the "as is" practices measurement. This was chosen because it is less subjective than "should be" values measurement (see Appendix 1.A, Appendix 1. B, Appendix 1. C).
The choice of these dimensions is based on Miles and Snow's (1978, 2003) strategy model and is used to analyse the three strategic problems that a company may face as identified by the authors. These three cultural dimensions resonate with some of the Miles and Snow´s elements in their strategic types. For example power distance with the dominant coalition, future orientation with planning and uncertainty avoidance with internal and external uncertainty.
The central theme of Miles and Snow's work is adaptation; this is achieved through solutions to different problems defined as the entrepreneurial problem, the engineering problem and the administrative problem.
The strategic choice made by the MNE is subject to adaptation. For this adaptation to be successful there has to be interaction with the institutions. Ostrom's Polycentricity was introduced as an additional way of analysing the interaction between the MNE subsidiary and the external environment. According to Ostrom the environment consists of formal institutions (e.g. Political) and informal institutions (e.g. Culture). One of Ostrom's contributions to this study is the recognition that culture is an institution. This insight, together with historical evidence that formal institutions in Argentina are weak (Botana, 2011; GonzĂĄlez Fraga & Lousteau, 2005;Hatum & Pettigrew, 2006; Micklethwait, 2014; Peng & Khoury, 2009; Sebreli, 2012; The
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Economist, February 13th 2014), allows this study to give culture the relevance it deserves in the Argentine context and justify its position as a central theme in this thesis.
Ostrom breaks down her analysis in terms of the action arena, exogenous variables and the outcome. In this thesis these elements are represented by the subsidiary (unit of analysis), formal and informal institutions, and strategic choice. They are displayed in the table 1.1.
The Action Arena
The Subsidiary (Unit of Analysis)
Exogenous Variables
Formal Institutions Informal Institutions
The Outcome
Strategic Choice
Table 1.1. Ostrom terms equivalence in this thesis
The literature reviewed is synthesized into a framework of departure which through the empirical work in this research subsequently evolves into a theoretical conjecture and a model that intends to be of help to practitioners, specifically to those managing MNE subsidiaries. The managerial implications of the research are that the model offers a formal platform to justify with the parent company the need to adapt corporate strategies to the host country context.
This research is therefore based on a high context perspective. Senior executives were interviewed in order to ascertain their worldview regarding the importance of
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bringing together different aspects of reality such as formal institutions, host country societal culture and MNE’s subsidiary business strategy.
1.4. The research question
The above context gives rise to various questions in respect of MNE adaptation to an unstable institutional environment. The main research question is therefore centred on the way in which MNEs achieve such adaptation:
How, and to what extent, do MNEs have to adapt their corporate strategies to the local context in order to be successful in Argentina? The perspective from which this question is tackled is the cultural one.
The choice of the cultural perspective is based on the fact that the context in which the companies operate consists of formal and informal institutions such as culture. The thesis seeks to establish the relative influence of formal and informal institutions on MNEs. In terms of informal institutions, this study focuses mainly on societal culture which turns out to be increasingly influential as it fills in for institutional weaknesses and voids (Bartjargal et al. 2012; Xu & Hitt, 2012).
This thesis fills the gap in the literature connected to external institutions, MNE subsidiaries’ strategy and host country societal culture. In emergent countries such as Argentina formal institutions are weak which makes host country societal culture play a central role as the informal institution that permeates the subsidiary (the organisation) and is everywhere in the society. Thus this study brings together
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different disciplines such as polycentricity, business strategy and societal culture under a multidisciplinary nature (Birkinshaw et al., 2011; Doz, 2011). Moreover, it seeks to establish which are the most important external forces acting upon MNEs are and how MNE subsidiaries adapt to them.
Moreover, the main research question is fleshed out into five subsidiary questions that lead the research towards issues such as the connection between MNE subsidiary strategy implementation and host country societal culture; strategic choice in the Argentine context based on organisational types; the way firms leverage advantages of foreignness and how they overcome liabilities of foreignness; and how exogenous variables such as formal and informal institutions impact on MNE subsidiaries' business strategy in the Argentine pendulum-like institutional environment:
1. Is there a connection between local culture and the implementation of strategy at the subsidiary level? 2. What is the strategic-choice in the environment-organisation relationship? 3. How does the firm leverage the advantages of foreignness? 4. How does the firm overcome liabilities of foreignness? 5. How do formal and informal institutional influences affect business strategy in MNE subsidiaries?
Answers to these questions would offer an insight into the forces that act upon MNEs in Argentina, the ways in which these companies adapt to them and the effects of this adaptation on their strategies.
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1.5. The approach
The approach in this research is qualitative under a social constructionist philosophical stance and with a particular interest in worldviews of one layer of organisational members represented by senior managers and directors (Maguire and Philips, 2008). The informants for this research are restricted to senior managers because they are the only group at the companies who are aware of the broader strategic issues (Baden-Fuller C. & Haefliger S., 2013; Baker M. & Moreo P., 2008; Eisenhardt, 1989; Hatum & Pettigrew, 2006; Pettigrew, 2013; Sloan A. P. Jr., 1990; Teece D.J., 2010). Interviewing blue collar workers or clerical levels would most probably not have generated insights into strategic issues. Their contribution would have been limited to cultural perspectives, whereas senior managers, being Argentine too, offered the study both strategic and cultural insights.
The case study method (Eisendhardt, 1989; Yin, 1994, 2009) has been selected as the approach to carry out this research because it is a well-established form in research in IB. Moreover, the case study format has been adopted by other researchers under the IB framework (Bamberger, 2008; Brannen and Doz, 2010; Piekkari, Welch, and Paavilainen, 2009, Redding, 2005; Welch et al., 2011).
Furthermore two MNE subsidiaries operating in Argentina were chosen to carry out this study because they satisfy the theoretical sampling for the purpose of this study (Eisenhardt, 1989a). The analysed organisations are subsidiaries of American and British MNEs embedded in the host country context. Both corporations’ subsidiaries
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present their British and American origins and have been operating in the Argentine environment for many decades. The fact that they have survived and thrived in Argentina all this time is worth noting, since the country does not precisely offer a stable environment. Furthermore, the decision to focus the research on MNEs that belong to two countries, UK and United States, which are parts of the Anglo Cluster as defined in the GLOBE Project (2004, 2008)1, is based on that the companies met two criteria. These two criteria are: (a) they had to be local operations of MNEs; and (b) in terms of culture, they had to be part of the Anglo cluster as defined by House et al.(2004,2008). This was essential in order to ascertain the societal culture differences between headoffice and the subsidiaries’ local operation and managerial team.
This derives in a particular perspective of their members who ‘belong’ to organisational frames of significantly different societal cultures and distant institutional structures. Moreover, both selected subsidiaries from the UK and United States (Anglo origin) operating in a culture (Latin) that is far distant from their own, i.e. Argentine (see appendices 1.a, 1.b and 1.c). They offer ‘rare or unique’ qualities that make them suitable candidates for ‘theoretical sampling’ (Eisenhardt, 1989a; Maguire & Philips, 2008, Yin, 2009). Consequently, the aim of this thesis is to show to what extent strategy adaptation to host country environment is enforced and in response to what forces. This justification will be expanded in section 4.5.1 ´Rationale behind selection of companies´ shown in Chapter 4.
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Anglo Cluster in the GLOBE Research Programme includes Australia, Canada (English speaking area), England, Ireland, New Zealand, South Africa (White sample) and the United States (House et al., 2008, p. 297)
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Following the idea of the action arena as the ‘black box’ (McGinnis, 2011), qualitative research is distinctively suited to ‘opening the black box’ of organisational processes, the how, who and why of individual and collective organised action as it unfolds over time in context (Doz, 2011). The strength of qualitative research is that it allows different paradigms and different types of research and research reporting (Bansal and Corley, 2011). In this thesis, the social constructionism perspective is followed. Under this perspective, phenomena are studied in their own environment and the social actors’ meanings are used to understand them (Denzin and Lincoln, 2005). This links directly with the high context perspective.
An Interpretive Sensemaking approach is adopted in this thesis (Stake, 2005) where there is a strong emphasis on context and there is no intention to reach generalisations as particularization prevails. Moreover, the context is highly important and the study can be considered “in context” (Arhens, 2008; Bamberger, 2008, Meyer and Peng, 2005, and Redding, 2005) where the role of context is vital for understanding the phenomenon being studied (Lee, 1999; Welch et al., 2011). The processes through which the two companies were chosen and the criteria under which informants were selected are described in Chapter 4.
Furthermore, as the research was conducted in Spanish, translation and backtranslation into English (Remenyi, 2011; Ercikan 1998; Warwick and Osherson, 1973) was carried out.
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1.6. The Contribution
This thesis reflects recent changes in the field of IB research where there is a trend towards a return to IB’s qualitative roots. Moreover, IB is an appropriate field for multidisciplinary studies (Birkinshaw et al., 2011; Doz, 2011) such as this that bridges across institutional polycentricity, business strategy and societal culture. The main contribution is that where formal institutions are weak firms adapt because of forces exerted by informal institutions. Strategy adaptation of MNE subsidiaries in uncertain contexts such as emerging counties gives primacy to local management that understands host country’s rules of the game.
Moreover, the outcome of the research is a model that becomes a tool that facilitates communication between senior officers at the subsidiary and headquarters. It helps headquarters understand the environment where the subsidiary operates.
1.7. Limitations
The scope of this study resides in its country context. The country where the research is carried out is Argentina, a Spanish speaking country situated in South America. A Latin societal culture prevails which means that it is considerably distant from the Anglo culture. This means that the application of the results of this study is restricted to Argentina. Any application by analogy to similar national contexts is the user’s responsibility.
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Moreover the two MNE subsidiaries under study are of American and British origin have been considered rich and representative enough for theoretical sampling for the purpose of this study (Hatum & Pettigrew, 2010). On the other hand, they might be considered a limitation because of the small number of cases.
Contextual description is vital for understanding (Lee, 1999; Stake, 2005). On the other hand, proponents of generalisability and the quantitative approach would say that the scope of this thesis is limited; however it shows a reality in managerial perspective in International Management (IM) or IB that is richer than what could have been achieved through a quantitative approach.
Some readers will point out another limitation deriving from the lack of comparison with indigenous companies, but following Shi and Hoskisson (2012), no comparison with indigenous firms has been made as the author considers that local firms do not have similar and comparable characteristics to MNE subsidiaries that would have helped understand strategy adaptation to the host country.
An intrinsic characteristic of this study is its interpretivist and theory building nature which was developed under an inductive approach in the data gathering stage. This was the basis for the emergence of a theoretical conjecture and model (Ridder et al., 2014) but may lead to limitations to readers with a deductive perspective.
To some the fact that all informants belong to the management layers of the organisations may be a limitation, but this is justified in that senior managers and directors are the most able to provide solid information about polycentric and
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strategic facets. Blue collar workers and other members of lower level echelons were not interviewed as they do not manage enough and significant information in connection to polycentricity and strategy which are central to this study.
1.8. Connections with management practice
The connections of this research and its theoretical conjecture and model with management practice situated in specific situational environments is described in chapter 6 and 7, Local culture is present at the companies in the form of local managers, who help to reduce uncertainty and provide direction as they interact with Argentina’s imperfect formal institutions. The local management team is also helpful in finding shortcuts and firefighting when necessary. Local managers know how to deal with the ever present implicit and explicit circumstances. This thesis addresses these situations and provides a formal tool to interact with head office.
1.9. Thesis Structure
The structure of this dissertation follows a traditional layout and its content is shown in Table 1.2.
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Chapter 2
Business Argentine Context. This chapter provides an overview of the Argentine environment in the light of formal institutions such as political, economic and regulatory bodies. Prevailing management styles in Argentina are briefly described. Existing trends are displayed.
Chapter 3
Literature Review. An overview of High Context and Low Context perspectives is described. Background literature on Polycentricity and Institutional Polycentricity, Institutional Theory, Societal Culture, Business strategy and Miles and Snow's strategic types centred on the subsidiary are developed on the basis of the outcome of the literature review. The literature is synthesised in a proposed framework of departure.
Chapter 4
Research Methodology and Design. The qualitative approach under a social constructionist philosophical stance is followed and there is special interest in worldviews of organisational members. The Research Strategy and Research Designed are delineated. Semi-structured interviews are the selected technique for evidence collection while case study is the method. Cross-case analysis is later carried out. Theoretical Conjecture and model guidelines are depicted. Validity aspects are considered.
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Chapter 5
Data Analysis Two case studies: IBM Argentina and Nobleza Piccardo (BAT – subsidiary in Argentina) are examined as stand-alone entities on the themes emerged from the Framework of Departure (figure 3.3)
Chapter 6
Cross-Case analysis. Theoretical conjecture. An analysis of similarities and differences is made, followed by a discussion. From this discussion a theoretical conjecture and a model emerge. Validity of findings and relevance to practitioners are assessed.
Chapter 7
Conclusions and relevance to practitioners.Limitations and Future Research Opportunities. General conclusions are described and relevance to practitioners is brought in. The limitations of the thesis are discussed. Finally, thoughts connected to Future Research in the field are presented.
Table 1.2. Dissertation structure
1.10. Summary
After having introduced the study with the correspondent context, the explanation of the conceptual framework, the research question emerged from both aspects. A theoretical approach has been discussed, followed by the contribution to the body of knowledge. Finally limitations of the research have been considered and the structure of the thesis has been displayed.
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In the following chapter, a brief visit to the Argentine context is shown. An overview of the Argentine environment encompasses formal institutions such as political, economic and regulatory bodies. Finally some prevailing management styles in the country are briefly depicted.
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Chapter 2. Business Context in Argentina
2.1. Introduction
Argentina is an emerging economy with characteristics that make it particularly suited for this study. The purpose of this chapter is to give an overview of its workings and to provide insights into Argentina as a context for doing business. Over the years, the Argentine economy has displayed a pendulum behavior, swinging abruptly from one political extreme to another. Indeed, a comment published on February 13th, 2014 in The Economist, asserts: “In 1914 Argentina stood out as the
country of the future….Now Argentina is a wreck” (Micklethwait, 2014). This description offers an indication of the weaknesses of formal institutions; the fact confers greater relevance to informal institutions in the form of societal culture.
This chapter is divided into two sections. The first offers an overview of the general characteristics of Argentina and describes how institutions function. The second focuses on the prevailing management styles in Argentina.
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2.2. The institutions in Argentina
Argentina is located in the Southern tip of South America and the capital city is Buenos Aires. The official language is Spanish and the population in 2013 was 42,192,494. Current GDP is US$596,000 m (Argentina Country Report, 2013).
Argentines are a fusion of national and ethnic groups as waves of immigrants from European countries arrived in the late 19th and early 20th centuries (mainly from Italy and Spain). Argentina is a member of Mercosur, a regional customs union whose other members are Brazil, Uruguay, Paraguay and Venezuela. The currency is the Argentine Peso.
Argentina is a Federal Republic. The president is the head of the Executive branch, head of state and commander in chief of the armed forces. The president is elected for a four-year term and can be re-elected once for a consecutive term. The Legislative branch consists of a bicameral congress with a chamber of representatives and a senate. The Judicial branch is headed by the Supreme Court and includes a court system ruled by federal judges (EIU Argentina Country Report, 2012). This three-branch government structure is replicated in every province.
The Argentine institutional context was delineated by Peng and Khoury (2009) in relation to defining structures of IB strategy and they describe the Argentine political system in the 1950s and 1970s. An example was used to illustrate an extreme instance –citing Guillen, 2001- in which the political system needs to be taken into
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account in an international strategic assessment of the oil industry. Continuous changes in the rules lead to a pendulum type of government intervention, which affected the perception of risk by oil firms investing in Argentina. In 1955 the Argentine government cancelled international contracts signed by Peron in 1952, the previous president. In 1958, the next president signed new contracts, later invalidated in 1963 by a different president. In 1966, foreign oil firms were invited to return to Argentina, and were subsequently driven out in 1973 and invited to return again by the 1976 government (citing Guillen, 2001). This pendulum governmental behaviour has been a recurring trait over the years, and has not changed to this day. Companies that were encouraged to invest in Argentina in the 90s are today under attack by the current government, which has generated a very hostile environment against foreign investment, culminating in the expropriation of foreign companies, such as Repsol – YPF in 2012.
As in any other country, Argentina’s story is unique (The Economist, February 13th 2014). Argentina is formally a democracy, but it experiences a low level of institutional quality. In this respect, an interesting perspective was offered by Botana (2011) when he described different types of democracies in Latin America. According to Botana, there are two types of democracy that correspond to two types of state. There are republican democracies and democracies organised around the National Executive branch. The first category enjoys legitimacy arising from its electoral roots. These governments are based on principles, rights, guarantees and restrictions of a constitutional nature. A proper system of checks and balances among the Executive, Legislative and Judicial branches of government is the defining
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characteristic of this type of democracy. This description applies to countries such as Costa Rica, Chile and Uruguay.
The second category is ruled by a hegemonic executive branch. These authorities, albeit democratically elected, use their mandate to subordinate constitutional branches and guarantees to the presidential will. These regimes are based on a Caesarean tradition, which happens to have solid roots in Latin America. The author asserts that in the XIX Century there were presidents in the region that were really more like monarchs. The problem is that these monarchical elements did not necessarily evolve the same way as today’s modern constitutional monarchies. They are basically de facto monarchies which demand strong subordination of the legislative and judicial branches of government. These democracies are ruled by decrees, resolutions and executive orders, or laws imposed with little or no debate.
The present government in Argentina, led by Ms. Cristina Fernandez de Kirchner, clearly falls under the second category. During her current presidential term (20112015) she has shown a marked tendency towards monocentricity, nationalization of companies and a ‘closed doors’ policy towards the rest of the world. Monocentricity is a political system where power is concentrated in a few hands. This Argentine pendulum style also becomes evident when comparing the current administration with president Menem (1989-1999), who implemented open door policies and encouraged foreign investment. During Menem’s period, Hatum & Pettigrew (2006) detected flexibility and adaptation by organisations to the unpredictable and uncertain context prevailing in Argentina. The authors mention that Argentina was
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the largest recipient of foreign direct investment in Latin America during the period 1990-97; however, this was followed by political chaos following economic meltdown and international debt default in 2001, which resulted in the removal of president de la Rua.
In December 2001, the country entered into default, and in 2002 there was a major recession (GDP fell by 10.9%), the worst in the country’s history. This was the aftermath of the traumatic events of November/December 2001 and January 2002. During this period the country’s financial, political and social system imploded and caused total institutional meltdown. In the space of two months, Argentina saw the currency devalued by almost 300%, a democratically-elected president removed and five presidents taking power and resigning in the space of a week. This triggered the largest sovereign debt default in history, around USD 81 billion. The banking system collapsed and individual and corporate bank depositors suffered compulsory confiscation of their funds.
President Néstor Kirchner was democratically elected in 2003 to serve until 2007.
During Kirchner’s presidential term there was rapid economic recovery, when the economy grew at a rate in excess of 8% p.a. (the three engines of recovery were agriculture, industry and construction). In 2004, exports represented about 23% of GDP, up from 14% in 2002.
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Economists González Fraga and Lousteau (2005) highlight the importance of strategic planning for countries like Argentina, and the fact that regrettably it does not actually take place. Governments seek only shortcuts, such as the devaluation in 2002 that marked the end of the financial system as it stood at the time. Lack of planning leads to pendular behavior, which in turn generates uncertainty. Uncertainty leads to short-term horizons, further discoursing planning.
Historically Argentina is used to political disorder. The last coup d’état took place in 1976, which saw the military take over until 1983, when democracy was restored under president Alfonsín. His presidency ended in chaos and resignation because he was not able to control the financial and social crisis generated by hyperinflation. President Menem was elected 1989 and 1995. He led a process that implemented profound changes, moving from a regulated and highly protected economy to an open, free market liberal economy, where players were able to compete freely. Menem controlled inflation by means of a currency board, which lowered inflation from 5,000% p.a. in 1989 to a negligible 0.7% p.a. in 1997.
The current president, Ms. Fernandez de Kirchner was first elected for the period 2007-2011 to succeed her husband. In 2011 she was re-elected for a further period until 2015. According to the EIU Argentina country report (2012) Ms. Fernandez’ administration is deteriorating quickly as political stability worsens. This government
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is escalating its dependence on “heterodox interventionist policies implemented on ad
hoc basis�, which instead of solving structural problems make the whole situation worse. A political system based on clientelism or patronage prevails, which means that government furthers its interests through its ability to distribute political favours and federal funds to provincial governors and key pressure groups in order to secure support. In this regard, the sociologist Sebreli (2012) asserts that the country is moving towards a hegemonic party where Cristina Kirchner consolidates her neopopulist vision along similar lines as Hugo Chavez, the recently deceased president of Venezuela. Mid-term legislative elections took place in October 2013; and there will be a presidential election in 2015. The opposition has been weakened by the ruling government party, kirchnerismo, which has built a powerful epic discourse based on a solid ideological framework; this means that the opposition is not able to convey a coherent and convincing alternative vision. (Perfil newspaper, 23rd February 2013).
Regarding international relations, the government has repeatedly shown itself willing to incite disputes with other countries in order to pursue internal policy goals. The EIU 2012 report does not expect this situation to change; for example, with regards to Spain (Argentina’s largest FDI investor) and the rest of the EU. In the interim, the Argentine context continues to deteriorate as rules are broken and rights eroded. Economic growth shows a weaker trend for 2014-15 since essential problems linked to competitiveness remain ignored. Moreover, the combination of an insistence on heterodox and interventionist policies, sustained uncertainty over capital controls,
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foreign exchange and tariffs, legal and regulatory aspects, all these will have an impact on investment and consumer purchasing power.
The current government displays a marked tendency towards monocentricity. A political structure has been created by the central government where key communications and decisions are handed down ambiguously and with total disregard to glaring contradictions between speech and action. Implicit and unwritten rules and messages prevail, whereas explicit and written communications and instructions are not common. Uruguay’s president (2013), characterizes the current Argentine administration as difficult to understand, and the management of the relationship between the two countries as an almost impossible mission.
A remarkable step towards monocentricity was taken by Ms Fernandez when she announced moves against the only remaining independent branch of government, the judiciary. In her address to Congress opening the 2013 legislative year, the president further announced that she will challenge the authority of judges and the judicial branch and push for judges to be elected by popular vote.
2.3. Argentina. Prevailing management styles
Altschul et al. (2008) in the Globe Project assert that the management style in Argentina reflects Argentine economic history, culture and values. The Argentine economy has been traditionally based on agriculture and the extraction of natural resources (oil and mining). With a small internal market, the economy has always
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been dependent on uncertain international markets. Fluctuating international prices generate periods of great prosperity followed by hardship. Argentina’s industrial model was based on highly protected import substitution industrialization. Periodic economic and financial crises prevented capital accumulation and affected the willingness of capital providers to support long term investment. Thus industrial development depended heavily on state support, including protection from competitive imports. Financial uncertainty, lack of capital accumulation, protectionism, and a small internal market, all conspired against truly internationally competitive industrial performance. As a result of this lack of integration with international competitive markets, the Argentine management style shows many characteristics associated with traditional authoritarian models. This means that people show loyalty and commitment to individuals, not institutions. This encourages a rule breaking, pragmatic, rather than principled approach. When people need something done, they will look for a contact to speed things along; thus wellconnected people gain influence and prestige.
Power in Argentina, including political power, is often exercised in an arbitrary way. People express the wish to attain power in order to exact a kind of revenge and as a result often a confrontational style of leadership emerges. Argentine management acts in an autocratic way, displaying its power and requiring loyalty from reports (Janssens et al., 1995). Janssens et al. (1995) identify a paternalistic and autocratic style in Argentina (Cordova, 1984), which at the sames time is a highly collectivist country (Hofstede, 1980).
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A hierarchic business culture prevails in Argentina where people show uncritical respect for their bosses and asking for the opinion of lower levels is not appropriate (Online website Management in Argentine Context, 2013). Moreover, Argentina appears to be a low trust society as per Fukuyama (1995), which results in greater reliance on immediate and extended family, which in turn, leads to a prevalence of family businesses and extensive nepotism, as well as cross-nepotism. (Management in Argentine Context website, 2011).
2.4. Existing trends
The current government, after ten years in power, appears to be coming to the end of its cycle. The constitution prohibits Ms. Kirchner from being reelected again as there is no clear succession plan it is very lightly that the opposition candidate, Mauricio Macri, will be elected to the presidency in 2015. This would further confirm the continuity of the pendulum style political environment in Argentina as Mr. Macri is a right wing candidate diametrically opposed to Ms. Kirchner’s populist style. Once again companies will be faced with a totally different political economic and regulatory context, further confirming the importance of local management continuing subsidiary survival.
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2.5. Summary
A brief analysis of the Argentine context is presented, where country data is offered as well as a description of the structure of formal institutions (EIU Argentina Country Report, 2012). Furthermore an analysis of the Argentine political system in connection to IB strategy and the oil industry during 1950s and 1970s, is used to illustrate pendular behaviour (Peng and Koury, 2009) which has continued along the years, as for example, in the 1990s, when foreign investment was encouraged and welcomed as part of an “open door” trading policy. However, in the last decade there has been marked hostility towards foreign investment and a sharp tendency towards monocentricity, where power is increasingly centralized in very few high ranking government officials.
Botana (2011) asserts that Argentina is a nominally a democracy but enjoys a low level of institutional quality and belongs to a category ruled by a hegemonic executive branch. These kinds of democracies are basically de facto monarchies that demand total subordination of the legislative and judicial branches. In Argentina’s case, the judiciary is still ‘free’ to act, but finds itself on a collision course with the executive branch which accuses it of being ‘a threat to democracy’. This is why the president is pushing for the ‘democratization’ of the judiciary (March 2013) in order to have full control of the three branches of republican government.
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Finally, a brief review of the Argentine management style is made. A summary of some details of Globe Project’s (Altschul et al., 2008) analysis describes some historical and cultural attributes. Other characteristics of the local management style expressed by other sources are also quoted in order to consider different views. Moreover, Existing trends are displayed and confirm Argentina’s pendulum style.
The following chapter shows the literature review that is connected the Argentine context. Literature review encompasses Polycentricity, societal culture and business strategy items which are applied to this study.
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Chapter 3. Literature Review
3.1. Introduction
The previous chapter has focused on the description of the Argentine context, which is peculiar because of its pendulum–like conduct and its particular rules of the game. The purpose of this chapter is to examine the theory relevant addressing the research question and discussing its connection with the prevailing cultural context. Moreover theoretical arguments are raised and are more closely aligned to the Argentine context. Finally a synthesis of the assessment is depicted in a framework of departure.
The focus of the review is the literature encompassing adaptation of MNE subsidiaries to host country context. Polycentricity (Ostrom, 2005; Ostrom, 2010; Ostrom, 2011; McGinnis, 2011) – applied in a socio-political framework- and Institutional Polycentricity (Bartjargal et al. 2012; Xu & Hitt, 2012; Hitt et al. 2012) rooted in Polycentricity and developed for business issues are the underpinning framework. Polycentricity (Ostrom, 2005). This literature, represented by the Institutional Analysis and Development (IAD) framework (figure 3.1) as the overarching theoretical framework with a major impact on institutions influencing subsidiaries’ behaviour, supports the final framework arrived at in this dissertation. Moreover, considering that this study applies to international business matters, Institutional Polycentricity pertains to the consideration of host country environment within a high context (Child, 2000) perspective encompassing the worldview generated by national contexts.
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First, an overview of high context (Child, 2000), Polycentricity and Institutional Polycentricity, plus Institutional Theory and Societal Culture, is briefly outlined. Second, the concept of high context and its contrast with low context (Child, 2000) are briefly described, as are Polycentricity and Institutional Polycentricity. In this regard, institutions take different forms and because formal institutions are fragile in Argentina, the focus falls firmly upon informal institutions, in particular culture. Another core concept in this research, institutional distance is visited. Furthermore, in section 3.4, the notion of Culture (Societal Culture) is described in the light of diverse authors such as Kluckhohn and Strodtbeck (1961), Perlmutter(1969), Hofstede (1991, 2001), Hofstede & Bond (1988), Trompenaars & Hampden-Turner (1993, 1998, 2000), and lately, Globe Project (2004, 2008.) Later, the three selected cultural dimensions, uncertainty avoidance, power distance and future orientation, which are central to this study, are described.
Following those general concepts, this review of the literature will focus on the organisation, which in this work refers to the subsidiary under study or the action arena in Ostrom terms. The subsidiary’s strategy is examined in the light of Miles and Snow’s (1978, 2003) strategic types that provides a framework for the adaptation processes. These strategic types are analysed in terms of three societal culture dimensions (Globe Project 2004, 2008): future orientation, power distance and uncertainty avoidance, which show a close relationship with Miles and Snow’s strategic types. The overall aim is to analyse the subsidiary’s adaptation to host country context through the strategic choices made by the organisations, which embedded in the local environment.
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Four strategic types –defender, prospector, analyzer and reactor are briefly described by Miles and Snow. In addition two other constructs arising out of the subsidiary’s endeavour in the host country, liabilities of foreignness and advantages of foreignness (Shi and Hoskisson, 2012) are also visited.
The final section, Outcome of the literature, carries out a synthesis of the literature and offers interpretation of diverse concepts which lead to a proposed framework of analysis (figure 3.3), which is a variation of Ostrom’s Institutional Analysis and Development (IAD) framework and is applied in this research to two MNE subsidiaries of American and British origin operating in Argentina,.
3.2. Overview of High Context perspectives, Polycentricity and Institutional Theory
This research is conducted under a high context perspective (Child 2000) in the International Business (IB) field as an overarching constituent applicable to MNEs. As mentioned above, Argentina offers a particular set where local business aspects differ radically from developed countries. High context perspectives support the notion that subsidiaries need to adjust to their local environment because there is a need to gain embeddedness and legitimacy, and this applies to the analysis made in this study. Thus, high context perspectives consider local conditions to be influential and relevant to the concepts being researched. High context perspectives consider theories like Institutional Theory and Cultural Theory. Under Institutional Theory, Peng (2009) describes institutions as being formal or informal, and he posits that
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culture is an informal institution. A high context perspective is appropriate because local adaptation plays a key role for MNEs in their strategy in connection to subsidiaries (Tallman and Yip, 2009; Xu and Hitt, 2012). High context theories recognise primacy of national cultures or national institutional systems when reporting for national differences in organisations, while low context theories do not grant national context any significance over the configuration of universals. Thus the description of Argentine business context described in the previous chapter offers an ideal set of analysis for a high context perspective.
Consequently this study focuses on Polycentricity as an encompassing frame of the socio-political aspect of a country: in this case, Argentina. Polycentricity suggests that institutions at multiple levels (i.e. national, state/provincial and local authority) are multi-centred systems, whereas monocentric systems have single-centred hierarchies (McGinnis, 2011; Ostrom, 2011; Ostrom 2010; Ostrom 2005; Polanyi, 1951). Institutional Polycentricity or Polycentrism reveals that a country’s institutional system is made up of several diverse institutions of multiple types; these institutions develop together and their influences are incorporated by the MNE (Bartjargal et al. 2012; Xu & Hitt, 2012; Hitt et al. 2012). Institutional Polycentricity thus requires a high context approach because nations have their own rationale in terms of social, political and economic institutions, as it is their rules that prevail.
There is evidence that in the past decade institutional theory has dominated the field of international business research and there are indications that the trend is likely to continue (Tihanyi et al., 2012). In this study institutional theory is applicable to MNE subsidiaries operating in an emerging country such as Argentina. There is an
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increasing need for managers and companies to understand local regulations, norms and customs in diverse countries (Tihanyi et al., 2012). Tihanyi et al. (2012) also detect a growing trend towards greater diversity in the international business research generated by leading universities and in papers submitted and published across different countries. . Argentina appears to have a monocentric political system, with weak institutions that seem to resemble Russia’s “authoritarian state with semi-democratic institutions” (Bartjargal et al., 2011). As formal institutions (regulatory, economic and political) are weak, informal institutions, in this case culture, are relatively more relevant to the need of companies to adapt to the local environment. In order to operate in different environments, the subsidiaries need to know the ‘rules of the game’ in their host country context. This research concentrates mainly on informal institutions in the form of societal culture, which becomes increasingly influential as it fills in for institutional weaknesses and voids (Bartjargal et al. 2012; Xu & Hitt, 2012). Moreover, the concept of institutional distance between MNE’s home and host country is analysed as the distance involved is significant.
With regards to societal culture, several concepts and authors are examined. The cultural dimensions adopted for this study emerged from, GLOBE (2004, 2008). These are three, Uncertainty Avoidance (UAI), Power Distance (PDI) and Future Orientation (FO). These dimensions were chosen because they are linked to Miles
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and Snow’s business model and relate to the strategic problems described in it and to how these parameters fit in with the business strategy model in terms of adaptation.
MNE subsidiaries are in turn the action arena according to Ostrom (2005) which McGinnis (2011) considers the ‘black box’. Various notions about subsidiaries are visited including concepts such as liabilities and advantages of foreignness. Business level strategy was developed by some relevant authors such as Porter (1985), complemented by a description of Miles & Snow’s strategic types. As the fundamental notion of adaptation is central to this research, it is developed in the study and becomes, to a great measure, the heart of the analysis.
3.3. High and Low Context Perspectives
Theoretical perspectives of cross-national organisation studies are mainly categorised into two theoretical perspectives which Child (2000) calls high context and low context. With regards to the origin of the terms low and high context, they were coined by Edward T. Hall (1976) as a way to distinguish between different cultural orientations. It was also used by Hall and Hall (1990) to make a distinction between linguistic and other forms of cultural differences in terms of communication. On the one hand, Hall (1990) contends that high context cultures are those in which people are profoundly involved with and sensitive to each other, sharing meanings at a tacit and nonverbal level, while Child (2000) applies high context perspectives to those that are sensitive to national contexts including specificities of language and meaning. On the other hand, for Hall (1990), low context applies to explicit and clear
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communication while Child (2000) applied this term to theories linking it to crossnational organisations that do not grant national context any significance and favour the configuration of universals. This universalism arises from pervasive economic and technological forces driven by human needs and desires. An extension of this perspective predicts increasing convergence between modes of organisation as countries develop industrial and post-industrial economies with similar political systems and personal lifestyles. This trend towards convergence seems to have accelerated under globalization in the twentieth’s century. Low context perspectives tend to minimize the impact of national individuality. These views hold a strong supposition of eventual convergence in management and organisations as countries are gravitating in greater numbers towards an increasingly efficient global economy and are subject to the impact of technological advances. Within this perspective, new forms of organisation are sought in a bid to reconcile efficiency with human needs more effectively than hitherto.
The high context theory has been selected for this study because ‘high context’ theories emphasise how vital particular circumstances are. High context grants primacy to national cultures or national institutional systems when accounting for national dissimilarities in organisations. They consider cultural and institutional matters as distinctive in terms of national contexts. Child (2000) contends that within the high context perspective, cultural theory applied to management and organisations is well represented by the two best-known cultural perspectives, Hofstede (1980a, 1991) and Trompenaars (1993). Both authors agree on the following basic assumptions: “Cultural values are deep-seated and enduring. They vary systematically between different societies. They condition what is acceptable
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organisational practice. And they predict inter-organisational differences in economic performance (GDP)� (p.37). Institutional theory should also be considered within the high context perspective. This implies that nations have their own logic as social and economic organisations, and that theories claiming universal application may in fact ignore their own specific institutional origins. High context perspectives recognise that nations have their own logic and mindset. Argentina as host country for MNE subsidiaries of American and British origin generates an environment where low context universal rationale does not fit in. This is because of the poor quality formal institutions in Argentina means that informal institutions, particularly culture, become more relevant in consequence.
3.4 Introduction to Polycentricity 3.4.1 Concept Polycentricity is a concept defined “as a structural feature of social systems of many decision centres having limited and autonomous prerogatives and operating under an overarching set of rules� (Aligica and Tarko 2012, p. 237). This tentative notion was initially visualized by Michael Polanyi (1951) who considered the term spontaneous as a synonym to polycentric. In the 1960s, Elinor and Vincent Ostrom applied the notion and provided empirical material. Later, polycentricity was widely developed and updated by Ostrom (2005, 2009, 2011). The polycentricity idea encompasses the existence of multiple decision making centres within an accepted set of rules. This principle considers a non-hierarchical, institutional and cultural framework where decision centres with different objectives and values coexist. This in turn, makes healthy competition possible and allows the interaction of complementary ideas and
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methods. It can be applied to democracies and or other complex systems where multiple decision making centres and governance function simultaneously with diverse values, interests and points of view (Aligica and Tarko, 2012; McGinnis, 2011; Ostrom, 2011; Ostrom, 2005). McGuinnis (2003) asserts that “polycentricity nicely conveys an image of a network of overlapping and interlinked arenas of choice� (p. 4). In turn, Argentina is the national context where polycentricity is applied. In 2005 Ostrom expressed the concepts of polycentricity in a framework called the Institutional Analysis and Development (IAD) framework. IAD is a multitier conceptual map; the simplest schematic representation of the action arena is shown in the figure below, which needs to be broken down into participants and action situation. McGinnis (2011) asserts that the IAD framework summarizes a collective effort of the intellectual community to understand how institutions operate and change over time.
Figure 3.1. The focal level of analysis and action arena. Borrowed from Ostrom, (2005) p.13
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The IAD framework is a nested set of theoretical concepts, which range from the most general to the most detailed types of assumptions made by the analyst. Frameworks organise diagnostic and prescriptive enquiry. The development and use of theories enable the analyst to specify which components of a framework are relevant for certain kinds of questions and to make broad working assumptions about these elements. Therefore, theories focus on parts of a framework and make specific assumptions that are needed for an analyst to diagnose a phenomenon, explain its processes, and predict outcomes. To conduct empirical research, a scholar needs to select one or more theories to generate predictions about expected patterns of relationships. Many theories are compatible with the IAD framework (Ostrom, 2005; Ostrom, 2011).
Multiple theories are usually compatible with one framework. The development and use of models entails making accurate assumptions about a limited set of variables and parameters to obtain explanations of the results of, for example, using a specific theory.
Ostrom (2005) refers to society as a system in which different players are composed of parts which in turn means that above every single individual there are structures made up of multiple individuals (such as families, firms, industries and nations) which are in turn parts of larger structures. The whole system at one level is part of a system at another level. Ostrom (2005) cites Arthur Koestler (1973) who refers to nested subassemblies, called holons, which are part of whole units in a complex adaptive system. Ostrom focuses on a particular holon, the action arena, where two holons take part: participants and action situation, which interact as they are affected
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by exogenous variables and produce outcomes that in turn, affect participants and the action situation. Exogenous factors affect the structure of the action arena so the contextual factors become the inputs that set the context where the action arena develops.
McGinnis (2011) follows Ostrom (2010) when she uses the terms action arena and action situation indistinctively, but originally for Ostrom (2005) the action arena contained the action situation. Action situations are social spaces where individuals interact, solve problems, and dominate one another, among other activities. Action arena is the unit of analysis where participants and the action situation interact. For McGinnis (2011), the action arena is the “black box” in which policy choices are made, participants are those that evaluate actions and outcomes, and action situation is the core component of IAD framework.
Ostrom (2005) emphasizes the idea that people’s implicit knowledge of the expected
do’s and don’ts in various situations is extensive. It is important to know that rules do not need to be written; nor do they need to arise from legal process. Institutional rules are often crafted by individuals to change the structure of repetitive situations that they themselves face in an attempt to improve the outcomes they achieve.
The IAD framework (Ostrom, 2005) shown in figure 3.1 is the foundation of the Framework of Departure (figure 3.3) that links concepts visited along the literature review and becomes the framework of departure for the empirical component of this study. Ostrom’s terms have been adopted such as action arena for the subsidiary
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organisation which is the focus of this study; exogenous variables encapsulates formal institutions – political, economic and regulatory - and informal institutions –
in the form of societal culture; and the outcome for the MNE subsidiary’s approach to strategic choice in the environment which leads to adaptation to the context.
3.4.1.1. Polycentricity critique Polycentricity is a comprehensive framework that belongs to the socio-political disciplines; it lacks some depth in its analysis of formal institutions, such as political, economic and regulatory, which are only implicitly included in what she refers to as formal institutions. Moreover, regarding informal institutions Ostrom mentions culture but she does not develop a sound and clear analysis of the issue. Ostrom's framework is broad and does not go into institutional details in depth. Similarly, when Ostrom mentions culture she defines it under the heading of informal institutions, but does not pursue the line of argument in any depth. However, this framework is found to be a good starting point for this research. It is well suited to a country like Argentina because it describes accurately the institutional weaknesses that give informal institutions (in the form of culture) such preponderance.
3.4.2. Institutional Polycentricity
Some authors (Batjargal B., Hitt M. A., Tsui A.S., Arregle J-L., Webb J. W. and Miller T. et al. 2012; Hitt, 2012; Hitt M. A., Sirmon D.G., Li Y., Ghobadian A. and Arregle J-L., 2011; Xu & Hitt, 2012) draw upon the concept of polycentricity and
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adapt the notion to institutional polycentricity, concept applied to business matters in different environments. In this regard, Batjargal el al. (2012) adopt and use the term “institutional polycentrism” - which is a theoretical concept- as equivalent and indistinct from “institutional polycentricity” – which is an attribute of institutions. With regards to polycentrism, Perlmutter (1969) applied the notion to multiple centres belonging to a multinational corporation. McGinnis (2011) characterizes institutions as “human-constructed constraints or opportunities within which individual choices take place and which shape the consequences of their choices” (p. 170) while Bartjargal et al. (2012) cite Scott (2001) and affirm that institutions “are composed of codified formal rules and un-codified informal norms that operate at global, regional, national, provincial, and local levels of governance” (p. 6). However, Ostrom (2000) had stated that there is little agreement about the meaning of ‘institution’, as multiple meanings exist. Different institutional contexts can elicit quite different types of behaviour from the same individual or organisation and it is important to note that no organisation stands completely on its own; instead, they are interlinked in complex networks of meaning. (McGinnis.2003). In this regard, Holmes R. M. Jr., Miller T., Hitt M. A. & Paz Salmador M. (2011) contend that institutional environments are multidimensional, complex and polycentric; and the various institutions are interdependent (Ostrom, 2005; Scott, 1995).
