Bartlett and Ghoshal – Typology of Multinational Companies

Keywords: multinational companies typology, bartlett and ghoshal theory

Abstract

This paper explores Bartlett & Ghoshal’s (1989) typology of multinational companies which has been used as the foundation for subsequent research (Harzing, 2000). The collective research has agreed upon three broad stroke classifications and/or defining attributes of MNCs: Global, Transnational and Multidomestic (Harzing, 2000). The continued quest for a comprehensible meaning of globalization and its future has been indicated by the overall ambiguity and uncertainty of MNCs.

Models of Typologies of MNCs

Multinational Companies (MNCs) have emerged at an accelerated rate due to Globaliztion. MNCs have established new work environments and have an important role in how business is conducted. They go beyond the scope of being just a business they are responsible for a whole revolutionized way to conduct business (Bartlett & Ghoshal, 1994). The boundaries that once separated regions and countries have been dissolved with the ease and availability of air travel, affordable telephones, cruise ships and personal computers. The Internet has been the largest contributor to the sharing of resources, ideas, information, products and cultural issues. MNCs vary in the scope of their products, the ways they conduct business and the locations of those businesses. Global integration as well as local responsiveness has played a significant role in the typologies and classifications of MNCs. Interdependence between economic units and political entities has increased with the advent of MNCs.

Harzing (2000) concluded that previous research regarding typologies of MNCs have been unclear and unsubstantiated by empirical evidence which has resulted in confusion of definitions and duplicity of word descriptions for various types of MNCs. Bartlett & Ghoshal (1989) developed a multinational typology model that following research has used as their foundation (Harzing, 2000). Current societal norms dictate the need for clarification and well defined typologies in addition to the labeling, ordering and classification of practically everything in a feeble attempt to feel stability in a fast changing world. Research has consistently concluded with three major typologies of MNCs: Global, Transnational and Multidomestic. (Harzing, 2000).

Globalization

The World Trade Organization has defined globalization, “as the process of increasing the interconnection and interdependence of the world’s various markets and businesses” (2009). Globalization or going global encompasses a large range of emotions, social views and political positions, depending upon one’s position or perspective. Positive and negative interpretation of this gigantic concept is one most people cannot begin to grasp, yet they know it to mean whole world or world wide. Disputes on almost every front will continue trying to determine the exact meaning and direction of globalization(Global Policy Forum, 2005-2009).

The insurgance of extreme growth and escalation of global organizations has sent even the experts into a state of continual chaos trying to derive the exact meaning of global. The very existence of global organizations and multinational companies (MNCs) has been the impetus of a revolution that is sweeping across nations (Witzel, 2002). Advancements in technologies such as the Internet, have been a major impetus for this current revolution, breaking through barriers that have been in place for centuries. The ability to communicate with anyone/anywhere coupled with the idea of free trade, (doing business without any interference or ) is very heady stuff and has added to the momentum of this type of organizational growth. Bratlett & Ghoshal have defined Global companies as, “building cost advantages through realization of economies of scale” (1989). The structure of such a company being scaled to encompass global perspectives is centralized with high integration with low responsiveness (Harzing, 2000).

Managing Across Borders

The model of the transnational organization was introduced by Bartlett and Ghoshal in 1989 and according to Dr. Bartlett, “the companies used in their sample were heading in the transnational direction, but none of them had actually achieved it”. Bartlett described MNCs as very diverse, complex, and dynamic making flexibility for global oganizations mandatory. He suggested a different approach from the old strategy/structure and systems model that used top-down management (Beaman, 2002). The new model would view the organization as a portfolio of core macro-processes: the entrepreneurial process, the horizontal learning process and the continual renewal process (Bartlett & Ghoshal, 2000). The Transnational company combines high integration with high responsiveness (Harzing, 2000).

Multidomestic Companies

Bartlett and Ghoshal (1989) have defined Multidomestic companies as having major ties with their local communities. This type MNC would be considered as an independent subunit, they have underlying interdependencies in a broad sense, yet remain autonomous from other subsidiaries or the rest of the company, including headquarters (Harzing, 2000). Multidomestic companies have a high level of local responsiveness, meaning their corporate strategy involves catering to the market demands of their immediate community. Multidomestic companies combine low integration with high responsiveness (Harzing, 2000).

Empirical Studies

Harzing’s study was offered as an empirical test and extension to Bartlett and Ghosal’s typology model in an attempt to lesson the complexity of MNCs and divide them into smaller less threatening size pieces of information (2000). Further research was continued from Bartlett & Ghoshal’s study to in an attempt to fill in the absense of MNC characteristics in any sort of systematic, empirical manner (Harzing, 2000). Harzing’s empirical study included the following characteristics: environment, strategy, structure, and systems and processes. Roth and Morrison (1990) conducted a study that was limited by the types of business units they used and degree of control standards, this resulted in not being able to compare the results to any other studies. Additional research only served to muddy the waters, being distinguished by the agreement of the three main types of MNCs (Harzing, 2000).