REVISE
This paper brings together two multinational companies operating and competing in the same industry who share the same host country, but they are from the different country of origin. The source country from which these multinationals come from should be one from a developed country and another from an emerging country. In light of this, we should mainly consider about their ownership and management structure on how they differ and how their priorities change as a result of the property and structures.
The paper examines on whether their home country institutional contexts change and if they do, in what sense. An in depth of how their country of origin’ institutional contexts affect production levels of their raw material is revealed. It examines how institutional differences between their host country and country of origin affects how the firms have been institutionalized. Fundamental disagreements over how the firms could have been regulated may include factors such as assets location, a company’s operation period abroad, nationalities of its management, and the structure of the organization and power of their foreign branches.
The two multinational corporations selected belong to the automotive industry. One is Toyota, which has its headquarters in Japan and Tata Motors, which has its base in India. These two companies compete in the sale of automobiles through their different engine brands they manufacture. The host country selected in which both operate in will be Kenya. They both have set up assembly units in Kenya from where they distribute their motor brands.
Toyota was founded in 1937 by Kiichiro Toyota, and it is led by members of the board of governors, the chairman and the vice chairman. There are operating officers led by the president, executive vice presidents, and other senior managing directors. (CORPORATION, 2017). Tata Motors under the umbrella of Tata group, which was founded by Jamsetji Tata in 1868. Tata motors are also led by the board of governors, and it steered by the chairman and other non-executive independent directors.
There is also a management team led by the Chief Executive Officer and managing director backed up by several executive directors from different departments. (Tatamotors.com, 2017). There is a slight difference on how they are controlled where Tata motors do not have a vice chairman of its board of directors. There is a difference in the year the two companies were founded where Toyota was established in 1937, and Tata Motors were created in 1868. However, there is no difference on who founded the companies, because both of them were founded by a person single handily.
These two groups differ in their home country institutional contexts. Institutional context refers to the things that are done, how they are done and explains who is involved in doing them. It includes compelling and symbolic level concerning decisions, actions, and communications made in an organization. Institutional culture and context are useful in assessing the possibility of collaboration with other companies or working on initiatives that would lead to collaboration. Companies past practices and current structures are areas evaluated to form an effective collaboration. (Acenet.edu, 2017).
For instance, Toyota has mastered a new method of innovation that is part of its corporate culture. Employees operate in the environment where they face challenges, and they must come up with new and fresh ideas on how to tackle the challenges. Toyota views its employees as knowledgeable workers who have acquired experience in the company operations.
Therefore, the company invests in the people’s capabilities and helps the organization garner ideas. Once in a while, the company offers different viewpoints to its employees and asks them to find solutions to various problems. These tensions created generate ideas that Toyota implements hence beating their competitors. Toyota does not rush in its activities, and they are implemented gradually. For example, Toyota began its production in the US by forming a joint venture with GM, which was named New United Motor. In manufacturing, it opened its first plant in Kentucky four years later. In the early 1950s, the company nearly collapsed due to bankruptcy, and it has risen and recorded steady sales and a market growth.
Despite the stability, senior managers use phrases that encourage people to purchase more and more but never get satisfied. Toyotas’ operations are efficient; because its employees are involved in activities they should not participate in like attending meetings. The company sends its employees to offices in the fields than a majority of its rivals. The company has multilingual coordinators who help in breaking down communication barriers between the headquarters and their international operations. In its base, the company cuts its expenses in the best way possible they can. For example, during lunch hour, the company turns off its lights in the offices to save power costs. Employees work from a large room without partitions due to the high cost of renting office space. Simultaneously, the company spends a lot of money on manufacturing facilities, creating dealer networks and human resource development.
Toyota dictates that communication by employees should be simple to understand. When presentations are being made, they summarize information in objectives, analysis on a single paper. There are links between employees across geographical boundaries and vertical communication across hierarchies through teaching relationships and mentoring. Although the company has a strict hierarchy, employees have the permission to air their grievances and push back. Toyota forces its employees to think of how to reach new customers, geographic areas, and how to tackle challenges and new practices that reduce rigidity.
Senior executives set almost impossible to attain goals to ensure the company breaks from the routine and enable employees to raise their consciousness. The company is heavily involved in experimentations where people test hypotheses and learn from the successes and failures. Toyota first breaks down a big goal to manageable challenges then experiments to come up with new initiatives for handling problems. This approach also presents several learning opportunities. Some values have been incorporated from the founders of the company, which is having a mindset of continuous success, teamwork, humility and putting the customer first. These values are passed to the employees through job training, and stories managers tell them. (Takeuchi, Osono, and Shimizu, 2008).
Tata Motors Limited was made stronger due to a restructuring plan designed in the early 1990s, and an internalization program was implemented at the start of the millennium. The company was mainly involved in business divestments and major and minor cross-border acquisitions. These acquisitions led to the expansion of sales six times. Group affiliation in Tata Motor limited transformation was influenced by parallel changes and management style under the chairmanship of Ratan Tata. When he took over, Tata group affiliated companies were led by independent-minded CEOs. Within a period of ten years, Ratan managed a change in internal governance and organization in the central group functions and top management. This change brought about expansions, business transformation, and internalization.
Tata Motors also geared to ventures in new markets and technologies. The group is characterized by cross-shareholdings, which help control, supervising of major companies and affiliate companies easier for the corporate center. An extensive network of managers through interpersonal relations from different companies is also a characteristic of this structure. Tata motors have a code of conduct, which is subscribed to ensure uniform standards and quality of their products. It also ensures ethical business practices are followed. Political nonalignment within the India politics and respect for national interests of host countries by Tata subsidiaries were clearly stipulated.