Hitt et al. (2012) produce research that supports the effects of institutional polycentricity -multiplex2 and multilevel institutions-, in turn formal national
2
Hitt et al. (2012) refer to the combined multi-type institutions as multiplex.
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institutions and informal industry institutions influence the way in which resources are managed to create value by the firms. Institutional polycentricity refers to multiple institutional rules and norms that originate from and are enforced by numerous centres of power. These authors also mention that there are formal institutions at national level such as regulatory, political and economic institutions and informal institutions such as culture. Formal and informal institutions also exist at sub-national level, which includes informal industry institutions (such as industry best practices), and formal state/province institutions. Hitt (2012) also supports the idea that institutions are polycentric and that their effects are complex.
All rules are a result of implicit or explicit efforts to achieve order and predictability among human beings (Ostrom, 2011). An example is provided by Hitt et al. (2012) when they mention that national institutions represent a super-ordinate influence on industry environments within a country. These institutions provide the “rules of the game” within which economic entities and individuals must operate. As such, they shape the opportunities available, place constraints on behaviours and thus influence the consequences of the selections made (McGinnis, 2011).
Institutions thus establish the “rules of the game” through prescribed (formal) rules and norms (Holmes et al., 2011) or as Peng & Khoury (2009) cite North (1990), institutions are equivalent to rules of the game around the world and are a major driver in IB strategy. These formal rules and norms influence the development and practice of informal rules and norms and internal firm processes that directly affect strategic choices (Hitt et al., 2012). In their study about Latin America, NichollsNixon C. L., Davila Castilla J. A., Sánchez García J. & Rivera Pesquera M., (2011)
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assert that understanding the context is vital as it influences the “rules of the game” which thereby impact the way businesses operate (Brutton, Ahlstrom & Puky, 2009). Xu & Hitt (2012) mention in their study about emergent countries that MNCs operating in developed environments also need to learn the “rules of the game” and adapt to host country environments. Argentina is an emergent country whose rules of the game are not easily understood by foreigners due to the implicit nature of many of its demands.
3.5. Institutional Theory
As previously mentioned, Tihanyi L. et al. (2012) contend that Institutional Theory has been used incrementally by IB and management researchers in order to explain MNE strategies and behaviour in the past decade. The link between institutional theory and MNEs underscores the unique institutional complexity that this type of organisations face and offers different opportunities for development of the theory as MNEs tackle a myriad of conflicting institutional pressures and the organisations “experience pressure to adopt local practices and become isomorphic with the local institutional context” (Kostova & Roth, 2002, p. 215). Kostova & Roth (2002) also refer to the concept of institutional duality when talking of MNE’s subsidiaries and host countries with particular institutional blueprints specific for those domains. The result is translated into the subsidiary facing two different sets of isomorphic pressures; one set belongs to the host country and the other to the mandate of the MNE itself. Thus institutional duality is connected to this study as the concept also analyses multinational offices that operate in a host country but belong to another corporate nationality. Peng (2002) coined the term ‘institution-based view’, which
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encompasses ‘institutional theory’, which was applied to the sociological side of institutional theory, whose main advocates were DiMaggio and Powell (1983), Meyer and Rowan (1977) and Scott (1995).
3.5.1. Types of institutions
The idea that ‘institutions matter’ is as old as the study of economics but the recent emerging interest in the subject is mostly linked to the richness provided by institutions as ‘background’ or environment in IB research. More recently there has been an appreciation that institutions influence the resources at the disposal of an organisation. This realisation is particularly applicable to IB research nowadays as the discipline increasingly deals with competitive situations in emerging economies, which are governed by formal and informal institutional frameworks that are very different from those in developed countries (Peng & Khoury, 2009).
International Business operates in complex and dissimilar environments which are made up of three types of formal institutions, commonly ‘state-linked’, significant to executives: political, economic and regulatory institutions. These institutions are principally enacted by governments who implement their authority and establish rules and control in a society and become critical for managers operating in International Business. Informal institutions, represented by the concept of culture, play a key role (Holmes et al., 2011; Peng & Khoury, 2009)). Informal institutions also exist at the sub-national level, including informal industry institutions (e.g., industry standards) and formal state/province institutions. Formal national multiplex institutions and industry attributes reflecting informal institutions (norms of
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behaviour) affect firms’ strategic resource orchestration activities that in turn have a critical influence on firm performance (Hitt et al., 2012). Both formal institutions and informal institutions (embodied in the concept of culture) are described below.
First, formal institutions are structures with codified and explicit rules and standards that shape interaction among members in a society (North, 1990 cited by Holmes et al., 2011). These institutions encourage order and stability by supplying authoritative guidelines for behaviour and allowing the formation of expectations about conduct (Scott, 1995). Formal institutions provide solutions to problems in a society. The solutions are provided by rules and standards that specify behavioural sets of action of individuals in society, who in turn conform to these rules and standards that are taken for granted and which everyone in society recognizes and accepts as formal institutions (Witt and Redding, 2009).
Political institutions (Hillman & Keim, 1995) are rules and standards instituted by governments that define the type of political process, determine who the participants are with what rights, and include how power is distributed within the government such as between legislation and executive branches. The resulting political institutions represent the rules and standards through which individuals and governments establish new formal institutions and adjust existing ones (Xu & Hitt, 2012). Holmes et al. (2011) assert that political institutions vary from autocratic institutions, where power is concentrated in a few hands and other participants are discouraged, to democratic institutions that encourage active citizen participation and distribute power among many (Ostrom, 2005; Ostrom, 2011).
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Economic institutions involve availability and management of financial resources, which are displayed in a country’s monetary and fiscal policies; Macroeconomics was born as a separate discipline in the 1940s in response to the General Depression (Lucas 2003). With regards to emergent economies, Hitt (2012) contends that weak economic institutions can generate illiquid markets and shortages of capital. Holmes et al. (2011) link this institution to future orientation and assert that accumulated capital provides a source of investment in long-term opportunities, which in turn, may influence both demand and supply of capital, thus shaping economic institutions.
Regulatory institutions establish rules that govern the activities of diverse organisations operating in a country, which in turn, provide standardized practices reducing uncertainty. They enact and protect property rights and exercise constraints on foreign companies. Regulatory institutions are a significant responsibility for governments as they regulate domestic and foreign firms operating in a country. Regulatory institutions institute rules to reduce uncertainty for operating companies by standardizing practices and requiring compliance. Though the content and scope of regulations differ, they provide codes of societal expectations and inclinations regarding the autonomy and power of organisations (Holmes et al., 2011; Scott, 1995).
Secondly, informal institutions are linked to formal institutions. Peng & Khoury (2009) assert that informal constraints appear to diminish uncertainty and supply guidance to managers when formal constraints are incomplete, weak or absent. Holmes et al. (2011) emphasize the role of informal institutions embodied in the
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concept of culture. Ostrom (2005) refers to the term culture as frequently applied to the values shared within a community: Culture affects the mental models that participants in a situation may share. If the participants in a situation come from many different cultures, speak different languages, and are distrustful of one another, the costs of developing and maintaining effective rules are substantially increased.
Scott (2005) considers informal institutions as lasting systems of shared meanings and collective understandings that reflect a socially constructed reality that provide shape to cohesion and coordination among people in a society. It is important to note that these concepts are not codified. Peng & Khoury (2009) stress that institutions depicted as informal can take the form of culture, societal activities and ethics underpinned by cognitive and normative pillars. In this regard, strategic activities can be affected by the normative pillar to the extent that strategies intrinsically relate to informal institutions in the form of societal norms (Peng et al., 2008). Strategic behaviour can also be influenced by cognitive pillars that include taken-for-granted values and shared beliefs that can be incorporated into organisation level decisions (Matthews, 2006).
Culture is one of the most relevant informal institutions as it is long-lasting and stable, showing slow incremental change over time (Hitt, 2012, Scott, 1995). Holmes et al. (2011) describe culture as tacitly understood by societal members, but its knowledge is obtained through socialization. Culture represents non-codified standards and shared values and reflects informal country institutions; it embodies societal members’ values and norms by stating which actions are acceptable and considered ethical and desirable (North, 1990; Peng et al., 2008). . Understanding the
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logic and rationale underlying the solutions provided by societal members equals understanding formal institutions (Scott, 1995); in turn, this logic and rationale are personalized in informal societal institutions (North, 1990). Some scholars contend that a driving force is required for societal culture to maintain and develop formal institutions (Redding, 2005).
Culture provides shape to how citizens in a country view the world and helps interpret others’ explanations, and thus cooperates to form the basis for the development of formal institutions which, in the end, are the explicit expression of the culture (Chui et al., 2002; Redding, 2005). Viewed in this way, culture leads to those systematic and long-lasting differences between countries (Hofstede 1980, 2001; GLOBE Project 2004, 2008). With respect to IB, the existence of legitimate and distinguished institutions to define business behaviour is vital for long-term wealth formation (Kostova & Zaheer, 1999). Institutions provide, in turn, both limitations and opportunities (Oliver, 1997).
The overall balance between formal and informal institutions may fluctuate across nations and time. Culture is frequently cited as an example of an informal institution (cites Hofstede et al., 2002; Redding, 2005; Hofstede, 2007) that may inform strategic decisions when formal institutions are absent (Sing, 2007; Peng et al., 2008; Peng and Khoury, 2009).
The conclusion reached in this section relates to the connection between formal and informal institutions as the object of study in this research. Formal institutions, mainly administered by governments, enforce their authority and control by enacting
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the rules of the game. Formal institutions take the form of political, economic and regulatory institutions. However, informal institutions embodied in the concept of societal or national culture represents a local mindset with non-codified standards and values. Considered from the perspective of the IB field, these institutions are analysed in the host country environment, where subsidiaries operate and become part of a complex and different context from their headquarters’ environment. This involves a significant institutional distance between parent company and subsidiary, which develops activities in a considerable dissimilar environment. A similar concept was studied by Kostova & Roth (2002) when they coined the term institutional duality when examining MNC subsidiaries and host countries practices with institutional blueprints specific for those domains. This institutional distance, sometimes difficult to understand for officers at headquarters, underpins this study, which intends to bring together these institutional environmental aspects that affect a subsidiary’s strategic implementation.
3.5.2. Institutional Distance
Xu & Hitt (2012) assert that autocratic political institutions reduce instability and unpredictability in the institutional context in some emerging countries, where policies are subject to the vagaries of a small group of individuals which in turn, create institutional voids, because monitoring controls are weak. On the other hand, in developed countries, democratic political institutions supply opportunities to influence government officials by means of interest groups, lobbying and elections. In less developed countries with institutional weaknesses and voids, societal culture and informal means -such as networks- become increasingly influential as they fill an
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existing gap to influence political institutions (Bartjargal et al. 2012; Hitt, 2012; Holmes et al., 2011; Xu & Hitt, 2012). Therefore, informal institutions become substitutes for weak and inefficient formal institutions, which in turn, lead to multiple centres that create rules and generate conflict. These conditions produce uncertainty and ambiguity (Hitt, 2012; Ostrom, 2005).
Institutional distance between home and host country is a concept that takes into account the dissimilarity between both ends (Xu & Shenkar, 2002) and suggests that the larger the institutional distance, the more difficult it is to obtain legitimacy in the host country (Xu and Hitt, 2012). The distance between developed and emerging countries in terms of political institutions suggests that there should be continuous learning by the MNE.
MNE background literature shows a growing appreciation of the institutional context and patterns about how MNEs respond to different contexts (Xu & Shenkar, 2002). Adaptation is required which leads to the concept of institutional embeddedness defined by Xu and Hitt (2012) “as an institutional adaptive state through which MNEs obtain legitimacy in the host country environment� (p. 162).
Thus, the selected host country environment, an emergent nation such as Argentina, falls into Xu & Hitt (2012) category of an emergent country with autocratic institutions, where currently a small group led by President Cristina Fernandez de Kirchner is in power and antennae of control reach far deeper into Argentine society than in most democratic nations. An additional ingredient is that Argentine voters are motivated more by their economic circumstances than by principles (Fidanza E.,
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2014). This means that, consistent with Argentina’s pendulum style, in the future we can expect the emergence of a radically different approach to politics, starting virtually from scratch, implementing diametrically opposed policies rather than continuing with the existing course of action. Therefore, as formal institutions are weak, business players need to understand local national culture that in many ways becomes a substitute for non-existent or inefficient formal institutions (Ostrom, 2005).
Given that the parent companies of the MNE subsidiaries under analysis are part of a radically different institutional style in their home countries, the UK and the United States, institutional distances are significant. However, in both cases they have obtained remarkable legitimacy and embeddedness in the local culture after almost one century in which they have not only survived but indeed thrived.
3.6. Societal Culture 3.6.1. Overview
Cultural researchers who analyse the effects of diverse national cultures in business such as Hofstede (1991, 2001), Hofstede & Bond (1988), Trompenaars & HampdenTurner (1993, 1998, 2000) and lately, Globe Project (2004, 2008) analyse the implications of societal culture in which companies operate.
Different societal cultures have an impact on MNEs operating in diverse geographical contexts which must adapt their strategic perspective to different countries (Tallman and Yip, 2009). Graham (2009) asserts that cultural diversity can
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encourage cultural creativeness in companies (Watson et al., 1993) but, that it is difficult to manage because cultural differences are frequently hidden and difficult to quantify. Graham (2009) shows that “…, cultural differences are often not obvious and associated problems are neither easily diagnosed nor corrected” (p.592, 593). These views show the importance of subsidiaries adapting to diverse local mindsets in order to operate successfully.
The study of societal or national cultures started in the 1960s by anthropologists such as Hall (1960, 1989, 1992), Hall & Hall (1990) and Kluckhohn and Strodtbeck (1961). Perlmutter (1969) is one of the most relevant authors cited in connection with early studies of cultural matters in MNEs. Later, authors like Hofstede (1980, 1991, 2001) and his traditional dimensions became a relevant contribution. A different approach is taken by Hampden-Turner and Trompenaars (1993, 1998, 2000) as they suggest that culture is the way in which a group of people solves problems and reconciles dilemmas.
In more recent times the Globe Project is highly relevant as a group of 160 scholars around the world collected qualitative data in sixty-two countries for research published in 2004 (House et al., 2004). The constructs they focus on are culture, organisational values and practices, and leadership.
In Leung’s foreword of the Globe Project Qualitative Study in 25 out of the 61 countries (2008), the author criticises the concept of “etic (culture-general) research for identifying pan-cultural constructs and dimensions in their high level of abstraction and its neglect of subtle, but important local variations and nuances
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(Morris et al., 1999)� (p. XV). Leung thinks that the remedy to the etic approach is to incorporate the emic (culture-specific) notion, which was done in this second edition of the Globe Qualitative Study (2008). It resulted in the incorporation of in-depth studies with a qualitative perspective that showed the richness of culture specific findings. This suggests that what works in one culture may not work in another. In turn, this is the case for this study subject which concentrates on the relationship of different societal cultures and their effect on business liason of subsidiaries operating in Argentina and parent company.
In both GLOBE studies (quantitative and qualitative) of 62 Societies the researchers define culture “as shared motives, values, beliefs, identities, and interpretations or meanings of significant events that result from common experiences of members of collectives and are transmitted across age generations� (p.15). These psychological attributes are applicable at societal and organisational levels (House et al., 2004). There is no universal definition of culture agreed upon by all social scientists, but most agree that culture is a useful concept. If culture is not taken into account, managers, executives and companies as overall players might experience pain. Graham (2009) provides some limitations to the use of culture on a national or societal basis. First, countries or nations are diverse and have subcultures, such as India, for example, that includes fourteen official languages in the subcontinent. Despite this obvious limitation, the use of nation as a proxy is a useful measure. A second limitation is linked to what extent this concept of culture promotes stereotypes. For this reason, researchers need to be aware of generalising the findings and thinking that everyone behaves the same way. Thirdly, despite these boundaries, culture has proven to be a useful concept, as the knowledge of employees and
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business partners’ cultural backgrounds help business people and managers to understand values and behaviours on the one hand, and predict relationships on the other, in order to do a better job. Finally, a reflection linking the above cited authors with the current study, which follows an ‘emic’ approach (culture specific) in a specific country (Argentina) where local vicissitudes are not easy to handle.
This study adheres to Graham (2009) third point above and accepts that, despite the boundaries, culture has proved to be a useful concept. The awareness of employees and business partners’ cultural backgrounds helps business people and managers to understand their mindset and construct relationships leading to improved business performance.
3.6.2 Selected Cultural Dimensions
In this section the three dimensions of culture selected for the study are reviewed. The three dimensions are Uncertainty Avoidance (Hofstede 2001; Globe Project Study 2004, 2008), Power Distance (Hofstede 2001; Globe Project Study 2004, 2008) and Future Orientation (Globe Project 2004, 2008 based on Kluckhohn and Strodtbeck, 1961). The rationale for the choice of these dimensions is connected to Miles and Snow’s strategic types and the intimate relationship they have with the model as they are considered from a strategic perspective. The three dimensions detected intend to link societal culture parameters and business strategy resulting in a cultural view of the existing strategic types. In this regard, Miles and Snow do not consider the importance of culture in their study. This relationship is described below.
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Uncertainty avoidance is a concept coined by Cyert and March (1963) that was later adopted by Hofstede (1980, 2001) and the Globe Project (2004, 2008) as a cultural dimension while on the other hand, it was also adopted by Miles and Snow (1978, 2003) in their strategic types study. While culture researchers connect this dimension to tolerance for ambiguous situations, Miles and Snow borrowed the term from Cyert and March, as a fact that occurs in organisations where procedures need to be executed in order to control the effects.
Power distance appears to have its origins in Mulder (1977) who described the concept as a degree of inequality between two individuals. It was later adopted and given prominence by Hofstede and Globe Project. The connection with Miles and Snow is related to the existence of a dominant coalition in every organisation and the way it interacts with other players within the firm.
The origin of Future orientation’s goes back to Kluckhohn and Strodtbeck (1961) and was later borrowed by the Globe Project (2004, 2008), which considers three categories in a temporal structure; Past, Present and Future. Ashkanasy et al. (2004) developed this chapter in Globe and assert that future management is fundamental in organisations. Miles and Snow also consider this aspect of managing the short and long term as being critical in every organisational type.
➢ 3.6.2.1. Uncertainty Avoidance
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The Globe study (2004, 2008) researchers De Luque and Javidan contend that Uncertainty Avoidance describes the extent to which ambiguous situations are considered threatening and thus rules and order are preferred, as uncertainty is not tolerated in society. This dimension is applicable at individual, organisational and societal levels. The notion of Uncertainty Avoidance has been examined in depth by the Globe study at organisational and societal levels working on a sample of middle managers.
As mentioned above, the concept was originally described by Cyert and March (1963) as a phenomenon that occurs in organisations. They coined the term Uncertainty Avoidance as an organisational phenomenon, which became one of the major four concepts in the behavioural theory of the firm, namely quasi conflict resolution, uncertainty avoidance, problematic search and organisational learning. These variables seemed, to the authors, “fundamental to an understanding of the decision-making process in a modern, large-scale business organisation” (1992, p. 174). Cyert and March argued that organisations implement procedures that minimize the need to predict uncertain events in the future. Cyert and March in their second edition (1992) define uncertainty as “a feature of organisational decision making with which organisations must live. In the case of the business firm, there are uncertainties with respect to the behaviour of the market, the deliveries of suppliers, the attitudes of suppliers, the behaviour of competitors, the future actions of governmental agencies, and so on” (p. 166). Based on this uncertainty, modern decision making theory has been concerned with decision making itself under risk and uncertainty. On the other hand, Solutions to certain problems these situations are sought by finding tools that promise certainty, such as expected value or by applying
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rules, such as those provided by game theory, that allow people to coexist with uncertainty.
Hofstede (2001) cites Cyert and March (1963) who argue that organisations avoid uncertainty within their environments in two ways. First, “they avoid the requirement that they correctly anticipate events in the distant future by using decision rules emphasizing short-run reaction to short-run feedback rather than anticipation of long run uncertain events. They solve pressing problems rather than develop long-run strategies. Second, they avoid the requirement that they anticipate future reactions of other parts of their environment by arranging a negotiated environment. They impose plans, standard operating procedures, industry tradition, and uncertainty absorbing contracts on that situation by avoiding planning where plans depend on prediction of uncertain future events and by emphasizing planning where the plans can be made self-confirming by some control device� (p.119).
In terms of time orientation, De Luque and Javidan (2004) find that uncertainty avoidance is described as having contrasting effects at organisational level. Cyert and March (1963) and Hofstede (1980) -and later editions in 2001 and 2003 respectively, reach different conclusions as to the link between uncertainty avoidance and time orientation. For Hofstede (1980, 2001), uncertainty avoidance at societal level leads to a focus on long-term rather than short-term results in organisations. On the other hand, Cyert and March (2003) find that high uncertainty avoidance at organisational level leads to short-term performance horizons. There is an apparent contradiction in these conclusions. However, one must remember that Cyert and March reach their conclusions in a context of societal risk and uncertainty. So perhaps there is no real
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contradiction. In fairly certain environments, companies may indeed establish long term performance goals as a result of high uncertainty avoidance. In uncertain environments, high uncertainty avoidance companies develop short-term strategies rather than anticipate long run uncertain events.
Eisenhardt (1999) referring to fast moving markets affirms that top executives think that uncertainty about the future is very high. Eisenhardt quotes Michael Dell a saying that in fact, the only constant in his business is that everything is changing. Strategies, like products, have lifecycles: companies compete on lifecycles, which had not happened five years earlier. Eisenhardt illustrates this point by saying that in the past companies competed on products and services, whereas now they compete on business models.
➢ 3.6.2.2. Power Distance
Power Distance was researched, together with Uncertainty Avoidance, by both the Globe Project (2004, 2008) and Hofstede. Following Hofstede (2001), Globe project (2004) defines Power Distance as “the degree to which members of an organisation or society expect and agree that power should be shared unequally” (p. 517). Globe Project asserts that the origin of the concept goes back to Mulder (1977) who described power distance as “the degree of inequality in power between a less power Individual (I) and a more powerful Other (O), in which I and O belong to the same (loosely or tightly knit) social system” (p.90). Pugh’s (1976) framework in Aston’s research found that the characteristics of organisations were defined in terms of centralisation. It is generally considered that there is a link between centralization
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and power distance. The higher the power distance dimension, the more centralised the organisation. Conversely, the lower the power distance, the more devolved the organisation tends to be. From an organisational perspective, Hofstede (2001) defines power distance also after Mulder (1977) “… power distance between a boss B and a subordinate S in a hierarchy is the difference between the extent to which B can determine the behaviour of S and the extent to which S can determine the behaviour of B” (p. 83).
Hofstede indicates that this dimension was applied at organisational level by Patchen (1965), when he created an index of employees’ willingness to disagree with supervisors. At societal level, this dimension was first applied by Whyte (1969) who wrote about Venezuela. The Globe Project (2004) quotes this author and mentions that “in a highly stratified society where all powers are concentrated in the hands of the superior, subordinates learn that it can be dangerous to question a decision of the superior” (p.529).
Trompenaars (1993; 1998) also employs this dimension as “achievement versus ascription”, which was based on Parsons and Shils’ (1951) theoretical background of achievement-ascription, which in turn shows correlation with Hofstede’s power distance dimension. Ascription is connected to who you are, and power increases naturally with age and experience. In contrast, achievement is mostly connected with what you have done, and status is linked to your track record.
When Miles and Snow (2003) talk about the dominant coalition in organisations, they too are applying this concept of power distance because culture plays a key role
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in the balance of power that reflects different pressure groups within the organisation (House et al., 2004).
With regards to the influence of IT and power distance, Alvesson (2002) mentions that the trend towards fast throughput production, Just in Time (JIT) has led to a different kind of organisation, which is less hierarchical and more flexible. The argument is that whereas traditional organisations rely on a hierarchical structure for control, in flat organisations that require a higher degree of flexibility, culture then becomes more important as a source of cohesion. The expansion of high-tech and other knowledge intensive companies employing large numbers of professionals whose loyalty is crucial, also contributes to the recognition of the significance of culture in management.
Furthermore, organisations tend to respond to cultures of diverse societies where they operate. This is the reason why they prefer to operate in places where power distance is similar to the parent company’s and to avoid those that show a major cultural gap with head office (Carl, 2004). Reality shows that sometimes MNEs expand into host countries with radically distant cultures. Argentina with its peculiarities can be considered a good example. This is the reason why it was chosen in this study.
➢ 3.6.2.3. Future Orientation
Time has been of major interest for many authors over the years and it is a crucial issue in planning, ‘just-in-time’ and the effects of Internet speeding up connections
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among different environments. For example, time has been identified as a basic value orientation of every culture (Kluckhohn and Strodtbeck, 1961). In the case of the Globe Study (2004), the researchers define Future orientation as “the degree to which individuals in organisations or societies engage in future-oriented behaviours such as planning, investing in the future, and delaying individual or collective gratification” (Chhokar et al.Globe Qualitative Study 2008, p.3). Following the pioneering work of Kluckhohn and Strodtbeck’s (1961), Ashkanasy et al. (2004) who developed the Future Orientation chapter in the Globe Study, consider three categories of temporal framework: Past, Present and Future. Some people use a temporal framework in an extensive way, whereas other people use it carefully which in turn, is translated in cultures with a differentiated future orientation perspective. Cultures mostly focused on high present orientation with low future orientation are able to enjoy their capacity to be spontaneous and live the moment without feeling guilty. On the contrary, cultures that show high future orientation are able to imagine future situations, “formulate future goal states, and seek to achieve goals and develop strategies for meeting their future aspirations” (p. 285). Future-oriented people and cultures try hard to develop and keep self-control and seek to assess plans in terms of future benefits. At the other extreme, past oriented people prefer, if they have been successful, to keep their past experiences alive and plan on the basis of maintaining the status quo. In case of negative or failure experiences, they try hard to modify their view in order to modify future events.
From the managerial perspective, Ashkanasy et al. (2004) consider that Future Orientation is fundamental for organisations since it is connected to the allocation of resources problem over time such as, for example, focusing on competences or
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developing new products and opportunities in new or existing markets. In every case, firms have to choose between current profit maximization, which may affect optimization of future profits, and long term profits. The authors also quote Webber (1972), who suggests that managers are concerned with the past as a way of giving better service in the future. Managers should be concerned about the organisation’s future as its survival and development is most important.
Ansoff introduced Long Range Planning in the 1950s, which became fashionable in the 1970s. According to Faulkner and Campbell (2003), in negative situations this perspective “became the development of the optimistic ‘hockey stick’ approach to future performance” (p.3). This method of extrapolating the firm’s past into the future “is based on the assumption that the future environment will develop in a logically incremental manner” (Ashkanasy et al., p.290). This type of planning is uniquely appropriate for developing incremental strategic plans which are explicitly guided and coordinated by different areas of the organisation. Ansoff et al. (1976) contend that some interesting results emerged, essentially “the definition of the length of time long-range plans are prepared for” (p.140). In economics, ‘long-range’ means longer than five year periods, reaching sometimes 20 or 25 year periods. Eisenhardt (1999) contends that strategy is increasingly temporary and subject to lifecycles. It includes mostly small moves. Companies also need to make medium and large moves. She speaks about the “rhythms” in fast-moving industries and the need to align a company’s moves in harmony. Eisenhardt gives the example of the way in which Dell adjusted the rhythm of their product development to coincide with the appearance of the reviews in magazines like PC World. So time is also a key
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factor in certain industries, and should be part of the strategy. The pace at which executives do things is important.
After this brief review of cultural issues in relation to concepts of societal culture in management literature and culture in relation to IB plus a specific focus on the three dimensions applied in this thesis: Uncertainty Avoidance, Power Distance and Future Orientation, attention is drawn to the Organisation, in turn, the MNE Subsidiary (the Action Arena in Ostrom’s terms).
3.7. Business Level Strategy 3.7.1. Overview
Business level strategy relates to the strategies pursued by the different business units in order to compete in particular markets (Johnson et al., 2008). Regarding strategy and its implementation at business level, there is extant literature such as Ansoff 1965; Andrews 1971; Steiner 1979; Porter 1980, 1985; Hax and Majluf, 1991; Grant, 1998 to name a few. Tallman and Yip (2009), Hofer et al. (1978) point out those business unit level strategies are vital as it considers how to compete in certain industries. In this regard, Johnson et al. (2008) contend that it is critical for business units that opportunities are identified and products or services are developed within their own or different markets in order to achieve advantage over competitors´ strategies. Fitzroy, Hulbert & Ghobadian (2012) refer to the business unit level strategy as the way a unit has to compete successfully and create value in its selected markets. This study particularly focuses on MNE subsidiaries implementing their
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strategies under corporate mandate and how they need to adapt to Argentine circumstances.
In the following section, a special focus is placed on Miles and Snow’s strategic types (1978, 2003). They form the basis of the analysis of strategic problems of business units (SBUs) in the light of host country’s societal culture and the need for adaptation to the environment. As mentioned above, the analysis of the adaptation process of MNE subsidiaries to Argentine business context is central to this thesis. The reason why Miles and Snow’s work has been selected as essential to this study resides on their overarching study of business level strategy mainly related to strategy implementation, which is particularly useful when studying actual strategies. A brief overview is shown below as it is one of the pillars of this dissertation.
3.7.2. Miles and Snow’s view: Strategic Types
Miles and Snow’s strategic types (1978; 2003) have been subject of considerable empirical research (e.g. DeSarbo et al., 2006; DeSarbo et al., 2005; Hambrick, 1983, to name three). DeSarbo et al. (2005) attribute the work’s longevity and distinction to its inherent parsimony, industry-independent nature and connection with current strategic postures in different industries and countries (Hambrick, 1983).
Miles and Snow contend that there are three superior performing business types and the rest are average or less than average. Their theory posits that in order to be superior, the organisation must show a clear and direct relationship between the organisation's mission and values and the organisation’s strategies, both business
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level strategies and functional strategies. The first edition was published in 1978 and it is still relevant today. Miles and Snow argue that effective organisations work on an ongoing process of evaluating their purposes by questioning, verifying and redefining how they interact with their environments. They create and maintain a viable market for the goods or services they offer and trade. Ineffective organisations fail at this market configuration task. Efficient organisations establish mechanisms that complement their market strategy.
For organisations, the dynamic process of adjusting to environmental change and uncertainty is extremely complex. This includes an effective alignment with the environment, while at the same time achieving an efficient management of internal linkages. The strategic types consider a comprehensive and integrated system of strategy, structure and processes, with a dynamic fit with the environment. On the other hand, culture has not been considered in their research and the purpose of this thesis is to link Miles and Snow’s adaptive aspects to relevant cultural dimensions.
With regards to the Process of Organisational Adaptation, Miles and Snow follow one general perspective of the process of organisational adaptation, Child’s (1972) strategic choice. Organisational adaptation is a topic of major managerial concern and Miles and Snow present what they call ‘the adaptive cycle’. They describe four types of organisations, Defender, Analyzer and Prospector as ‘stable’ forms. If management does not follow these strategies in their pure form, the organisation will be slow to respond to different opportunities and this leads to a probability of becoming an ineffective performer. This fourth form is called Reactor, which is essentially an unstable form.
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Organisations are embedded in their respective environments, which impose a network of external influences and relationships. Top management has two main responsibilities: to align the organisation with the environment and to manage existing internal linkages (interdependencies). Organisational survival depends on the quality of the ‘fit’ which management achieves among major variables shaping the organisation’s product-market domain, technology, structure and processes. This embeddedness attribute has a profound connection to a pivotal concept, ‘organisations act to create their environments’. And particularly this research examines resultant strategic choices under Miles and Snow’s strategic organisational types. The environment in question is the Argentine context faced by MNE’s operating in the county. This environment is subject to abrupt cycles and is where organisations, in this case, MNE subsidiaries of Anglo origin, have to operate and succeed.
Miles and Snow’s approach has several important features,
1. Dominant coalition: group of decision makers in organisations whose influence on the system is the greatest. These executives have problem-finding as well as problem-solving responsibilities. The idea of coalition was also previously analyzed by Cyert and March (1992) under the idea of “the organisation as a coalition” (p. 31). In business organisations, members include managers, workers, shareholders, suppliers, customers and so on. But some of these members are organised in sub-coalitions.
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2. Perceptions: the dominant coalition largely enacts or creates the organisation’s relevant environment. The organisation responds largely to what management perceives. On this point, Ansoff & Hayes (1976) should also be mentioned, as these authors consider the interaction with the environment as fundamental in management issues.
3. Segmentation: the dominant coalition is responsible for partitioning the environment and assigning components to different subunits.
4. Scanning activities: the dominant coalition is responsible for surveillance of organisational elements critical to the organisation. They can be proactive or reactive.
5. Dynamic constraints: the dominant coalition’s adaptive decisions are constrained by the past and current strategy, structure and performance.
The dominant coalition is an expression of power distance as understood by Globe Project and predecessors (e.g. Hofstede). A criticism that can be levelled at Miles and Snow is that they did not take into account the effects of culture of the adaptation process. The purpose of this thesis is to explore the connection between culture and adaptation strategies that MNEs need to adopt in order to operate effectively in Argentina. In the Adaptive Cycle, the strategic-choice approach followed by Miles
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and Snow contends that organisational adaptation’s effectiveness depends on the dominant coalition’s perceptions of the environmental conditions and decisions made concerning the way the organisation will cope with them. This complex and dynamic process can be broken into three problems, solved on a continuous basis by management: the entrepreneurial, engineering and administrative problems, which are inherently interlinked.
The Entrepreneurial Problem shows that the adaptive cycle is most observable in new and fast growing organisations and in those surviving after a crisis. In the new organisation, an entrepreneurial insight must be developed into a concrete definition of an organisational domain: a specific product or service and a target market or market segment. In the ongoing organisation, the entrepreneurial problem has thus an additional challenge that the organisation has already a set of so-called ‘solutions’ to its engineering and administrative problems which constrains its attempt at an entrepreneurial drive.
The Engineering Problem involves the creation of a system which puts into concrete operation management’s solution to the entrepreneurial problem. This requires the selection of appropriate technology for producing and distributing the chosen products and services and the creation of new information, communication and control linkages (or also modification of the existing ones) to make certain appropriate operation of the technology.
With regards to the Administrative Problem –as described by most of management theories- it is related to uncertainty reduction within the organisational system or, for
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this model, of rationalizing and stabilizing those activities that have proved successful in solving problems faced by the organisation during the other two phases. Solving the administrative problem involves more than simply rationalizing the system already developed, which means uncertainty reduction itself, it also involves formulating and implementing those processes which will enable innovation in the organisation. The conception of the administrative problem is a central factor in the cycle of adaptation. Figure 3.2 shows the three mentioned adaptive problems that help companies define their type and strategic-choice.
Figure 3.2. Three Adaptive Problems
3.7.2.1. The four types of organisational adaptation
As previously mentioned Miles and Snow suggest four organisation types according to the different strategies pursued in response to the environment, by means of particular configurations of technology, structure and process consistent with those
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strategies. The organisation types are Defender, Prospector, Analyzer and Reactor which are briefly described below,
Defenders are engineering oriented, focused on their secure niche in an environment with greater stability than do their competitors within the same industry. Defenders intentionally create and maintain a certain environment for which a stable form of organisation is appropriate. The risks are linked to their single narrow domain. Defenders serve their present domain but have little capacity for locating and exploiting new areas of opportunity. Defenders only concentrate on updating current technology to maintain efficiency and do not look for new market opportunities or try to develop appropriate technologies to supply those markets. For Defenders, it is more advantageous to know the strengths and capacities of their company than the trends and developments in the industry.
Prospectors are continually searching for market opportunities and regularly experiment potential responses to
emerging environmental trends. These
organisations enact their environment in a way almost opposite to Defenders. Thus, these organisations are creators of change and uncertainty to which their competitors must respond. However, despite their commitment to product and market innovation, these organisations are not often efficient. The central dilemma faced by many Prospectors resides mainly in how to maintain effective control over shifting services, markets and technologies. The main conclusions are Prospector’s rapid enactment and response to their environments with the costs and benefits associated with the whole process. There is a continuous modification of its product-market
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domain to take advantage of perceived opportunities and emphasis on flexibility in technology and administrative system to generate rapid adjustment.
Analyzers reside in the continuum between Defenders and Prospectors, which in turn is a viable combination of both extreme strategic categories. A real Analyzer is an organisation that minimizes risk while at the same time, maximizes opportunities for profits. Analyzers are organisations which operate in two types of productmarket domains, one relatively stable and the other one continuously changing. In their established areas, these organisations operate routinely and efficiently through the implementation of formalized structures and processes. In their more fast moving areas, top managers observe their competitors closely for the adoption of new ideas, and later adopt rapidly the ones that appear to be the most promising.
The Analyzer defines the entrepreneurial problem in a similar way to Prospector and Defender: how to place and exploit new opportunities while at the same time, maintaining a solid base of traditional products and customers. The Analyzer’s engineering problem has two aspects: the organisation must develop enough efficient technology for producing and distributing its traditional products or services, and it must create archetypal technologies for producing new products or services. Stability or flexibility are key characteristics. The Analyzer is characterized by a reasonable degree of technological efficiency. The administrative problem resides in how to differentiate the organisation’s structure and processes to accommodate both stable and dynamic areas of operation which in turn is reflected by the intermediate position between Defender and Prospector. The Analyzer’s 89
dominant coalition focuses upon the functions of marketing, applied research and production. This reflects the composition of both Defender and Prospector’s dominant coalition. An extremely complex and expensive coordination mechanism is present; some conflict resolution through product managers, some through normal hierarchical channels.
The fourth type of organisation, whose type of adjustment to the environment is unstable and inconsistent, is the Reactor. In the authors’ view, the Reactor is unstable because it lacks a set of reliable response mechanisms that it can put into effect when faced with changing environment. This inconsistency potentially may stem from at least three sources. First, management fails to articulate a workable organisational strategy. Second, the strategy is implemented but technology, structure and process are not linked to it appropriately; and third, a management team adheres to a specific strategy-structure relationship despite it no longer being relevant to environmental conditions.
What follows is a final reflection on Miles and Snow’s perspective. Miles and Snow’s strategic types are used in this thesis to analyse the organisation in terms of business level strategy. In this chapter organisational adaptation to the local environment has been described in terms of strategic choice. This choice will be analysed in the light of the organisational strategic type. Later, the strategic choice will become the outcome of the subsidiary –action arena- that operates in an environment where it has to interact with exogenous variables such as formal and informal institutions. This is how this thesis integrates Ostrom’s framework into Miles and Snow’s strategic types to generate a business oriented framework. 90
3.7.2.2. Reasons why Miles and Snow has been adopted in this study
This study has adopted Miles and Snow’s perspective at business strategy level as it has advantages vis-à-vis other authors in this field such as Porter with his Value Chain that focuses only on internal resources or activities and Porter’s Five Forces that focuses only on external forces from a competitive perspective. Miles and Snow’s strategic types link the external forces acting upon the organisation to its internal resources encapsulated in the three problems –Entrepreneurial, Engineering and Administrative. These permits a proper understanding of the cultural issues and what happens within the subsidiary organisation - unit of analysis – which is one of the aims of this research. As described before, an ever changing business environment such as Argentina with its unique rules of the game has been selected in this investigation. On the other hand, other models such as Treacy & Wiersema’s (1997) “Value Disciplines”, link external forces with internal resources, but they are not really designed to deal with cultural problems or adaptation. Moreover, the researcher of this study is conscious that Miles and Snow’s work has limitations in the third strategy type (i.e., Analysers), it is a little weak as they are found somewhere on the continuum between Defenders and Prospectors. Reactor is also weak as it appears to represent a container where all else is deposited. This is similar to Porter’s “stuck in the middle” in his generic strategies model. Nevertheless the Miles and Snow model displays a defining advantage in relation to this study, it enables us to visualise “adaptation”, which is the essence of this work.
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3.7.3. Liabilities versus Advantages of Foreignness
Shi & Hoskisson (2012) state that liability of foreignness has been recognized as an MNE competitive disadvantage of operating abroad because of unfamiliarity with host country environments and the need to coordinate across geographical distance (Zaheer, 1995). To overcome liabilities of foreignness, MNE subsidiaries need to leverage firm-specific advantages (FSAs) to compete successfully with local companies. Thus, prior research shows that international business scholars have focused so extensively on the negative aspects of foreignness and that foreignness has been equated with MNE subsidiary competitive disadvantage.
However, another view argues that MNEs have immense advantages vis-Ă -vis host country domestic firms through the combination of location-specific advantages and unique resources developed in home countries and associated with FSAs existing in host countries, (Dunning, 1992 cited by Shi & Hoskisson, 2012). MNEs have FSAs in highly competitive home countries that can be perfected in their own territory; they own a compilation of resources that they are ready to defend against international and local firms (Caves, 1996). Shi & Hoskisson (2012) do not dispute either liabilities or advantages of foreignness but they consider that overemphasis on the negative aspects of foreignness comes at the price of underestimating what the authors call advantages of foreignness. Advantages of foreignness express intangible benefits that are exclusive to MNE subsidiaries simply by their foreign nature.
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When host countries are culturally and geographically distant, the MNE can, for example, break social prejudices, such as IBM in South Korea employing women, whereas locally there is cultural resistance to employing them. This example shows a trade-off between liabilities of foreignness and advantages of foreignness, in addition to showing opportunities exclusive to MNEs because of their foreign nature. Tihanyi et al. (2012) contend that the long-term survival of the MNE subsidiary depends not only on organisational efficiency but on its ability to adapt to local institutional conditions (Kostova & Zaheer, 1999). Employing indigenous managers may help MNE subsidiary to overcome the liability of foreignness as indigenous managers may have the necessary skills to face local environmental contingencies.
Shi & Hoskisson (2012) argue that possible advantages of foreignness are embodied in the definition of liabilities of foreignness. They point out that liability of foreignness advocates the “unfamiliarity with and the lack of roots in a local environment� (Zaheer, 1995, p. 343). Therefore MNE subsidiaries are shielded from understanding local social obligations and responsibilities which may be hurdles for local firms (Sethi & Judge, 2009). A good balanced judgement between liabilities and advantages of foreignness has to address and recognize the trade-off between these two opposite effects. On the other hand, some researchers have profound doubts about the impact of nationality as a source of competitive advantage for MNEs in a host country environment (Nachum, 2010; Un, 2011).
