Geography Reference
In-Depth Information
MNE
L
A1
L
B3
L
C2
L
A2
L
A3
L
B1
L
B2
L
B4
L
C1
L
C3
Figure 3.23
Hierarchical organizational decision-making structure
The simplest default case is where the multinational organizational struc-
ture of the firm exactly represents the decision-making logic of the MNE
location decision represented by Figure 3.1 - in the introduction of the
present chapter - and replicated in Figure 3.23. Here we also use the thick-
ness and direction of the arrows to indicate both the strength and direction
of the decision-making structure of the firm.
In Figure 3.23 we see that the MNE has developed seven different estab-
lishments in a variety of locations across three different countries A, B
and C. If the multinational firm initially chose
L
A1
as its original overseas
investment location, the decision-making structure will be represented by
Figure 3.23 in that the firm will have first decided to invest in country A,
and then secondly will decide in which particular location within country
A to invest. The same argument holds for any alternative chosen location.
Yet, while a strictly tiered hierarchical decision-making structure implied
by Figure 3.23 is almost always applicable to an MNE's very first foreign
direct movement overseas, in the long term as more international estab-
lishments are developed, it is not always the most appropriate organi-
zational structure. The reason is that once the initial foreign investment
project has become well-established, further overseas location choices will
generally require more complex corporate decision-making and reporting
structures than implied by Figure 3.23, as different establishments become
