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Emerging Issue Paper 1 — Managing Relations Between Headquarter and Subsidiary

by on January 20, 2010

The importance of having a good relationship between headquarter and subsidiary is recognized by more and more corporations since global companies nowadays have the desire to expand territory to foreign country and therefore have the needs to better manage the relations with subsidiaries.  There are four approaches to better enhance this kind of relationship.

(1) Adjusting formal structure: Headquarter should adjust their formal structure based on the various context of subsidiary.  (Nohria & Ghoshal, 1994)  Since the foreign subsidiary has its unique organizational culture and specialty, standard organizational structure of headquarter might not necessarily fit in any subsidiaries.

(2) Considering the local advantage of subsidiary: Headquarter should always consider the local complexity of subsidiary and therefore taking the opinions of subsidiary into account.  There must be various aspects of information that subsidiary knows much better than headquarter. Also, one should not assume that the strategy that works in one environment will definitely work in the other environment.

(3) Setting the same value and goals: Setting the same value and goal could effectively solidify headquarter and subsidiary.  According to Nohria and Ghoshal, “Socializing organizational members to have a common set of values and goals can minimize their divergent interests and enhance their sense of mutual interdependence.”  (Nohria & Ghoshal, 1994)  If members in subsidiary have the same goal and values as the members in headquarter have, it is more likely that there will be less conflict between them.

(4) Trust and dependence: “From a relationship perspective, key success factors in cultivating successful relationships include the subsidiary’s trust in and dependence on the headquarters.”  (Hewett & Bearden, 2001)  Winning the subsidiary’s trust could result in more cooperative attitude towards headquarter which leads to friendly communication and sucessful relations.

These four approaches provide the strategies that could help or at least remind the multinational corporation to carefully manage the relations with subsidiaries.

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One Comment
  1. that’s good idea, I like that

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