In connection with these characteristics and as previously described in chapter two, the Argentine context becomes an ideal setting for investigation, “Advantages of foreignness represent social-cognitive perquisites, benefits and privileges of foreign
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organisations vis-à-vis indigenous organisations –often a veiled set of organisational advantages” (Shi & Hoskisson, 2012, p. 103). Advantages of foreignness are benefits that are durable, intrinsic and exclusive to MNEs versus indigenous competitors.
For the purposes of this thesis no comparison has been made between MNE subsidiaries and local companies as it is not recommended given that they belong to groups with dissimilar attributes and characteristics (Shi & Hoskisson, 2012). Additionally, MNE subsidiaries differ from local companies in terms of institutional roots as well as capabilities and resources, which make comparison of the two types of companies even less desirable. Finally, these apparently contradictory elements, namely, liabilities and advantages of foreignness are an integral part of the MNE subsidiary’s existence. Argentine context in this case, where liabilities or advantages of foreignness are closely related to the organisations’ strategic choice or in Ostrom’s terms, the outcome.
3.8. Outcome of the literature
3.8.1. Synthesis of the literature
This literature review under high context perspective in the IB field covers the main areas of research, high context perspective that is centred on local issues; which in turn, coincides with the aim of this thesis to focus on Argentina as host country; Polycentricity, with special emphasis on Institutional Polycentricity. After navigating along Institutional Theory and Societal Culture, there is an analysis of MNE subsidiaries and Miles and Snow’s business level model is introduced. Moreover, the
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concept of liabilities and advantages of foreignness is examined. There are regular references to the linkages between the literature and the Argentine business context described in the previous chapter.
Authors divide Polycentricity and Institutional Polycentricity into formal institutions, manifested as political, economic and regulatory institutions; and informal institutions in the form of societal culture. Formal institutions determine the institutional distance between the host country and the subsidiary head-office country. Culture is considered in terms of three of Globe’s cultural dimensions, uncertainty avoidance power distance and future orientation. Moreover, the subsidiary’s strategic choice is described following Miles and Snow’s perspective and becomes the action arena – in Ostrom’s terms- which is the essential point of this research. Finally, characteristics of subsidiaries’ adaptation are examined in the form of liabilities and advantages of foreignness.
3.8.2 Interpretation: Linking the concepts
After analysing diverse seemingly unconnected concepts, an interpretation is suggested in the light of high context (Child, 2000) parameters. Polycentricity (McGinnis, 2011; Ostrom, 2005; Ostrom, 2011) which includes multiple decision making centres within a set of rules, gives rise to the concept of institutional polycentricity (Bartjargal et al., 2012; Hitt, 2012; Hitt et al., 2012; Hitt et al., 2011; Xu & Hitt, 2012) applied to business matters in different country contexts. As mentioned above, Argentina is the selected business context in this study.
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Polycentricity manifests itself either as multi-centred systems with institutions at multiple levels (i.e. national, state/provincial and local authorities) or as monocentric systems with single-centred hierarchies (McGinnis, 2011; Ostrom, 2011; Ostrom 2010; Ostrom 2005; Polanyi, 1951). Institutional Polycentricity reveals that a country’s institutional system is made up of several diverse institutions of multiple types (Bartjargal et al., 2012; Xu & Hitt, 2012; Hitt et al. 2012). As mentioned in the introduction, Institutional Polycentricity thus requires a high context approach because formal and informal institutions operate in diverse countries with diverse mindsets that are grounded in those formal institutions or may be implicit in their societal culture.
Argentina is an emerging economy with a monocentric political system and weak formal institutions (political, economic, and regulatory) which in turn, gives relevance to an informal institution such as societal culture. Consequently, adaptation to the host country where institutional distance is significant, takes the form of knowing the ‘rules of the game’. In a society where formal institutions are weak, informal institutions primarily in the form of culture, become relatively important, as they fill the institutional void (Bartjargal et al., 2012; Xu and Hitt, 2012).
In order to link different disciplines in the IB field, this research brings together Institutional Analysis and Development (IAD) framework (Ostrom, 2005; Ostrom, 2010; Ostrom, 2011) as a general form of theoretical analysis linked to business strategy at subsidiary level. Institutional theory concentrates on formal institutions (political, economic and regulatory) and its informal institution, culture. These two
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levels should be considered as exogenous variables in Ostrom’s terms. Societal culture in the form of three dimensions, uncertainty avoidance, power distance and future orientation are considered when analysing the organisation which in Ostrom’s terms is the action arena. The ‘action arena’ encompasses these cultural dimensions
and strategic problems in Miles and Snow’s view and gives rise to a strategic choice
which in Ostrom’s terms, results in the outcome. Adaptation is examined and complementary facets such as liabilities and advantages of foreignness are investigated. Cultural distance can give rise to advantages of foreignness if the distance is used imaginatively, for example, IBM’s employment of women in South Korea (Shi and Hoskisson, 2012).
Advantages of foreignness are based on generating intangible benefits instead of being affected by the negative effects of foreignness. Repercussions of advantages of foreignness can be deep and far-reaching. The main principle of advantages of foreignness is that MNE subsidiaries are not subject to the same pressure of institutional isomorphism as are indigenous firms when the distance is significant.
The definition of advantages of foreignness is broad as it encapsulates intangible benefits at organisational and group level, as described earlier. If executives focus on the liability of foreignness and intend to conform to local institutional isomorphism, this might damage the subsidiary and neutralise the advantages of foreignness.
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3.8.3. Proposing a Framework of Departure
The framework of departure is the result of bringing together into Ostrom’s polycentricity framework – IAD - three domains of knowledge: the strategy field, the societal culture field and institutional theory, represented by formal and informal institutions. The IAD framework consists of formal and informal institutions, what Hitt et al. call institutional polycentricity. These institutions exert influence the company (action arena) which for Ostrom leads to outcomes. The outcomes take the form of the strategic choice in this framework of departure. Therefore figure 3.3 shows an adaptation of Institutional Analysis and Development (IAD) framework (Ostrom, 2011; Ostrom, 2010; Ostrom 2005). Ostrom (2011) contends that “frameworks are general forms of theoretical analysis” (p. 8). The intention of this research is to follow her approach and use this framework in order “to explore new questions, new research methods, and new modes of analysis” (p. 24). Therefore, figure 3.3 shows the overall areas of research which are brought together in the analysis of this dissertation.
This framework adopts three main concepts of the IAD framework: first, exogenous variables, which in turn, become the inputs that include the contextual factors (McGinnis, 2011). In this diagram, contextual factors or exogenous variables take the form of formal and informal institutions within which the action arena is located. Institutional Theory is considered mainly for formal institutions. Informal institutions
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in the form of societal culture are reflected in Cultural theory. Both these types of institutions, formal and informal, are mediating constructs to the subsidiary.
Constructs such as business strategy problems, societal culture dimensions and strategic choice occur inside the subsidiary or action arena. The strategic choice is the outcome of the interaction of two constructs, the business strategy problems and the societal culture dimensions. The “action arena” or “action situation” (Ostrom, 2011), or also the “black box” (McGinnis, 2011), is the conceptual unit where different actors play their role. In this case, the action arena is represented by an MNE subsidiary which is analysed in terms of the cultural perspective of Miles and Snow’s organisational types (1978, 2003). These are analysed in terms of the three management problems (entrepreneurial, engineering and administrative).
The cultural perspective is provided by societal culture through the lens of the three dimensions that emerged from the GLOBE Project (2004, 2008): Uncertainty Avoidance (UAI), Power Distance (PDI) and Future Orientation (FO). Third, the resulting outcome is the strategic-choice that results from organisational adaptation. As a complementary aspect, a moderating construct exerts influence on foreign organisations host country environments. This is described as liability of foreignness and advantages of foreignness. This construct has a moderating effect because it limits strategic choices the subsidiary can make. It depends on how the community sees foreign companies and it limits or increases the range of strategic choice the subsidiary can make. These aspects are analysed in the subject companies that have been operating in Argentina for more than nine decades.
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Finally, the overall aim is to reveal the subsidiary’s adaptation to the environment as demonstrated by their approach to strategic choice as subsidiaries are embedded in their environments. Moreover, figure 3.3 shown below, illustrates a framework that brings together the overall areas of research considered in this thesis.
Notes: 1) 2) 3) 4) 5) 6)
The MNE Subsidiary is the action arena in Ostrom’s terms The Strategic Choice emerge from Miles and Snow is the outcome in Ostrom’s terms Formal and Informal Institutions are exogenous variables in Ostrom’s terms Liabilities/advantages of foreignness emerge from Shi and Hoskinsson Business Strategy problems emerge from Miles and Snow Societal Culture construct and its dimensions emerge from Globe Project
Figure 3.3. Framework of Departure
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After having examined literature applicable to this study and its link with the host country, the next chapter addresses methodological topics. The methodology and research design guides the empirical work.
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Chapter 4. Research Methodology and Design
4.1. Introduction
Literature reviewed in Chapter 3 shows the three pillars of this research whose perspective is high context, as it gives significance to host country vicissitudes in contrast with global policies pursued by multinational companies. In this regard, MNE subsidiaries adapt to local conditions. This adaptation is required in order to survive and thrive. This is especially true in Argentina. The above mentioned pillars are business strategy (Miles and Snow 2003), societal culture (House et a., 2004, 2008) and institutional theory in the form of polycentricity (Ostrom, 2005). These disciplines have been brought together in a conceptual framework (figure 3.3) which is a contribution to the body of knowledge, as it permits a more comprehensive analysis of MNE subsidiary’s adaptation to host country conditions.
Some of the challenges of this research reside in the uncertain context of the Argentine business environment in conjunction with the fact that local companies are not used to participating in academic research and that their managers are not particularly open to talk about their organisation’s problems with outsiders.
The philosophical stance adopted in this research is social constructionism. The methodology adopted is the multiple case study method (Bamberger, 2008; Brannen and Doz, 2010; Piekkari et al., 2009, Redding, 2005; Welch et al., 2011); (see Appendix 6 for complementary information), implemented from a qualitative
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perspective in the IB field (Bamberger and Pratt, 2010; Birkinshaw et al. 2011; Doz 2011; Johns, 2006). This inductive approach leads to a theoretical conjecture and a model that emerged from the empirical study.
The research strategy is delineated in section 4.2 and it generates theory (Eisenhardt, 1989; De Ridder et al., 2014) in the form of a theoretical conjecture and a related model that emerges from it. The selected strategy is a multiple case study of two cases. The organisations under analysis are subsidiaries of American and British MNEs. The local executives form a particular worldview as they belong to different organisational frames of reference in term of societal culture (Argentina belongs to the Latin America cluster while the US and UK belong to the Anglo cluster – House et al., 2004). This worldview shaped by the distance between local societal cultures and distant MNE head office societal cultures and institutional structures. Therefore, the aim of this dissertation is to show to what extent adaptation to host country environment is achieved
Section 4.3 describes research design
topics that follow Yin’s (2009)
recommendations on the components case studies should adopt. Section 4.4 focuses on case selection and describes the rationale behind the choice of firms. Section 4.5 shows how access to the companies takes place while section 4.6 describes the mode of informant selection that was employed in this study.
In section 4.7 the selected technique, semi-structured interview, is briefly described and the two stage plan is mentioned. Moreover the strategy followed is multiple case studies (Eisenhardt, 1989; Yin, 1994, 2009). Plans for two rounds of interviews are
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described and the evidence collection technique is primarily semi-structured interview. Translation and back-translation are explained and the lessons learned from the pilot are briefly mentioned. Other evidence collection is mentioned.
Evidence analysis is described in section 4.8. There is an outline of the selected method, thematic analysis, and the introduction of the Framework of Departure (figure 3.3), which arose from the literature review. Both stand-alone cases are conducted as within-case analysis, which are then examined through cross-case analysis. Section 4.9 discusses theoretical conjecture and models. Finally validation topics are mentioned in section 4.10.
Further, in section 4.11 the work plan is shown and in section 4.12 the strengths and weaknesses of the study are discussed.
4. 2. Research Strategy3
The research strategy is based on the creation of a theoretical conjecture and a model based on empirical investigation (Costanzo, 2004; Griffiths, 2004). Moreover, the selected research strategy in this research is case study where the aim is to understand the dynamics of the settings (Eisenhardt, 1989; Yin 1994, 2009). Therefore, “case study is a research strategy which focuses on understanding the dynamics present within single settings� (Eisenhardt, 1989, p. 534). The selected strategy in this research leads to theory generation (Eisenhardt, 1999; Ridder et al, 2014) where a novel conceptual model is built up based on a framework of departure 3
Strategy is understood as the way in which particular methods and techniques are brought together in the research so as to produce the most efficient means of collecting empirical evidence and analyzing it (Griffiths, 2004, p. 104)
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(figure 3.3) and empirical work. Framework of departure (figure 3.3) is the result of distilling three domains of knowledge such as the strategy, societal culture and institutional theory. Empirical work is based on case studies of two British and American MNE subsidiaries that operate in Argentina. It is carried out with the aim of understanding their global strategy towards adaptation to host country conditions.
Inductive logic is applied where inferences between empirical evidence and theory allows the researcher to describe the understanding of the phenomenon and also offer substantive explanations (Eisenhardt, 1989; Ridder et al., 2014) and a qualitative case study approach is adopted (Bamberger, 2008; Bartlett, 1979; Birkinshaw et al., 2011; Brannen and Doz, 2010; Cresswell, 2007; Crozier, 1965; Eisenhardt, 1989a; Griffiths, 2004; Pettigrew, 2013; Piekkari, Welch, and Paavilainen, 2009, Stake, 2005; Yin, 1994, 2009; Welch et al., 2011). Nevertheless this research is not purely inductive (Griffiths, 2004) because it makes the most of existing literature and executive worldviews and experience to build up a novel theoretical conjecture and model.
Moreover, as stated in chapter 1 the rationale behind the choice of the adaptation issue in connection to MNE subsidiary embeddedness resides on trying to explain how some organisations have been able to survive and thrive in such an unstable and unpredictable environment as Argentina.
The researcher adopts a Social constructionist philosophy in this study. This interpretive approach, which includes social constructionism (Cresswell, 2007), highlights uniqueness in social sciences. An example of this kind of research is the
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paper published by Maguire and Philips (2008) about loss of trust at Citi Group after a merger. The authors state “we are interested in the worldviews of organisational members” (p. 380). In their paper, Maguire and Phillips mention Marshall and Rossman (1995) who recommend qualitative studies in the study of poorly understood phenomena. This is the case in this study where MNE adaptation to the Argentine context is analysed. Pettigrew’s 1990 contextualist approach in adaptation is also taken into account.
Particularisation is the aim of these types of case studies (Welch et al., 2011) as it is in this study. Researchers in this tradition embrace the context rather than nullify it (Stake, 1995). This perspective tends to include the researcher as part of the context (Welch et al., 2011).
Similarities between this thesis and McGuire and Philips extend to the fact that their work on managers' world views is also based on interviews and that they apply a qualitative approach.
Table 4.1 borrows key concepts of this approach from Welch et al. (2011) and is adapted to this study.
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Dimension
Interpretive Sense making
Philosophical perspective
Interpretive Social Constructionist
Nature of the research process Subjective search for meaning Case study outcome
Understanding of actors’ subjective experiences
Attitude to generalisation
‘Particularisation’ not generalisation
Role of the context
Contextual description Necessary for Understanding
Main advocate
Stake
Table 4.1 Interpretive sense making approach
Stake (2005), who is described by Welch et al. (2011) as the main advocate of ‘case study’ under the interpretive sense making approach, identifies three types of case study. Multiple case study or collective case study has been selected for this study where two MNE subsidiaries are examined in the light of their executives’ worldviews. Both enterprises are part of the Anglo cluster (House et al, 2004, 2008) and have been embedded in the Argentine context for decades.
To this end, this research is consistent with the theoretical model which advocates that “context counts” (Bamberger, 2008 p. 839). The context involved is Argentina,
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an emergent South American country. The definition of context is mainly the “surroundings associated with the phenomena which help to illuminate the phenomena” (Cappelli and Sherer, 1991: 56). Johns (2006) also provides his definition of context as the “situational opportunities and constraints that affect the occurrence and meaning of organisational behaviour as well as functional relationships between variables” (p. 386). This is the case of this research in which two subsidiaries are analysed within a host country environment.
4.3. Research Design
The plan or research design for this study is outlined below and concurs with Yin (2009). In this regard, design might suffer some adjustment –particularly once inductive logic is applied- when taken to the field (Layder, 1993).
The components considered in research design are particularly important,
a) The research questions. This issue is tackled in Chapter 1, section 1.4 where the main research question is set out. The central point is MNE subsidiary adaptation to host country environment in terms of Argentine societal culture. A well-defined focus is established for data collection. The theoretical conjecture arises subsequently from data analysis, both within cases and across cases. The main research question is subdivided into five subsidiary questions. These five subsidiary questions are also depicted in section 1.4. Just to refresh them, they are shown below.
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Main research question: How, and to what extent, do MNEs have to adapt their corporate strategies to the local context in order to be successful in Argentina? The perspective from which this question is tackled is the cultural one.
Moreover, five subsidiary research questions investigate the main point from different angles:
1. Is there a connection between local culture and the implementation of strategy at the subsidiary level? 2. What is the strategic-choice in the environment-organisation relationship? 3. How does the firm leverage the advantages of foreignness? 4. How does the firm overcome liabilities of foreignness? 5. How do formal and informal institutional influences affect business strategy in MNE subsidiaries?
b) Unit of analysis. The central component of this research is the MNE subsidiary, which in Ostrom terms, is the action arena where episodes and experiences take place, both inside and in relation to the local environment. The subsidiary represents a boundary within which different constructs like business strategy problems, societal culture and strategic choice take place, while exogenous constructs like formal and informal institutions occur outside and affect the subsidiary’s actions.
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c) Logic linking data. The logic behind this study encapsulates the crosscase study technique applied to two case studies, whose comparative analysis (Pettigrew, 1990) is set in the context of a specific country, Argentina. Thus both subsidiaries share similar external context, but have their own internal contexts. Thus the collected evidence is analysed in terms of similarities and differences between both organisations as will be seen in chapter 6. The presentation of the cases and the within-case analysis is carried out in Chapter 5. d) Criteria for interpreting the findings. Validity. This component is related to the assessment criteria. Bearing in mind that this study is carried out under the qualitative approach, the criteria for evaluating qualitative research are credibility, transferability, dependability and confirmability (Remenyi and Bannister, 2012). This element is further developed in section 4.10.
4.4. Selection of the cases
Pettigrew(1990) indicates decision rules that ought to be applied in case selection. Choose extreme situations, go for polar types, go for high experience levels of the phenomena under study, and go for more sites and increase the probabilities of negotiating access. The choice of sites in this thesis satisfies the latter two as the companies in question have decades of experience of adapting to the Argentine pendulum-type environment. Both companies are different enough but cannot be described as extreme or polar types They are in different industries, one sells consumer goods to the local public in a highly regulated market, the other sells
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services locally and internationally to companies in totally unregulated markets. This thesis follows Yin’s comparative case method (2009), which is a distinctive form of multiple case study. Two is the minimum number of cases for a multiple case study and as Yin says, the analysis is likely to be easier and the findings likely to be more robust than having only a single case.
Yin illustrates the feasibility of the two case analyses by citing Hooks’ (1990) example of two companies in the US. One was in the aeronautics industry and the other in the microelectronics industry. The companies satisfy the argument for multiple case analysis not because they were in the same industry but because they belonged to industries that were actively promoted and encouraged by the US government. Equally, the companies in this thesis are in different industries but they are complementary because they share important characteristics such as continuous embeddedness in the local environment for almost a century.
Another example of research in two companies is Bannister (2001) who takes a qualitative and interpretative approach. It discusses IT value and assessment and IT investment decisions in public administration. Bannister carries out his research in Ireland at two civil service departments, the Department of Social Welfare (DSW or DSCFA) and the department of Agriculture (DAFRD). Both departments were large and of comparable size while the study was conducted on a historical basis. The DSCFA is considered successful in its exploitation of IT, while the DAFRD has a long history of experiencing difficulties in this area. Therefore this is an example of polar cases, which is not the case in this research, where the choice of cases was
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based on fundamental similarities. A qualitative and interpretative approach is followed while a social constructionist philosophical stance is taken.
Back to the current study, both corporations’ subsidiaries manifest their British and American origins and have been operating in the Argentine context for many decades. The fact that they have survived and thrived in Argentina all this time is worth noting, since the country does not precisely offer a stable environment. The sampling of cases from the selected population is unusual when constructing theory (Eisenhardt, 1989) while it is reasonable to choose complementary cases in a limited number of cases to be studied. The two selected organisations operate as subsidiaries of large corporations in a specific type of environment such as Argentina. Although the industries and activities of both organisations are dissimilar, they share some general characteristics as players in the local context, such as embeddedness, and the same Anglo origin as per Globe Project (2004, 2008) from the societal culture perspective. Similarities reinforce the picture and bring it into focus. Similarities are displayed in table 4.2 below.
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British American Tobacco
IBM
(BAT) Culture
Anglo Cluster as per Globe
Anglo Cluster as per Globe
Type of organisation
MNE Subsidiary
MNE Subsidiary
Years in Argentina
115 years
90 years
Local management
Yes
Yes
Domestic market
Yes
Yes
Business context
Intense competition
Intense competition
Centralised or
Follows global guidelines
Follows global guidelines
decentralised subsidiary
Table 4.2. Similarities related to general characteristics of the organisations
Moreover differences complement the picture. Differences between both organisations basically reside in country origin, industry, type of business (i.e. consumer or business market) and business context (i.e. highly regulated market or non-regulated market). Table 4.3 shows differences between both companies.
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Subsidiary name N of employees (approx.) Origin. Industry.
British American Tobacco (BAT) Nobleza Piccardo 1,200 British
IBM IBM Argentina 8,000 American
Tobacco
Products/Services
Exports Type of business The business context
IT products and services -Products produced and - Exports services sold in domestic market - Import highly - Does not export technical products (mainframes) and software; sells them in the domestic market No Yes Consumer Business Highly regulated market Non regulated market Does not compete with Competes with other other subsidiaries IBMs Does not export Exports services
Centralised or decentralised Global form Global strategy under subsidiary transnational form Southern Cone business unit Activities for other Only sells locally IBMs Export services
Table 4.3. Differences in company characteristics
The organisations were purposefully selected in order to build a model and raise a theoretical conjecture (Eisenhardt, 1989). Moreover following Miles and Huberman (1994) qualitative samples are likely to be purposeful rather than random as qualitative research is usually constructed with small samples. In this study, beyond similarities, complementary differences between both organisations make them suitable for building the theoretical conjecture and corresponding model.
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In respect of complementary differences, the selected companies met the criteria of being different enough and wide scope to be applied in the theoretical conjecture and model. The fact that they belong to different country origin, American and British origin; two industries, one focused on domestic market while the other is also focused on exports; one product based while the other has a potent service component, one is in the market of consumer oriented while the other is based on business clients; business context (i.e. highly regulated market or non-regulated market).
Moreover the selected companies met the following criteria based on their similar characteristics: (a) They had to be local operations of MNEs; (b) In terms of culture, they had to be part of the Anglo cluster as defined by GLOBE, (c) they had to be embedded in the Argentine context. This was necessary in order to ascertain the cultural differences between head-office and the subsidiaries’ local operation and managerial team. By researching into companies whose head office was part of the Anglo cluster, the cultural dimension of the head office could be taken as a given as per the literature. Moreover, both selected subsidiaries from England and United States (Anglo origin) are operating in a culture (Latin) that far distant from theirs, i.e. Argentine (see appendices 1.a, 1.b and 1.c). Therefore, borrowing from Maguire & Philips (2008, p. 378), “culture is the broad context within which processes of identity formation and identification take place�. This would give a basis of comparison with the subsidiary to ascertain the degree of adaptation to the local culture. From this cluster the two selected companies were: Nobleza Piccardo, a British American Tobacco subsidiary (of British origin) and IBM Argentina, the local subsidiary of the American multinational.
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4.4.1. The selected organisations
In this section, the two selected case studies are presented and briefly described. As mentioned earlier, they are MNE subsidiaries selected on the basis that they belong to the Anglo cluster as defined by the Globe Project (2004, 2008) in terms of societal culture. One parent company is American while the other one is British.
4.4.1.1. IBM Argentina
IBM Argentina is a subsidiary of the IBM Corporation and was founded in Argentina in 1923. As at 2013, IBM Argentina has been in the country for 90 years. It currently employs approximately 8,000 people locally. Its products and services are related to Information Technology (IT). In terms of geographic scope, IBM Argentina supplies the domestic market with products and services, and it exports services to more than 180 clients in 20 countries in five continents. The clients are government agencies, large MNEs, and Small and Medium size companies (SMEs). IBM is considered a model firm in terms of corporate citizenship, a concept that is reflected in the organisation’s ethical management and transparency in its dealings with different stakeholders, and which sets corporate goals compatible with sustainable development. From its beginnings, IBM Argentina has shown a strong institutional commitment to the community. This is shown by its contribution to areas such as education, integration of disabled people, and promotion of scientific, academic, cultural, economic and environmental activities (see appendix 10 for further details).
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4.4.1.2. BAT Subsidiary in Argentina: Nobleza Piccardo
Nobleza Piccardo is the Argentine subsidiary of British American Tobacco (BAT). In 2013, Nobleza Piccardo celebrates the 115th year anniversary of its foundation. The subsidiary employs approximately 1,200 people and it belongs to the tobacco industrial sector. The products are cigarettes of various types and flavours. The company basically sells to the local market. In 2010, Nobleza changed the way it had been operating until then. It became part of a business unit that brought together the four markets that make up the Southern Cone business unit, Argentina, Chile, Peru and Paraguay (see appendix 11 for further details).
4.5. Access to the companies
As far as the researcher ‘being accepted’ is concerned, it is worth mentioning that Argentina is a low trust society (trust as defined by Fukuyama, 1995) and this characteristic naturally extends to the business world. Academic research is not common in the business environment, and this further restricts access to companies. The selected site should have the following characteristics (Remenyi et al., 2004), (1) Entry should be possible. (2) The company should provide the possibility of obtaining appropriate evidence. (3) It should be possible to establish a relationship of trust with informants.
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(4) The quality and credibility of the evidence gathered for the study should be guaranteed.
Access to the selected organisations should satisfy these four requirements. First entry was possible, which was absolutely necessary to start the study. The other three were conditions were met through the empirical work. Based on these qualities and having decided to focus the research on MNEs that belong to two countries, UK and United States, part of the Anglo Cluster as defined in the House et al. (2004, 2008)4, the gatekeepers who grant access to the companies were contacted. All organisations were approached through personal networks. Nobleza Piccardo, the BAT subsidiary, was contacted with the assistance of the executive director of the Argentine British Chamber of Commerce. In the case of IBM Argentina, access was gained through personal contacts. In all cases, the introductions were made and a corporate data questionnaire was developed by the researcher during the first half of 2009. An introductory letter was sent to the respective gatekeepers, which was followed by an introductory meeting with said people.
4.6. Informant selection: Purposive sampling
Senior managers and directors were selected to be interviewed at the chosen companies. The lower echelons and blue collar workers on the shop floor were deliberately not included because it was thought that they could make a contribution in terms of company strategy. Although they could share cultural insights, it was felt
4
Anglo Cluster in the GLOBE Research Programme includes Australia, Canada (English speaking area), England, Ireland, New Zealand, South Africa (White sample) and the United States (GLOBE Project 2008, p. 297)
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that senior managers could offer their sense making and world views on both of the principal pillars of this thesis, strategy and culture.
Informant selection is decidedly appropriate both for quantitative and qualitative techniques. As this research’s orientation is the qualitative approach, a purposive sampling technique has been adopted. Purposive sampling technique “is a type of non-probability sampling that is most effective when one needs to study a certain cultural domain with knowledgeable experts within.� (Tongco M.C, 2007).
Choosing the purposive sampling is fundamental to the quality of data gathered; thus, reliability and relevance of the informant must be ensured. The standard interviewee level was selected by the researcher founded on their knowledge of the high level strategic issues to be discussed. They were regional and local directors, senior and middle managers. In all cases, the respective CEOs were included and interviewed.
4.7. Evidence collection
The evidence collection technique is essentially the semi-structured interview (Remenyi, 2011). The idea of returning to the subject companies and engaging focus groups with feedback as a form of triangulation was discarded. This was because Argentine management culture is quite secretive and loath to disclose information, even among colleagues.
Instead, a reduced second round of interviews had to be carried out and an event organised at the Argentine-British Chamber of Commerce. This event consisted of
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gathering a number of Anglo cluster MNE executives and sharing the results with them (on an anonymous basis). It was expected that their comments and feedback would help validate the results.
In the early part of the research; a pilot study was carried out (Section 4.7.3) - that led the researcher to adopt a qualitative approach. Initially the research idea was to focus only on MNE corporate strategy and societal culture in order to find answers to the adaptation process – this was pursued in 2009/2010 -. During that period, interviews with executives of a third company, a joint venture of mixed British origin and Argentine were planned and carried out. However, this organisation was subsequently discarded from the main research because it did not meet the study requirements on MNE type of investment (i.e. subsidiary). But those executives’ perspectives were considered for the Argentine context analysis.
Nonetheless, the initial topics turned out not to be satisfactory enough to reach appropriate results. This led the researcher to continue investigating along other complementary paths such as polycentricity and business strategy. Both disciplines were incorporated in the second stage of empirical research that was carried out in the 2012/2013 period.
4.7.1. Semi-structured interviews
Semi-structured interview is a method of research that is not as rigid as a structured one. The interviewer has a guideline of themes to follow while new ideas are permitted to be brought up during the conversation as a result of what the
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interviewee states. Remenyi & Bannister (2012) refers to semi-structured interview as “the most common type of interview in management research” (Remenyi & Bannister, 2012, p.67).
The present research had to be conducted by means of semi-structured interviews with senior executives. These semi-structured interviews were to last a relatively short time (one hour) due to the time constraints experienced by the businessmen who participated (Morgan, 1980). They are busy practitioners and do not have much time to spare. Following Remenyi et al. (2003), the interviews were designed as semi structured, with some open-ended elements to provide the range of information from the interviewee.
Two rounds of interviews were planned, in 2009/2010 and 2012/2013. The interviews in the period 2009/January 2010 were to cover corporate strategy topics and culture (see Appendix 2); in December 2012 to January 2013 (see Appendix 3) they covered strategy, culture, polycentricity and questions relating to developments in the intervening years. In both instances semi-structured interviews were to be carried out in meeting rooms provided by the companies. All the interviews would be be tape recorded with the interviewees’ agreement. A schedule would be set up in advance at both companies and would be provided by the gatekeeper’s assistant.
In the first round 2009/2010, the interviews were designed to start with the strategy related questions because it was felt that interviewees would find them less threatening than questions on cultural issues, as strategy is an area where they feel comfortable as it is less personal. The strategy related questions referred to the
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subsidiary and the whole corporation and were prepared by the researcher. For example, in the case of the question of centralisation versus decentralisation, the question was framed in non-controversial terms that did not involve confidential information. The interviewee was asked if the measures taken to deal with the Swine Flu epidemic that had recently affected society worldwide had been determined centrally or decided locally. The questions on culture were based on Globe Project’s research as it was the latest major research available in the field, plus questions adapted from Trompenaars and Hampden-Turner (2000, 1998). Interviewees showed considerable interest in the fact that the research was connected to culture, and were especially interested in the link to national culture and adaptation.
All interviews were carried out in Spanish, the language spoken in Argentina. In both case study companies, the CEOs were interviewed, as well as other managers and directors, thirty one in total. After each interview a transcript of the recording was produced in Spanish by a third party and double checked by another colleague and by the researcher against the actual recording. The transcripts were later translated into English and subsequently back translated to check for accuracy.
Regarding the validity aspect within the constructionist umbrella, the intention was to satisfy the main question asked by Easterby-Smith (2004), “Does the study clearly gain access to the experiences of those in the research setting?” Table 4.4 summarizes interview topics.
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Interview Topics
•
MNE
Subsidiaries
First round (2009/2010)
Second round (2012/2013)
. Corporate strategy traits
. Business strategy topics
. Societal culture:
. Institutional
- IBM Argentina
- Future orientation
- Nobleza Piccardo (BAT)
- Power distance
polycentricity aspects . Societal culture overview
- Uncertainty avoidance •
Argentine
Context - Foreign invest reps. •
Argentine Context
- Argentine private sector
. Business strategy topics . Institutional polycentricity aspects
rep.
. Societal culture overview
Table 4.4. Content of Semi-structured interviews
4.7.2. Translation and back-translation
The questions and interview guidelines were translated from English into Spanish and back-translated into the original language to guarantee accuracy (Brislin 1980; Brislin and Triandis 1984). Similarly, the interviews (which were also in Spanish) were transcribed and translated into English. The transcriptions and translations were double checked by a second person as suggested by Remenyi et al. (2011), Ercikan (1998), and Warwick and Osherson (1973). Language considerations were planned prior to starting interview stage.
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The researcher was aware that different meanings can be attached by different cultures to concepts that would appear to be the same when translating from one language to another (Brislin and Triandis, 1984). The etic-emic aspects have been taken into account; meaning in this case, etic as culture-common and emic as culturespecific (Brislin and Triandis, 1984). This raises the issue of the etic-emic aspects of research. These issues have to be taken into account when researchers belong to a different culture from that of their subjects, which is not the case here. However, the fact that the researcher is working across two languages, writing and reading in English and carrying out the fieldwork in Spanish raises emic-etic issues. The way the emic-etic question is dealt with is by back-translating all the interview material into English and the questionnaire into Spanish (Brislin and Triandis, 1984). The researcher, as a member of the same culture as the subjects has an advantage, especially in qualitative research. The cultural and academic parameters guiding this piece of research are, if not specifically British, at least part of the Anglo culture as defined by Globe Project (2004, 2008). This gives the researcher a foot on both camps, so to say.
4.7.3. Pilot Study: Problems found at the initial stages
At the early stages of the research, a pilot study was carried out in six companies in order to ascertain the rate of response within selected companies and to identify potential problems. Two of the companies were subsidiaries of American origin, one was German and three were Argentine companies. The Argentine enterprises were the control. In every case, the firm was accessed as a result of personal contacts.
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The research was intended to be quantitative by way of questionnaire sent by email. The questionnaire contained 35 questions, 15 based on Trompenaars and HampdenTurner (2000, 1998) and 20 based on Hofstede (2001) (see Appendix 7).The pilot study was carried out in the second half of 2006 and the results were presented at a Henley Business School research colloquium on 12 May 2007. The main conclusion was that managers in the foreign subsidiaries appeared to display stronger Argentine characteristics than did managers in Argentine companies. This led to the main idea behind this thesis, which is adaptation to the local environment.
In addition, four interviews were carried out based on the same questionnaire in order to ascertain that the questions were correctly understood. In every case, some questions based on Hofstede’s work were not clear. One of the problems was whether the questions referred to actual situations or to the situation as the respondent thought they should be. GLOBE Project solved this problem by asking two types of question, ‘as is’ and ‘should be’.
The response rate was 32 percent. It is important to mention that few questionnaires were allowed to be sent within companies. The reason is mainly associated to the fact that practitioners are not familiar with academic research in Argentina. The result of the pilot study findings led the researcher to the interpretive paradigm; it was decided to move onto qualitative research. In this regard, plans about the way qualitative research would be carried out started to be delineated as previously mentioned.
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4.7.4. Other evidence collection
Other type of evidence collection was carried out in order to obtain data from secondary sources. These data would be used for triangulation of the information obtained in interviews. Brochures of the organisations were considered as well as institutional websites and information about the companies published in the press.
With regard to the local business environment, which is considered in the light of formal and informal institutions, information published in the media was also analysed. The Economist Intelligence Unit (EIU) annual reports on Argentina were assessed in order to obtain reliable information about the country context. Academic lectures about the Argentine situation and Argentine management styles were also analysed. Moreover, executives from private sector companies were interviewed in order to ascertain their view and experience in the same Argentine context.
4.8. Evidence Analysis
Data analysis is considered “the heart of building theory from case studies� (Eisenhardt, 1989, p. 539). Case studies are rich, empirical descriptions of particular occurrences of a phenomenon based on various sources of data (Yin, 2009); as such, the two selected cases fulfil the requirements for the aim of the study. In this regard, this study follows this assertion as both case studies are the pillars of the theoretical conjecture and the model that emerge.
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The adopted data analysis method was thematic analysis (Cresswell, 2007; Gibbs, 2007; Guest, 2012) in its simplest form of classifying data and information for qualitative data. The researcher assessed the collected data, took notes and classified them into categories. Thematic analysis is considered by Boyatzis (1998) as a data or information analytic strategy, as it helps the investigator shift the analysis from a broad reading of the data towards discovering patterns and developing themes. Moreover following the philosophical stance of this research, interpretive analysis was considered as the broad approach, whereas thematic analysis is a method. Thematic analysis was the technique adopted in this study. Furthermore, as this research takes an inductive stance, there was at all times a process of analysing existing data plus discovering new items that enhance the results of the study.
Thematic analysis was applied to the interview guidelines for both cases. Additionally, the key step of “within-case analysis” (Eisenhardt 1989, p. 540) follows the format of analysis by categories based on the “Framework of Departure” (figure 3.2). The table shown below shows the selected categories for case analysis.
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Institutional Polycentricity
Formal institutions. Political, economic and regulatory.
Rules of the game.
Informal institutions. Societal culture.
Societal culture dimensions
Uncertainty Avoidance
Power Distance
Future Orientation
Business level strategy
Entrepreneurial problems
Engineering problems
Administrative problems
Strategic choice and cultural dimensions Liabilities or advantages of foreignness
Table 4.5. Selected themes based on Framework of Departure (figure 3.2)
However, following Eisenhardt (1989, p. 540) the central idea was to familiarise “with each case as a stand-alone entity” or as Yin (2009, 156) calls them “individual case study as separate study”. Thus both cases become the basis on which to build the mainstays of the next step, cross-case analysis.
Cross-case analysis was combined with within-case analysis and shared same patterns. Moreover, the selected tactic was to list and work on similarities and
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differences between both organisations. Bearing in mind that a modest number of case studies were examined, “the creation of word tables that display the data from the individual cases according to some uniform framework� (Yin 2009, p. 156) was incorporated. In this regard, the above mentioned initial framework arising out of the literature review (Figure 3.3) - was the ground on which findings from the two case studies were analysed. Following Eisenhardt (1989), subtle similarities and differences in the organisation categories were searched for. Incidentally, the result of comparisons could be new categories and concepts that had not been anticipated. In this regard, serendipity had an impact in this qualitative study (Corbin and Strauss, 2008).
4.9. Building theoretical conjecture and model
Theory generation (Ridder et al., 2014) in the form of a theoretical conjecture and a resulting model became the theoretical contribution. Theoretical conjecture would emerge as a constant comparison between emerging constructs, connexions and existing literature in three fields of study, i.e. societal culture, business strategy and institutional theory in the form of polycentricity.
With the purpose of constructing an appropriate theoretical conjecture and model across organisation types, the selected companies were purposefully selected (Pettigrew, 1990). A final stage was the cross-case analysis –mentioned in the previous section- where different findings had to be compared in order to reach overall conclusions. Similarities and differences were examined and general lessons learnt which were shown in the form of a discussion, giving rise to a theoretical
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conjecture and a proposed model. In this regard, the study followed the definition of theoretical conjecture as “a clear expression of a possible theory that has been compiled by the researcher for the purposes of testing” (Remenyi et al., 2003, p. 290) and in connection to this issue, “a model may be described as a representation of … a system or an event or sequence of events” (Remenyi et al., 2003, p. 285). Therefore, the model explained the logic of the theoretical conjecture involved.
Inductive logic was applied and constructionism or interpretivism was the adopted paradigm, centred on “exercise of judgement (not following of procedures or rules) and the making of an interpretation” (Schwandt, 1994, p. 122). Moreover, inductive theory building involved making inferences between empirical evidence and theory already shown in the literature review chapter.
4.10. Validity This component is related to the Evaluation Criteria. Considering that this study is carried out under the qualitative perspective, the criteria for judging qualitative research are credibility, transferability, dependability and confirmability. The equivalent concepts in quantitative research are internal validity, external validity, reliability and objectivity, as summarised on the table below (Remenyi and Bannister, 2012). Qualitative criteria are used in this research. Table 4.6 displays the analogy between quantitative and qualitative research validity concepts.
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Traditional Criteria for
Alternative Criteria for
Assessing Quantitative Research
Assessing Qualitative Research
Internal validity
Credibility
External validity
Transferability
Reliability
Dependability
Objectivity
Confirmability
Table 4.6. Analogy between Quantitative and Qualitative Approaches
4.10.1. Credibility The credibility criteria involve establishing that the results of qualitative research are credible from the perspective of the participant in the research. From this perspective, the purpose of qualitative research is to describe or understand the phenomena of interest from the participant's view. This in turn, means that the participants are the only ones who can legitimately evaluate the credibility of the results.
4.10.2. Transferability Transferability refers to the degree to which the results of qualitative research can be applied in other contexts or settings. From a qualitative perspective transferability is primarily the responsibility of the one doing the ‘generalising’. Transferability can be enhanced by doing a thorough job of describing the research context and the assumptions that are central to the research. Therefore, there is no desire to make these cases generalisible, since an ‘interpretive sense making’ approach that looks for ‘particularisation’ is being followed. 131
4.10.3. Dependability The traditional quantitative view of reliability means that it is based on the assumption of replicability or repeatability. Dependability, in essence, is showing that the findings are consistent and could be repeated. Essentially it is concerned with whether we would obtain the same results if we could observe the same thing or event twice. However we can not actually measure the same thing twice as, by definition if we are measuring something twice, we are measuring two different things. The idea of dependability, on the other hand, emphasizes the need for the researcher to account for the ever-changing context within which research happens. The researcher is responsible for describing the changes that occur in the background and how these changes affected the manner in which the study is approached.
4.10.4. Confirmability Qualitative research tends to presume that each researcher brings a unique perspective to the study. Confirmability refers to the degree of neutrality or the extent to which the findings of a study are shaped by the respondents and not researcher bias, interest or motivation. In this research, this side is considered in the activity developed at the Argentine British Chamber of Commerce where both the theoretical conjecture and the emergent model from the empirical field study was evaluated by a selected group of senior executives (September 2013).
