The 1970s ushered in the Age of Sobriety, as corporations in Europe and Japan became formidable competitors not only in the international market but also at home. VW Beetles, Volvos, and inexpensive consumer goods from Japan began to invade the United States. U.S. and European MNCs embarked on a fierce competitive battle aimed at not only conquering each other's home markets but also getting a foothold in the newly industrialized and developing world. The end result of this "competition by replication" was a non-evolutionary proliferation (cloning) of plants all over the world by European and U.S. MNCs.
Part II of Figure 11.8 depicts the experience curves characteristic of MNCs during these years. The replacement of a few large plants with a number of smaller plants, designed to satisfy the local markets, nullified the economies of scale. The inputs experience curve continued to decline sharply, primarily because the existence of many small plants close to both the factor and the product markets facilitated the sourcing process. The production experience curve still exhibited a slight decline, attributable to the low wages and salaries. (This effect was a temporary one which tended to disappear when labor forces became accustomed to the idea of being employed and began to understand their position within the MNC.) The outputs experience curve, however, became a sort of "negative experience curve." The existence of numerous small plants all over the globe made distribution of outputs exceedingly complicated. Millions of customers in small markets had to be researched, and thousands of distributors had to be investigated, negotiated with, and supplied. A huge administrative and support system had to be developed. The costs associated with the maintenance of this administrative system outweighed any decrease in the production experience curve.
Under such conditions the design and implementation of an organization structure becomes a very challenging task, to say the least. Billions of dollars in management and consultant time must be spent drawing and redrawing organizational charts, writing job descriptions, and reshu1fling personnel from one area to another and from one function to another. Huge computer departments must be staffed and equipped with the latest in hardware and software to keep track of the daily business activities.
During the seventies and early eighties, MNCs were searching for an adequate response to the challenge of organizational design. New gurus were appearing every day. To decentralize or not to decentralize was not the question. The question was how to decentralize without ending up with inadequate control. Some consultants recommended trimming down, pruning, cutting back, "sticking to the knitting," and so on. Others went for the simplicity of the One Minute Manager. Still others proposed "Theory Z," a sort of Japanization of MNC management styles. Academics and consultants were busy developing new buzzwords, and MNC managers all over the world were struggling with a "change of heart."
- 970 reads