A Tata customized total quality management model was adopted in improvement models and innovation schemes, which are used as benchmarks to assess the company’s performance. The involvement of Tata Motors in passenger cars was majorly due to purchase of assets, accumulation and organizational learning processes. Tata group supports its affiliated companies through group level initiatives thus help improve overall efficiency and its ability to carry out big projects. The group contributes knowledge, experience, and capabilities in handling very complex projects. Tata group is well known for nurturing talent and is engaged in supporting India’s art and science.
The company employs a talented school graduate that takes advantage of exploiting in its recruitment process. Proper training and promotion of intercompany mobility enlarge the company’s access to qualified candidates. Candidates with international exposure are transferred to do major projects involving international exposure to overcome foreignness liability. Tata auto comp systems run 30 manufacturing facilities in India and China. TAL also partners with Tata motors to provide construction engineering and information technology. Following the acquisition of INCAT, it supports Tata Motors in product development and a range of design services. These resources provide Tata Motors with access to technological know-how and expertise as well as increasing its absorptive capacity for external knowledge. It also increases access to low cost of inputs needed in car production by saving transaction negotiation cost of complex contracts or improving Tata Motors negotiation position with external suppliers. (Bruche, 2010)
Institutional differences between the host country and home country affect access to markets. Global partnership positions in countries they operate in cannot be achieved without selling products in most of the markets in the world. Establishment of production facilities within a region allows access to the area's market. Early entrance into a certain market before rivals also helps stabilize the market share through dominance. The aggressive expansion should be sought to shun being overtaken despite the early entry into the market. Access to resources used in production by the company is a major issue. A primary reason for an investor can be attracted to invest in a country could be specialized resources such as a highly skilled workforce, which is relatively mobile. In modern day though, highly transferable knowledge and technology are the primary determinants as compared to natural resources or available labor.
Many multinational companies may relocate some business to offshore some of its operations, obtain individual components and supplies or relocate a production facility. The main aim of doing any of this could be geared to reduce maintenance costs from the home country. There has been criticism whereby multinationals exploit low-cost labor in host countries where the same working conditions would be regarded as unacceptable or inadequate. The size of the firm and organizational culture are important factors. A Larger enterprise like multinationals enters a market through acquisition whereas small businesses use lower risk strategies.
Corporate culture can be the hierarchical culture that stipulates rules and regulations. Organizational structures from home country could differ with those at host countries due to different standards and regulations. A clan culture is also a factor to consider based on loyalty and tradition. People from the countries of origin and host countries may possess different character traits, which would make operations easier or hard. Character traits could include how loyal the people are due to traditions and beliefs they hold. A market culture determines internationalization through competition and achievement.
A multinationals zeal to penetrate a certain market and face its main competitors is important as all employees from top management to the employees are geared to achieve individual goals. Competition and achievement in a company may differ from the host country and the countries of origin. The level of efforts and style of management may vary because of pursuing different goals and objectives. Adhocracy culture within the organization may change in a multinational company from the home country and its subsidiaries in other host countries. This culture is characterized by entrepreneurial activities and innovation. The rate of innovation and business in a multinational differs from the home country and the host. Management carries out activities due to the level of innovativeness among its employees or business facilitated by host governments.
The firm’s geographical location also determines institutionalization. Clusters and networks provide an opportunity for organizations to benefit each other by supplying specialized services, engage in research and development, the attraction of skilled labor, and creating a market for each other’s products within that geographical region. Networks affect location decisions in the sense that multinationals dominate international communication traffic and lease telecommunication systems to enhance their international operations between the host countries and the headquarters. (Harrison, Dalkiran, and Elsey, 2000)
REFERENCE
Tierney, W. (n.d.). Institutional Context and Culture. [Online] Acenet.edu. Available at: http://www.acenet.edu/news-room/Pages/AHITW-Institutional-Context-and-Culture.aspx [Accessed 25 Apr. 2017].
Bruche, G. (2010). Tata Motor’s Transformational Resource Acquisition Path A Case Study of Latecomer Catch-up in a Business Group Context. 1st ed. [eBook] Berlin: IMB Institute of Management Berlin. Available at: http://www.mba-berlin.de/fileadmin/user_upload/MAIN-dateien/1_IMB/Working_Papers/2010/neu_WP55_online.pdf [Accessed 25 Apr. 2017].
CORPORATION., T. (2017). Executives | TOYOTA Global Newsroom. [online] Newsroom.toyota.co.jp. Available at: http://newsroom.toyota.co.jp/en/detail/1481087 [Accessed 25 Apr. 2017].
Harrison, A. L., Dalkiran, E. and Elsey, E. (2000), International Business, Oxford University Press, fig. 12.1, p. 256
Takeuchi, H., Osono, E. and Shimizu, N. (2008). The Contradictions That Drive Toyota’s Success. [online] Harvard Business Review. Available at: https://hbr.org/2008/06/the-contradictions-that-drive-toyotas-success [Accessed 26 Apr. 2017].
Tatamotors.com. (2017). Tata Motors Board of Directors | Tata Motors Management | Tata Motors Corporate Strategy | Tata Motors Limited. [online] Available at: http://www.tatamotors.com/about-us/leadership/ [Accessed 26 Apr. 2017].
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