Another relevant participant at this confirmability stage was a Citibank regional head office director in charge of Human Resources for the Latin American region who resides in Miami. In this case, two teleconferences took place in December 2013. A 132
questionnaire had been previously sent which was filled in after the conferences. The Citibank director, the researcher and Paul Griffiths participated in both three way conversations. Moreover, further material similar to that used at the Chamber had been sent to the interviewee in advance.
4.11. Work plan
A high level work plan is shown and activities at different stages are described below. Activities are briefly described but it is important to note that departures from the initial plan in 2006 took place. Personal matters related to the highly uncertain environment and geographic distance from Henley Business School had an impact.
Figure 4.3 displays activities performed during research period.
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2006
2007
2008
2009
2010
2011
2012
2013
Literature Review
Final CDP Thesis Critique
Pilot Study Select Contacts Enroll Cases
Design semi-structured interview guidelines 2009
Perform interviews 2009
Write up results 1
Literature review II
Design semi-structured interview guidelines 2
Perform interviews 2012
Write-up cases
Write conclusions
Final draft
Final write-up
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Group Presentation
Final thesis
Figure 4.3. High level Work Plan
-
Literature Review: this activity is continuously updated; even at the very last stage where Polycentricity and Institutional polycentricity were concepts incorporated as crucial elements in order to reach conclusions.
-
Final CDP and Thesis critique were submitted at the end of 2006.
-
At the end of 2006 and beginning of 2007, a pilot study was carried out. It contributed to the decision to follow a qualitative approach.
-
To focus on Anglo cluster subsidiaries in diverse industries was decided and
selection of contacts plus cases took place in 2008 / 2009 -
Semi-structured interview guidelines were designed in 2009 and interviews
took place in the second half of 2009 and first half of 2010. Final results were written up in 2010 and 2011. -
Additional Literature Review was incorporated. Additional interviews
were designed and conducted in 2012. -
By the end of 2012 and beginning of 2013 case studies were written-
up, and conclusions reached. -
Thesis draft was submitted + Final thesis
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4.12. Strengths and weaknesses of the design
The position of this researcher is social constructionist following a subjective search meaning (Welch et a., 2011) as the researcher belongs to the geographical context and makes the researcher ‘part of the context’, leads her to a quite subjective position in relationship to the context but also allows her to hold an independent position (Yin, 2009) in the relationship with the subject companies.
Some limitations such as having access only to local subsidiary managers and senior managers drives this study into an inductive perspective when considerations about the whole organisation are taken into account. This limitation is a reality that the researcher had to face, but on the other hand, it is a fact that managers and senior managers are the only ones that are aware of sensitive information such as strategy and company connexions. That they accepted to participate in academic research in this environment is positive considering that managers and companies in Argentina are not used to disclosing information for these purposes. This initial step in such an uncertain and low trust environment was not easy, it required real effort from both sides, researcher and research subjects, which is a welcome development in Argentina. Regarding the social constructionist approach, the researcher’s intention is to interpret or make sense of the vision others have of the world. Strengths and weaknesses coexist in this qualitative study where subjectivity and context are strong elements.
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4.12.1. Strengths:
-
This study contributes with theory generation and its constructs and
interrelationships to theory body of knowledge (Ridder et al.) -
It is one of the few academic studies in the IB field that considers MNE
subsidiaries, in this case American and British in origin, operating in Argentina. -
Its nature gives it originality.
-
The fact that the study is qualitative provides it with originality too.
-
The high context perspective (Child, 2000) provides sensitivity to the national
context. -
The Qualitative approach under IB field (Birkinshaw et al., Doz, 2011) is
followed, which means going back to qualitative research in IB field, in turn is the aim of this study5. -
Case study under the IB framework (Bamberger, 2008; Brannen &
Doz, 2010; Piekkari et al., 2009, Redding, 2005; Welch et al., 2011) -
Case study parameters (Eisenhardt 1989; Yin, 1994, 2009) are
followed. -
“In context� (Arhens, 2008; Bamberger, 2008; Meyer and Peng, 2005; Redding, 2005) where the role of context is vital for understanding (Welch et al., 2011).
5
Related to the connection between IB and qualitative research, Birkinshaw et al (2011) affirm that the International Business (IB) field was originally set up on a rich heritage of qualitative research (for example, Bartlett, 1979; Crozier, 1965; Kindleberger, 1956; Prahalad, 1975; Wilkins, 1970, 1974). Over time, qualitative methods were cast aside in favour of quantitative methods as a reflection of the increasing influence gained by positivism in the social sciences.
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The purpose is “to rely as much as possible on the participants’ views of the
-
situation” (Creswell 2007; p.18) and reach some inductive conclusions with regard to some aspects of reality as they see it. -
This study looks for ‘particularisation’ not generalisation,
-
Theory generation in the form of theory building and emerging model (De
Ridder et al., 2014; Eisenhardt 1989)
4.12.2. Weaknesses:
-
The fact that is not generalisable from a sample to a population may be seen
by some as a weakness. -
The fact that the study relies on participants’ views could impair the
study’s objectivity. -
It would have been interesting to have had access to lower level staff to understand their perspective on realised strategy, but this was partially replaced by observing evidence from external secondary sources.
-
Indigenous organisations of comparable characteristics could have been a source of comparison, but in fact due to the size and prominence of the subject organisations, no suitable local firm are in existence in the respective industries.
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g 4.13. Summary
After having developed research methodology and design aspects, an overall conclusion is delineated in this section. Social constructionist approach encompasses the research in which qualitative stance is adopted. Precisely qualitative research in the field of International business (IB) (Bamberger and Pratt, 2010; Birkinshaw et al. 2011; Doz 2011; Johns, 2006) is explored as it is at the heart of this work. Case study method (Eisenhardt, 1989; Stake, 2005; Yin, 2009; Welch et al., 2011) under the IB framework is the tool selected to develop this research, which involves two MNE subsidiaries in Argentina. After case study stand-alone analysis, cross-case analysis takes place. A special country context (Cappelli and Sherer, 1991; Johns, 2006; Welch et al., 2011) such as Argentina for the development of the fieldwork, and the researcher’s interest in the worldviews of the people interviewed at the subject companies, is central. Consequently, cross case analysis becomes the basis of an emerging theoretical conjecture and resultant model that emerges from empirical research. Finally, the next chapter presents the cases and introduces the within-case analysis for both cases.
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Chapter 5. Data Analysis
5.1. Introduction
Chapter 4 describes methodology and research design of the empirical phase where the two selected case studies are analysed as stand-alone entities (Eisenhardt, 1989). As mentioned earlier, both case studies are MNE subsidiaries selected on the basis that they belong to the Anglo cluster as defined by House et al. (2004, 2008) in terms of societal culture. One parent company is American while the other is British. Initially there was a third company involved in the research. It was an ArgentineBritish joint- venture involved in the oil industry. Data collected at this company was not used in this research because it was not a subsidiary and therefore it did not meet the selection criteria for this research. The selection criteria involving MNE subsidiaries of Anglo cluster companies was established after executives at the jointventure were interviewed. It was necessary to restrict the research to Anglo cluster MNE subsidiaries in order to homogenise the home office cultural background.
This chapter focuses on analysing the data of both case studies, which becomes later “the heart of building theory of case studies� (Eisenhardt 1989, p. 539). Thematic analysis is carried out on the data collected during empirical research. This data is analysed in terms of categories. The categories arise in turn from the constructs used to build the framework of departure (figure 3.3). The framework of departure represents the foundations on which the theoretical conjecture and model are built in chapter 6.
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Section 4.7.1 highlights the existence of two rounds of interviews. The reason why a second stage occurred resides in the fact that first phase concepts did not explain the researched phenomenon. There was a subsequent review of the literature where the researcher came up with new set of concepts such as polycentricity (Ostrom, 2005) and institutional polycentricity (Batjargal B. et al., 2012; Hitt, 2012; Hitt M. A. et al., 2011; Xu & Hitt, 2012), and strategic types at business level strategy (Miles and Snow, 1978, 2003) in which adaptation to business environment is investigated.
As mentioned above, IBM Argentina is first analysed as a stand-alone case, followed by Nobleza Piccardo, a BAT subsidiary. Evidence analysis is described in section 4.8. There is an outline of the selected method, thematic analysis, and the introduction of the Framework of Departure (figure 3.3), which arose from the literature review. Both stand-alone cases are conducted as within-case analysis, which are then examined through cross-case analysis.
The logic behind this study encapsulates the cross-case study technique applied to two case studies, whose comparative case study (Pettigrew, 1990) is set in the context of a specific country, Argentina in this case. Thus both subsidiaries share similar external context, but have their own internal contexts. The collected evidence is analysed in terms of similarities and differences between both organisations, this cross case analysis is carried out in chapter 6. However, at an earlier stage each individual case study is treated as an individual case. This initial analysis is carried out in the present chapter. Both case studies follow the structure shown in table 4.5.
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The fieldwork consisted of interviews at each company. The use of this tool is consistent with the researcher's personal style, and together with the fact that we live in an “interview society� (Fontana and Frey, 2005), contributed to the choice of this technique. Evidence collection took place at two different times, 2009/2010 and 2012/2013. A first set of 12 interviews at each company was carried out during the second half of 2009 and January 2010, the second set of 5 interviews at each company was carried out in 2012/2013. At Nobleza Piccardo (BAT subsidiary), 1 out the 5 interviewees had been interviewed before in the first round, whereas at IBM 4 out of 5 had been interviewed before. Table 5.1 indicates the interviews that were carried out.
Stages First round (2009/2010)
Second round (2012/2013)
- IBM Argentina
12
5
- Nobleza Piccardo (BAT)
12
5
MNE Subsidiaries
Overall quantity of interviews at organisations subject of the case study = 34 (*) (*)
Complementary
information:
Quantity of informants in the second round of interviews that had already been interviewed in the first round. 4/5 -IBM Argentina 1/5 - Nobleza Piccardo (BAT)
Table 5.1. Centres where Case Study interviews were carried out
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All informants were met individually in the same meeting room at each organisation, except for IBM's CEO who met the researcher in his own office in January 2010. The topics covered mainly focused on Argentine societal culture and corporate strategic issues in connection to the degree of organisational centralisation (see Appendix 2). During the second round, at the end of 2012 and beginning of 2013, five informants were interviewed at each company.
During these sessions, the main issues were subsidiary strategic problems, implementation of strategic choice, relationship of the subsidiary with local environments; the ways in which formal institutions shape the rules of the game and how informal institutions interact with the organisation (see Appendix 3). This second round of interviews relates to the fact that as the researcher delved into the initial evidence, a number of issues emerged. The researcher came across the concept of institutional polycentricity, which proved to be a remarkably useful frame of reference to tackle these hitherto unexpected perspectives. The scheme that is used for the environmental analysis is shown in the figure below.
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Figure 5.1. Scheme for analysis of the relationship of the subsidiary with the context
The relationship of the subsidiary with the host country environment is described in the light of the polycentricity framework. Batjargal B. et al., 2012; Hitt, 2012; Hitt M. A. et al., 2011; Xu & Hitt, 2012) further introduced the concept of institutional polycentricity which encompasses formal and informal institutions. Formal institutions are political, economic and regulatory institutions. Informal institutions include societal culture and industry norms (Bartjargal et al.). Both formal and informal institutions establish the rules of the game. In this thesis, societal culture is analysed along three dimensions, Future Orientation, Power Distance and Uncertainty Avoidance.
Two cases are analysed below. IBM Argentina is an IBM subsidiary and it is linked to American culture. Second, Nobleza Piccardo, BAT subsidiary is connected to English culture.
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5.2. IBM subsidiary in Argentina: IBM Argentina
5.2.1. The relationship with the Argentine environment
IBM has been in Argentina for ninety years (see appendix 10), which means that IBM Argentina has survived under different type of governments and extremely different political circumstances. In this regard, IBM’s subsidiary in Argentina had periods where the market exhibited mature characteristics and therefore IBM growth was limited to expanding existing product lines. At other times, the Argentine market was open to innovative initiatives. This much different conditions were created by Argentina’s abrupt political and economic swings. Formal institutions are weak in Argentina, in its pendulum environment executives develop the necessary skills to adapt to an ever changing economic context, innovating and listening to the clients’ needs (see appendix 10, section 10.5).
Despite Argentina’s political and economic vicissitudes IBM Argentina has shown a positive attitude towards adaptation (see appendix 10, section 10.2). In this regard, executives agreed on the importance of continuously taking care of the financial health of our company. Moreover, executives are conscious that in present times Argentina’s government is centralised into a few hands. This is the main characteristic of the monocentric socio-political structure in place during this period. In this context, formal institutions are constantly interfering in the market. The level of market interference has an impact on the way the company operates. For example, companies cannot obtain permits to import goods or inputs unless they have a
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positive corporate balance of trade, i.e. they export individually as a corporation more than the import.
IBM is a global company and it has subsidiaries in different environments. IBM is used to operating in emerging countries and markets which are not as yet mature; however these economies have gained increasing importance in global business. That makes Argentina not substantially different from the global environment. In other words, IBM as a corporation is used to dealing with complex environments such as China or Asian countries, or Eastern European markets (see appendix 10, section 5.3).
The figure shown below shows key points connected to Argentine formal institutions as perceived by IBM staff who are used to uncertainty and ever changing conditions.
Figure 5.2. IBM Argentina. Perspectives about Formal Institutions
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Within this context, rules of the game are not clear. Informality prevails in Argentina’s formal institutions, where excessive written regulations and bureaucracy coexist with implicit communications. Moreover, there is a heavy heritage; especially in the way rules are written that comes from the Spanish colonial tradition, which is reflected in Argentina’s current bureaucracy. IBM Argentina has not suffered a major impact on operations, despite an expanding bureaucracy the company has managed to adapt. In the last few years, market regulation has spawned implicit and explicit bureaucracy. A file in government’s hands can be dealt with quickly and efficiently, or an official can delay it as long as he wants. In some areas, the more complex the question involved, the more it is subject to the discretionary decision of a particular official. This turns the process quite particularistic and far from universalist. Regarding implicit or explicit forms, there is agreement on certain prohibitions, in which civil servants will provide the general framework in writing, and later there are particular things they don’t write, and will never put in writing.
The rules of the game are not at all clear under this government. Adaptation is required to survive and make progress. The fact is that when IBM local executives receive American managers, it is difficult for the local team to commit or guarantee anything, because of constant changes: for instance, plans for imports next month cannot be guaranteed. But they move forward under uncertain conditions but with great confidence that everything will be all right on the day. Though rules are not extremely clear as far as decisions in writing is concerned, some are of course can be modified at any time. Generally IBM Argentina’s executives always face situations and challenges that are new but they also have the practice of overcoming them.
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Fortunately until now no obstacle has proven to be an insurmountable barrier for the subsidiary which has been able to continue to do business and to grow. An important adaptation change occurred in 2001-2002, when the company faced a considerable challenge in the form of compulsory conversion of contracts from US dollars to Argentine pesos ((EIU Argentina Country Report, 2012). As it really had some substantial contracts with some corporate clients, IBM Argentina’s managers sat down with each one of them to understand their position and to find a point of equilibrium where no one won and where agreement allowed the company to continue in operation reasonably without affecting the clients business and without impacting substantially on the profitability of the company. Often situations in which the company faces problems can be overcome but at a cost; there is always some kind of loss which the executive team considers part of the business risk.
Besides, these crises also help cement the relationship because they turn a supplierclient relationship into a relationship akin to that of partners, where one supports the other, a relationship which turns fruitful in times of plenty. There were a lot of providers who withdrew in the face of risky or difficult situations. Clients really dislike this kind of attitudes and reject providers who come back in times of plenty. IBM staff perspectives about rules of the game in Argentina are summarised in figure 5.3.
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Argentina: Rules of the Game Perspective I
not clear
highly bureaucratic
insiders know the rules
informality prevails
particularistic
implicit and explicit communication coexist
bureaucracy comes from Spanish tradition crises help cement relationship with clients
cannot commit or guarantee anything
Figure 5.3. IBM Argentina. Perspectives about Rules of the Game
The way to understand the whole spectrum of the society should be across informal institutions in the form of societal culture (Hitt et al., 2012; Redding, 2005) which not only shape formal institutions but also organisations, managerial teams and the people who work within them. In this study, three societal dimensions are analysed and linked to Miles and Snow’s strategic typology; they are future orientation, power distance and uncertainty avoidance. In this case, the world headquarters are emplaced in the US, which means that a degree of adaptation to Argentina, the host country, is required by the organisation. Embeddedness is a characteristic of IBM Argentina, which in 2013 had been in Argentina for ninety years. Argentina shows a considerable gap between the “as is” and the “should be” dimensions that were extensively researched by Globe Project (House et al., 2004, 2008).
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5.2.2. Societal culture dimensions analysis
Globe Project (House et al., 2004,2008) displays results for future orientation, in which Argentina shows a score of 3.08 on the “as is” measure, while the “should be” is 5.78, showing a wide gap. The US displays an “as is” score of 4.15 and a “should be” index of 5.31 (see Appendix 1.C).
Moreover, in this study, twelve interviews with managers and directors were carried out in the second half of 2009 focusing mainly on the ‘as is’ aspect which in turn, means practices relating to the above mentioned three dimensions. The dimensions are examined under subsidiary members’ insights (appendix 12). The analysis of each dimension is shown below.
First, The uncertainty avoidance “as is” index in Argentina measures 3.65 and the “should be” displays 4.66, while the United States shows an “as is” score of 4.15 and “should be” of 4.00. The gaps between “as is” and “should be” were measured by Globe Project and can be quite significant when compared within each country and across different countries (see appendix 1.A). Argentina shows considerable gaps between “as is” and “should be”, whereas the US shows smaller gaps between their own “as is” and “should be” scores. There is also a considerable gap between Argentina’s scores and the US, but this was to be expected and is a central idea in this dissertation. One of the ways in which multinational companies such as IBM cope with this cultural gap is through the concept of embeddedness, which is largely achieved by employing mainly local people at the subsidiary.
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Regarding the uncertainty avoidance dimension, the executive team at head office is not used to uncertainty like colleagues in Argentina are. There is a remarkable difference between the organisation of American origin and the local mind-set at the Argentine subsidiary, where people are used to coexisting with uncertainty.
A question borrowed from Globe Project (House et al.) helps identify the preference related to two characteristics in an organisation, orderliness and consistency versus experimentation and innovation and whether one is prioritised over the other,
Would you say that here order and coherence is given priority even at the expense of experimentation and innovation?
Five responses were obtained favouring order and coherence, while another five gave orderliness and consistency equal value to experimentation and innovation, and only two interviewees thought that experimentation and innovation were more important in the organisation. Interviewees provide diverse perspectives, some, for example, assert that it depends on the role. A project manager would be expected to emphasize order and coherence while a software developer might favour creativity and innovation. Moreover some informants do not take either extreme position, the company tries to achieve a balance and emphasize that it is important to generate creativity in an environment of order. Whereas in some cases, contradiction between order, coherence and innovation is not observed and these three things can be
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combined since they are not different concepts that can all be related to customer needs.
The spirit of IBM is synthesised in both concepts which are fundamental in a large organisation, but it should not be achieved at the cost of killing innovation. The two notions are not incompatible; IBMers try to reconcile them at the company. Order and coherence are important not only because IBM is large, but also in a sense because it is many businesses in one, hardware, software, services, consulting, so order and coherence are needed to integrate everything into a whole organisation. The result is that new ideas and innovation tend to be reviewed by more people than in a smaller organisation and that ideas take longer to come through.
Moreover, both concepts are applicable and it depends on the circumstances. For instance, when giving service order and coherence are needed; the rules and procedures of the service to be provided are agreed beforehand with the client. There is no room for innovation and experimentation at the time of delivering the service. Quality is defined in terms of adherence to agreed processes and procedures: however, there could be situations where a solution cannot be found and when experimentation and creativity would be an asset, but this would be the exception rather than the rule. In this concern, IBM Argentina obtained a prize for innovation in 2008 (see appendix 10, section 10_ 2), so they do encourage it in the right context.
Respondents that emphasize a balance in the organisation affirm that a balance between order and processes need to be struck, if all the controls were applied there would never be innovation, but on the other hand if there were only innovation and
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creativity, chaos might ensue. Innovation is encouraged with a culture of creativity and innovation. There is an Innovation Board, where employees can present projects and ideas and where the Board can allocate funds to allow the project to develop.
Experimentation is not at the implementation stage in countries like Argentina. There is room for discussion, but they follow rigid and stable procedures. IBM is a company run by procedures. Additionally, there are areas where processes are very important such as services. They have to deliver a service and there is no room for innovation.
The second dimension that has been considered is power distance. Globe Project’s results in the “as is” power distance score for Argentina is 5.64, and 2.33 for “should be”, show a substantial gap. In this dimension, Argentina shows the highest score in the world for the “as is” index. The scores for the United States are 4.88 for “as is” and 2.85 for “should be”. It can be observed that the US displays a considerable gap between both measures (see appendix 1.B).
Moreover, in this study, twelve informants were interviewed and all agreed that there is enough room to express divergent opinions. Answers in connection to the relationship with the boss assert in one case that the boss allows dissent and gives his people the opportunity to give their opinion because they are experienced and knowledgeable. Furthermore the researcher was informed that the word “subordinate” is disapproved of in the company, they would rather call them direct reports. Furthermore, direct reports find it easy to talk to people about career issues and personal questions.
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The degree of communication is very high, which ties in with the idea that the organisation is becoming increasingly network-like rather than pyramid-shaped (see appendix 10, section A_10_4). At IBM, it can depend on the manager but in general it is a very open company. It is very strict in many ways, such as the need to follow proper procedures, and very open in others, such as the freedom to express divergent opinions.
IBM is a very open company and not a hierarchical organisation. In Argentina, subsidiary members show an informal style and all call other colleagues by their first names. Another interesting example is if there is problem with a client, the CEO will want to talk directly to the person in contact with the client, regardless of his position at IBM. He will cut through the hierarchy and talk to the relevant person and nobody feels that they have been left out of the loop.
The company encourages employees to be proactive and to generate ideas and suggestions, not to be afraid of being wrong or of making a mistake. Reports do not see managers as authority figures, but rather as facilitators. Managers should care about their report’s career progress, to encourage him to attend courses, to travel, to learn new skills. This is consistent with the fact that IBM is now a primarily a services company selling solutions, having divested from hardware and other forms of industrial products.
There are a lot of formal and informal channels to express opinions, such as webs, web blogs, and wikis. There are hundreds of ways of expressing oneself and of being
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heard. There is an open door policy, employees can go and express disagreement and no one will be offended if a report goes and sees the boss.
There is good communication between bosses and direct reports, especially in the sales culture. IBM has many subcultures; perhaps other areas like services are more formal. In sales a more informal and communicative culture is found. But the disagreement or criticism has to be constructive and in the spirit of finding a solution. They want people to make a contribution while they are choosing strategies, for example, but once the strategy is chosen they want every one behind it, and do not want the strategies or decisions to be open to discussion for ever. Nonetheless at IBM there is room for reports to discuss strategies and work methodologies with their managers.
The fact that it is normal for reports to sit down to talk to managers or in other words, that there is room for different opinions, is considered a cultural issue here. While the corporate company encourages people interacting actively, in Argentina the team is not so good at interchanging ideas without antagonism and argument. In the US this is common, to engage even in heated exchanges. This is seen as positive and constructive but in Latin countries like Argentina reports are more likely to say, ‘yes
sir.’ In this regard, it depends a little on the idiosyncrasies of each country.
Another question connected to power distance is one borrowed from Trompenaars and Hampden-Turner that they used to illustrate universalism versus particularism
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(Trompenaars F. & Hampden-Turner C. 1998, 2000). In this research, it is used to evaluate the situation at the company in terms of the power distance dimension. It is a hypothetical situation that can apply to any company, but the answer given offers a good indication of attitudes towards power. Interestingly, this is a question that surprises interviewees, especially at IBM, as it relates to their company. It is based on an anecdote involving Louis Gerstner, legendary former CEO at IBM, when he forgot his electronic entry card for the IBM building and joined the queue like everyone else in order to get a card for the day. The specific question is:
Imagine that your company has instituted a system where you need an electronic entry card to enter the building. When people forget the card, they have to queue up at reception to obtain a card for the day. One day the CEO arrives and finds that he/she has forgotten the card. What would happen at your company?
1.1. The CEO would queue like everyone else to obtain a card for the day 1.2. The CEO would be given priority and not have to queue to obtain a card for the day
In the Argentine subsidiary, responses to whether the CEO should queue or go first are diverse, where 9 out of 12 answered that the CEO should go first while 3 answered that he should queue up like everyone else.
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The results show that local culture prevails over corporate culture of American origin. High-level executives are respected and deserve different treatment. Universalism is not applicable and particularism is the valid behaviour. Some participants are conscious that the CEO should be treated the same way as everyone else, but they feel that he may deserve exceptional treatment by virtue of his extraordinary responsibilities, and some even recommend that a member of staff should be asked to queue on his behalf. This statement hides the difference that exists from level to level and not everybody is the same inside the organisation. Local mind-set prevails in the subsidiary.
Third, future orientation is analysed. Planning aspect is specially researched. Planning is vital within an organisation that shows mostly long term orientation with a good inclination towards change, while at the same time upholding the status quo. This demonstrates a large degree of adaptation to the local context. Some managers and directors’ perspectives reflect their position towards the future, which in turn, results in a mix of corporate guidelines adapted to the pronounced swings of the Argentine business pendulum. In this regard, when asked to discuss the dilemma between planning for the future and accepting the status quo, most of the informants emphasized that planning was vital. In connection to this issue, one of the main values of the company is that it is in a constant state of transformation. The company is large and slow but it manages to stay one step ahead of the others. There may be areas that are not easy to transform, where the status quo is preserved, the company looks for transformation and does not change its strategy constantly. The managers and directors are obliged to plan, despite day-to-day pressures, which indicate that
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the organisation is extremely planned. IBMers” are constantly thinking future based on their heritage (2011, IBM Chairman and CEO Parmisano speech).
IBM is always thinking of building the next step. The corporation is constantly planning for the future. IBM is at the forefront of research into services, which is the most important sector in the world today. In response to the specific characteristics of the IT industry, IBM´s duty is absolutely to anticipate the future which is the essence of the organisation (see Appendix 10, section 10_3). Moreover, no five year plan exists because 5 years is a long time in terms of technology. They draw up a plan twice a year. Spring Plan and Fall Plan. The Fall Plan is more strategic and focused on what markets they are going to concentrate on.
As the market is very changeable, they work on 3-year forecasts, but managerial team works on next year’s marketing plan but also they plan during a time of year when they prepare plans for next year and next year for the next. They are already planning next year, but do not plan more than two years ahead. Longer planning processes take place but a time horizon of a year is ideal for the subsidiary due to local circumstances.
5.2.3. Business level strategy
Miles and Snow’s strategic problems are applied to IBM Argentina in this section. Taking into account that this type of organisation is complex, when different products and services are categorised in this model, this can only be done partially, 158
so other conceptualisations might exist. Strategic problems and corresponding solutions are examined below.
First, entrepreneurial problems are analysed. The company is engaged in B2B activities within the domestic market where the subsidiary covers the whole country and also exports services to the other areas of the world. Products sold in the domestic market consist of hardware manufactured in countries which are much more competitive and the software which is also imported. Services include consultancy services and all technical services.
Regarding exports, the fundamental change is that Argentina is losing competitiveness, even if some people don’t want to see or understand that the subsidiary is reducing its level of service exports to the world. Competitors are other IBM subsidiaries such as IBM India, IBM Philippines, IBM Poland, IBM Brazil, IBM Costa Rica where labours cost are lower.
Related to local market, IBM will remain strong in Argentina; the subsidiary will either grow or reduce our size, but since it has been in Argentina for ninety years the corporation wants to stay another ninety. In this regard, there can exist peaks and troughs, but a company like IBM has a solid future in Argentina, since it is the only technology company that has been in the country for ninety years (see appendix 10, section 10_2).
Regarding market penetration and product market development, expansion means strong growth in quantitative terms year on year, gaining new clients, in terms of
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quantity as well as quality. Related to market positioning, the company works hard on IBM message to places where IBM Argentina has not reached yet. In other words let prospective clients know what IBM Argentina does and what it can offer.
As already mentioned (see appendix 10), the market consists of three or four big players like IBM Argentina. The competitors that have a similar profile are HP, Oracle, and Oracle/Sun, and there are also SME niche players that have specialized in very specific solutions for certain industries (like insurance, for example). But IBM has a wider portfolio. There are bigger players which offer solutions and show similar technical profiles, but their portfolios are not as diverse and wide ranging as IBM’s. But what differentiates IBM Argentina as a vital and key solution, what they call product roam up (i.e. continuous update).
With regards to the community and stakeholders, they are paramount for IBM that “has shown strong institutional commitment to them� (IBM 2012 dossier). With suppliers IBM Argentina also has all the metrics in place, all the standards that the corporation uses, so they too can be efficient and ecological at the same time.
IBM has a programme called Business Control where they permanently conduct customer satisfaction surveys with the clients, which allows them to measure how they are responding. Moreover, they try to have an excellent communication with clients. The fact is that IBM takes good care of all its stakeholders.
Second, engineering problems are considered. IBM Argentina is the largest IT company in the market and it has the longest track record. It runs a large service
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centre from which it exports software, maintenance and other support services to clients throughout the world. In this concern, the subsidiary has eight facilities in the Buenos Aires and the province of Buenos Aires. Moreover one director asserts that the company has recently opened a new physical office not only to export services, but also to serve local clients in Cordoba and Rosario.
The company covers the whole country and the structure is divided into regions. The Middle Market and geo expansion unit responds flexibly to further the company’s quest to gain new markets. When the company attempts to expand into the provinces, it depends on the existing technological infrastructure, which sometimes is not ideal. The smart cities project poses a real challenge, but it is being developed despite these obstacles (see appendix 10, section 10_5).
In addition, IBM Argentina imports hardware and software for sale to local customers. They are imported from countries best equipped to produce them. In the current climate, this works well as the subsidiary shows a positive corporate trade balance which, as mentioned before, is necessary under this government. Furthermore, advanced technologies are adapted to the local market by the subsidiary.
The competences of IBM Argentina together with the talent and quality of professionals found in Argentina, allow it to service clients throughout the world from Argentina. IBM exports services to more than 180 clients in 20 countries in 5 continents. Export Service Centres supply the following services:
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- Support, operation, maintenance and monitoring of operating systems. - Consultancy on Business Process Management for Human Resources and Finance. - Development of applications. - Asset Management.
Efficiency is the main characteristic of the company, which is given by stable areas such as hardware and software. IT is a very powerful tool to show efficiency when selling to companies, and the concept is applied at the home office too.
With regards to administrative problems, the company is a matrix organisation and follows an analyser strategic type. The dominant coalition is formed by marketing commercial professionals, a significant number of whom have an engineering background. The relevance of planning depends on the type of business run by each unit. At the Middle Markets and Geo Expansion business unit, first they plan and then they execute. Therefore, they plan, execute and assess in relation to a measurable parameter. This shows the traditional plan, execute, and evaluate routine. And later, plan again, execute and assess.
The Global Business Services (GBS) unit works on a balance between planning, execution and assessment. This process is much standardised. Along the year they have a period when they plan, another period when they act and another when they validate or assess. Though this is standard situation, the time frames became shorter, they became six-monthly, then quarterly and nowadays they are monthly and even weekly. As a result they are becoming more flexible. In turn, the cycles become
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constantly shorter, when they have just finished planning they execute in parallel, when they finish executing they evaluate, which means that the process is constant.
Control is oriented to results versus metrics but each member of managerial team has to establish intermediate control points to ensure the result at the end of the period. It is a difficult balance to manage but experience tells when it is the right moment to start, apply control points, or not start.
Related to process, IBM Argentina is the process company par excellence. IBM is aware of the way things are handled as all executives follow the same processes and methodologies, because IBM is unique in that respect. They have more processes than the average company, and many are copied by the market. They definitely have a process for everything. This defines IBM as process company.
Uncertainty is an issue where the experiences of executives who are in charge of decision making plays a key role in mitigating difficult situations. In order to counteract uncertainty they give their clients the opportunity to establish variable consumer agreements with IBM, which means that they don’t necessarily have to pay for the amounts that they have contracted, but rather only for the volumes they actually consume. This helps clients, and IBM too, considerably to deal with uncertainty, as they can absorb peaks in growth, and IBM Argentina helps them cope with lean times by not expecting payment during difficult times.
There is a link with the entrepreneurial spirit that is open to challenge. Performance evaluation is not only connected to results at IBM. It also includes other
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characteristics. This is a sales organisation in constant search of innovation, constant search of new opportunities, whether they materialise or not. They have a constant manifestation for a positive and open attitude to challenges and to go out and find solution.
IBM solutions to strategic problems are indicated in table 5.2 where key points are summarized,
IBM Argentina. Strategic Problem Solutions Entrepreneurial Domestic market growth Problem
Exports services
Solutions
Business Product excellence Innovation Think about the client Relationship with stakeholders Customer satisfaction surveys Import software and hardware /not produced locally Market development with new products (i.e. smart cities) Three big players + smaller ones
Engineering
Various investments on commercial offices and service centres
Problem
Efficiency provided by stable areas
Solutions
New commercial offices around the country Sales and technical people based in nearly the whole country Adapts technologies to local market
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Administrative
Structure: matrix on an international basis
Problem
Processes
Solutions
Strict Control oriented to results Dominant coalition: marketing and engineering Planning depends on the business unit Structure: matrix on the national basis
Table 5.2. IBM Argentina. Strategic Problem Solutions
5.2.4. The strategic choice and the cultural dimensions
In a changing and uncertain environment such as the Argentine pendulum economic and political scene, IBM represents a good example of an analyser. It has struck a balance that has helped it grow slowly and steadily and embed itself in the country despite unfavourable environmental conditions.
IBM Argentina, good illustration of an analyser, delineates the entrepreneurial problem in terms of establishing and developing new products and market opportunities while sustaining traditional activities with traditional products and customers. The result is a hybrid prototype domain that makes coexistence of stable and emerging products, such as technological solutions for smart cities.
Despite a prospector spirit existing in the organisation, concerned with capitalising on opportunities without a great outlay; IBM is a case where research and development prevail under very structured and professional schemes. IBM expresses
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its engineering problem under a “dual technological core” as Miles and Snow calls it. The core includes a steady technological component that gives rise to standard products and services. In IBM’s case, there is a core capability such as ‘roam up’ that enhances the product. The stable component allows the existence of a flexible new component, such as in this case, the smart planet concept and, specifically in Argentina, smart cities, which is a product at a developmental stage aimed at new markets.
From the administrative perspective, the structure is a matrix organisation, Intensive planning is key in some lines of business while not that strong in other types. Control and processes are relevant in IBM. The domain shown by the analyser is a combination and it is expressed in technology, structure and process. The standards are globalised while IBM activities are not exactly regulated in Argentina. This shows a constant adaptation to ever changing rules of the game in the host country. Moreover, the dominant coalition is mostly formed by commercial managers with engineering professional background that give sound roots to IBM Argentina. Figure 5.4 summarizes IBM Argentina’s core issues as analyser type.
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IBM Argentina Analyzer Type
commitment from corporation
follow global standards
stable + flexible components
flexibility
non regulated market
domestic market plus export services
short term with long term coexist
diversity of product and services with no price control
Figure 5.4. IBM Argentina Strategic Choice
5.2.5. Liabilities or advantages of foreignness
An advantage of IBM Argentina is definitely the brand, which executives take care of. IBM means something to the market. It would be very different if they tried to sell technology and technological solutions if they were not IBM. A related advantage is having access to the knowledge and the technological capabilities that a company like IBM has to offer. Moreover, embeddedness is an advantage that strengthens IBM’s position in Argentina. The company has a strong commitment to clients who in turn, experience a high degree of security with IBM Argentina. In this regard, the company has different types of clients with different needs. The team has a confident attitude towards the need for adaptation as they show the corporation the good things that are taking place locally, which are plenty. And some are not so
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good. A company that is not embedded in the society in which it operates cannot last for ninety years.
Another advantage is employing local people since an indigenous team knows the local culture and its subtleties such as implicit and tacit meanings and how to deal with them. Adaptation is central and ‘think local’ is vital. In this regard, the investment director declares that the head office hands down the strategy, but if it is not adapted and somehow nationalised, the results are not going to be as expected. In fact the centre of gravity was lowered recently and the local team now has more influence on strategy implementation. Things have changed considerably and this has had a very positive effect. This is related to that the country should have a say in the construction of the business model, that it should have more power that it had. The fact that local executives are hands on in strategic decisions empowers implementation in the host country.
Adaptation to host country environment fits under embeddedness, and it means, on the one hand, understanding the way one should operate at a social level with providers, clients and the different players and within this scheme to have local people working internally. IBM Argentina adapts solutions and products to the market. Some solutions fit the market; other solutions do not fit the market, in the latter cases they do not invest because it would not make sense.
With regards to liabilities, the subsidiary is subject to two sets of regulations, the law of the host country and the law of the United States. They need to certify, every year all the employees who need to certify their business conduct must read the so-called
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bible. That is the Business Standard Guidance, which reflects both situations. The laws of the United States and those of the country, not the laws of the country from the strict point of view of articles or specific laws, but rather the need to obey both. In case of conflict, the company has a whole body of legal advisors; they can also seek advice from both local and corporate lawyers. This situation reflects different legal contexts that need to be reconciled. The host country has its own legal sphere that in many cases does not coincide with that of the parent company. Therefore, it turns into a liability.
The importance of the brand, which is well positioned at world level, provides security for people who work and who want to come and work for IBM Argentina, while many companies look favourably on the subsidiary. This shows a virtuous loop that reinforces the company’s position in the local environment and minimizes liability. IBM is an American corporation and might be not well regarded by certain sectors of society that are anti-American. The subsidiary belongs to a multinational company, which is to say capitalist and American. But the name of the subsidiary is IBM Argentina, for the company their second name, Argentina, is the most important, as helps identify itself strongly with the host country. This potential liability of foreignness related to the corporate origin has been well managed by the subsidiary and it has become strength. A remarkable advantage is the above mentioned embeddedness. That is, clients know that IBM has been in Argentina for ninety years. (see appendix 10). This assertion shows IBM Argentina’s commitment to the country where they have been for long time. It is in a context where it is not easy to develop a business because of the ever-changing rules of the game. IBM advantages and liabilities of foreignness are shown on table 5.3.
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IBM Argentina Advantages The Brand
Liabilities To be subject to two sets of regulations, Argentine and US
Embeddedness
Being an American corporation might not be well regarded in some sectors, but the subsidiary managed to turn it into an advantage by emphasizing the local nature of IBM Argentina.
Emphasis on local nature of IBM Argentina Employing local people IBM committed to Argentina Access to knowledge and technological capabilities Clients experience a feeling of security with IBM
Table 5.3. IBM Argentina Advantages and Liabilities of foreignness
5.2.6. Conclusions
During 2013, IBM Argentina will celebrate 90 years in the country, which means that this subsidiary of an American MNE is thoroughly adapted to the Argentine context. Ninety years during which this organisation has shown sufficient strength and flexibility to survive and thrive in a pendulum like environment. IBM Argentina has been able to show its skills of adaptation and change. Argentina as host country
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does not offer an easy business context, but IBM has survived and thrived for ninety years in good times as well as bad times (see appendix 10).
Institutional polycentricity is a radical and quite unique characteristic of Argentina that IBM has to coexist with. Lately the subsidiary has been losing competitiveness in its exports of services because of exchange rate issues and legal insecurity but its corporate balance of trade is still positive and this allows it to import hardware that cannot be produced in the country.
High uncertainty is a local characteristic which local people are used to dealing with, whereas it is not easy for foreigners who come from a developed country like the United States to overcome. The rules of the game are not clear and informality prevails in Argentine formal institutions. Implicit communication sometimes prevails over explicit. Therefore, it is not easy to operate in such blurred context where guidelines are not clear enough.
From the strategic perspective, IBM is a company that resembles an analyser type with a good balance of a prospector attitude to entrepreneurial problems in some activities. This is the case with advanced and innovative activities, such as providing solutions to communities with projects such as the smart cities concept, which has become its flexible component. And a defender type when the subsidiary works on established competitive activities such as hardware and software, plus services, which has become its stable component.
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Adaptation is widely observed in such an embedded organisation that has thrived in this pendulum like environment. IBM Argentina directors proudly display the brand as an advantage and do not mention specific liabilities of foreignness except for being subject to two sets of regulations in two different countries, the US and host country. Furthermore, the fact that the subsidiary employs local people is considered an advantage.
5.3. BAT subsidiary in Argentina: Nobleza Piccardo
5.3.1. The relationship with the Argentine environment
As already mentioned in the previous case, the relationship of the subsidiary with the host country environment is described in the light of the polycentricity framework in the form of institutional polycentricity. Formal institutions such as political, economic and regulatory institutions are described with an emphasis on the rules of the game. Moreover, the selected informal institution - societal culture - is analysed along three dimensions. These dimensions are part of the societal context in which the company operates. The context permeates the organisation allowing the researcher to measure them also within the company. They are Future Orientation, Power Distance and Uncertainty Avoidance. The relationships of formal and informal institutions with Nobleza Piccardo (BAT subsidiary in Argentina) are examined below.
Control bodies that are part of the formal institutions have relationship with Nobleza Piccardo. Political institutions are represented by Argentina’s government policy,
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which has followed a pendulum pattern over the years.. In the 1990’s the government adopted a laissez-fare stance (EIU, 2012; Hatum & Pettigrew, 2006). The economy was open to inward investment from abroad. Things have now changed radically. And informant asserts that everything happens behind closed doors and the source of decision making is uncertain. In the past, decisions and the decision making process were distributed throughout the government structure but today the concentration of power into a very few hands makes things more difficult.
Moreover following Argentina’s pendulum style, in the past the fact that an executive went to see a minister was a reliable action. Both parties knew what had been talked about and agreed and the conversation with the minister was a guarantee of what was going to happen. Nowadays a minister’s agreement does not necessarily guarantee that something will happen, because there is a tier above him to which he has no access. This shows the degree of centralisation in a monocentric nation during Kirchner’s 12-year tenure see chapter 2).
The same is the case with provincial governors: in the past if something had been agreed with the governor, it could be relied on, but now even with governors who belong to the national party in government, the process cannot be guaranteed. Reality is much more complex now and it has become more difficult to deal with, but on the other hand, it gives Corporate Affairs’ professional role more relevance, showing that the corporate affairs, institutional relations, public affairs, etc. departments in most companies are relevant. The importance of the existence of a professional team expert in difficult governmental context is central to continuing with the company’s embeddedness. In this concern, one informant states that the formal institution
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framework as absolutely complex and inherently highly unstable. Moreover, the most important impact of the political context is uncertainty, a lot of controversies that at the end of the day impact on the economy and prevent the executive team from thinking of an economic scenario or of long term economic measures.
Argentines do not think in the long term, Argentines are always thinking in the short term from an economic perspective. At company level what happens is that the government obliges the company to allocate a lot of resources to managing short term variables; because there are a lot of them. But executives always have the space and the time to think of the long term.
From the legal aspect, there is no decision making at state, provincial, at municipal level. Polycentricity, with various and visible levels of decision making centres does not exist. Instead there is a trend towards monocentricity as there is a clear centralisation of political power at every level in every area. Talking with someone who always needs to report to a higher level shows the high degree of centralisation. This is also observed at different ministries. An example is seen in foreign trade, where all decisions, even the most trivial, are made by Moreno, the Minister for Commerce. A view was expressed to the effect that the country seems to be in the hands of a few people. Five, six people maximum; it is not really known, perhaps the president plus two or three ministers. It was felt that Argentina was going against the trend of globalisation, rejecting the option of building a network of worldwide relationships, and was instead following the Venezuelan model, increasing internal political centralisation and closing the frontiers to the outside world.
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Figure 5.5 depicts Nobleza Piccardo executives’ perspectives on formal institutions in Argentina.
Argentine Formal Institutions Perspective II
Emergent Country
Argentina’s pendular behaviour
More regulations, more procedures Uncertainty
The Government in its traditional role
Government concentration of power in few hands makes things more difficult
Figure 5.5. Nobleza Piccardo. Perspectives on Formal Institutions
The rules of the game are clear, but not formalised or explicit. There is a great deal of informality with regards to the rules of political and economic activity in Argentina. There are some matters that are part of government policy that later become clear, but are not written at the time. This generates a perception that the context is informal because it is known why policy is not written. As it is not written, tomorrow it will be more difficult to change, or achieve compensation, recover losses or correct wrongs imposed on businesses, because those in power will be able to deny that it ever happened. When looking at the business environment in Argentina, it is clear that lately the importance of counting on or establishing contacts with those who have the power to take decisions regarding the business environment has become a
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priority. This statement displays a remarkable degree of personalism in doing business in Argentina where having good contacts is significant. The environment is highly complex in connection to the state’s framework and the rules of the game that the state sets. The fact is that the rules of the game neither are nor clear, nor communicated in advance, and often not justified, either complicates strategies or day-to-day operations. One example is connected to imports and import controls which affect the company directly. They import a lot of products and it is not clear which goods they are permitted to import and which ones are not. Payments abroad for those imports are not easy and market regulations change all the time, therefore there are no clear rules. Price controls in the market are implicit, tacit, but some are explicit. There is no logical sequence to follow, thus it is not easy to deal with them. There is no coherence; the company allocates considerable resources towards trying to understand the logic behind the measures in order to run the business accordingly. This means having to adapt permanently (see appendix 11, sections 11_2, 11_5).
Within the company at corporate level it is not easy to show how the business is developing and it is difficult too to explain developments that arise, these changes in context; especially in some countries or markets. Some cultures are not used to dealing with these changes in the business. What all that complexity implies is undoubtedly a series of impacts on the results of the company. At financial level, some government manoeuvres naturally impact on the results of the company or on a key resource where an explanation is needed, because the result has changed and in those cases sometimes the explanation has to do with uncertainty and the rules of the game in the local context.
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At political level, something is said or stated by the authorities but actually something different happens in practice. This distorts the decisions that are being communicated to head office. Nobleza Piccardo’s management has attempted to set clear goals and work hard to achieve them. This behaviour has attained to continue operations in a business context where the implicit coexists with the explicit. Rules of the game are not clear for anybody.
Furthermore, in figure 5.6, Nobleza Piccardo executives summarise their perceptions on the rules of the game in Argentina.
Argentina: Rules of the Game Perspective II
not clear
highly bureaucratic
insiders know the rules
many resources are employed to understand reality
informality prevails
particularistic
implicit and explicit communication coexist
contradictory messages from authorities saying one thing and doing something else distorts decisions
Figure 5.6. Nobleza Piccardo. Perspectives on Rules of the Game
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Following, informal institutions in the form of societal culture are studied. Three societal cultural dimensions closely linked to Miles and Snow model are considered, uncertainty avoidance, power distance and future orientation. The fact that worldwide headquarters is of British origin implies that a certain degree of adaptation is required in a host country such as Argentina where a remarkable gap between the “as is” and the “should be” is displayed (see appendices 1.A, 1.B, 1.C).
Within the subsidiary, executive team’s worldviews were examined. Twelve interviews with managers and directors were carried out in second half of 2009, focusing mainly on the ‘as is’ aspect which in turn, means practices. The dimensions are examined under subsidiary members’ insights shown below in next section (See more details in appendix 10, b).
5.3.2. Societal culture dimensions
Uncertainty Avoidance “as is” index in Argentina measures 5.64 and its “should be” shows 2.33 (see appendix 1.A). People are used to living under uncertainty, but aspire to a different situation. Nobleza Piccardo managers show great tolerance to and coexistence with uncertainty; they are used to short-run reactions and are used to solving pressing problems, which in turn, means that this is a type of high uncertainty avoidance company that develops short-term strategies because it has to thrive in a high uncertain environment. BAT’s Argentine subsidiary has to complement very well with the parent company in order to thrive in such a different context.
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The following question is borrowed from Globe Project and helps recognize the preference related to two aspects in an organisation, orderliness and consistency versus experimentation and innovation and whether one is prioritized in the company. Respondents mostly preferred order and coherence in six interviews, while both aspects simultaneously were chosen in other five, while only one response was ambiguous.
The guideline is the following one:
Would you say that here order and coherence is given priority even at the expense of experimentation and innovation?
Executives try to find order and at the strategy meetings they seek way to improve room for innovation. It is always a challenge to find spaces for innovation within order. They try to create programs to generate ideas. Moreover this company has based itself on order and coherence rather than innovation. Everything is very controlled, very tidy. It is a very big company producing a controversial product. It is a product that on the streets is as valuable as cash, so there are very strict controls at every stage of the operation. Regarding innovation, it can be linked to differentiation of the product in which innovation is required.
They try to maintain a balance, there are processes and controls, and they have to be in place. There have been times when internal controls were enforced at the expense of flexibility and giving more space to innovation and creativity. As a company,
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innovation and creativity are considered as very important. Nonetheless they are players in a highly regulated industry where they have to adhere to intense regulation. In addition BAT applies a lot of self-regulation which other companies in the industry don’t, so creativity is always subject to the restrictions imposed by regulation.
They would love to have space for innovation, but in practice they are ruled by processes and have a tendency towards controls. The type of company and product restricts creativity. Moreover, they are extremely disciplined. In Argentina they have overdone processes, planning and controls to the detriment of clients and consumers. The legal department is very conservative. In decision-making processes executives often look for consensus, which rather slows down the procedure.
Innovation is a concept in which there is a lot to learn. Sometimes they innovate but they have a fairly basic sense of innovation. They are looking for permanent innovation, but they haven’t achieved it. But a loss of control cannot be allowed. A balance between order and innovation needs to be struck, as innovation cannot be allowed at the cost of disorder. And sometimes they do not innovate because they are afraid of disorder. This is why they have to reach a balance. Neither creativity that becomes chaotic, nor order that stifles innovation. If there is order and coherence, there is space for thinking of innovating. On the contrary, one concept follows from the other. Order and coherence provides the platform to innovate (see appendix 12.b).
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Power distance is a cultural concept that applies to the dominant coalition and the type of structure in place. Despite Argentina showing a high power distance index (5.64) in the “as is” and a major gap with the “should be” (2.33) in GLOBE Project, this could be a reason why people work in organisations such as these that give employees opportunities for personal growth by offering career plans under a large corporate umbrella (House et al., 2004, 2008).
One question applicable to this dimension asks whether in this organisation, subordinates are expected to obey their boss without question or question their boss when in disagreement. Twelve interviewees agreed that that they have enough space to express divergent opinions.
For instance, managers have access to the Board which is totally open; also can sit down with the country manager and challenge the strategy and similarly have the freedom to do it together with the directors. Openness in decision making and feedback and the possibility of discussing issues is always present. Moreover, directors are accessible and listen to the managers, and the managers do the same with their reports. Rather than a methodology of work, it is part of the culture at Nobleza Piccardo. In the company, there is definitely room for dissenting opinions, and this is encouraged (see appendix 10, b).
There is great freedom and informality in communications. Managers do not have to ask for an appointment, just knock on the door and walk in. The organisation is hierarchical like all organisations, but communication flows in every sense and direction. Accessibility is everywhere and in very sense.
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There are pre-established routines where people can express their views, like when personal performance is evaluated and when reports set objectives for the following year, these are two clear opportunities for reports sit down with their boss and discuss things. The culture of the company allows a degree of informality in the relationship with superiors. Moreover there are different forums for people to express their opinion. The General Manager has quarterly meeting with all the managers to review and discuss the business.
There are informal and formal channels. It is possible to talk to the boss with complete freedom and without fear of retaliation. There are also the formal channels, like the company climate survey, where reports can express their views anonymously. There is a lot of room for dialogue; there are formal and informal structures in which to share ideas. There is a general climate of informality and spontaneity. They encourage freedom of expression through surveys and directors follow an open door policy.
The second question in this dimension is the one connected to whether the CEO should queue up in case he loses his ID card to enter the building. This question is borrowed
from
Trompenaars
and
Hampden-Turner’s
universalism
versus
particularism dimension. In this research, it is thought that this dimension is equivalent to power distance and reflects the space between people in an organisation. The hypothetical question is the following one:
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Imagine that your company has instituted a system where you need electronic identity card to enter the building. When people forget the card, they have to queue up at reception to obtain a card for the day. One day the president and CEO arrive and find that he/she has forgotten the card. What would happen at your company?
1.1. The CEO would queue like everyone else to obtain a card for the day 1.2. The CEO would be given priority and not have to queue to obtain a card for the day.
Results obtained from the twelve interviewees reflect diverse perspectives where for four interviewees the CEO should go first, for six he should queue and two cases were unclear.
Four interviewees that assert that the CEO should go first show responses like they are not such a huge population that they can’t take care of these exceptional circumstances so theg CEO should go first. The influence of local societal culture is shown when some respondents indicate that he should queue but obviously he’s not going to do it himself, his secretary will do it for him. In this company the CEO and directors enter the plant trough a different gate from the rest of the staff. They drive in in their cars. His salary costs the company a lot so he shouldn’t be wasting time. Despite these circumstances, he should have a card like everyone else and adhere to the rules like the rest. In connection to local societal culture, the directors have preferential treatment already for security reasons; they come into the plant directly
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through a different gate. The CEO must not wait because he is important to the organisation and difficult to replace.
Responses that show low power distance are six interviewees in which case, respondents agree that all directors should queue up like everyone else. In reality, they have direct access through a different gate but in the canteen the CEO queues up like everyone else. He can sit anywhere with anyone. There aren’t separate areas for directors, like there used to be twenty years ago when things were different.
In this regard, there is an example that illustrates the direction the culture is moving towards. Many years ago there were separate toilets for senior managers and the rest of the men, and toilet for women. There was not separate toilet for women managers. When the building was refurbished, senior managers’ toilets disappeared, now there are simply toilets for men and women on each floor. And the CEO used to have his own private toilet; this is no longer the case. There has been a shift in the company culture in the last few years.
Despite the influence of local culture attitude, the CEO and directors want to follow the rules. They are conscious that he leads large teams, has to lead by example, and can’t claim privileges. Moreover, the CEO is clear in what aspects he is equal to the others and in what aspects he is not. For instance, he is the same as the others when queuing at cafeteria but when the time comes to take decisions he behaves differently and if there is no consensus, he takes the decision himself.
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The third dimension being examined is future orientation. Argentina shows the term orientation “as is” measure (3.08), immediately after Russia. The gap with the “should be” (5.78) is remarkable too (see appendix 1.C). This encapsulates the dissatisfaction Argentine people feel with reality as they actually experience it, which is very different from what they actually desire.
At Nobleza Piccardo, planning is intensive and also focused on the short-term due to local external circumstances. This coexists with long term planning. With regards to indigenous managers, the corporation shows major commitment their long run career plan.
Under future orientation answers in connection to planning, all managers and directors show that planning is central while only one remarks that there is excessive planning. One interviewee asserts that there is an established planning routine, it is structured, it is a 10 year plan and it is updated every year. The long term plan is reviewed in the light of short term developments. This is used to create scenarios from the macroeconomic point of view as well as for the business itself. But in parallel, they work against annual targets and constantly review their performance and take decisions in order to meet the plan. Therefore the Strategic Review plans 10 years ahead, they also plan constantly 24 months ahead, and in addition they also check every month and adjust the plan in line with the milestones. The management team is constantly planning, with medium and long term objectives and the objective of this plan arise from the corporate strategy and from the local strategy. Moreover, in terms of the subsidiary’s attitude to the market, they are obliged to challenge the
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status quo because they are not the market leaders, which force the executive team to be creative and try to upset the status quo.
From finance department perspective there is a 2 year plan, where the first year is more detailed, and once every two years they draw up a 10 year strategic plan that shows in what direction they want to go. They plan 10 years ahead but put the details only for the near future. Sometimes the strong context influences in the subsidiary in such a way that mangers have to adapt the strategy as they go along, trying to maintain the status quo. Other departments do not follow the strategy strictly: on the contrary, they sometimes determine it on a yearly basis. These statements show how the long term spirit of a traditional and recognised multinational coexists with enough flexibility needed in uncertain and ever changing environments.
5.3.3. Business level strategy
Miles and Snow’s strategic problems are analysed, but they should not be taken as watertight compartments; rather taken as areas which are intertwined. This is one reason why in this analysis, some examples could show up other problems too and the same with relevant solutions.
In terms of the entrepreneurial problems, the company is involved in mass market and consumption, which has been an important driver of the Argentine economy in the last few years.
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Nobleza Piccardo is now focused on the domestic market, as they want to expand later from a secure home situation. This means consolidation, growth of market share, improvement of company results and becoming solid and mature in order to increase market share by 5 or 6 points within 4 or 5 years. Today Nobleza Piccardo concentrates fully on market penetration in Argentina with very competitive products.
As a cigarette producer, it concentrates exclusively on cigarettes. Despite this, there are other small lines of business in terms of market share which are related to pipe tobacco and other forms of combustion-free tobacco consumption that are being developed. However cigarettes are the most important product and so is the innovation generated in that category. At global level, in some laboratories they are working on product innovation and a lot of money is being invested on product innovation as a global strategy.
This innovation strategy is global. An example that they offer is the cigarette capsule, which is a clear example that the innovation pack is managed by the global BAT team. Once an innovative product is developed, the markets where it will be tested are chosen. As an example, the capsule was developed at global level but Argentina was one the main test markets. This testing is carried out in different markets around the world, but basically they are working on product innovation at laboratories at head office and a lot of money is being spent on product innovation. The fact that there will be more regulation means that in overall terms the market will shrink. So the major challenge is to understand why the consumer would be ready to pay more for a product. And innovation is central there.
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Nobleza Piccardo’s intention is always “think about the client”. In other words, try to understand consumers and what consumers most value about the products the company offers. There are lots of funds budgeted for market research, surveys or market audits. There is an enormous budget spent on trying to understand what consumers value and what they are going to value in the future. As mentioned above, the market is divided into two major players, where Nobleza Piccardo is the second largest. The rest are small regional players plus illicit competition (see appendix 11).
Nobleza Piccardo deeply values the relationship with suppliers, clients and other stakeholders. For BAT interaction with different stakeholders is very relevant. The offer they bring to clients, suppliers and others is based on a win-win principle. This is why it is very important for them to check different stakeholders’ interests. So Nobleza has the formal tools, such as dialogue processes where business issues relevant to the business are discussed with all the key players involved in that specific issue. They are the ones that have a direct or indirect interest in the matter. This process is carried out periodically just to check what expectations different stakeholders have with regard to the company, the particular issue and the industry.
Dialogue is very important and they are pioneers on that on a global basis. In Argentina, this tool was launched in 2001 and they have completed 5 dialogue cycles. The last one was focused on the illicit trade, the previous one related to preventing smoking by minors. As a result of that survey of expectations concrete commitments that led to tangible actions were reached. Recently Nobleza Piccardo launched a campaign called Responsible Trade to make retailers aware of the
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importance of not selling products to children under 18 or products emanating from the illicit trade. This campaign was present at 80,000 out of the 104,000 selling points they have in Argentina. This is the level of awareness needed by the retailer who, at the end of the day, is the person that sells the product to consumers. Nobleza does not sell directly to the clients, but through kiosks.
With regards to the engineering problems, the subsidiary has moved from producing locally 85% of products sold in Argentina to producing 99.6% locally. This is something that was planned, but the company accelerated the process. There were various variables that came together, like a new product (connected to product domain) that has grown exponentially which brought the investment decision forward, but also these facts are important when they have to negotiate with government officials. They made a large investment in machinery, making the operation more efficient with newer and more efficient technology (see appendix 11).
Moreover, there is more investment to improve the distribution system; vehicle fleet, internal IT systems, software. Locally all investment is focused on making the operation more efficient. There are additional distribution centres in 11 cities in Argentina because Nobleza Piccardo has a mixed commercialisation system in which it has its own sales-force carrying out the distribution themselves, and the territory not covered by its own sales force is covered through distributors.
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An investment of more than 25 million US dollars in the new plant was made recently, and there are also new commercial offices and a distribution centre under construction which involve further investment of 15 million US dollars. In this regard, they have recently also invested approximately a further 15 million US dollars in capital assets for the production line. Today the subsidiary wants to focus on Argentina and the plan is based on this new factory with capacity to produce 14 million cigarettes a year, and which is currently producing 10. So their target is that the remaining 4 million should represent growth in the Argentine market. If they are able to reach the goal, they will need to enlarge the plant. Argentina is of major importance for BAT and this is the reason why for the time being the plant is dedicated 100% to the Argentine market.
Finally, regarding technological systems, most of the IT systems are ordered from head office. For example, SAP, a German Business Management System, whose acquisition was made at global level. All subsidiaries operate SAP. In connection with administrative problems, following a defender strategy, the company definitely looks to maximization results in the markets where it operates. This applies to BAT on a global basis and to the Argentine subsidiary, where Nobleza Piccardo is focused on domestic growth. Control is consistent with the domain’s development as it operates on a central basis. The dominant coalition is mostly guided by a finance and legal orientation, while marketing focuses on market share growth in this mature market.
As for planning, the finance department considers the process of strategic planning as a circle that feeds back onto itself. The reason is connected to the link placing oneself
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in context in order to plan. The subsidiary is an ongoing company and the planning part is derived from an evaluation of the context. So at a given time, when they want to plan again and rethink the long term strategy, they need to place themselves where they are standing. A diagnosis that reflects the actions that have been taken in the past is made, and based on that diagnosis the planning process is started. Furthermore, evaluation of the context is made and then the place that the company wants to get to is defined. Later a lay out of the strategy is designed to show how to get to that position.
About traditional cycles in planning, there it is a mix at the company. It has to do with the market situation they find themselves in, and the needs arising from where they are placed. The dynamics they face today in the Argentine market environment, where the priority is to seize more market share, means that the traditional cycle is reversed. In general terms, the order of the process tends to be predetermined and normal, such as plan – act - evaluate. But on the other hand they need to versatile and flexible.
Uncertainty, which is not low in Argentina, is managed with a number of technological resources, but the clue, especially in such a fast moving context, is that they have a fairly standardised internal business cycle that tells them how to run the business. As there are different forums, the management of the business is always being conducted at different forums that take place during the month, locally and also up the hierarchy. That is, regionally and globally, and in those forums basically they interact with all the areas that operate within the context. These can be operations to manufacture, the commercial area to sell, finance to give support and
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monitor the targets that have been set. And also all the tough areas like human resources and IT, and what these different forum do is to offer interaction and give the whole company an update on developments affecting the business and the context and on situations that have been changing. This statement provides an emphasis on the relationship with the context.
Additionally uncertainty is handled as quite a solid and standardised business process, with reliance on technology, but what is required is a strong emphasis on communication, because when there are last minute developments the procedure needs to capture this information and incorporate it into the business process. Communication cannot fail and it is important that it does not, because if the chain of communication fails, perhaps the information enters the business somewhere, but due to communication failure it never reaches the area where it can make an impact.
Related to coordination mechanisms, there is a mix because there are things that are simple and others that are complex, but sometimes Nobleza as a private company tends to be somewhat bureaucratic where some processes are complex. In this concern, an observation is made that some processes could be simplified.
With regards to the structure, locally at subsidiary level, it is largely functional, but at higher levels of the organisation, there is a reporting office on a geographic zone basis in Chile (see appendix 11 section 11_1), then there is the region too and then we move to global level. So as going up the organisation above the market, a matrix structure starts to appear strongly in the organisation chart.
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Regarding performance evaluations, basically they are quite standardised, but there are subsequent adjustments that can be made on the basis of function or seniority, which are strongly related to results. But there are other performance assessments, depending on the area, which are not the harder, more numerical, sales targets to be met. These are the ones that are a combination. For example, in support areas like the Corporate Affairs department, the truth is that the evaluation of results takes into account that most processes do not depend on personal management. Sometimes processes are assessed. It depends on the function, but the company does not necessarily make a negative assessment when the individual does not meet their objectives 100%. There is also heavy investment in quite a lot on administrative, planning and distribution systems to speed up processes. Efficiency is the most important characteristic, which does not mean managers neglect effectiveness, which is also considered essential. Table 5.4 illustrates solutions applied by Nobleza Piccardo to its strategic problems under its defender prototype.
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Nobleza Piccardo (BAT) Defender strategic type Strategic Problem Solutions Entrepreneurial Mass market and consumption Dialogue cycles
Problem
Has to deal with illicit trade Solutions
Produces locally Domestic market growth Product excellence Innovation Think about the client Relationship with stakeholders Two big players and niche ones
Engineering
Looks for efficiency Investment in distribution fleet
Problem
Heavy investment in distribution systems Solutions
Recent Investment in new plant and commercial centre New Plant 100 per cent dedicated to Argentine market Technological Systems : SAP
Administrative
Structure: matrix at international level Structure: matrix at local level
Problem
Processes Solutions
Strict Control Dominant coalition: finance and legal Planning: normally plan /act/evaluate Structure: largely functional at local level Heavy investment in a considerable number of administrative and planning functions.
Table 5.4. Nobleza Piccardo (BAT) Solutions to Strategic Problems
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5.3.4. Strategic choice and the cultural dimensions
Nobleza Piccardo, BAT subsidiary in Argentina, is run under the global corporate model, which displays a degree of centralisation under the Southern Cone business unit (see appendix 11, section 11_1). This type of business could be referred under the traditional defender strategic type where they work on a product and new product development. The company is the second largest player, fighting for an increase in its market share in the Argentine domestic market. This type of organisation deliberately maintains its stability –and in this case, strongly defends it - to keep an appropriate stable form of organisation. Big bet by the parent company is demonstrated in the form of remarkable recent investment in a new production plant plus distribution and administrative offices which shows commitment to the host country.
Company standards are globalised (see appendix 11, section 11_2). They are part of a highly regulated industry selling a controversial product, so it is important that standards are the same in all countries, in that respect they are quite standardised at global level. But also, as a local player, local institutions influence the way they work with certain rules of the game that the state sets. The truth is that these are not clear, nor communicated in advance, and often not justified either.
If something affects them directly, like import controls, as they import a lot of products and it is not clear which goods can be imported and which ones cannot, payments abroad for those imports are often hindered by the authorities. Market regulations change all the time, there are no clear rules. Price controls in the market
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are implicit, tacit, some are explicit. The reality is that they are there but it is not easy to follow a logical order because there is no coherence behind it.
The dominant coalition is mainly integrated by finance managers but also includes the Corporate Affairs director, who deals with regulatory norms, and legal manager too. The main reason behind their enhanced status is the fact that they produce and sell a controversial product.
What all this complexity implies is undoubtedly a series of impacts on the results of the company. Long term planning coexists with short-termism due to high uncertain and a changing environment. In turn, this leads to the situation of constant short-term fire fighting without planning, which is the result of the rules of the game of this market where companies have to adapt to. Flexibility is paramount.
Nobleza Piccardo’s management team proudly speak of their organisation, and the Corporate Affairs director uses a metaphor that describes the organisation as still crossing the river. And in five years they shall have arrived at a safe harbour. By “arriving at a safe harbour” they mean having a stabilized organisation in terms of a fully operational plant, a new building and our new commercial centre, having made all the necessary changes in the portfolio to achieve market share objectives. And a healthy plant would be operating within the cost parameters under which it was built, and having production costs indicators in line with the capacity of the plant. Also despite not being leaders in the market, they are always clearly ahead in innovation vis-à-vis their competitor. Moreover there is confidence on solving the portfolio issue, which would complete the process of consolidation and would lead in five
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years’ time to the company reaching a stable 30-point market share. A stabilized company is foreseen, which today it is not because of internal processes connected to a process of change (see appendix 11, section 11_4).
Figure 5.7 depicts Nobleza Piccardo leading strategic choice characteristics under its defender type.
Nobleza Piccardo Defender Type
commitment from corporation
imports are problematic
highly regulated market
follow global standards
flexibility
domestic market
short term with long term coexist
price control on products
Figure 5.7. Nobleza Piccardo’s Strategic Choice
5.3.5. Liabilities or advantages of foreignness
In the case of BAT’s Argentine subsidiary, the name of the acquired company was kept: Nobleza Piccardo (see appendix 11, section 11_2). The positive intangible side –an advantage- of this British origin subsidiary is that as it is a large company, part
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of a global group. The actual size of the company is in itself an advantage because of the work it generates not only at the company, but also all along this industry’s value system. Also for people that work at the company, the fact that it is a global company makes it interesting and opens a range of possibilities, not only locally but also at regional level within the company and even further afield.
On the other hand, being in such a highly regulated industry could be viewed by many as a negative factor, but the other side of the coin is viewed by a respondent as a high level of sharpness and willingness to change constantly being required by executives. These features run in parallel with constant awareness of new regulations as a positive aspect.
Another informant identifies the contribution to heterogeneity, diversity and complementarity as an advantage of the fact that the subsidiary belongs to an MNE. Whereas on the other hand, he affirms that he has not noticed any disadvantage arising from the fact that our main shareholder is British. Another interviewee expresses the same view when he says that being a company of British origin might be a problem, but they never experienced any on that account.
Advantages are represented by many positive policies such as the corporate social responsibility issues, such as the elimination of child labour in tobacco plantations (see appendix 11, section 11. This is part of social responsibility
One example of liability of foreignness under the current government has to do with restrictions on payment of royalties. Nobleza Piccardo, as most subsidiaries of
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foreign corporations is not able to pay royalties, but there are no regulations that say so. The government simply refuses to authorise foreign currency transfers. It is difficult for the British parent company to understand, as they belong to a low context society where they expect to see the specific written rule that forbids the remittance of royalties abroad. Unfortunately, sometimes it is just a phone call from a government official that tells the company, for instance, that they cannot make any foreign remittances whatsoever during the month. These are the rules of the game as set by the current government. Advantages and liabilities of foreignness are shown on table 5.5.
Nobleza Piccardo (BAT) Advantages Embeddedness
Liabilities No disadvantage as a result of main shareholder being British
Employing local people
Restrictions on payment of royalties
Complementarity High degree of sharpness and willingness Highly regulated industry to constant change Awareness of regulations Heterogeneity and diversity For people working there, belonging to a Difficulties
in
making
head
office
global company opens a range of understand local rules of the game. Many possibilities.
of them are unwritten.
Table 5.5. Nobleza Piccardo (BAT). Advantages and Liabilities of Foreignness
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5.3.6. Conclusions
In 2013, Nobleza Piccardo, BAT Argentine subsidiary celebrated its 115th anniversary which indicates that the company is deeply embedded in the local context. It has a long tradition as the oldest tobacco company in Argentina. Nobleza Piccardo has recently experienced a change process by becoming a member of the Southern Cone business unit, which in turn led to a higher degree of centralisation. Host country’s business context is not easy to survive and thrive in but BAT continues to make major investments, showing commitment to the country and that is prepared to make big bets. Local management is fundamental for the company’s success as it understands local players and local reality with which the company deals. Tobacco is a mature industry with intense competition. Nobleza Piccardo is the second biggest tobacco company, number one being Philip Morris, its American competitor.
Institutional polycentricism plays a key role in the company’s life as Argentina, with its characteristic pendulum behaviour is not an easy country to adapt to. Argentina changed its open door economic policy in the 1990s, to a closed economy managed in a monocentric way by very few people, displaying a steep hierarchical decision making centre at the top. It is not easy to understand the rules of the game as they are not formalised or explicit, which generates a perception that the context is informal. This shows the importance of a high context analysis where local formal and informal institutions and adaptation by the MNE subsidiary is relevant; especially as institutional distance and societal culture shows quite a significant gap with the headquarters’ societal structures.
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Nobleza Piccardo deals with the traditional business strategic problems such as entrepreneurial, engineering and administrative. The products are cigarettes and operate in a mature market with a controversial product in which innovation is provided by the parent company. Major investment in a new plant plus distribution system and offices has recently been implemented. No exports are considered for now, as they concentrate on regaining market share in the domestic market in Argentina. On the administrative side, planning is not a tradition, as high uncertainty is involved. The strategic choice results in a defender type style that requires a high degree of adaptation in an environment that is ever changing and not easy to deal with. Societal culture dimensions, uncertainty avoidance, power distance and future orientation are analysed in connection with the strategic type. Subsidiary adaptation has shown to be critical in its long existence in a context with ever changing paradigms.
5.4. Closing paragraph
A final thought about the presentation of the two case studies links their long and successful track record in Argentina to the next chapter, where a cross case analysis is carried out. The cross case analysis examines similarities and differences between IBM Argentina and Nobleza Piccardo (BAT Argentine subsidiary). The subsidiaries are of American and British origin and belong with different industries. Although the companies show marked differences, this research is focused on their similarities. Chapter 6 follows with cross case analysis between IBM Argentina and Nobleza Piccardo.
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Chapter 6. Cross-Case Analysis and Theoretical Conjecture
6.1. Introduction
Chapter 5 concentrates on data analysis of the selected case studies as stand-alone entities. The analysis follows the lines of the fieldwork structure of interview guidelines based on thematic analysis. Themes are constructed on the Framework of Departure (figure 3.3).
In this chapter the cross-case analysis is carried out by
aiming on the similarities and differences alongside the significant ‘themes’ potentially linked to theoretical issues stated in chapter 3. The purpose of both cases is to perform the cross-case analysis conducted by focusing on the fewer emerging themes that are interesting and relevant to potential connections with the emergent theory.
Cross-case analysis in section 6.2 shows that the MNE subsidiaries share certain characteristics that are central to their adaptation, survival and prosperity in such an environment as the one Argentina offers. The Cross-case analysis is carried out on similarities and differences between both subsidiaries.
The discussion is carried out in section 6.3. In the discussion, the cross-case analysis is brought together with literature review aspects based on the framework of departure (figure 3.3.). Based on that ramp, the selected themes are examined and also new constructs emerge based on the empirical work.
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Moreover, in section 6.4 a theoretical conjecture and a model emerge from this inductive study. It is expected that both the theoretical conjecture and the model may be of assistance to managers at other organisations of similar type. Section 6.5 shows how the validity of findings was achieved and is followed by section 6.6, the conclusions.
6.2. Cross-case analysis
This section analyses both organisations in the light of a common host country context. The subsidiaries engage in disparate activities but have been able to prosper for more than nine decades in a complex environment which experiences abrupt pendulum-like swings. The successful long-term business development of the firms makes interesting comparison. Although the comparison is based on similarities and differences, there is a sharper focus on similarities, as they provide an indication of the adaptation strategies required to thrive in the environment they share. As already mentioned, the examined themes are connected to literature review and its conclusive framework of departure (figure 3.3). In turn, selected themes in figure 4.5 are linked to the emergent model and theoretical discussion exposed in next section.
6.2.1 Similarities
Similarities reside in several aspects, such as the societal culture that encapsulates the origin of both headquarters, which the Globe Project (House et al, 2004, 2008) described as the Anglo cluster. With regards to the type of organisation, the analysis
203
is made at MNE subsidiary level. In both cases the companies have been in Argentina for a considerably long time and have thrived in this environment.
Another coincidence between these subsidiaries, deeply embedded in the local environment as they are, is that they employ local people and that their management team is indigenous too. The companies are not only located in Argentina, but in both cases they deal primarily with the domestic market. The business context is similar in both cases, as both organisations compete with major players in an intensely competitive market. Moreover, both subsidiaries follow global guidelines and count on significant support from their respective global corporate structures, and in both cases they show a considerable degree of adaptation. Both cases share the same environment which means that socio-political institutions are alike.
The question of Polycentricity in the form of Institutional Polycentricity operating in Argentina is common to both organisations, as it relates to the environment where they develop their activities under a constantly shifting set of rules. The country is currently experiencing a monocentric type of Government, which means that power is concentrated in a few hands, situation that somewhat complicates the smooth running of the companies.
Formal institutions have a similar impact on both companies, which nevertheless manage to thrive in this emergent country, despite uncertainty continuing to be a defining characteristic of Argentina. However, this dominant and centralising type of government does allow a degree of independence to certain pockets of power within it. It is never totally monolithic. High bureaucracy is remarkable in Argentina.
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The rules of the game are not clear, and interaction with the authorities is highly bureaucratic, as they continually generate more regulations and more procedures. Informality coexists with intensive bureaucracy, and this, in turn, generates parallel communication channels conveying implicit messages rather than explicit ones. Ambiguity is a characteristic of this society. Explicit information is generated by a highly regulated and bureaucratic system. This dichotomy, generated by the coexistence of institutional styles which are very different from headquarters’ own institutional environment, provides local managers and staff with an advantage, as they know the rules and they know who the relevant players in the government are and how to ‘play the game’. Moreover, contact with key players is paramount in order to obtain good results and exert effective lobbying pressure, which becomes a necessary activity.
Moreover, table 6.1 summarises key components of Institutional Polycentricity, formal institutions and rules of the game that affect both companies in a similar way.
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Argentine Context Institutional Polycentricity
- emergent country - Argentina’s pendulum behaviour - Government concentration of power in few hands makes things more difficult
Formal institutions:
- Uncertainty
How they affect the companies
- More regulations, more procedures - High bureaucracy
Rules of the game
- not clear -highly bureaucratic -informality prevails -implicit and explicit communication styles coexist -particularistic -insiders know the rules
Table 6.1. Similarities in terms of Institutional Polycentricity, formal institutions and rules of the game
Informal institutions are represented by societal culture in this research. The importance of host country culture is represented by Argentina and is shared by both subsidiaries. Even though parent companies belong to American and British origin culture, its influence on subsidiaries operations and thrive is displayed on both organisations’ embeddedness with continuous success.
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Societal culture is linked to formal institutions and is analysed on the basis of three cultural dimensions with close links to Miles and Snows’ strategic types. Local culture is present at the companies in the form of local managers, who help to diminish uncertainty and provide direction as they interact with Argentina’s flawed formal institutions. The local management team is also helpful in finding shortcuts and firefighting when necessary. The three dimensions that are explored are the following:
- Uncertainty avoidance as expressed by managers at both companies shows very similar results. This is not surprising as managers and directors are used to uncertainty and coexist with it in the local environment as a result of the short-period pendulum nature of the Argentine business context. In both companies managers expressed similar preferences for orderliness and coherence, while a similar number thought that there was no contradiction and that both orderliness and consistency and experimentation and innovation were possible at the same time. Table 6.2 shows some common characteristics to both organisations.
- Power distance. Both companies show substantial space for staff to express divergent opinions within the organisation and in interactions with their direct bosses. This dimension was also analysed by means of a hypothetical question related to a situation where subsidiary CEOs had to queue up at the entrance of their own buildings as a result of having forgotten their electronic access key tags. In both organisations, the majority of interviewees agreed that CEOs should be afforded special treatment and not have to queue up, which shows a high degree of respect for hierarchical structures.
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- Future orientation. This approach is shared by both subsidiaries, in which long term planning coexists with short-termism generated by abruptly changing circumstances in Argentine institutional policies which require a great degree of adaptation to the local environment. Besides, both subsidiaries enjoy considerable support from their respective corporations which have placed a long term bet on Argentina.
The table below shows the analysis of the three selected cultural dimensions.
Informal institutions: Societal Culture
Similarities
Dimensions Uncertainty avoidance
- Great tolerance to and coexistence with uncertainty (managers) - develops short-term strategies
Power distance
- considerable room for divergent opinions - special treatment for high hierarchies is admitted
Future orientation
- used to short-term that coexists with long term - flexibility
Table 6.2. Similarities on Societal Culture dimensions
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At business level strategy and following Ostrom’s terminology, a visit to ‘the action arena’ (Ostrom, 2005) or the ‘black box’ (McGinnis, 2011) was made, where deep commitment from a strategic perspective of both corporations is evident. In connection to this perspective, business strategy similarities follow in the categories or themes examined below.
Both subsidiaries face common strategic problems such as, first, the entrepreneurial problem; in which domestic market penetration and innovative product excellence in the field stand out, as well as success against major players in a competitive marketplace. Second, the engineering problem generates commitment from parent companies, as there have been recent significant investments in facilities and technologies. Third, administrative problems are centred on uncertainty reduction within each system, and these are handled by means such as a robust structure, continuous processes and stringent controls. Table 6.3 shows similarities in business strategy topics between both companies.
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Similarities IBM
Business level strategy
Entrepreneurial
Nobleza Piccardo
Strong companies that are committed to Argentina
problem -Domestic market growth
solutions
- Product excellence - Innovation - Think about the client - Relationship with stakeholders - Two large players and - Three large players and niche ones
smaller ones
Engineering problem
Recent Investment in new Various investments
solutions
plant
and
in
commercial commercial offices and
centre
service centres
Administrative problem
-Structure: matrix on an -Structure: matrix on an
solutions
international basis
international basis
-Processes
- Processes
-Strict Control
- Strict Control
Table 6.3.Business level topics common to both subsidiaries
The strategic choice, which in Ostrom´s terms becomes the outcome in response to the local context, confirms that there is major commitment from both corporations. In these cases the subsidiaries behave flexibly in the face of strong pendulum-like behaviour by the institutions with which the subsidiary is forced to coexist in the
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long term. The companies can thus tolerate a high level of uncertainty. Subsidiaries at the same time have to comply with corporate standards. Despite having different strategic types (i.e. IBM as analyser and Nobleza as defender), they share similarities such as the ones displayed in the table below,
Similarities - commitment from Strategic choice in
corporation
Argentina
- flexibility - uncertainty tolerance - short term coexists with long term - follow global standards
Table 6.4. Similarities on Strategic Choice
Liabilities and advantages of foreignness that are common to the analysed subsidiaries are examined as the following topic. Both companies have been operating in Argentina’s context for more than nine decades. This is translated into a remarkable embeddedness in both cases and high commitment from correspondent corporations. Furthermore, high commitment to clients is observed in both cases.
Employing local people is an advantage for both subsidiaries as it helps them understand the local reality and local players in a cultural setting that is distant from those of the parent companies. Thus embeddedness is an advantage experienced by both organisations.
Constant adaptation is an ever present characteristic that, in
turn, is related to the above mentioned concept of embeddedness. It is closely related
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to employment of local people who understand the ever changing paradigms of the formal institutional framework. The indigenous management teams contribute to coexistence with uncertainty and understanding the rules of the game.
Common liabilities reside on difficulties found on dealing with correspondent parent companies that are located abroad with different mindsets.
Table 6.5 displays liabilities and foreignness common to both organisations.
Similarities Liabilities
Difficulties in dealing with head office
Advantages
Corporation committed to Argentina Embeddedness Local people employment Highly committed to clients Emphasis on host country nature
Table 6.5. Similarities on liabilities and advantages of foreignness
6.2.1.1. Conclusions on similarities
The conclusion that has been reached again emphasizes characteristics such as the embeddedness of these long standing subsidiaries in Argentina that show a strong commitment from the parent company and the subsidiary itself, and a desire to stay in this host country in the long run. In turn, institutional polycentricity that frames subsidiaries and the business context provide rules of the game that are not easy to follow, but which become easier to understand and play when local management are
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part of the local subsidiary, as it shares local societal culture. Formal institutions show uncertain behaviour with high bureaucracy. Moreover the importance of host country informal institutions represented in this study by societal culture has major influence on both subsidiaries embeddedness. A strong local management team that is very keen in firefighting if necessary and find adaptation of parent company global policies.
With regards to business level strategy, both parent organisations show strong commitment to Argentina. Furthermore common solutions to strategic problems are examined. Entrepreneurial problems are solved by focusing on the client and domestic market growth with product excellence and innovation with a strong relationship with stakeholders. Engineering problems focus on investment for operational continuous improvement and update. Administrative problem solutions reside mainly on their structure, processes and corresponding strict control.
Strategic choice is based on high resilience to local turbulences that coexists with high commitment from the corporation. The flexibility also resides on how short term coexists with long term and the subsidiary follows global standards. Liabilities reside on difficulties found in dealing with head office while advantages of foreignness are represented by indigenous employment of managerial team and emphasis on host country nature with strong embeddedness.
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6.2.2. Differences
This section focuses on the other side of the coin of the examination that is being carried out. The five themes are described below.
In connection to subsidiaries and the Argentine environment, Polycentricity frame in the form of institutional polycentricity is applied. IBM Argentina plays the role of a company that operates in the domestic market, but it also has the Argentine government as its client for some products. Nobleza Piccardo, on the other hand, plays only the role of a company operating in Argentina. The government’s relationship with the company is contradictory as on the one hand the government welcomes foreign investment, job creation and, with these products, considerable tax generation; but on the other hand the product in question carries considerable health risks. The relation with formal institutions, mainly linked to the regulatory framework and economic issues such as imports and exports, matter to the government. In IBM’s case, the company shows a positive corporate balance of trade, thanks to its large scale export of services. This facilitates the company’s ability to import hardware and software. Nobleza, on the other hand, produces and sells locally but does not export, which can affect its ability to import some inputs. It also finds that regulations change constantly. This is summarised in table 6.6.
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Nobleza (BAT)
IBM Argentina
Institutional Polycentricity
Contradictory relationship
Government has two roles
Formal institutions./ how
-Regulations affect
- More regulations mainly
they affect the companies
imports as it does not
for export procedures and
export, which means that
no problems with imports
it does not have a positive
because of positive
corporate balance of trade
corporate balance of trade
- the government in its
- the government is also a
traditional role
client - It doesn’t produce
- suffers import
locally and doesn’t suffer
restrictions
import restrictions
Table 6.6. Differences in Institutional Polycentricity and formal institutions
Regarding the rules of the game, Nobleza employs considerable resources to understand Argentine reality and continue to thrive. IBM Argentina has found that it can grow in times of crises and uncertainty, which help cement relationship with clients. Table below summarizes differences in how rules of the game affect both companies. Nobleza (BAT) Rules of the game
IBM Argentina
-many resources are
-crises help cement
employed to understand
relationship with clients
reality
-bureaucracy comes from
- contradictory messages
Spanish tradition
from authorities saying one
-cannot commit or
thing and doing something
guarantee anything
different, distorts decisions
Table 6.7. Differences on how rules of the game affect each company
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Informal institutions in the form of societal culture closely associated with the strategic types, show some differences along the three dimensions analysed, which are described below.
- Uncertainty avoidance (UAI) orientation is similar in both organisations when the option related to order and coherence is chosen ahead of innovation and experimentation, so no significant differences were detected on this dimension.
- Power distance (PDI) dimension - both companies display similar attitude towards whether there is room to express divergent opinions, whereas the answers regarding the CEO and whether he should queue up were quite different. At IBM nine respondents answered without hesitation that the CEO should go first whilst only three said that the CEO had to queue up. This shows a considerable influence of the local societal culture. On the other hand, at Nobleza four interviewees thought that the CEO should go first, while six informants said that he CEO should queue like anyone else and in two cases the answers were ambiguous.
- Future orientation (FO) - Nobleza shows a high score, as expected from a subsidiary of a British corporation and also a subsidiary that is constantly forced to adapt to the status quo. IBM Argentina shows a mixed score not as expected from an American corporation. A possible reason for the difference with Nobleza could be linked to the entirely nature of the industry. Nobleza is in a stable mature predictable industry. IBM Argentina, on the other hand, operates in a high-tech fast moving environment through multiple business units in multiple markets. It is perhaps not
216
surprising that IBM executives are less concerned about the future because they feel that they themselves embody the future. Differences in selected societal culture dimensions are summarised on table 6.8.
Societal
culture
Nobleza Piccardo (BAT)
IBM Argentina
dimensions Uncertainty Avoidance
Power Distance
Future Orientation
- Similar to IBM as
- Similar to Nobleza as
expected.
expected.
- Showed lower power
- Showed higher power
distance score than IBM,
distance than BAT,
whereas it was expected to
whereas it was expected to
have higher PDI as it
have lower PDI as it
belongs to a very mature,
belongs to a high tech, fast
stable and conservative
moving business
business environment.
environment.
- High score as expected
- Mixed answers, not as
from a British corporation
expected from an American corporation.
Table 6.8. Differences in Societal Culture dimensions
At business strategy level, analysis of the ‘black box´ or ‘action arena’ is carried out. Differences are considered. Inside this box, the three Miles and Snows typology problems are described together with the way the companies address each problem.
First, at Nobleza, its entrepreneurial problems on product and market stem from the consumer market nature of its business, where a mass market and consumption in the
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domestic market is dealt with. Illicit trade is also a problem that exists in the industry and that the company has to face. Dialogue cycles with clients exist in order to learn about their taste and improve the product. Two big players compete in the national marketplace where Nobleza is number two. At IBM, entrepreneurial problems find solution in its relationship with client organisations by administering customer satisfaction surveys. IBM operates in the domestic market selling hardware and software, while at the same time exporting services. It has a remarkable portfolio of products and services in a B2B business model. Three of four large players are the major competitors, and it appears that IBM is the dominant player because it provides most diverse solutions.
Second, engineering problems are manifested at IBM in both stable and flexible forms, which reflect a dual technological heart, where they can never be completely efficient but efficiency, in turn, is provided by stable areas. Looking for market expansion, IBM has invested in new commercial offices around the country where sales and technical people are located. With regards to Nobleza, it is continuously looking for efficiency, as demonstrated by the substantial corporate investment made in a state of the art plant completely dedicated to the Argentine market, while the investment in the distribution fleet gives another indication of this pursuit of efficiency.
Third, the dominant coalitions that deal with the administrative problems are different at each company. At Nobleza the dominant coalition is finance and the legal management team; while at IBM, the dominant coalition is marketing and engineering. Moreover, at Nobleza, the structure is largely functional at a national
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level, while the matrix is applicable at international level. Its planning cycle normally follows the traditional plan/act/evaluate format and internal uncertainty is managed with technological resources. At IBM, the business is organised at national level through a matrix structure and detailed processes that provide good coordination despite the complexity of the trading and communication channels within the corporation. With respect to internal uncertainty, Nobleza goes for technological solutions, and coordination goes from simple to more complex mechanisms. Whereas at IBM internal uncertainty is more focused on executives managing this variable, and planning the cycle depends on each business unit. Solutions to strategic problems are summarized in the table exposed below.
Business level strategy
Nobleza Piccardo (BAT)
IBM Argentina
Solutions to
-Mass market and
-Business
Entrepreneurial problems
consumption
-Exports services
- Dialogue cycles
-Customer satisfaction
- Has to deal with illicit
surveys
trade
- Import software and
- Produces locally
hardware /not produced locally - Market development with new products (i.e. smart cities)
Solutions to Engineering
- Looks for efficiency
- Efficiency provided by
problems
- Investment in
stable areas
distribution fleet
- New commercial offices
-New Plant 100 per cent
around the country
dedicated to Argentine
- Sales and technical
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market
people based in nearly the
- Technological Systems :
whole country
SAP
- Adapts technologies to local market
Solutions to
- Dominant coalition:
- Dominant coalition:
Administrative problems
finance and legal
marketing and engineering
- Planning: normally plan
- Planning depends on the
/act/evaluate
business unit
- Structure: largely
- Structure: matrix on the
functional on a national
national basis
basis - Uncertainty:
- Uncertainty managed by
technological resources
executives
- Performance: numerical
- Performance: objective
and a combination in some and qualitative aspects areas plus seniority - Control: Centralised
- Control: results oriented
- Coordination: some simple mechanisms, some
- Coordination: Complex
complex
mechanisms.
Table. 6.9. Differences in Solutions to strategic type problems
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With regards to strategic choice or outcome –in Ostrom’s terms, Nobleza follows a defender type as per Miles and Snow. This is clear despite being number two in the market. In terms of the entrepreneurial problem, Miles and Snows mention that a defender can defend a niche. Regarding the engineering problem, Nobleza has acted consistently with this choice by concentrating on updating its plant in order to improve technology and gain cost-efficiency. It is also working hard on product innovation and market penetration. Moreover, a controversial product subject to price controls and a highly regulated market is a continuous challenge and due to its lack of exports, imports are problematic.
With regards to IBM and its analyser profile, it operates in stable areas such as services, hardware and software in combination with new and flexible initiatives, such as Smart Cities. Besides, the company experiences no problems in importing hardware and software so it can supply the local market unhindered. This organisation operates in a non-regulated market and exports services worldwide. At IBM the nature of the business appears to be more complex, wide ranging and hightech. The competitive stance of both units is compared in table 6.10.
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Business level strategy
Nobleza Piccardo (BAT)
IBM Argentina
Strategic choice in
-Defender type
-Analyzer type
Argentina
-highly regulated market
-non regulated market
-imports are problematic
-no problem with imports
-price controls on the
-diversity of product and
product
services with no price control
-domestic market
-domestic market plus export of services - stable component + flexible component
Table. 6.10. Business level differences
Advantages of foreignness are generated by both companies but in different ways. Nobleza is an attractive place to work for because, as it belongs to a global company, staff finds a wide range of career opportunities. The other company under study, IBM Argentina, emphasizes the ‘Brand’, and access to advanced knowledge and technologies as key. With regards to liabilities, Nobleza does not find any as a result of its British ownership, while it suffers some restrictions in making payments abroad. At IBM, the fact that they are subject to two types of regulations, American and Argentine, can sometimes be complicated, and their American origin might not be welcome in some sectors of the government. Differences in liabilities and advantages of foreignness are shown in table 6.11.
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Nobleza Piccardo (BAT) Liabilities
IBM Argentina
- some restrictions in
- subject to two types of
making payments abroad
regulations, American and Argentine
Advantages
-does not find any as a
- American origin might
result of its British
not be welcome in some
ownership
sectors of the government.
-attractive place to work
-emphasis on the brand
because it belongs to a global corporation
Table 6.11. Differences in liabilities and advantages of foreignness
6.2.2.1. Conclusions on differences
The conclusions show that Nobleza plays in a mature market under the defender type in a highly competitive and highly regulated market. With regards to IBM, which falls under the analyser type, it operates in mature markets and young developing markets where it ´shapes the future.’ However, with regards to exports, lately it has been losing competitiveness as a result of rising costs and increasingly unfavourable local conditions.
Their successful adaptation is the relevant aspect in both cases. Nobleza asserts that embeddedness is achieved primarily through employment of local people; this results
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in flexibility and rapid response to surprises. In IBM’s case, the fact that the decision making centre of gravity has been lowered down from corporate level recently is seen as critical. Adaptation of solutions and products to the local market is significant; a third way to show adaptation is to offer solutions in periods of crises, which means that clients will remain loyal and choose IBM in good times and ride the wave of prosperity together.
6.3. Discussion
Reflecting on the cross-case analysis, the intention is to synthesise the concepts that emerge from it and compare the findings with literature review concepts in order to ascertain what the body of knowledge asserts vis-Ă -vis evidence analysis. New themes that emerge are also discussed.
Based on the two case studies and their similarities it is clear that embeddedness is a concept strongly connected to the corporate business strategies being implemented. Likewise, foreignness is a factor with implications in a local context like Argentina. On the other hand, despite clear differences such as the type of industry, or whether they play in a consumer or a business to business market, or whether one operates in a highly regulated market and the other in an unregulated one, an important difference. In this regard, this study corroborates that a high context perspective ((Boissot & Child 1988, 1996; Chhokar et al., 2008; Graham, 2009; Hofstede, 1991, 2001; House et al., 2004; Tallman and Yip, 2009; Trompenaars & Hampden-Turner 1993, 1998, 2000)) is applicable because adaptation to host country is critical for MNE subsidiaries’ strategy (Tallman and Yip, 2009: Xu and Hitt, 2012).
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Furthermore, the ´how´ plays a key role. Uncertainty is an important variable and how to manage it is relevant. In connection to planning, they manage the long term and coexist with the short term, so how they adapt long term strategies is vital. The dynamics of how they administer long term planning in line with head office directives and tactical planning as dictated by the vicissitudes of the Argentine context are vital. Employing local management is important in order to understand local issues and the rules of the game as Argentina is different from other countries. This situation corroborates that there is an increasing need for managers and companies to understand local regulations and customs in host countries (Tihanyi et al., 2012). Moreover from the analysis in this study, it appears that engaging local management is critical for an MNE subsidiary to tolerate the contextual uncertainty and thus increase its life expectancy in this market. Conversely, it can be posited that starting up an MNE subsidiary in Argentina with ex-pat staff diminishes the possibilities of success in terms of longevity.
Argentina as host country is odd because of its pendulum–like conduct and its particular rules of the game. “Argentina has major fluctuations, such fluctuations are rare as most institutional environments change slowly (evolve over time)” (Hitt M., 18-06-2012, personal email communication). Local context is not easy since formal institutions (Bartjargal et al. 2012; Hitt et al. 2012; Holmes et al., 2011; Ostrom, 2005, 2010, 2011; Xu & Hitt, 2012) are weak and monocentricity (Ostrom, 2005) is currently the type of government with high bureaucracy. Formal institutions - i.e. political, economic and regulatory - are fragile (Botana, 2011; González Fraga & Lousteau, 2005;Hatum & Pettigrew, 2006; Micklethwait, 2014; Peng & Khoury,
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2009; Sebreli, 2012; The Economist, February 13th 2014) while informal institutions in the form of societal culture (Holmes et al., 2011; Ostrom 2005, 2010; Peng 2009) are more significant for companies to adapt to the local context and its ‘rules of the game’. Thus in Argentina societal culture fills in formal institutional weaknesses and voids as previous research demonstrated (Bartjargal et al., 2012; Xu and Hitt, 2012). Similarities in this regard are shared by both subsidiaries. If they do not adapt they cannot survive in an ever changing environment lacking stable and clear rules of the game. There is special emphasis on the rules, written and unwritten, as ground rules are not very clear in Argentina. In connection to rules of the game, this study corroborates what previous research declare that they are a major driver in IB field strategy (Brutton et al, 2009; Holmes et al., 2011; Nicholls-Nixon et al., 2011; North, 1990; Peng & Koury, 2009; Xu & Hitt, 2011). The environment is common to both companies which mainly agree on the environmental situation.
High context perspectives (Child, 2000) recognise that nations have their own logic and mindset thus Argentina fulfils this perspective. Argentina as host country for MNE subsidiaries of American and British origin generates an environment where low context universal rationale (Barlett & Ghoshal, 1989; Biggart, 1997; Chandler, 1977; Kerr et al., 1960; Toffler, 1971; Yang, 1994; Williamson, 1975; Williamson, 1985) does not fit in. Institutions are formal and informal and culture is an informal one (Holmes et al, 2011; Peng, 2009; Peng & Koury, 2009). Thus this research corroborates how poor quality formal institutions in Argentina means that informal institutions, particularly culture therefore become more significant.
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Polycentricity (Aligica and Tarko 2012: McGinnis, 2011; Ostrom, 2005; Ostrom, 2010; Ostrom, 2011; Polanyi, 1951) which is applied in a socio-political framework like Argentina in the form of Institutional Polycentricity (Bartjargal et al. 2012; Xu & Hitt, 2012; Hitt et al. 2012). In this study, the analysis corroborates what authors assert and monocentricity which is the type of government concentrated in few hands is currently the one in Argentina and coincides with Russia. The Russian model is stated by Bartjargal et al. (2012) and profound similarities between both countries are substantial.
With regards to the analysed subsidiaries, both organisations have been in Argentina for decades and they belong to different industries but continue to be embedded in the local environment with successful connotations despite the circumstances of a local environment where formal institutions are not solid and appear to be quite weak. A main characteristic is the ever changing rules of the game that require high flexibility to adapt to different circumstances. From literature perspective this study corroborates what Aligica and Tarko (2012) posit in their definition of polycentricity of decision centres that operate under overarching set of rules. But in the case of Argentina, they are not clear and can change under abrupt pendulum swings. On the side of the government, formal institutions, explicit information in the form of high bureaucracy is managed in parallel to implicit communication that, quite often contradicts the explicit kind, but it seems that it has a higher level in the hierarchy. This suggests that a high degree of knowledge of the local circumstances and adaptation are required. Corroboration with previous research MNE subsidiaries (Tallman and Yip, 2009; Xu and Hitt, 2012) and the need for managers to understand local context (Tihanyi et al., 2012).
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The fact that the analysed organisations are MNE subsidiaries shows that their corporate minds are radically different and at the subsidiary level requires certain degree of adaptation for strategy implementation. Thus, adaptation to local circumstances means that they also need to compete and excel in order to show the parent company that it is worthwhile continuing to operate in the market. The gap between institutions confirms what Xu & Hitt (2012) assert about autocratic political institutions. Similarly the comparison between developed societies with strong institutions and emergent countries with weaknesses and voids (Bartjargal et al., 2012; Hitt, 2012; Holmes et al, 2011) is corroborated in a society such as Argentina and the two selected MNE subsidiaries from Anglo origin.
The companies can claim success on the basis that they have been in the market place for a long time and have consistently made profits despite the Argentine environment showing sharp pendulum swings, where adaptation to changing circumstances and flexibility are paramount. The organisations are in completely different industries, so their success does not appear to be linked to a particular industry. In this regard, it is important to express what success is, and it must be born in mind that, “the definition of success of a business firm depends on whose eyes we are looking through� (Fitzroy et al, 2012). Furthermore, besides remaining profitably in the country for many years, they have transmitted processes to thriving generations of managers who, in turn, have become a synonym of continuity and embeddedness. Moreover, the subsidiaries have been able to create value over decades under different circumstances.
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An interesting and relevant aspect is societal culture which is pervasive. Societal culture characteristics reside in the society where the subsidiary operates but it also permeates company boundaries to a certain extent and finds its way inside the organisation, which helps the organisation to thrive in the market and to understand diverse local parameters. This study emphasizes the importance of societal culture in doing business across borders and corroborates societal culture aspects carried out by previous research (Hofstede, 1991, 2001; Trompenaars & Hampden-Turner, 1993, 1998, 2000; House et al., 2004, 2008). Furthermore this study coincides with Graham (2009) on the importance of knowing the culture as a useful concept that helps develop business.
In connection to this, the current thesis works on three selected dimensions from House et al. (2004, 2008) investigation. The selected dimensions are closely linked to Miles and Snow's strategic types; they are future orientation, power distance and uncertainty avoidance. Future orientation means that managers have to deal with both long term and short term characteristic of the local context, which is controlled by constantly changing and difficult-to-understand rules. Power distance shows hierarchical style in local society that might influence the organisations. Uncertainty avoidance is another dimension that shows to what extent uncertainty is tolerated. In this regard, the connection with the subsidiary and its executives, this IB study corroborates what House et al. (2004, 2008) investigated in connection to societal culture.
Another distinctive attribute at societal level is the remarkable gap that exists between the scores of cultural dimensions measured in terms of “as is� (practices)
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and “should be” (values) as measured by Globe Project (House et al, 2004, 2008). This indicates a cognitive dissonance that affects what is done in real life versus how it is thought things ought to be (See Appendices 1.A; 1.B; 1.C). Consequently the current study is able to corroborate the difficulties that local management experience in connection to cultural specifics.
Business strategy level is represented by Miles and Snows (1978, 2003) and both subsidiaries with different strategic types confirm the problems they face whether similar or different and very specific in its strategic type. Also the way they find solutions to each business strategic problem. With regards to strategic choice considered the outcome in Ostrom’s terms (Ostrom, 2005), this investigation shows a step further since it is an IB study and the researched organisations are MNE subsidiaries that respond to corporations with global policies but at the same time need to operate in a host country with a peculiar context with abrupt swings. But corresponding strategic type corroborates Miles and Snows (1978, 2003) proposed strategic ones.
Within this frame, the subsidiary needs to operate and at the same time, show positive aspects which in this case would be called advantages of foreignness such as local people employment or emphasis on the brand and corporation’s commitment to Argentina which is linked to embeddedness in the country. In this category, the other extreme, liabilities of foreignness considers negative aspects such as difficulties in dealing with head office or difficulties in making payments abroad. Thus in connections to this category, corroborations with Shi & Hoskisson (2012) are
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confirmed for example with local people employment as an advantage or difficulties in dealing with head office.
Based on this discussion, a theoretical conjecture and a model emerge which are displayed in the next section. The themes connected to environmental factors, in turn, exogenous variables (Ostrom, 2005) have been analysed and formal and informal institutions in the form of societal culture are examined. The Framework of Departure (figure 3.3) has been the ramp on which the empirical work completed the research and from which more themes emerged. Thus, from formal institutions’ examination a subdivision into Political, Economic and Regulatory constructs that stand alone arise and have their own causal relation that impact the subsidiary’s business strategy. Moreover, an imperative construct emerges due to the close connection between the subsidiary and head office represented by Global/Corporate Strategy with its natural mandates. In connection to this strategic organisational assembly, a third construct emerges, i.e. Evaluative Criteria, which represents the assessment of the strategic choice and implementation from head office.
After having analysed and discussed the selected themes that will build up the theoretical conjecture and the model, the following section is dedicated to both central and interconnected topics.
6.4. Theoretical conjecture and the model
From the analysis and comparison of the two cases plus the discussion, it is possible to posit a theoretical conjecture and propose a strategic model that considers the
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subsidiary, its strategic behaviour and relationship with diverse local institutions. The theoretical conjecture is reached at departing from the literature review and based on the analysis of the empirical work.
Furthermore, the applicability of this model and theoretical conjecture is in providing subsidiaries with a formal tool to help in their relationship with headquarters and also in being of help to align local management and communication strategies. The model is shown in figure 6.1 and the corresponding theoretical application is later described in this section.
The following constructs emerged from the research and are linked to Ostrom’s concepts and her Institutional Analysis and Development (IAD) framework. Firstly, the action arena becomes the organisation, in this case the subsidiary. Secondly, exogenous variables such as formal institutions and informal institutions (in the form of societal culture as selected for this research). Both of these have an effect on the organisation and specifically in the case of culture, which exists outside and inside the organisation and that helps it develop and thrive. Thirdly, the outcome becomes the strategic choice which generates and at the same time benefits from the foreignness. These advantages often derive from the corporate umbrella. The liabilities of foreignness may arise out of the context in the host country. Liabilities and advantages of foreignness construct have a moderating effect on the strategic choice of the subsidiary.
Different constructs show causal relationships among them and connect into the model and drive the subsidiary’s adaptation process because in both IBM and BAT cases, linking constructs emerged from the empirical work as they were found to
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offer an encompassing perspective of the MNE subsidiary operating in a different environment from that of the company of origin. Institutional distance is significant since high uncertainty prevails and formal institutions are fragile. Hence, informal institutions in the form of societal culture fill in weaknesses and voids in the local environment. Similarities between both companies show the need to be in a state of constant adaptation and awareness of local rules of the game, which are not clear and where implicit and explicit communication styles coexist.
The theoretical conjecture emerges out of the interaction between the action arena (the MNE subsidiary- organisation) and exogenous variables (indigenous formal and informal institutions), which produces an outcome (the strategic choice) that reflects adaptation to the environment. Thus the relationships that impact directly between constructs has a mediating effect as they define what is going to happen in the affected construct.
New concepts emerged from the empirical work, as follows. First, within the formal institutions, which displays a subdivision on political, economic and regulatory ones emerge in order to provide better specificity. Second, corporate strategy appears as Global/Corporate Strategy and is shown as a mediating effect as it defines what it is going to happen in the business strategy within the subsidiary. Third, a new construct that emerges from the empirical work is Evaluative Criteria which means how head office at corporate level is going to assess the performance of the subsidiary. Evaluative Criteria is a grid between head office at corporate level and the subsidiary. After strategic choice, there is an arrow coming out towards this construct. Then it behaves as a loop that goes back into business strategy problems.
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The Subsidiary Strategy Adaptation Model is the final model that is arrived at and the interactions between constructs. The figure is displayed below.
Figure 6.1. The Subsidiary Strategy Adaptation Model
Mapping the evidence from the two MNE subsidiaries onto the framework of departure (figure 3.3) led to the proposal of a theoretical conjecture that will be explained in the following paragraphs. Based on the focus of this research, MNE subsidiaries, the model that emerged from the cross case analysis has been called “The Subsidiary Strategy Adaptation Model” (figure 6.1). It is based on similarities between the companies and is focused on the organisation, which is the subsidiary. With a focus on the subsidiary (the organisation, -the action arena in Ostrom terms) at the heart of the analysis, the subsidiary is examined through the perspective of Miles and Snow’s strategic types, which consider the adaptive problems the
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organisation
faces.
The three
problems,
entrepreneurial,
engineering and
administrative do not exist in watertight compartments, but are closely intertwined. The entrepreneurial problem relates to the product-market domain, while the engineering problem refers to the choice of technologies for production and distribution and the administrative adaptive problem encompasses structure, process and innovation. Moreover, the solutions provided to the problems are described and lead to the strategic choice, which in Ostrom’s terms, is the outcome. The strategic choice is developed in a contextual framework, which means that enactment of the organisational milieu occurs. Organisational adaptation is managed by strategic choices senior managers make, which means that organisations implement strategies that enact their environments. In this construct, three successful strategic types are considered.
First, the defender type that has a narrow product-market domain where the senior management team is decidedly expert in their area of operation but do not intend to seek new opportunities beyond these domains and rarely need to make amendments to technology, operational methods or structure. They work hard on improving their operational efficiency. Second, the prospector type is continuously searching for new market opportunities and shows proactive behaviour with potential answers to emerging environmental trends. Organisations of this type are usually creators of change and uncertainty, become leaders, and competitors need to respond. Conversely, these organisations do not usually run efficient operations. Third, the analyzer type describes organisations that operate on a hybrid domain with two types of product-market, both stable and changing. In stable areas, operations are carried out routinely and efficiently with formalized structures and processes. In uncertain
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areas, senior managers follow competitors and search for new ideas which may not always be promising.
The model has been inspired on the Institutional Analysis and Development (IAD) framework developed by Ostrom (2005) and depicted on figure 3.1. Following her advice about using it as the basis for further knowledge development (Ostrom, 2005), it is the intention of this research to put forward a theoretical conjecture that intends to be of help in some cases to reflect about the business strategy followed and adaptation required by certain environments. Regarding national contexts in emerging countries, it is worthwhile mentioning that Argentina was described as an unpredictable country by Kydland (2004). Under the Polycentricity framework and institutional polycentricity concepts, the above mentioned two MNE subsidiaries are analysed. And using Ostrom's terminology such as exogenous variables, action arena, outcome among others, each subsidiary is extensively examined from the qualitative perspective of senior managers and directors who, in turn, are participants within the organisation or action arena (Ostrom, 2005).
Moreover, Institutional Polycentricity (Bartjargal et al., 2012; Xu & Hitt, 2012; Hitt et al., 2012) is one of the latest frameworks put forward to describe International Business (IB). Both formal and informal institutions are considered as exogenous variables and the business context is similar for both organisations. Formal institutions such as political, economic and regulatory bodies are interlinked in complex networks of meaning. Furthermore, constantly shifting rules of the game are always present and uncertainty is a defining characteristic of Argentina. Rules of the game are sometimes not clear or clear but not formalized. In addition, some
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government measures show no consistency or logical sequence. Explicit information is disseminated by the highest levels of the bureaucracy in coexistence with informality and implicit communication.
Informal institutions represented by societal culture -which is all-encompassing and thus is present in the whole society and in the organisation itself- are analyzed in the form of three dimensions with close links to Miles and Snow's strategic types. The three cultural dimensions that are explored are future orientation, power distance and uncertainty avoidance. These three dimensions are implicit in Miles and Snow’s strategic types. Local societal culture is examined through the eyes of local managers who help adaptation and ensure embeddedness on the one hand, and implement corporate guidelines on the other.
First, future orientation is related to how people think past, present and future and, within the organisation, whether the short term or long term prevails, or both coexist. This dimension is closely connected to the company’s long life. Second, power distance is characterised by the degree of centralisation of an organisation and how power is displayed within it and how interaction between different levels is carried out. Third, uncertainty avoidance describes the extent to which ambiguous situations are considered intimidating, rules and order are preferred, and uncertainty is not tolerated, which leads to a specific form of decision making.
Besides, local societal culture offers a way to adapt to the local environment and helps coexistence of parent company with adaptation to local conditions. The societal culture dimensions become an input to organisations, which not only constantly deal
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and interact with the local environment but, as they have local people working within, find that they help organisations not only to survive but also thrive.
Foreign owned companies suffer consequences as result of their foreign nature. These attributes are called liabilities of foreignness while the same foreign nature expresses a positive side on advantages of foreignness. Liabilities of foreignness might be closely connected to conditions related to environmental features plus organisation enactment and strategic movements while advantages of foreignness might result from the strategy followed or they might be derived from the corporation’s reputation and good name, which together give it an advantage in the host country context.
Additionally, the evaluative criteria of the business strategy implemented by the subsidiary should meet the requirements of objectives set by the head office, which in turn, tend to show a major commitment to continuing embeddedness in the Argentine context. This means that assessment is performed by the subsidiary itself and the parent company at a different level. The parent company might apply control through global or regional headquarters.
Adaptation to the environment is an ever present concept which is performed by successful organisations that fit into the local context and show a continuing commitment to a complex environment.
Finally, once more an emphasis is made on the fact that the purpose of this theoretical conjecture and related model is to be of assistance in actual business life.
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In addition, the broad scope of the model attempts to form the basis for communication between the subsidiary and its headquarters, through which a formalized examination of the overall environment can be executed. Considering that executives at headquarters experience different perceptions of the diverse facets of the local environment, this instrument might offer a platform for subsidiary executives to communicate and share Argentine reality in terms of its own cultural and formal institutional features. Within this frame, it might be constructive to demonstrate how the subsidiary interrelates with the environment and how this relationship might influence its performance. And thus demonstrate that a certain level of adaptation of the global strategy to local conditions is necessary.
Therefore, subsidiaries of multinational companies operating in Argentina need to adapt their global strategies to take into account local vicissitudes that are powerful exogenous variables in the form of formal and informal institutions. Informal institutions in the shape of societal culture play a considerable role and permeate the subsidiary as a result of employing local staff. This helps achieve a continuous adaptation process to the local environment. This leads to embeddedness as a way to deal with an uncertain and pendulum like movement of the Argentine context where the implicit overshadows the explicit form. This local situation is sometimes not easy to be communicated by THE subsidiary to head office in which case, a formal communication framework such as “The Subsidiary Strategy Adaptation Model� presented above in figure 6.1 provides a formal tool to understand local subsidiary strategic behaviour within an ever changing environment with not clear rules of the game to be understood.
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Global strategies of MNE need to be adapted to local conditions in Argentina in order to succeed. This requires profound local knowledge, agreement at HQ and fluid communications between them. The theoretical conjecture is that successful subsidiaries in Argentina are managed by Argentines capable of navigating local cultural idiosyncrasies and constantly adapting in ways that may be surprising or alien to HQ. Local managers gain room for manoeuvre through continuing success, as has been the case with the companies studied.
6.5. Validity of findings
As the nature of this research is qualitative under an inductive approach, many considerations such as generalization, replication and validity which are applicable to quantitative research are not appropriate to the qualitative perspective. Instead, evaluation criteria run mainly under four concepts: credibility, transferability, dependability and confirmability or usability which was the target of the workshop organised at the Argentine British Chamber of Commerce where the theoretical conjecture was presented and the strategic model was displayed and explained to a group of executives connected to other subsidiaries in Argentina. The participants agreed on the constructs used in the model and the importance taking into account issues related to the local business environment. Complementary to this, a presentation of the model to a Citibank Latin American regional headquarters Human Resources vice-president met confirmability requirements, as she confirmed the importance of the model as a formal communication platform between subsidiary and head office from the perspective of headquarters.
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Credibility was gained as participants understood the phenomena shown at the Chamber's activity and suggestions for improvement were obtained for future research. Transferability to other organisations is applicable but the responsibility for its applicability lies with the party using the model, rather than with the researcher. The researcher is responsible for explaining the model and its border conditions.
Dependability resides on the fact that the findings are consistent and could be repeated. Two different subsidiaries in different industries were analysed in the same setting and the similarities between these long lasting companies residing in Argentina were significant. In addition, participants at the workshop agreed on the constructs, and a model emerged which would apparently throw up the same similarities if we were to observe the same things in other organisations. The notion of dependability, on the other hand, which emphasizes the need for the researcher to account for the ever-changing context within which research happens, appears to be valid as both model and theoretical conjecture are grounded in the concept of different and changing environments. The researcher is accountable for describing the changes that occur in the background and how these changes affected the model as the researcher delved into the study. Confirmability was also reached through a high degree of neutrality by the researcher, which ensures that the findings of a study are largely shaped by the respondents, and not researcher bias, interest or motivation. This is illustrated through interviewees’ quotations in the cases, and also through the workshop run at the Chamber with senior participants who were absolutely free to agree or disagree with the conclusions and express this through the anonymous survey.
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As previously mentioned, confirmability was also ascertained with a Citibank executive based in Miami. Two teleconferences were held (see Appendix 9) and the theoretical conjecture plus the model were considered as a way of formalising the dialogue between regional headquarters and subsidiary which in turn, might help when raising points with worldwide headquarters. Citibank is another example of a company with a 100-year presence in Argentina.
6.6. Closing paragraph
This chapter concentrates on cross-case analysis which is carried out on similarities and differences between the two subsidiaries focusing on the significant themes that emerged in the framework of departure (figure 3.3). Moreover, the discussion is carried out and the selected themes are examined and also new constructs arise based on the empirical work. A theoretical conjecture and corresponding model emerge. Both theoretical conjecture and model are expected to be of assistance to managers operating in IB field. Chapter seven follows with the conclusions of the study, limitations and future research opportunities.
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Chapter 7. Conclusions, Limitations and Future Research Opportunities.
7.1. Introduction
The purpose of this chapter is to bring together the work carried out in earlier chapters and focus on the novel theoretical contribution of the thesis to the body of theoretical knowledge discussed in the literature review. Furthermore, in this chapter the future research opportunities are explored as well as the possible conjunction with other research in the area.
The research focused on the need for Anglo cluster subsidiaries in Argentina to adapt to the local cultural environment. It was carried out by using qualitative techniques which led to a theoretical conjecture and model. This model has been presented to experienced consulting practitioners who considered it valuable.
The conclusions of the study, contribution to the body of knowledge, limitations and directions for future research are described hereafter.
7.2. Conclusions
The main conclusions of this thesis are that the MNE under study need to adapt to local environment in order to thrive. However the local environment to which the MNE is complex and ever changing due to the pendulum characteristics described in earlier chapters. The main conclusion of the thesis is that the national context is best
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defined by informal institutions as expressed through societal culture rather than formal institutions. This is because in a country like Argentina where formal institutions are weak, informal institutions, in this case the silent and implicit informal institution becomes a key factor to adaptation. This makes the MNE’s adaptation to the culture all the more important, but given the cultural distance between Argentina and parent companies’ countries of origin, it can also be a source of misunderstanding and conflict with the parent company.
The empirical work carried out at IBM Argentina and at Nobleza Piccardo have been in Argentina for over ninety years. Both companies are embedded in the host country context despite the abrupt political swings. The cross-case analysis was later carried out and was the basis for a discussion from which the theoretical conjecture and model emerged. The model that emerged brings together diverse constructs, such as exogenous variables formal institutions and informal institutions (societal culture) and the three selected cultural dimensions, future orientation, power distance and uncertainty avoidance. The action arena is the subsidiary where business strategy problems need solutions. The outcome is shown under the Strategic Choice construct which interplays with characteristics such as liabilities and advantages of foreignness. In this scenario, the subsidiary constantly interacts with exogenous variables. A new construct emerges and is shown under the name Evaluative Criteria, which is performed by Head Office and the subsidiary itself. Moreover, the presence of head office has been incorporated under the Global/Corporate Strategy construct. Furthermore formal institutions construct is subdivided into three standalone constructs: Political, Economic and Regulatory.
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The main lesson learnt from this research is that MNEs need to adapt to the local culture in order to survive and prosper, and that they achieve it mainly through embeddedness. Embeddedness is accomplished by employing local management which shares and is therefore in tune with the local culture. This in turn, generates a strong commitment to remain in the country.
The MNEs under study adapt corporate strategies to the local environment by employing different planning horizons from those expected by head office. In the case of Nobleza Piccardo, they continue to produce and sell brands that are no longer supported by the corporation but continue to be popular in Argentina. On the other hand, IBM pursues a local commercial strategy whereby they support clients to particular circumstances found in Argentina. For example, they offer special contractual arrangements that allow clients to pay only for services consumed and not be tied to contracts that may be onerous in lean times. In general the commercial policy followed by IBM Argentina is to support clients through tough times to secure their loyalty in good times. This is a good example of adapting commercial strategies to Argentina’s pendulum environment.
The need to adapt corporate strategies to the local environment can create communications short circuits with head office whose cultural distance may make the necessary changes to strategy difficult to understand. Thus, the emergent model provides a formal tool to help communication between subsidiary and head office. Themes such as formal institutions in the shape of political, economic and regulatory bodies might assist on strategic choice. Moreover the evaluative criteria construct that has emerged from the analysis in both organisations will assist to understand
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Argentina’s environment and explain decisions taken by local management that corporate head office staff may find difficult to understand.
Moreover, the importance of the model for practitioners that was raised in the presentation at the Argentine British Chamber of Commerce (Appendix 4) where the survey responses prove that it was well received (see appendix 8). The feedback obtained from local executives were raised and showed the importance of understanding host country rules of the game in order to adapt to local conditions. Also this was corroborated with a head office director at regional level located in Miami who provided her perspective (see appendix 9 and 10). Both local team members and head office director remarked the existence of written and unwritten laws in Argentina that sometimes collide. Furthermore, the importance of adaptation of corporate and global strategy to local circumstances was emphasized. It was also agreed that the model would be useful to align local management.
7.3. Contribution to the body of knowledge
The main contribution is that the theoretical conjecture and model corroborates that where formal institutions are weak firms adapt to forces exerted by informal institutions (i.e. societal culture). The theoretical conjecture and the model bring together three disciplines that span across institutional polycentricity, business strategy and societal culture. Another contribution is that the study is carried out within the IB field of research where there is a trend towards a return to IB’s qualitative roots. Moreover, IB is an appropriate field for multidisciplinary studies
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(Birkinshaw et al., 2011; Doz, 2011). This work contributes to support and reinforce this trend. In general, Latin America is not a fertile ground for academic research in the IB field. This study makes an important contribution to knowledge not only because of its qualitative nature but also because of its geographical location.
The Subsidiary Strategy Adaptation Model is an important contribution for practitioners to facilitate and improve communications between the MNE subsidiary and head office. Therefore, the model is useful because it “formalises� and recognises the existence and effects of culture on corporate strategy. It does this by pointing out the existence and emphasising the importance of informal institutions in countries like Argentina. It helps explain the inexplicable or seemingly irrational. By introducing weak formal institutions into the model, it immediately illustrates the relative importance of informal institutions, and hence culture.
7.4. Limitations
Limitations relate to the study being highly contextualized, which means that generalisability is not an aim of this study. However, the literature supports this methodology in certain circumstances ((Bamberger, 2008; Bartlett, 1979; Birkinshaw et al., 2011; Brannen and Doz, 2010; Cresswell, 2007; Crozier, 1965; Eisenhardt, 1989; Griffiths, 2004; Lee, 1999; Pettigrew, 2013; Piekkari, Welch, and Paavilainen, 2009, Stake, 2005; Yin, 1994, 2009; Welch et al., 2011).
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The initial hurdles presented by lack of trust, which runs deep in Argentine society, had to be overcome: organisations are not used to academic research in the Argentine context. Altschul et al., (2008) in their research for the Globe Project experienced similar problems in their study about societal culture in Argentina. In general companies are quite reluctant to cooperate, especially when it involves academic research.
In addition, despite the fact that this study comes under the IB umbrella and the subject organisations belong to MNEs, globalisation aspects are not considered, but rather local issues and adaptation to the local context are the main topic. In this regard a high context (Child, 2000) perspective prevails within an Institutional Polycentricity frame. The way in which formal and informal institutions interact in the form of societal culture are intertwined with the subsidiary is analysed.
7.5. Directions for future research
Specifically, the model and the corresponding theoretical conjecture provide a basis for continuing this line of research in the IB field. It gives importance to local aspects and the interaction of the subsidiary and the strategy it follows. As this model can be described as pioneering, it offers a basis for future research and different types of opportunities. Though it still needs to be worked on, the constructs can be developed into variables for theory testing in a future study.
While this study has been carried out in a geographical region that is little developed in terms of academic work in the IB field, it is hoped that it will open doors to future
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research. Qualitative research in the IB field has been scarce (Doz, 2011) and this is even worse in Latin America. Opportunities for future research are broad.
A research opportunity arises to replicate the study in Argentina under a new government. It could be a way to confirm Argentina’s pendulum behaviour and to test how subsidiaries adapt to new circumstances.
Another interesting place similar to Argentina in terms of societal culture is Russia. The theoretical conjecture and model can be tested on MNE subsidiaries of Anglo origin operating in that environment. The model could also be tested in environments such as Singapore and other countries in Latin America.
The qualitative nature of this research achieves depth and detail in answers that cannot be achieved in a quantitative study. Furthermore, the intention of this multidisciplinary (Birkinshaw et al., 2011; Doz, 2011) piece of research is to understand local adaptation by foreign MNE subsidiaries in a context that is quite distant from the US and Britain. Companies need to understand that globalisation is not simply a homogeneous way of thinking, but that different views of the world do exist.
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Appendices
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Appendix 1.A. Societal Culture “As Is” and “Should Be” in 25/61 Globe Countries Dimension: Uncertainty Avoidance
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Appendix 1.B. Societal Culture “As Is” and “Should Be” in 25/61 Globe Countries Dimension: Power Distance
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Appendix 1.C. Societal Culture “As Is” and “Should Be” in 25/61 Globe Countries Dimension: Future Orientation
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Appendix 2: Semi-structured questionnaire (by Dora Rizzuto)_2009-2010
1. Tell me about yourself: Tell me your position? What do you do here? 2. Entry mode Please tell me the history of your company in Argentina 4. Degree of centralisation During the swine flu scare what preventative measures did you take? And where was the decision taken? Who controls the advertising budget and decides on marketing and advertising strategies. Are you able to choose your own transport and logistics providers, or are these chosen centrally at head office level? 5. Strategic metric Do Argentine executives from this company move around the organisation overseas and are they posted to head office positions? 6. Market Has the market changed in the last 5 years and if so, how? 7. Structure M form – U form – N form 7.1. How many people do you report to. And who are they? 7.2. How is the corporation organised worldwide? 7.3. Do you think that it is a network or a hierarchical organisation? Like a pyramid? 8. Horizontal versus Vertical management direction and allocation of resources. Are funds for new projects managed and allocated centrally at Head Office or locally. 9. How do you see the next five years? 10. How does your company in Argentina determine its strategy?
Culture questions 11. Future orientation: Organisation Practices (As is) 11.1. In this organisation, the accepted norm is to: 1. Plan for the future. 2. Accept the status quo 11.2. What form does this planning take? Five year plans, scenario planning?
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11. 3: How long have you been with the company? 11. 4: How long do you expect to be with the company? Where do you expect to be in 5 years or 10 years’ time? In this organisation or another one?
12. Power distance: Organisation Practices (As is) 12. 1. In this organisation, subordinates are expected to: 1. Obey their boss without question 2. Question their boss when in disagreement 12. 2. In this organisation, a person’s influence is based primarily on: 1. One’s ability and contribution to the organisation 2. The authority of one’s position 12. 3.How frequently in your experience are employees afraid to express disagreement with their managers. 12. 4. In this organisation, are people consulted by their boss in his/her decisions? 12. 5. Imagine that your company has instituted a system where you need electronic identity card to enter the building. When people forget the card, they have to queue up at reception to obtain a card for the day. One day the president and CEO arrives and finds that he/she has forgotten the card. What would happen at your company? 1.1. The CEO would queue like everyone else to obtain a card for the day 1.2. The CEO would be given priority and not have to queue to obtain a card for the day. 13. Uncertainty avoidance – Organisational Practices (As is) 13. 1. In this organisation, orderliness and consistency are stressed, even at the expense of experimentation and innovation: 1 Strongly agree 7 Strongly disagree
13. 2. In this organisation, job requirements and instructions are spelled out in detail so employees know what they are expected to do: 1 Strongly agree 7 Strongly disagree 13. 3. At this company, rules are not broken – not even when the employee thinks it is in the company’s best interest.
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13. 4: At this company, two equally well-qualified candidates have to be promoted. Who gets promoted? 14.A. An older, experienced manager 14.B. A younger manager who has completed successful projects lately. 13. 5. As a manager, your performance is assessed, 5.A. By means of an objective measurement of your performance 5.B. By your boss’s appraisal of your performance
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Appendix 3. Interview guidelines 2012-2013
1. What is your current position? 2. Show the interviewee GLOBE dimensions and discuss at company level and national level 3.
Uncertainty Avoidance: UA relates to culture’s reluctance to accept ambiguity. Structured or unstructured situation. Germany high (careful plans), US lower than Germany.
4. Power Distance: Argentina is the highest. Do you agree? Entry card example. Toilet (private for top executives or are all the same?). 5.
Future Orientation: Argentina is the lowest (after Russia). Does your company offer opportunities to develop personally and professionally? Is there any career planning?
Institutional Polycentricity: 6. How do you see the situation in Argentina in terms of political, economic, regulatory and business environment? 7. How do you see the situation in five years time? 8. How do you see the industry? How do you see competitors? 9. How is the relationship with suppliers, customers and different stakeholders? 10. Rules of the game: how clear are they in Argentina? 11. Is yours a regulated market? 12. Industry culture: Rules? How is it the same or different from industry standards?
Back to culture: 13. Findings in 2009 (Uncertainty Avoidance, Power Distance, Future Orientation) 14. Have you noticed a gap between what Argentines think should be done and the way they actually do things? (they say one thing and do another) Give examples at societal and business level Subsidiaries advantages and disadvantages:
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15. Which are the advantages and disadvantages of foreignness? Can you give example of advantage? (I provide an example too: IBM provides jobs to women in South Korea – an intangible-). Strategic problems: 16. Do you think your company focuses more on new products and new market development, the selection of appropriate technology for production and distribution purposes or enhancing administrative systems, planning, structure and control? 17. Does your company search for new opportunities such as new products or new markets? 18. Does your company check what competitors do? 19. Does your company know well client needs and become familiar with them? 20. Does your company manage more efficiently or effectively? Or both? Why? 21. Planning: which is the order you consider members behave in planning? What comes first? Act / Evaluate / Plan 22. How does your company manage uncertainty? Through appropriate technological systems? Or any other? 23. Which type of structure you have? 24. Control: is it centralized or decentralized? Short or long-loop information systems? Vertical or horizontal loops? Is control system result-oriented? Or any other? 25. Do you consider your company gives priority to stability and efficiency or effectiveness and change? 26. Is your company active in scanning the environment? 27. Do you consider your company prioritizes flexibility in technological processes or a technological system that minimizes variability and uncertainty? 28. Do you consider you have simple or complex coordination mechanisms? 29. Performance assessment: is it based on effectiveness or efficiency measures? 30. Do you think the company has to adapt to the local environment?
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Appendix 4. Argentine British Chamber of Commerce. Questionnaire for participants.
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18 de Septiembre de 2013 ‘Estrategia Multinacional vs. Implementación local. El desafío de la adaptación a las reglas de juego del contexto’
Dora Rizzuto Paul Griffiths
Questionnaire Cuestionario We should be grateful if you would fill in this brief questionnaire in order to help us better understand the dynamics of the local context. Le agradecemos tenga la gentileza de completar este breve cuestionario a fin de ayudarnos entender mejor la dinámica del contexto local. 1. Is your company a MNE subsidiary? Es su empresa subsidiaria de una multinacional? Yes/Si
No
2. If your company is foreign, on a scale 1 to 5, does its foreignness confer your business any advantages? Si su empresa es extranjera, en una escala de 1 a 5, ¿qué ventaja le confiere ser extranjero a su negocio? No advantage advantage Ninguna ventaja
Enormous Enorme ventaja
Comments: If the answer is positive, please indicate briefly what the advantages are. Comentarios: Si la respuesta es afirmativa, favor indicar brevemente cuales ventajas.
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3. If your company is foreign, on a scale 1 to 5, does its foreignness generate your business any disadvantage? Si su empresa es extranjera, en una escala de 1 a 5, ¿le genera esto alguna desventaja a su negocio? No disadvantage Ninguna desventaja
Enormous disadvantage Enorme desventaja
Comments: If the answer is positive, please indicate briefly what the disadvantages are. Comentarios: Si la respuesta es afirmativa, favor indicar brevemente cuales desventajas.
4. On a scale 1 to 5, do you think that the rules of the game in Argentina are clear? En una escala de 1 a 5, ¿son para usted las reglas de juego claras en la Argentina? Not at all clear Nada claras
Totally clear Totalmente claras
Comments / Comentarios:
5.On a scale 1 to 5, who sets the rules, the law or Government officials? En una escala de 1 a 5, ¿quién pone las reglas, la ley o los funcionarios públicos?
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The Law officials La Ley
Government Funcionarios
Comments / Comentarios:
6. On a scale 1 to 5, to what extent does your company adapt to local culture? En una escala de 1 a 5, ¿hasta que punto se adapta su empresa a la cultura local? Does not adapt No se adapta totalmente
Adapts totally Se adapta
Comments / Comentarios (Examples/Ejemplos):
7. On a scale 1 to 5, how much do you need to adapt corporate strategy to implement it under local conditions? En una escala de 1 a 5, ¿qué nivel de adaptación necesita darle a la estrategia corporativa para implementarla en el entorno local? Low degree of adaptation Bajo nivel de adaptación
High degree of adaptation Alto nivel de adaptación
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Comments / Comentarios:
8. If your company is a subsidiary of a MNC (if not, please go to question 10): On a scales 1 to 5, do you have trouble explaining to your HQ the difficulties of implementing the global strategy due to the particulars of the local business environment? Si su empresa es subsidiaria de una multinacional (si no, favor pase a la pregunta 10): en una escala de 1 a 5, ¿qué nivel de dificultad tiene para explicar a su casa matriz los problemas de implementar la estrategia global debido a las especificidades del mercado local?
Little difficulty Poca dificultad
Great difficulty Mucha dificultad
Comments / Comentarios:
9. On a scale 1 to 5, do you think that the model presented today would be of assistance to improve strategic discussions with the people at HQ? En una escala de 1 a 5, ¿cree que este modelo seria de utilidad para mejorar la fluidez de las discusiones de estrategia con la casa matriz? Not helpful helpful Ninguna utilidad utilidad
Very Gran
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Comments / Comentarios:
10. On a scale 1 to 5, do you think this model would be useful to align local management and communicate strategy to the staff of the subsidiary? En una escala de 1 a 5, ¿piensa usted que este modelo podría ser útil para alinear la gerencia local y comunicar la estrategia al equipo de la subsidiaria? Not helpful helpful Poco útil
Very Muy útil
Comments / Comentarios
11. Please feel free to make general comments on the model or suggestions on how to improve it. Estaríamos muy agradecidos si nos hace comentarios generales sobre el modelo, o si propone aspectos a mejorar. Comments / Comentarios:
Thank you very much. Muchas gracias.
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Appendix 5.1 : Log of Interviews 2009/2010
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Appendix 5.1. Log of Interviews 2009/2010
Date 22 September 2009
Name AgustĂn Gattas
Organisation IBM Argentina
22 September 2009
Alejandro Zarich
IBM Argentina
23 September 2009
Diego Rinaldi
IBM Argentina
23 September 2009
Silvia Lopez Grandio
IBM Argentina
29 September 2009
Graciela Di Rado
IBM Argentina
29 September 2009
Alejandro Lastra
IBM Argentina
30 September 2009
Diego Callegari
IBM Argentina
6 October 2009
Antonio Salgado
IBM Argentina
6 October 2009
Maria Ines Cura
IBM Argentina
7 October 2009
Alicia Sentenero
IBM Argentina
Title IBM Sales & Distribution, Financial Services Sector Client Unit Manager Marketing & Communications Director, IBM Latin America IBM Sales & Distribution, Operations Manager Argentina IBM Sales & Distribution, Software Sales SW Business Development and Strategy Manager - SSA Region Marketing Executive, Spanish South America - SSA IBM Sales & Distribution, Legal SSA Counsel IBM CHQ, Enterprise On Demand SSA Global Resources Sr Manager, BT/IT Integrated Technology Delivery, Geo Service Delivery IBM Sales & Distribution, IBM General Business MidMarket Sales Manager, Argentina IBM Sales & Distribution, Software Sales
Goal/Activity Strategy & Culture / Semistructured interview ditto
ditto
ditto
ditto
ditto
ditto
ditto
ditto
ditto
286
SW Manager, Technical Sales Argentina
Date 7 October 2009
Name Roberto Cruz
Organisation IBM Argentina
26 January 2010
Guillermo Cascio
IBM Argentina
9 November 2009
Facundo Etchebere
Nobleza Piccardo
Institutional Relations Director
23 November 2009
Ricardo Guardo
Nobleza Piccardo
30 November 2009 “
Sebastian Gianetti Alberto Raguzzi Sabrina Propper Andrés Ortner
7 December 2009
Roberto Boghossian
Nobleza Piccardo Nobleza Piccardo Nobleza Piccardo Nobleza Piccardo Nobleza Piccardo
Marketing Finance Manager Supply Chain Manager Security Manager Legal Director
“
Esteba Piquero
9 December 2009 “
Alejandro Riomayor Mariana Pinto
10 December 2009
Matias Szapiro
18 December 2009
Gabriela Quintana
“ “
Nobleza Piccardo Nobleza Piccardo Nobleza Piccardo Nobleza Piccardo
Nobleza Piccardo
Title IBM Sales & Distribution, IBM General Business Territory Manager Argentina
CEO
Goal/Activity ditto
ditto
Strategy & Culture / Semistructured interview ditto
ditto ditto ditto
Finance Manager Accounting and Finance Manager Marketing Manager CEO
ditto
Finance and IT Director Manager of CORA – Corporate and Regulatory Affairs Human Resources Manager
ditto
ditto
ditto ditto
ditto
ditto
287
Appendix 5.2. Log of Interviews 2012/2013
288
Appendix 5.2 .Log of Interviews 2012/2013
Date 4 March 2013
Name Ignacio Vaca de Osma
Organisation IBM Argentina
Title Communications, Marketing and Institutional Relations Director
4 March 2013
Diego Rinaldi
IBM Argentina
6 March 2013
Jorge Bustello
IBM Argentina IBM Argentina
Middle Market GEO Expansion and Commercial Director Special Projects Senior manager
6 March 2013 Agustin Gattas
6 March 2013
Fernando Wendt
IBM Argentina
19 December 2012
Matías Szapiro
Nobleza Piccardo
19 December 2012
Fernando Sueta
19 December 2012 13 March 2013 “
Nobleza Piccardo Nicolás Beveratti Nobleza Piccardo César Travaglini Nobleza Piccardo María Cecilia Nobleza Montello Piccardo
Goal/Activity Strategy, institutions & rules of the game / Semistructured interview ditto
ditto
IBM Sales & Distribution, Financial Services Director
ditto
Director
ditto
CORA – Corporate and Regulatory Affairs Director
Finance manager
Strategy, institutions & rules of the gamed / Semistructured interview ditto
Legal manager
ditto
Marketing manager Human Resources South Cone manager
ditto ditto
289
Appendix 5.3 : Log of Interviews Log of Interviews about the Context / both periods 2009/2010 and 2012/2013
290
Appendix 5.3.Log of Interviews about the Context / both periods 2009/2010 and 2012/2013 Date 24 November 2009
Name Informant 1 (*)6
25 November 2009
Informant 2 (*)
1 December 2009
Informant 3 (*)
1 December
Informant 4 (*)
2 December 2009
Informant 5 (*)
16 December 2009
Informant 6 (*)
16 December 2009
Informant 7 (*)
8 November 2012
Alberto Galvis British Petroleum (BP)
20 December 2012
Carlos Jornet
6 7
Organisation Foreign Energy Organisation (*)7 Foreign Energy Organisation (*) Foreign Energy Organisation (*) Foreign Energy Organisation (*) Foreign Energy Organisation (*) Foreign Energy Organisation (*) Foreign Energy Organisation (*)
AsociaciĂłn de Entidades PeriodĂsticas Argentinas (ADEPA)
Title CEO
Goal/Activity Strategy/Societal culture
BP General Manager & Southern Cone Legal Manager Vice-President of Reserves of Oil and Gas
ditto
Chief Financial Officer
ditto
Commercial Developments VP
ditto
Senior Finance VicePresident
ditto
Vicepresident Planning & Economics
ditto
Regional President BP South Cone
President
ditto
Local context institutions & rules of the game ditto
(*) Non disclosure executives identity agreement. (*) Non disclosure company identity agreement.
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Appendix 6. Conceptual underpinning of the research method and design
This appendix shows complementary information to methodology aspects. First, a brief overview of the concept of paradigm is carried out while stating the philosophical position of the researcher, which is social constructionism. Qualitative research is later examined in the light of authors such as Bansal and Corley (2011), Gephart (2004) and the traditional Denzin and Lincoln (2005). As one of the aims of this dissertation is to work on the international business (IB) field, qualitative research under this umbrella is also considered from the perspective of leading authors such as Birkinshaw, Brannen and Tung (2011) and Doz (2011), to name a few.
Case study method has been selected as the tool to carry out this research, which involves two MNE subsidiaries in Argentina which in turn, represent a case study under the IB framework (Bamberger, 2008; Brannen and Doz, 2010; Piekkari, Welch, and Paavilainen, 2009, Redding, 2005; Welch, Piekkari, Plakoyiannaki and Paavilainen-Mäntimäki, 2011). Welch et al. (2011) examine four frameworks for case study development and the theorizing that arises from them. An Interpretive Sensemaking approach has been adopted in this dissertation (Stake, 2005) where there is strong emphasis on the context and there is no intention to reach general conclusions as particularization prevails. Moreover, the context is very important and the study can be considered “in context” (Arhens, 2008; Bamberger, 2008, Meyer and Peng, 2005, and Redding (2005) where the role of context is vital for
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understanding (Welch et al., 2011). Thick description (Geertz, 1973; Lincoln and Guba, 1985; Ponterotto, 2006; Ryle, 1949) is a strength of the study.
A_6_1. Qualitative research
Following the idea of the action arena as the ‘black box’ McGinnis (2011) in another field mentioned in the first chapter, qualitative research is distinctively suited to ‘opening the black box’ of organisational processes, the how, who and why of individual and collective organised action as it unfolds over time in context (Doz, 2011). The beauty of qualitative research is that it allows different paradigms and different types of research and research reporting (Bansal and Corley, 2011), in this research, social constructionism. Gephart (2004) considers qualitative research to be multi method research that applies an interpretive approach to the area under research. Under this approach, phenomena are very often studied in their own environment and the social actors’ meanings are used to understand them. It addresses questions related to how social experiences are created and given meaning and produce representations of the world that make it visible (Denzin and Lincoln, 2005). Gephart also conceives qualitative research as highly descriptive, which often describes who said what, to whom, over and above how, when and why.
Qualitative research is important for the management research community for numerous reasons. Briefly, it offers insights that are difficult to obtain with the quantitative approach. For instance, qualitative research can supply thick detailed descriptions of definite acts in real life contexts that preserve and retain the actual meanings that the people involved give these actions and settings. Qualitative research can thus provide bases for understanding the social context that frames
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management practice. (Gephart, 2004). In addition, qualitative research is quite complicated to pin down because of its “flexibility and emergent character”, which it is sometimes designed simultaneously, this in turn, necessitates “highly contextualized individual judgements” (Van Maanen, 1998: XI).
While being aware of the existence of various definitions, Doz (2011) adopts a somehow limiting one, “qualitative analysis (such as narratives and conceptual development) of qualitative data (such as semi-structured interview data, qualitative case studies, ethnographic studies and so on) (p. 583). A more comprehensive view is shown by Denzin & Lincoln in their 2005 Handbook of Qualitative Research, as it expresses that,
“Qualitative research is a situated activity that locates the observer in the world. It consists of a set of interpretive, material practices that make the world visible. These practices transform the world. They turn the world into a series of representations, including field notes, interviews, conversations, photographs, recordings, and memos to self. At this level, qualitative research involves an interpretive, naturalistic approach to the world. This means that qualitative researchers study things in their natural settings, attempting to make sense of, or interpret, phenomena in terms of the meanings people bring to them (Denzin & Lincoln 2005, p. 3).
With regards to this study and the connection with Denzin & Lincoln’s definition, the scope embraces the interpretive perspective and does not include any impact on transforming of the world. The special focus resides on answering the questions
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Why? How? (Yin, 2009, 1994); and it is worthwhile noting that the questions are asked about contemporary occurrences over which the researcher has no control (Griffiths, 2004).
A_6_2. IB and qualitative research
After a brief introduction about Qualitative Research, the focus moves into IB field, which in turn, is the aim of this study. Related to the connection between IB and qualitative research, Birkinshaw, Brannen and Tung (2011) affirm that the International Business (IB) field was originally set up on a rich heritage of qualitative research (for example, Barlett, 1979; Crozier, 1965; Kindleberger, 1956; Prahalad, 1975; Wilkins, 1970, 1974). Over time, qualitative methods were cast aside in favour of quantitative methods as a reflection of the increasing influence gained by positivism in the social sciences. In their essay, Birkinshaw et al. (2011) espouse Van Maanen’s (1979) definition of qualitative research as an “umbrella term” that encompasses “an array of interpretive techniques that can describe, decode, translate, and otherwise come to terms with the meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world” (p. 520).
Moreover, “the field of IB is ‘multidisciplinary in scope and interdisciplinary in content and methodology (statement of JIBS editorial policy)” (Birkinshaw et al., 2011; p. 573). Although quantitative methodologies offer clear advantages, the nature of IB, multi-cultural, multi-dimensional and dynamic, makes it open to different research methodologies, including qualitative approaches. Despite the increasing recognition of the importance of qualitative research in IB (for example,
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Marschan-Piekkari and Welch, 2004) and the efforts of some journal editors and scholars, the number of published qualitative articles in leading IB journals is quite low. In this respect, it is worthwhile mentioning a paper by Welch et al. on qualitative case studies (2011), where the authors carry out an analysis of the qualitative content of case studies published in three leading journals, Academy of Management Journal, Journal of International Business Studies and Journal of Management Studies, where they seek to understand how researchers produce theories and how this could be applicable to future IB studies.
Doz (2011) states that “qualitative research in international business has been rare, the main research streams in the field have relied more on quantitative methods (p. 582). Doz also states that IB is essentially multidisciplinary, as numerous disciplines can contribute to it and thus benefit from the richness of its multidisciplinary nature. However, most IB researchers have been content to remain within comfort zones such as institutional theories to research different patterns of international development by MNEs and their internal workings (Doz and Prahalad, 1991). In Doz’s view, qualitative research can be used for theory testing where different theoretical lenses can be applied. Theory testing is a potential contribution to the IB body of knowledge. IB also needs theory development on its own, and case study could be of help (Welch et al., 2011). Doz (2011) concludes that IB is definitely an open field which needs theoretical development and testing; and that qualitative research methods provide an interesting opportunity to assist the discipline in gaining its own theoretical basis.
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Birkinshaw et al (2011) agree that the relatively low use of qualitative methods represents a remarkable loss to the IB field, where qualitative methods can play a significant part in understanding and interpreting the complexities of different contexts, cultural, institutional and organisational, generated both by globalization and by companies developing overseas business. The authors provide culture as an example; which is an ever present topic in IB. In their view the measures applied by Hofstede (1980), Schwartz (1994) and Project GLOBE (2004) are “all value-based” (p. 574). Their suggestion is that value based quantitative research has reached a limit because it ignores the link between values and behaviour. IB can only move forward and explore the biculturalism and cultural hybrid phenomena that are appearing as a result of new work demographics by pursuing qualitative techniques. Despite this endorsement of qualitative methods, this researcher believes that Birkinshaw et al.’s criticism of the “value basis” nature of Project GLOBE research is unjustified because in their monumental quantitative research in 2004, Project GLOBE did indeed measure both values and behaviour. This took the form of ‘as is’ and ‘as should be’ measurements. Moreover, Project GLOBE went on to carry out a significant piece of qualitative research in 2008, a fact that was also overlooked by the authors.
Moreover, Birkinshaw et al. (2011) emphasize that the use of thick description (Denzin, 1989; Geertz, 1973; Lincoln and Guba, 1985; Ponterotto, 2006; Ryle, 1949), exploratory research and comparative case analysis that spotlight on inductive theory construction and hypothesis creation may be more appropriate. Another remarkable aspect in IB research is the critical role of the complex plurality of contexts (Birkinshaw et al., 2011; Doz, 2011)
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With regards to the importance of the context, One of the current trends followed by the Academy of Management Journal is research in extreme and “unusual contexts” (Bamberger and Pratt, 2010) in parallel used as an analogy and linked in this case to a country where rules of the game (Ostrom, 2005) are ever-changing. Argentina, the context where this research is carried out is an emerging economy that provides an unusual context. Bamberger (2008) focuses on the role of context which he describes as “that amorphous concept capturing theory-relevant, surrounding phenomena or temporal conditions” in research. The author also notes a revolution in management theory where context counts and it deserves to be given theoretical relevance. Bamberger also mentions that the quantity of context-relevant investigations is on the increase. Arhens (2008) also considers the importance of the context as well as new contexts and intents to address age-old disputes about philosophical approaches expressed as objective-subjective dichotomies in areas such as accounting (KakkuriKnuuttila et al., 2008).
Apparently, this is the first time that this type of study is carried out in Argentina and the whole of Latin America. The companies belong to the Anglo Cluster (GLOBE Project, 2004, 2008) and have subsidiaries operating in Argentina, which are greatly different environment from the institutional and cultural perspectives. The difference is also reflected in this research itself, as the mindsets are dissimilar. It is worthwhile establishing whether companies need to adapt to the host country or whether globalization and national head-quarter’s parameters prevail.
A_6_3. Qualitative international business (IB) research and the case method
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Case study is the chosen methodology for this research on a basis of multiple case studies in the IB field as one subsidiary is of American origin while the other two are British. The case study has a positive track record in qualitative international business (IB) research. A recent review of four key IB journals over a 10 year period has shown case study to be the most accepted qualitative research strategy. Case studies have shown a remarkable potential to produce new and innovative theoretical insights. (Welch et al, 2011).
In their paper, Welch et al (2011) take a novel approach in arguing that qualitative case studies can be used to theorise about IB. Up to now it was generally considered that one could only theorise on the basis of quantitative research. The authors place their typology on a matrix composed of contextualization and causal explanation which generate four methods of theorising. These are inductive theory-building, interpretive sense-making, natural experiment and contextualised explanation. The objective of the paper is “namely to analyse methods of theorising ‘in context’ rather than ‘away from context’ ” (p. 743), as “context-oriented” qualitative research outlines an answer to the problem of underweighting contextual sensitivity. In this regard, Bamberger (2008) emphasises that central beliefs may be forcing researchers to overweight generalisability and underweight contextual sensitivity.
In their paper Welch et al (2011) mention the tension between context and scientific explanation, which causes unease to any piece of research, particularly in IB, where cross-border considerations are vital. How to explain context has been a persistent and unresolved topic in the IB field (Brannen and Doz, 2010; Redding, 2005). The
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authors contend that more qualitative research is needed as there is a remarkable gap in the existing literature in relation to contextualising IB research.
Qualitative research is linked to rich description and exploratory, inductive theorising. However two problems arise in connection with case studies. Firstly, as the generasibility of their findings is low, case studies are often considered as inferior in their theorising potential vis-à-vis hypothesis-testing research. For this reason, case studies are limited to the very initial exploratory phase of investigation. Potential for causal explanation is overlooked. Secondly, as qualitative research is frequently assumed to be context sensitive, a strong trend in de-contextualisation has prevailed in much case study research, as rich context has been perceived as an impediment to theorising. As theorising is to generalise away from context, explanation and contextualization are regarded as basically incompatible aims. In their paper, Welch et al. (2011) challenge these perceptions and suggest how explanation and context might be reconciled, leading to theorising from case studies in the IB field.
Welch et al (2011) adopted Piekkari et al’s (2009: p. 569) case study definition for their study, “a research strategy that examines, through the use of a variety of data sources, a phenomenon in its naturalistic context, with the purpose of ‘confronting’ theory with the empirical world”, while they are aware that case study is a controversial term. When the authors analyse the methods of theorising, they highlight three of them – inductive theory-building, natural experiment and interpretive sensemaking- as well established, whereas the fourth – contextualized explanation- is newer in the methodology literature.
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The first method of theorising the authors analyse is Inductive Theory-building whose main strength is its ‘positivist view’ and whose main representative scholar is Eisenhardt (1989, a) who later (Eisenhardt and Graebner, 2007) shows that there is “a shift from context-bound detail to context-free propositions” (Welch et al., 2011: p. 246). The main goal of this type of method of theorising is to suggest associations between constructs and the variables to be tested.
The second method of theorising is Natural Experiment which is associated with Yin (2009) as its main advocate. Yin agrees that case-studies are appropriate for exploratory theory-building but, as opposed to Eisenhardt, he does not restrict this method to early stage theorising. Yin (2009, 1994) shows how case studies can also be used for ‘explanatory’ rather than ‘exploratory’ purposes, as he asserts case studies are more suitable to ‘how and why’ enquiries. Many of the processes Yin (2009) supports, for example, replication logic, time-series and pattern matching, are adaptations of experimental techniques. In his philosophical orientation, he does not query goals of generalisability, validity and reliability. Yin appears to share some philosophical positions with Eisenhardt (1989), despite the fact that he is not explicit about his philosophical stance.
The third method of theorising is Interpretive Sensemaking whose main advocate is Stake (2005). His philosophical orientation is Interpretive/Constructionist, which is in turn, this researcher’s personal research position. From Stake’s perspective (1995), particularization is the aim of case studies, which implies comprehending the uniqueness of each case study on its own. In contrast to researchers that look for
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generalisable explanations and who ‘nullify the context’ and eradicate the simply situational in order to obtain them, interpretive researchers adopt the context, narratives and their own personal involvement. Case researchers who follow this tradition argue that in social sciences, “the scientific ideal of erläeken (explaining an action by attributing it to exogenous causal factors) needs to be replaced by verstehen (understanding an action through the actor’s subjective experience of it” (Welch et al., p. 747). Welch et al. also cite Lincoln and Guba (1985), who contend that case studies allow good description of the context, which is vital for understanding.
The fourth method of theorizing is case study as Contextualised Explanation, an innovative alternative in IB, whose philosophical position is critical realism and whose main representatives are Bhaskar (1998) and Ragin (2000). As critical realism has developed quite recently, it reveals less consistency and uniformity than the other three methods. Social scholars are still debating how to apply it effectively to the practical world. Nevertheless, researchers in this new tradition have produced pioneering work generating contextualised explanation.
According to Bhaskar (1998), cited by Welch et al (2011), critical realism philosophy shows a reality which is independent of human perceptions of that reality, but comprehension of reality is subjective and theory-laden, which means that it is concept-dependent or that the meaning is linked to it. In Bhaskar’s view, there is a reconciliation between understanding (verstschen) and explanation (erklären). Social scientists go beyond events as they have a need to understand the nature of objects and, on the other hand, cause-effect relationships do not generate regularities in open systems.
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The methodologies involved in contextualized explanation consider why and how events occur. Proponents of this perspective contend that history is not in opposition to general theory, as explanations for actions have to be located in social place and social action.
Finally, Welch et al (2011) make a comparison of the four methods by placing them on two axes, causal-explanation (x-axis) and/or contextualization (y-axis), shown below in figure 4). This summarizes the four methods: inductive-theory building which seeks law-like generalizations and which looks for regularities rather than causalities and theorises ‘away from’ context rather than ‘in context’. The strength of this method is induction. Secondly, the natural experiment can generate causal, internally valid explanations. But the emphasis on contextualisation is still weak.
In the third quadrant the interpretive sensemaking approach is found, this encapsulates ‘thick description’, which becomes its strength, resulting in particularization and characteristics which make it context-specific. The fourth quadrant, contextualized explanation, represents a rejection of contextualizationexplanation trade off. This method asserts that case studies can engender causal explanations while preserving contextualization, as its advocates claim that explanations have to be essentially context-bound.
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Strong
Interpretive sensemaking
Contextualised explanation
Emphasis on Contextualisation Inductive theory-building
Natural experiment
Weak
Weak
Strong
Emphasis on causal explanation
Figure App_6_1. Approaches to Case Study Methods Adopted from: Four Methods of Theorising, Welch et al., 2011)
Based on this model where the four approaches are placed in the contextualizationexplanation framework, the authors mention that the first three methods underline the traditional divisions in social sciences between “erläken and verstehen, explanation and understanding, nomothetic and idiographic, objective and subjective, inductive and deductive, general and particular, context-free and context specific” (Welch et al, 2011: p. 750).
The nature of this research, where a study of the relationship between the environment, strategy and culture in three MNE subsidiaries in Argentina (strong contextualisation) and where the researcher does not seek to generalise the results (weak causal explanation), places it firmly in the interpretive sensemaking quadrant.
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Appendix 7. Pilot study. The importance of culture in FDI initiatives (questionnaire about national cultures)
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Universalism vs. Particularism 1. Imagine that your company has instituted a system where you need electronic identity card to enter the building. When people forget the card, they have to queue up at reception to obtain a card for the day. One day the president and CEO arrive and finds that he/she has forgotten the card. In your opinion, 1.1. The CEO should queue like everyone else to obtain a card for the day 1.2. The CEO should be given priority and not have to queue to obtain a card for the day. 2. You are riding in a car driven by a close friend. He hits a pedestrian. You know he was going at least at thirty-five miles per hour in an area of the city where the maximum allowed speed is twenty miles. There are no witnesses other than you. His lawyer says that if you testify under oath that he was driving at only twenty miles per hour, you will save him from serious consequences. What right has your friend to expect you to protect him? Pls. choose your option. 2.1.a. My friend has a definite right as a friend to expect me to testify to the lower speed. 2.1.b. He has some right as a friend to expect me to testify to the lower speed. 2.1.c. He has no right as a friend to expect me to testify to the lower speed. What do you think you would do in view of the obligations of a sworn witness and the obligation to your friend? Pls. choose your option. 2.2.a. Testify that he was going twenty miles per hour. 2.2.b. Not testify that he was going twenty miles per hour. 3. Six months after your company had signed a long-term contract with a foreign buyer to buy a commodity in 10 annual installments the world price of that commodity collapsed. Instead of paying $4 a ton below world market price, the buyer now faced the prospect of paying $3 above. The buyer faxed your company to say it wished to renegotiate the contract. The final words of the fax read: “You cannot expect us as your new partner to carry alone the now ruinous expense of these contract terms.� Your company negotiators had a heated discussion about this situation. Several views were offered: 3.1. A contract is a contract. It means precisely what its terms say. If the world price had risen we would not be crying nor should they. What partnership are they talking about? We had a deal. We bargained. We won. End of story. 3.2. A contract symbolizes the underlying relationship. It is an honest statement of original intent. Where circumstances transform the mutual spirit of that contract, then terms must be renegotiated to preserve the relationship. 3.3. A contract symbolizes the underlying relationship. It is an honest statement of original intent. But such rigid terms are too brittle to withstand turbulent environments. Only tacit forms of mutuality have the flexibility to survive. 306
3.4. A contract is a contract. It means precisely what the terms say. If the world price had risen we would not be crying, nor should they. We would, however, consider a second contract whose terms would help offset their losses. Indicate the approach you prefer. Individualism vs. Communitarism 4. Two people were discussing ways in which individuals could improve the quality of life. 4.A. One said: “It is obvious that if individuals have as much freedom as possible and the maximum opportunity to develop themselves, the quality of their life will improve as a result.” 4.B. The other said: “If individuals are continuously taking care of their fellow human beings the quality of life will improve for everyone, even if it obstructs individual freedom and individual development.” Which of the two ways of reasoning do you think is usually best, A or B? 5. In your view, which kind of job would you find more desirable? 5.A. Everybody works together and nobody gets individual credit. 5.B. Everybody is allowed to work individually and individual credit can be received. 6. A defect is discovered in one of the installations. It was caused by negligence of one of the members of a team. Responsibility for this mistake can be carried in various ways. 6.A. The person causing the defect by negligence is the one responsible. 6.B. Because he or she happens to work in a team the responsibility should be carried by the group. Which one of these two ways of taking responsibility do you think is usually the case in Argentina, A or B? Affective vs. Neutral 7. How would you behave if you felt very upset at the news that your department was going to be moved to offices in the basement? Would you express your feelings openly? Yes
No
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8. In a meeting you feel very insulted because your business counterpart tells you that your proposal is insane. What is your response? 8.1. I will not show this person has hurt/insulted me, because that would be seen as a sign of weakness and would make me more vulnerable in the future. 8.2. I will not show that I am hurt because that would spoil our relationship. This will allow me later to tell the counterpart how much I was hurt by his or her comment so he or she might learn from it. I rather show my emotions when the counterpart has more chance to improve our business relationship. 8.3. I will show clearly that I am insulted so that my counterpart gets the message. I believe the clarity of my message will allow me to be able to control even greater emotional upset in the future. 8.4. I will show clearly that I am insulted so that my counterpart gets the message. If business partners cannot behave themselves properly they have to bear the consequences. Indicate the approach you prefer. 9. Which statement best summarizes the attitude in Argentina? 9.1. Negotiations should be typically focused on the object or proposition being discussed, not so much on the people.” 9.2. “The entire negotiation is typically focused on the people, not so much on the object or proposition being discussed.”
Specificity vs. Difuseness 10. Your boss asks to help him/her to look after of his/her house while he/she is away on holiday and water the plants three times a week and feed the dogs. You don’t feel like doing it, discusses the situation with a colleague. 10.A. A colleague argues: “You don’t have to do it if you don’t feel like it. He/she is your boss at work. Outside he/she has little authority.” 10.B. Another colleague argues: “Despite the fact that you don’t feel like it, you should do it. He/she is your boss and you can’t ignore that outside work either”. Who is right? A
B
11. Which of the following four types of people do you prefer to have around you? Review these descriptions carefully, then mark the one that most closely relates to your preference. 11.A. People who completely accept you the way you are and feel responsible for your personal problems and welfare (combines diffuse and affective: love) 11. B. People who do their work, attend to their affairs and leave you free to do the same (specific and neutral: approval)
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11. C. People who try to improve themselves and have definite ideals and aims in life (diffuse and neutral: esteem) 11.D. People who are friendly, lively and enjoy getting together to talk or socialize (specific and affective: enjoyment). 12. You have a business meeting with some people for the first time, what is your preferred course of action? 12.A. To limit small talk and to start the meeting without name delay 12.B. To engage in small talk and establish a rapport with the people before talking business. Achieved vs. Ascribed Cultures 13. The respect a person gets is highly dependent on their family background. S Strongly disagree
Tend to disagree
Undecided
Tend to agree
Strongly
agree
14. You used to promote one of two equally well-qualified candidates, 14.A. An older, experienced manager 14.B. A younger manager who has completed successful projects likely. 15. You would prefer as a manager to be determined by, 15.A. An objective measurement of your performance 15.B. Your boss’s appraisal of your performance ___________________________________________________________________ HOFSTEDE VSM 94 questions (page 495) Please think of an ideal job –disregarding your present job, if you have one. How important would it be to you to‌ (please circle one answer in each line across). 1 = of utmost importance 2 = very important 3 = of moderate importance 4 = of little importance 5 = of very little or no importance 01. Have sufficient time left for your personal or family life 1
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02. Have good physical working conditions (good ventilation and lighting, adequate work space, etc.) 1
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04. Have security of employment 1
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06. Be consulted by your direct superior in his/her decisions 1
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07. Have an opportunity for advancement to higher level jobs 1
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08. Have an element of variety and adventure in the job 1
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In your private life, how important is each of the following to you? (please circle one answer in each line across). 09. Personal steadiness and stability 1
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12. Respect for tradition
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13. How often do you feel nervous or tense at work? 1. 2. 3. 4. 5.
never seldom sometimes usually always
14. How frequently, in your experience, are subordinates afraid to express disagreement with their superiors? 1. 2. 3. 4. 5.
very seldom seldom sometimes frequently very frequently
How much do you agree or disagree with each of the following statements? (Please circle one answer in each line across) 1 = strongly agree 2 = agree 3 = undecided 4 = disagree 5 = strongly disagree
15. Most people can be trusted 1
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16. One can be a good manager without having precise answers to most questions that subordinates may raise about their work 1
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17. An organisation structure is which certain subordinates have two bosses should be avoided at all cost 1
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18. Competition between employees usually does more harm than good 1
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19. A company’s or organisation’s rules should not be broken –not even when the employee thinks it is in the company’s best interest 1
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20. When people have failed in life it is often their own fault 1
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Appendix 8. Argentine British Chamber of Commerce. 18/09/13. Questionnaire for participants. Summary of results.
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Appendix 9. Corroboration with regional HQ officer
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Appendix 9.1. Questionnaire for regional HQ officer
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2 December 2013 / 2 de diciembre de 2013 “MNE Strategy vs. Local Implementation: The Adaptation Challenge to local Context Rules of the Game” ‘Estrategia Multinacional vs. Implementación local. El desafío de la adaptación a las reglas de juego del contexto’
Dora Rizzuto Paul Griffiths
Questionnaire Cuestionario We should be grateful if you would complete the questionnaire below in order to help us understand the dynamics of the local context. Le agradecemos tenga la gentileza de completar este breve cuestionario a fin de ayudarnos entender mejor la dinámica del contexto local. 1. Is your location the headquarters of an MNE? Es su sede, casa matriz de una multinacional? yes/ si
No
2. Who sets the rules, the law or Government officials in Argentina? Quién pone las reglas, la ley o los funcionarios públicos en Argentina? Please show your answer on a scale from 1 to 5. Por favor refleje su perspectiva en una escala de 1 a 5.
The law officials La ley
Government Los funcionarios
Comments / Comentarios:
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3. Do you think that the rules of the game are clear in Argentina? Para usted las reglas de juego son claras en Argentina? Please show your answer on a scale from 1 to 5. Por favor refleje su perspectiva en una escala de 1 a 5.
Totally clear Totalmente claras claras
Not at all clear Para nada
Comments / Comentarios:
4. To what extent does your company adapt to local culture? Hasta quĂŠ punto se adapta su empresa a la cultura local? Please show your answer on a scale from 1 to 5. Por favor refleje su perspectiva en una escala de 1 a 5.
It adapts totally Se adapta totalmente poco
It adapts very little Se adapta muy
Comments / Comentarios:
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5. How much you need to adapt corporate strategy to implement it under local conditions? QuĂŠ nivel de adaptaciĂłn necesita darle a la estrategia corporativa para implementarla en el entorno local?
High level of adaptation existent Alto nivel de adaptaciĂłn
Non Inexistente
Comments / Comentarios:
6. If your company is foreign, does it confer your business an advantage in Argentina? Si su empresa es extranjera, le confiere esto alguna ventaja a su negocio en Argentina?
Enormous advantage Enorme ventaja
No advantage Ninguna ventaja
Comments / Comentarios:
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7. If your company is foreign, does it generate a disadvantage to your business in Argentina? Si su empresa es extranjera, le genera esto alguna desventaja a su negocio en Argentina?
Enormous disadvantage Enorme desventaja desventaja
No disadvantage Ninguna
Comments / Comentarios:
8. Do you think that the model presented today would be helpful in improving strategic discussions with the people at subsidiaries? Cree que este modelo seria útil para mejorar la fluidez de las discusiones de estrategia con las subsidiarias? Please show your answer on a scale from 1 to 5. Por favor refleje su perspectiva en una escala de 1 a 5.
Not helpful helpful No útil
Very Muy útil
Comments / Comentarios:
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9. Do you think this model would be useful to align local management and to communicate strategy to the staff at the subsidiary? Piensa usted que este modelo podría ser útil para alinear la gerencia local y comunicar la estrategia al equipo de la subsidiaria? Please show your answer on a scale from 1 to 5. Por favor refleje su perspectiva en una escala de 1 a 5.
Not helpful helpful No útil
Very Muy útil
Comments / Comentarios
10. Please feel free to make general comments on the model or suggestions on how to improve it. Estaríamos muy agradecidos si pudiera hacer comentarios generales sobre el modelo, o si propone aspectos a mejorar. Comments / Comentarios:
Thank you very much. Muchas gracias.
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Appendix 9.2 Regional HQ officer’s responses
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15 de diciembre de 2013
Summary of results. 15/12/2013 Citibank Regional HR Vice-president (Latin America) “MNE Strategy vs. Local Implementation: The Adaptation Challenge to local Context Rules of the Game”
Dora Rizzuto Paul Griffiths
Participant 1. Is your location an MNE headquarters? 2. Who sets the rules, the law or Government officials in Argentina? 1-5 1 The law – 5 The Government Comments
3. Do you think that the rules of the game are clear in Argentina? 1-5 1 Totally clear – 5 Not at all clear Comments 4. To what extent does your company adapt to local culture? 1-5 1 Adapts totally – 5 Doesn’t adapt Comments
5. How much you need to adapt corporate strategy to implement it under local conditions? 1-5 1 High level of adaptation – 5 Level of adaptation Comments 6. If your company is foreign, does it
No. Regional.
4 The written law and the unwritten law sometimes collide. The co. abides by the letter of the law. Government officials have impact in how much exposure the co. is willing to take.
4
4 Size of the business and part of the market are adapted. Global policies are not adapted (e.g. compensations)
3
Adapt size.
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confer your business an advantage to your business in Argentina? 1-5 1 Huge advantage – 5 No advantage at all Comments
7. If your company is foreign, does it generate a disadvantage to your business in Argentina? 1-5 1 Huge advantage – 5 No advantage at all Comments 8. Do you think that the model presented today would be of assistance to improve strategic discussions with the people at subsidiaries? 1-5 1 No use at all – 5 Very useful Comments
9. Do you think this model would be useful to align local management and communicate strategy to the staff of the subsidiary? 1-5 1 Not very useful – 5 Very useful Comments
10. Please feel free to make general comments on the model or suggestions on how to improve it. Comments
2 Globallity/Connectivity offer operational advantages for clients and provide opportunities for employees. Only American bank in Argentina.
3 Competitors in our industry play with different rules (we are the only American bank in the country).
4 To agree between subsidiary and HQ what are the triggering events that will show the co. can move from the “wait & see” to a more proactive approach
4 “Formalise conversation”: To formalise "grapevine" conversations into transparent communications regarding employee value proposition - Appetite to accommodate model in the light of the size of the franchise in the country and its importance in global financial plan - Globallity and connectivity at the centre of employee value proposition - Formalise the conversation between subsidiary and HQ to minimize noise in communication.
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Appendix 10. IBM subsidiary in Argentina: IBM Argentina
10_1. Overview
IBM Argentina is a subsidiary of the IBM Corporation and was founded in 1923. As at 2013, IBM Argentina will have been in the country for 90 years. It currently employs approximately 8,000 people. Its products and services are related to Information Technology (IT). In terms of geographic scope, IBM Argentina supplies the domestic market with products and services, and it exports services to more than 180 clients in 20 countries in five continents. The clients are government agencies, large MNEs, and Small and Medium size companies (SMEs). IBM is considered a model firm in terms of corporate citizenship, a concept that is reflected in the organisation’s ethical management and transparency in its dealings with different stakeholders, and which sets corporate goals compatible with sustainable development. From its beginnings, IBM Argentina has shown a strong institutional commitment with the community. This is illustrated by its contribution to areas such as education, integration of disabled people, and promotion of scientific, academic, cultural, economic and environmental activities.
The most important objective at IBM is making it easy for society to obtain access to technology. It works hard to bridge the gap that prevents low income sectors from being able to gain access to new technologies. Strategic topics such as mission statement, vision and values are shown in the table below:
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Mission
IBM Argentina’s mission is to help its clients achieve their business
Statement
objectives, supplying them with innovative services and solutions for companies of all sizes.
Vision
To become the IT supplier of choice as an innovative company as a result of its solutions, products and services; and in recognition of the professional and human quality of its people.
Values
-dedication to the success of every client. -innovation that matters, to our company and the world. -trust and responsibility in all relationships.
Table App_10_1. IBM Argentina corporate strategy topics (IBM Argentina 2012 dossier)
10_2. The History of IBM in Argentina (2012, IBM Argentina website; 2012, IBM Argentina dossier)
IBM Argentina has a long and successful track record despite the inherently uncertain environment. The company not only survived but has positively thrived. Initially as an exporter of manufactured products, and currently as an exporter of services and know-how, as well as selling hardware, sofware and services in the domestic market.
Throughout the twentieth century IBM Argentina prospered. IBM was founded in Argentina in 1923. However, IBM’s predecessor – The Computing-TabulatingRecording Company (CTR) – had started to sell its products (such as dial recorders) in Argentina in 1916 through a distributor under the name International Time Recording Company. CTR opened its own branch in the country in 1923-1924. IBM acquired weight and time measurement equipment agencies and started operations 329
through a branch in Buenos Aires. A second source dates the start of IBM’s business in Argentina as 1924. In 1927 the first punch card plant was established in Buenos Aires while in 1928 IBM opened new large premises in Buenos Aires. Later in 1933, the first IBM Service Office was opened in Buenos Aires and in another major city.
In the 1950s there were remarkable developments at IBM Argentina. In 1950, during a visit to Buenos Aires, IBM President Thomas J. Watson suggested that a manufacturing plant should be built in Argentina. In 1955 IBM Argentina manufactured its first machines for export: rotating key punches for Norway, Australia, South Africa and various clients elsewhere in South America. In 1956 for the first time IBM Argentina manufactured IBM 8500 Mechanical Time Clocks for local markets and for export. Finally, in 1958 the Buenos Aires plant made its first export shipment of IBM 8600 Mechanical Time Clocks.
During the following
decades IBM Argentina continued its expansion and international growth. The 80s was another noteworthy decade for IBM Argentina to the point that by 1991 the plant exported 34% of its production to Japan and Australia, 17% to other countries in the Asia Pacific region, 23% to other Latin American countries, 15% to North America and 6% to Europe. Only 5% of the plant’s production was sold in Argentina.
In 2008 IBM Argentina celebrated 85 years of uninterrupted commitment to the country. And that year it announced three new service export centres. Later in 2009, the Service Export Centre in Argentina was awarded the eSCM level 5 certification (Carnegie Mellon University eSourcing Capability Model for Service Providers) which meant that it was the first IBM business unit to achieve this level of excellence. In 2010, Olivos III was created, a new Service Export Centre facility
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with capacity for 2,000 people. IBM Argentina was awarded the Ibero-American Quality prize.
As far as export services are concerned, IBM’s capabilities together with the talent and quality of the professionals available locally, have enabled it to offer services from Argentina to clients throughout the world. This includes services such as operating systems technical support, operations, maintenance and monitoring; human resources and financial process consultancy; application development and asset management. IBM Argentina is divided into four business units. These are shown in figure App_10_1 below and subsequently outlined.
Figure App_10_1 IBM Argentina’s business units
Global Technology Services (GTS), Global Business Services, Software and Hardware Groups. The GTS business unit satisfies the needs of clients with
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technological operations. It is divided into six areas, Technical Support Services, Business Continuity and Recovery, Network and Connectivity Services, System Infrastructure
and
Management
Services,
Outsourcing,
and
Integrated
Communications.
With regards to Global Business Services, IBM consolidated its leadership in 2002 with the acquisition of PricewaterhouseCooper’s global consultancy business and technology services –PwC Management Consulting Services. A new global business unit was created, IBM Business Consulting Services and more than 30,000 professionals worldwide were transferred from PwC, which became part of IBM Global Business Services. Through this acquisition IBM has positioned itself as the main consultancy company at world level.
The strategy of the Software Group business unit is built around alignment of technology to the changing needs of the client’s business, supplying middleware products and first class solutions tailored to the industry. IBM aims to build long lasting relationships with clients, helping them develop more competitive business models which are capable of being flexible and highly responsive.
In the Hardware area, the Systems Technology Group offers the most advanced solutions in servers and storage. The IBM products range is characterized by offering flexibility, innovative technology, reliability and the necessary security to boost the transformation of our clients towards a more intelligent world ((IBM Argentina dossier, 2012).
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10_3. IBM Corporation
Today IBM is the leading company worldwide for IT solutions, and it is present in 170 countries. IBM, which is an acronym for International Business Machines, is American and it is a listed company. The IBM business model maintains equilibrium among different business units such as Hardware, Software, Services and Consultancy, Outsourcing and Finance. IBM employs more than 400,000 people worldwide, who call themselves “IBMers� (2011, IBM Chairman and CEO Parmisano speech).
A policy of innovation is present in each action and guides new ideas and trends towards the evolution of IT. Under this initiative, IBM reinforces its leadership, providing services that allow sustained business development and the achievement of organisational objectives by its clients.
IBM Corporation is the parent company and was founded in 1911 and renamed as IBM in 1924. Computing-Tabulating-Recording Company (C-T-R) was the initial name and was formed by various mergers in 1911. Charles R. Flint arranged the merger of the International Time Recording Company, Computing Scale Company, and the Tabulating Machine Company to form the Computing-TabulatingRecording Company (C-T-R). The new company was based in New York City and had 1,300 employees. George Fairchild became the first chairman of the board of directors. C-T-R was renamed International Business Machines Corporation in 1924 (IBM history website [Online]. Accessed 02-02-12).
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In May 1914, Thomas Watson Sr. was brought in to run the organisation and in December 1914, Watson brought together top managers from C-T-R for a meeting for the first time. On that occasion, managers were expecting Watson’s speech to give guidelines but instead, Watson asked them what he should do and emphasized the idea of unity of purpose and of working together. From its beginnings as C-T-R, IBM had a corporate culture that flowed up from its people and was centred on shared beliefs about the organisation’s worldwide position and how to achieve it. Along the years, IBM has kept this spirit which has been the key to its vitality over the century. IBM firmly believes that a business ‘built on beliefs can absorb change as long as the beliefs remain intact” (IBM 100 – A Business and its Beliefs website [Online]. Accessed 02-02-2012). When Watson was hired to take charge of the company, it was producing clocks, scales and punched-card tabulating machines. Later IBM has moved into a diverse variety of information-related activities such as typewriters, magnetic tape drives, disk drives, memory chips, personal computers, mainframes, IT services and consulting. IBM expanded operations to serve customers in more than 170 countries.
Along the years, IBM´s beliefs have been consistent throughout the world. In 1962, Thomas Watson Jr. firmly asserted that the company needs to be loyal to its fundamental beliefs and adhere to them. Watson Jr. also believed that based on these beliefs, the company was ready to face the many challenges generated by a changing world, which would change everything about the company except these beliefs.
IBM believes in a “Smarter World”, applied to each person, to each business, to each organisation and each government, where natural systems and mankind interact.
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Each interaction represents an opportunity to produce better things, more efficiently and more productively. Nowadays we live in an interactive world and IBM refers to instilling intelligence into the way the world functions. Digital infrastructures and the physical world tend towards actual convergence and IBM is a proactive player that puts its input to work for a smarter world.
Three pillars help to focus on IBM’s task: quality as the fundamental value that inspires all processes and operations, not only with clients and employees but also the environment and the community; education which is in expansion and continuously demands resources and specific competences; green world + collaboration with a cost reducing perspective, meeting legal requirements and developing each new business process in accordance with environmental needs.
IBM makes an important input into the concept of smarter cities. Cities grow at extremely high velocity and generate unprecedented challenges that require more intelligent solutions to massive urbanization, infrastructure at the limit of capacity, together with global economic crisis and global warming. To help with these issues IBM intends to provide smart tools to each problem area. IBM is helping nations to develop a smarter future in areas such as smart transport (reducing traffic jams and pollution); smart health with digitalization of health registers to improve global attention to patients. Up to now IBM has developed more than 2,000 smart city projects worldwide.
Moreover, the IBM business model has changed. IBM undertook to turn itself into the globally integrated company par excellence, which required massive investment
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that is now generating significant growth. To this end, disinvestments and acquisitions were made in order to gain the lead with the model of emergent computing. In every business line – software, hardware, services and consulting – IBM shifted from commodity lines to segments with more added value. This demonstrates that IBM has innovated. The fact that it anticipates the needs of the clients allows it to be the only worldwide company with the ability to satisfy the needs of all companies, regardless of size, adding value and creating a structure to protect their investment.
Finally, under its acquisition policy, IBM has acquired more than 150 companies with the goal that they should complement each other and build economies of scale in terms of products and specifically in terms of business integration and transformation software. IBM has the power of reinventing itself down the years.
10_4. Degree of centralisation
IBM Argentina appears to follow the transnational form under the corporate strategy umbrella. This means that the subsidiary plays an active role in terms of responsiveness to the local context and at the same time participates fully in a highly integrated global corporation (Faulkner, 2006).
IBM is an integrated global company. For instance, the company may close a business deal in Switzerland, or in Israel, or in the United States, perhaps a contract that requires a lot of people to do the job and to provide the services to fulfil it. Certain skills and knowledge may be found in this subsidiary, if that is the case that
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part of the project is transferred to Argentina, another part to Manila in the Philippines, another part to India, and so on. Everything flows globally and projects are run from wherever on the planet the corporation has the expertise. Teams are developed at Centres of Excellence at different subsidiaries around the world, and innovation is a characteristic that they must excel at.
The company follows standards and IBM in China, in the Philippines, in Spain or Argentina, for example, can work together in project because standards are common. They are very similar because they sell the same products, the same solutions in the same way. The parameters of commercial behaviour are the same, as well as ethics, transparency and quality of human resources.
Full integration started at the beginning of 2001-2002. IBM Argentina started to receive a lot of activities external to the subsidiary. This meant that they started to receive orders, requirements for development activities for other IBM’s around the world. This relates to their adherence to strategic guidelines, to the strategic direction that the company follows when it presents itself as an integrated global company. That means that, conceptually, executives state 'We are just one IBM’.
10_5.The business context
IBM Argentina as a subsidiary of IBM Corporation plays its role in the international corporate concert as it provides services on a worldwide basis. In this respect, it competes with other subsidiaries such as IBM India, IBM Philippines, IBM Poland; IBM Brazil and IBM Costa Rica. To export high added value services requires
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talented and skilled staff. But in any case, Argentina has been losing competitiveness, not only because of exchange rate issues, but also legal insecurity in the local context.
With regards to the domestic market, external competitors are very aggressive, but they are having even more problems in the market than IBM Argentina itself. Firstly because generally, since they do not export services, they do not have a positive corporate trade balance. Under this government, if a company has a positive corporate trade balance, the government allows it to import freely, if the company doesn’t, the government bars firms from importing anything. This means that year the last few years have been very difficult for hardware competitors because they have been unable to bring in their products. So they have to adapt like IBM Argentina but they are less resilient.
So it is a market, according to market research, that has been growing since 2003 until 2012. Since then in general the market has been decreasing, which means that they have to fight for an increasingly smaller pie. And IBM Argentina’s executives are specialists in that because that is their strength, in a crisis they hold their ground. They still have all the state of the art technologies. For example, their technological campus in MartĂnez is on a par with the one in Raleigh, in the United States. That is a strength.
On the question as to whether IBM competes in a regulated market, it is an open market, not a regulated market for them. There is no regulation of any kind. There
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are, however, some regulations regarding electronic waste, for example, and questions of the kind, but the market is not regulated as such.
Regarding the market and competition, the market is large, even though IBM has quite a large market share in the corporate market. There is always competition for those clients’ spending budget. There is always a provider, either a niche provider or providers similar to IBM in some technologies who can profit from time to time, but they are exposed to a highly competitive market. The key is value. Value is built up mainly by knowledge of the industry and, also by providing innovative solutions. The combination of these two aspects generates considerable competitive advantage, and leaves competitors, if they are not addressing the same issues, on a different level.
Regarding the industry and competitors, there are few companies with such wide portfolio of clients, products and services as IBM. Nowadays the market is made up of three or four players with a similar profile. One of them is IBM, the others are HP, Oracle and, Sun, as stated by IBM executives. In any case IBM has a wider portfolio despite having a similar profile. Then there are companies that are very much niche operators, smaller companies, SMEs that have specialised in very specific solutions that compete effectively in highly specialised areas such as Insurance.
At the moment IBM Argentina is in a strong position with regards to product portfolio, well regarded in the market as well as by the other companies. But what executives think differentiates them, and this is essential, is what they call product roam up. This means a continuous upgrading of products. Another strategic
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marketing decision that has benefited the company is that they are moving strongly into the interior of Argentina which gives IBM the chance of a strong market development.
Regarding the industry, it is dynamic in the world and it is very dynamic in Argentina despite is lagging behind compared to the developed world. IBM Corporation, IBM in the world is always a step ahead, showing what the future will bring when it comes to technology. For example, it was one of the creators of eBusiness. First it created the PC and then it created e-Business, it created the first mainframe and now it is involved in the issue of the smart planet, or the creation of a more intelligent world. Even all competitors have started to use the same language; IBM is always moving forward and it is always looking a step ahead. And they make the most of the opportunities because the good thing about IBM is that new concepts are launched in Buenos Aires at the same time as New York.
Under the theme of Smart Planet, IBM Argentina is driving the concept of smart cities, reflecting the fact that since last century more people have been moving to the city. This means that in Argentina or other places in the world, the city is suffering considerable infrastructural problems, such as transport, security, flooding, to name a few. In this regard, IBM is working on building added value to offer cities structured solutions to these problems. One example is flood control, where a possible application is a portable device that can read sensors on the river which monitor even minute changes in the level of the water. By setting the system to the correct parameters, it can issue an early flood alert, allowing the authorities to evacuate the population at risk and take other preventive measures.
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In terms of the notion of strategic postures (Courtney et al., 1997), IBM shapes the future as it plays a leadership role in setting standards and creating demand; and manages a portfolio of actions primarily based on big bets.
10_6. Summary
This appendix shows IBM Argentina as the local subsidiary operating in a controversial host country such as Argentina. The subsidiary is a large company and employs more than 8,000 people. Clients are in the B2B category in the range of large MNEs to SMEs and government departments. Mission statement, vision and values are shown as strategic topics while the most significant objective stands for making it easy for society to get access to technology.
Secondly, the history of IBM Argentina is thoroughly related and it shows all the stages since it was founded in 1923 until the present, with four business units: Global Technology Services (GTS), Global Business Services, Software Group and Systems Technology Group (Hardware).
Thirdly, IBM Corporation is briefly described. This MNEof American origin employs more than 400,000 people worldwide. Thomas Watson Jr. beliefs are still the heart of the organisation which make IBMers conscious of the challenges that a changing world generates. This is why IBM believes in a “Smarter World” and interactivity is paramount. Moreover, three pillars such as quality, education and green world consciousness underpin the company’s constant development. One example of commitment to society is the concept of smarter cities. 341
Fourth, an analysis on the degree of centralisation is briefly depicted. IBM appears to follow the transnational form where the subsidiary responsiveness to the local context is implemented while full integration to the global corporation is also exercised. Standards are the same throughout the world.
Fifth, a description of the business context in Argentina as domestic market is shown and also the international environment in which the examined subsidiary operates. The type of market which is not regulated due to the type of industry is concisely described. Moreover the industry and competitors show few companies that command a similar portfolio to IBM’s. Therefore IBM Argentina holds the strongest position in the host country market. Concerning the industry, it is dynamic within a fast moving business environment but not as dynamic as in developed countries.
Finally, the analysis of executives’ worldviews is examined on Chapter 5 where the categories of the Framework of Departure are the headings for the diverse items being analysed.
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Appendix 11. BAT Subsidiary in Argentina: Nobleza Piccardo
11_1. Overview
Nobleza Piccardo is the Argentine subsidiary of British American Tobacco (BAT). In 2013, Nobleza Piccardo celebrates its 115th year anniversary of its foundation. The subsidiary employs approximately 1,200 people and it belongs to the tobacco industrial sector. The products are cigarettes of various types and flavours. The company basically sells to the local market. There have been changes in the way Nobleza operated until 2009. In 2010, Nobleza became part of a business unit that brought together the four markets that make up the Southern Cone business unit. It is made up of Argentina, Chile, Peru and Paraguay. Each country keeps its own individuality and keeps its own market objectives. Management and some operational synergies are sought within the Southern Cone business unit, which reports consolidated results to the regional and thence at global level. The four markets report to the Southern Cone business unit which is physically located in Santiago, Chile, where management and support teams for the area are based. Southern Cone Business Units are indicated on figure App_11_6. The staff is composed of nationals of the four countries that are part of the business unit. Distance work is being implemented, which means that, for instance, Argentine executives do not necessarily have to live in Chile and are able to perform their jobs from Argentina, flying to Santiago when required.
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BAT Southern Cone Business Units
Argentina
Chile
Paraguay
Perú
Figure App_11_1. BAT Southern Cone Business Units
Nobleza Piccardo’s strategy is in line with its parent company, BAT. The strategy is based on growth that seeks to increase market share with a focus on global brands. Their vision states that they wish to achieve leadership in the global industry of snuff (British American Tobacco website, [Online]. Accessed 20 January 2013).
Nobleza Piccardo’s business model is focused on putting together the skills and abilities, experience, drive and passion of its team to meet the goal of transforming the company into the leading tobacco operation in Argentina. Nobleza Piccardo’s Key Success Factors are the talent, energy and diversity of the people who are part of its team. This policy is backed by the company’s firm belief in the need to recruit the best candidates for diverse positions without considerations for genre, race or religion. 11_ 2. History of Nobleza Piccardo and its relationship to BAT
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Nobleza Piccardo, British American Tobacco’s (BAT) Argentine subsidiary, has its origins in two local companies. Piccardo y Cía. founded in an attic in Buenos Aires in 1898, and Compañía Nacional de Tabacos, which was created in 1913, and was renamed Compañía Nobleza de Tabacos in 1933. As it can be observed, this subsidiary has a long tradition in Argentina. In 1977, these companies merged and gave rise to Nobleza Piccardo, which held a dominant position with a 63% market share in Argentina.At the time, Nobleza’s principal shareholder was BAT with a 70% stake in the merged company, Piccardo held the remaining 30% (Nobleza Piccardo website, [Online]. Accessed 12 December 2012). BAT currently holds a 98% stake in its subsidiary. (British American Tobacco 2010 financial statements website. Accessed 22 January 2013).
BAT is the parent company and defines itself as “the second largest quoted tobacco group by global market share with brands operating in 180 markets” with a responsible approach to doing business from crop to consumer. In 2011 BAT supplied those markets with 705 billion cigarettes under 200 brands which had been produced at 46 cigarette factories operating in 39 countries (British American Tobacco website [Online]. Accessed 20 January 2013).
The Born Global concept is not entirely new, British American Tobacco (BAT), which started life in 1902, is considered by some authors to have been a company that was born as a global enterprise, as it started life purely as an overseas business operation. At the time, the business was hardly global but, from its beginnings BAT “was a truly international business” (Wilkins, 2009, p. 19). BAT was founded as a
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joint venture (JV) between British Imperial Tobacco and the American Tobacco Company whose logic was to end the trademark war between both organisations. This gave rise to a period in which the new company was able to grow exponentially on an international basis. The original purpose was not to compete in their respective home markets, the USA and the UK. Its aim was to develop foreign markets such as Asia, Africa, Latin America and Europe. The strategy along the years and in different territories was based on offering superior quality products and employing quality people to develop them.
In recent years BAT has invested more than 50 million US dollars in Nobleza Piccardo’s new plant employing state of the art technology, administrative offices plus a distribution centre that will function separately from the plant. This investment shows a major commitment on the part of the parent company to Argentine operations, especially as the plant is aimed at expanding the company’s market share rather than exports. The company has moved from producing locally 85% of products sold in Argentina, to producing 99.6% locally. This means that the company is focused on the domestic market and wishes to grow market share and improve its figures.
At Nobleza, those who are committed and are ready to do their job, have equal chances of growth. Compensation policies are designed to be competitive and ensure a real differentiation between individual and team performance. Staff earns their salaries on the basis of challenges the business offers, the professional opportunities they experience and the positive team relationships they develop. The company cares about people and their maximum development. Nobleza generate training that
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promotes knowledge and the development of abilities (from Nobleza Piccardo’s brochure, Innovation and Commitment chapter). Nobleza Piccardo firmly believes in its right to communicate information about the brands to adults. Conscious of the harm to health, they emphasize the message that Smoking causes harm to Health, as they are aware that they are part of a controversial industry. Nobleza Piccardo considers itself a winning organisation, working in a responsible way which in turn, seriously seeks to reduce the risks produced by their products.
11_3. BAT Corporation
BAT is a British Public Limited Company and is the second largest stock market quoted group by global market share that employs more than 55,000 people worldwide (British American Tobacco website [Online]. Accessed 20 January 2013). It is present in America-Pacific, Asia-Pacific, Latin America and Caribbean, Europe, Africa and Middle East regions.
BAT ensures that it meets adult smokers’ different preferences and tastes on a worldwide basis. The products offered by BAT cause potential serious risks to human health, which in turn is managed on a responsible basis. Conscious of stakeholders and the creation of value for them, the company is committed to sustainability in its business model, while tackling the impact of the business and trying to meet expectations and requirements of consumers and overall society (British American Tobacco website [Online]. Accessed 11 January 2012).
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BAT invests heavily in research and development which includes product innovation and potentially reduced risk products. The company is deeply interested in tobacco growing, supplying support to approximately 70 per cent of the farmers the company purchase the raw material from. BAT’s brand portfolio has been conceived to meet critical consumer needs and provide a marketing strategy based on consumer choice, innovation and always acting responsibly.
BAT manages a sustainability agenda that focuses on building value for stakeholders by means of addressing social, economic and environmental impacts, delivering shareholder returns by doing the right things for stakeholders and the environment. BAT believes that by tackling impacts today, they will help their business flourish in the future. The group contends that “Sustainable business practice is at the heart of the Group’s strategy”. BAT has been listed in the Dow Jones Sustainability Index for 9 years (BAT’s sustainability chapter website. (BAT sustainability, British American Tobacco [Online]. Accessed 11 January 2012). Dow Jones Sustainability Indexes (DJSI) is based on the assessment of the economic, environmental and social performance of leading sustainability-driven companies worldwide. World DJSI cover the world and other geographically based areas such as Europe, and they are founded on the co-operation between Dow Jones Indexes and the Sustainable Asset Management (SAM) Group which is an international investment company with a specific focus on sustainable investments.
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11_4. Degree of centralisation
After years following a multidomestic corporate strategy, in the mid 2000s BAT started a process of globalisation which shows more centralised and global strategies. Local brands have started to decline to give rise to brands with a global presence. Now the strategy is global while implementation is regional. Moreover, in 2010 Nobleza Piccardo started a process under which it became part of the Southern Cone business unit, which is now fully integrated and shows a move towards a degree of centralisation within the corporation.
The way they determined strategies in 2009 displayed that they have the global strategy, then the regional strategy, where the global strategy is adapted to the characteristics of the region, and then we have the local market strategy. They align our strategy with the global and regional strategy. Their local strategy may be somewhat different from the global or regional strategy because they face different circumstances. For example, the regulatory framework in Argentina is different from other countries, so they have to act differently under a specific regulatory or financial objective.
11_5. The business context.
The Corporate Affairs director states that,
“This is a highly regulated industry worldwide and so it is in Argentina too, where tax pressure is extremely high, for example 70% of the selling price to the consumer
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represents tax. Some government players, such as the Health Ministry, which is highly influenced by organisations that wish to control tobacco, are under considerable pressure.” Furthermore, as increasing regulation is seen worldwide. Argentina started with a regulatory framework a year ago in line with world trends, but at international level an increasing participation by tobacco control groups have had a more restrictive effect on activity. So the next wave of regulations locally are likely to be driven by tobacco control organisations and government health authorities.
The market is divided into two major players, Nobleza Piccardo (BAT’s subsidiary) and Philip Morris. At present Philips Morris holds 72% market share and Nobleza has 26%; then there are some small players such as a Jujuy tobacco cooperative that operates regionally in the North West of the country. Then there are other 4 or 5 that are based in Greater Buenos Aires, who hold a total of 2-3 per cent market share. There is also illicit trade which represents 4-5 per cent of the market and which has three characteristics: smuggling, counterfeiting and tax evasion.
Phillip Morris’ current market leadership was built on the acquisition in 1965 of a local company that had been founded in 1900. The acquired company was named “Massalin & Celasco”, and PM’s leadership was cemented by the acquisition in 1980 of two further local tobacco companies.
Interaction takes place through the Tobacco Industry Chamber which brings together both major players to discuss the issues that affect the industry; it is important for them to sit at the same table. That is basically what it is. Apart from this forum, they
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try to look at the industry, the market, the country and they try to understand how the global and local macro-economic environment is developing so the company executives can establish to what extent they can achieve the goals that have been set by them.
Over a total of 44 million cigarettes sold in Argentina, 42 million are sold on a legal basis and approximately 2 million represent the illicit trade. Out of those 42 million, 30 or 31 million are sold by Philip Morris, 10 million by Nobleza Piccardo and the other 2 million by the small players. Illicit trading is a considerable problem which severely affects company profits, as tax evading traders selling smuggled or counterfeit cigarettes can undercut legitimate tax bearing products. Both instances result in a loss of revenue to the company and of a loss of tax to the state, but the sale of counterfeit goods additionally damage company reputation and undermine the credibility of its products.
With regards to pricing, traditionally prices are increased in unison with the other big market player. For instance, in the middle of January 2013, there was a 4% increase in price implemented by both companies. As mentioned before, 70% of the selling price goes directly to the state in the form of tax.
Furthermore the World Health Organisation foresees that in 2050 there will be more smokers than today because of a natural growth in the population. Executives assert that demand will not disappear because, despite people being conscious and aware of the damaging characteristics of our product, 25 or 26% of the population in Argentina chooses to smoke. They don’t believe that one product can be sufficient to
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satisfy everyone. The portfolio of over 200 brands is aimed at different strategic segments – premium, fresh flavour and adult smokers under 30. British American Tobacco’s four global brands – Dunhill, Kent, Lucky Strike y Pall Mall- cover the premium and low price segments. While the development of our Global Brands is fundamental for our strategy, we have also been raising the profile of Vogue (for women) in the premium segment and Viceroy, one of the main international brands in the low price segment. (British American Tobacco Central America. [Online]. Accessed 14th February 2013).
Table App_11_1 describes the main brands sold by Nobleza in Argentina,
Brands
Description
Dunhill
Created in London in 1907. It was introduced in Argentina in 2010 in the super premium segment,
Lucky
Launched in 1871, it is one of the oldest international brands in the
Strike
world. In Argentina it has been competing in the international premium segment since the 1980s
Camel
Camel is an international brand that has been in existence in the world market since 1913 and has been sold in Argentina by Nobleza Piccardo since 1981.
Parisiennes
Parisiennes is the leading brand in the dark tobacco segment in Argentina, where it has been established since 1970.
Kool
As a leading brand in the segment, Kool uses menthol flavoured tobacco.
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Viceroy
This is one of the main worldwide brands for British American Tobacco and for Nobleza Piccardo in Argentina. Launched in the US in 1936. Launched in Argentina in 2002.
Jockey
Jockey is a local brand launched in the 60s which quickly achieved market leadership, becoming number 1 in the 80s and 90s. The Argentine brand with the longest track record in the market.
Derby
Since its launch in 1988, Derby has been one of the leading brands on the Argentine market, with the widest reach across the nation.
Other
Other brands are sold locally such as Gitanes, Gold Leaf, 43/70,
brands
Winston y Conway.
Table App_11_1. Brands sold by Nobleza Piccardo in Argentina
-( Nobleza Piccardo website. [Online]. Accessed 14th February 2013)
11_6. Summary
This appendix shows a company such as Nobleza Piccardo, BAT subsidiary, operating in Argentina.
This company develops its activities linked to a
controversial product such as tobacco industry. The environment where it is located is Argentina, a country which is characterised by its continuous uncertainty and pendulum behaviour. The company keeps the acquires company’s name and employs approximately 1200 people and clients belong to B2C segment. The company reports to BAT Southern Cone business unit.
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Secondly, a brief history of Nobleza Piccardo created in 1893, is depicted and BAT’s acquisition of this local company in 1977 is concisely described. Moreover BAT’s recent and major investment in Nobleza Piccardo’s plant and administrative offices.
Thirdly, a description of the BAT corporation is carried out. It employs more than 55,000 people around the world. The corporation works on an adult smoker’s segment and it is conscious of its tastes and preferences while it is also conscious of risks of human health. Furthermore, it is conscious of sustainability issues.
Fourthly, the degree of centralisation as a corporation is shown. Historically, BAT worked on a multidomestic corporate strategy but in 2010 started a process of change towards a global strategy model.
On the fifth place, the business context in host country shows how the subsidiary operates within a regulated industry that it belongs to. The market is divided into two major players: Nobleza Piccardo (BAT subsidiary) and Philips Morris, and some minor ones that take 8% of the market share. Moreover illicit trading is a major problem that coexists with legal and the well embedded company. Pricing is applied and agreed with the major competitor. With regards to brands, the company sells ten brands in the domestic market.
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Appendix 12. First round of interviews
Answers connected to subsidiaries’ connection with parent company and societal culture dimensions are tabulated below.
a) IBM Argentina
1 IBM position
Entry mode centralisation/decentralisation swine flu decisions who controls advertising budget are you free to choose logistics suppliers can Argentines move to other countries? market changed in last 5 years?
2
IBM & Sales and Distribution - Financial Services Clients
Marketing & Communications Director - IBM LA
3 Sales and Distribution Operations Manager Argentina
greenfield centralised
4
5
Sales & Distribution Global Resources , Software Sales SW Manager Business Development and Strategy Manager - SSA Region greenfield
centralised locally centrally centrally not sure centrally yes international culture short assignments & regionalyes - career plan constant changes in technologylabour marker changed clients more competitive constantly
how many people do you report to? how is the corporation organised at world level? matrix vertical or horizontal allocation of resources - fundsvertical for new projects how do you see the next 5 years? how does the company in Argentina determine strategy? global, locally adapted hierarchical or network organization? towards pyramid
centralised centrally
2
2 2 matrix not sure- thinks 3d matrix matrix structure vertical vertical clients look to IBM to save verymoney optimistic high growth at global level / local imp globally project/team based hierarchical LA- but matrix toomatrix structure
2
6
7
8
9
10
Mid Market Sales Manager
General Business Territory Sales Manager Argentina
Sofware Sales Argentina
Integrated Technology HR Manager - Partner Delivery - GEO Global Business Technology Delivery Services
locally centrally
locally centrally
local implementation centrally
not necessary definitely
not necessary huge changes
yes regionalisation
local implementation centrally no doesn't happen a lot problems recruiting
planned centrally locally yes no more outsourcing to IBM
1 matrix structure matrix structure depends on scope challenging uncertain combination of factors pyramid to network
2
2
3
2 matrix structure vertical not possible to tell globally missionary organisation
cubic matrix vertical difficult globally net
planning 3 year plan evey year 39 years
planning
planning scenarios 13 years IBM IBM
planning twice a year 23 years IBM retired
planning 3 year scenarios 15 years IBM IBM
planning 3 year plan 20 years IBM IBM
slow to respond
plan 2 year plans 15 years 16 years IBM but narrow pyramid IBM another area IBM but narrow pyramid IBM another area
planning short term plans 17 years IBM IBM
planning not realistic
power distance is there space to express divergent opinions? influence based on expertise or position? can people be afraid to express disagreement do bosses consult with reports? ceo queues up or goes first?
yes position?? qualified response no somebody to queue for him!
yes - coaching expertise yes yes queue
yes position no yes queue
yes expertise no sometimes goes first
yes position increasingly less no goes first
absoultely expertise no yes definitely goes first
definitely position depends yes, but only in sales should have priority
yes expertise no sometimes should queue but ??
of course expertise not at all definitely goes first
ambiguous answer
balance ambiguous answer never broken based the person objective yes
experimentation both never depends objectively yes
no contradiction depends on seniority no younger objectively
go together personal autonomy yes, they are broken younger objectively yes, they are
order and coherence personal autonomy they are not broken younger objectively
order and coherence personal autonomy fewer loopholes neither - best known subjectively
order ambigouos answer never age not a issue-potential objectively yes
uncertainty avoidance order & coherence vs experimentation and innovation depends on the function detailed job descriptions vs personal autonomy detailed job descriptions rules are never broken even if in best interest of theambiguous co answer experienced vs young candidate best qualified are you evaluated objectively or subjectively? objetively are metrics clear?
ambiguous answer ambiguous answer
3
matrix structure vertical slow growth globally
umbigous answer ambigous answer
CEO
global centrally mixture absolutely yes, dynamic market
2 matrix-like matrix vertical more globalisation and coflict globally globally net
planning 5 year plans
14 years abroad with IBM retired
12
Legal Manager Spanish South America
global plan, local decisions global control, local decisions centrally yes yes some constant change the world has changed
matrix - regions depends dynamic globally hierarchical
Societal Culture Dimensions future orientation planning vs status quo type of planning how long have you been in the company? where do you see yourself in 5 years? where do you see yourself in 10 years?
11
innovation???
corporate level ??
29 years retired retired
yes should show card
yes position moving to network yes yes should queue- wouldn't actually
yes mixture no yes goes first
innovation encouraged empowerment never best qualified both yes
order and coherence detailed job descriptions never best qualified objectively yes
order and coherence detailed job description never best qualified objectively
absolutely
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b) BAT subsidiary: Nobleza Piccardo
Summary of answers BAT position
Entry mode centralisation/decentralisation swine flu decisions who controls advertising budget are you free to choose logistics suppliers can Argentines move to other countries? market changed in last 5 years? how many people do you report to? how is the corporation organised at world level? vertical or horizontal allocation of resources - funds for new projects how do you see the next 5 years? how does the company in Argentina determine strategy? hierarchical or network organization? Societal Culture dimensions future orientation planning vs status quo type of planning how long have you been in the company? where do you see yourself in 5 years? where do you see yourself in 10 years?
1
2
director institutional relations
marketing finance manager
acquisition
acquisition
local local mix yes yes
local up to a level no yes yes 2
4 levels some autonomy changes independently n/w towards pyramid
planning 10 year routine 4 years 3 months
3
4
supply chain & customer service manager
5
security manager
6
legal director
7
finance manager
8
accounting & finance manager
9
marketing manager
general manager
acquisition local
central
local
80% global yes yes
yes yes yes
yes yes yes
2 towards centralisation towards global vertical vertical instability challenging follows BAT follows BAT
2
1 vertical more insecurity follows BAT hierarchical
local global no yes no
yes yes 1
1 towards global challenging follows BAT
11
12
finance & IT director
corporate regulatory human resources affairs manager business partner for operations
local mixed global yes more sophisticated
thinks local
acquisition
local up to a level
towards global horizontal more globalisation independently
10
local locally
local 50/50 yes yes no - stability
yes premium brands 1
hierarchically horizontal challenging follows BAT
1 towards matrix depends on size premium products follows BAT
1 pyramid to network vertical hopefully more orderly follows BAT
depends yes stable 2
network up to a limit contined sophistication follows BAT matrix locally
global approval local control freedom yes stable
1 trend towards centrilisatiotrend n towards centrilisat vertical vertical stricter regulation young people problems follows BAT follows BAT towards pyramid network
planning medium & long term 8 years o'seas or back here
planning medium & long term 8 years here
planning medium & long term 34 years here
planning medium term and longer 12 years here BAT
planning planning next year + scenarios 10 years 13 years here here doesn't know
planning long term
excessive planning scenarios and 3 years 16 years elsewhere in the grp elsewhere in the grp
plan 2 years - 10 years 12 years elsewhere in the org
plan scenarios and 10 years 9 years here elsewhere
planning 3, 5, 10 years 2.5 years here elsewhere
yes ambiguous answer no yes secretary queues
yes teams=expertise no yes n.a. democratic canteen
yes teams=expertise no umbiguous goes first (security)
yes expertise no yes universalist examples
yes teams=expertise no yes would go first
yes expertise
yes expertise no yes queues
yes combination no yes queue unless emergency
yes position no yes queues
yes expertise no yes queues
order and coherence teams=personal autonomy only emergencies best qualified mostly objective yes
balance detailed job desc never younger objective yes
order and coherence detailed job desc never based on competence objective yes
both, no cotradiction order and coherence personal autonomy detailed job descriptions never never best person for the job best person for the job objective subjective yes
order and coherence personal autonomy never best person for the job objective
ambiguous answer personal autonomy never young candidate objective yes
order & coherence personal autonomy never young candidate objective
50/50 personal autonomy has happened age not an issue objective yes
out of NP maybe BAT
power distance is there space to express divergent opinions? influence based on expertise or position? can people be afraid to express disagreement do bosses consult with reports? ceo queues up or goes first?
yes expertise mentoring program yes, mechanisms goes first
uncertainty avoidance order & coherence vs experimentation and innovation detailed job descriptions vs personal atonomy rules are never broken even if in best interest of the co experienced vs young candidate are you evaluated objectively or subjectively? are metrics clear?
order and coherence strike a balance detailed job descriptions personal autonomy never broken never broken it depends best qualified objectively mix yes
yes expertise no yes queues
yes queues
both, no cotradiction personal autonomy never it depends objective yes
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c) Summary of societal culture dimensions
IBM
BAT
future orientation planning vs status quo type of planning how long have you been in the company? where do you see yourself in 5 years? where do you see yourself in 10 years?
10 plannning/ 1 innovation/ 1 slow to respond 2 scenarios/ 1 (5 years)/ 4 (2-3 years)/ 2 short term/ not realistic 20,2 years 9 IBM/ 2 retired/ 1 ambiguous 6 IBM/ 4 retired
11 planning/ excesive planning 3 scenarios/3 (10years)/ 5 long term 11,7 years 8 here/ 3 elsewhere in group or org none here
power distance is there space to express divergent opinions? influence based on expertise or position? can people be afraid to express disagreement do bosses consult with reports? ceo queues up or goes first?
12 yes 5 expertise/ 4 position/ mix 6 no/ 2 yes/ 3 qualified responses/ 1 no answer 6 yes/ 2 no / 3 sometimes 9 goes first/ 3 queues
12 yes 10 expertise/ 1 position/ 1 ambiguous 11/11 no 11 yes/ 1 ambiguous 4 goes first/ 6 queues/ 2 not clear
uncertainty avoidance order & coherence vs experimentation and innovation detailed job descriptions vs personal autonomy rules are never broken even if in best interest of the co experienced vs young candidate are you evaluated objectively or subjectively? are metrics clear?
5 order and coherence / 2 experimentation/ 5 both 3 detailed/ 4 autonomy/ 4 ambiguous 7 never/ 3 broken/ 2 ambiguous 4 younger/ 8 best qualified 9 objectively/ 1 subjectively/ 1 both/ 1 na 6/6 yes
6 order/ 5 both/ 1 ambiguous 4 detailed / 8 personal autonomy 10 never/ 1 emergencies only/ 1 has happened 3 young candidate/ 9 depends, best qualified 9 objectively/ 2 mix/ 1 subjective 7/7 yes
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