Suspending Operations
The international market environment is complex, co-dependent and dynamic. Any multinational company (MNC) with the intention of withdrawing its activities from a particular country must adopt effective strategies that would enable it manage political risks. This is essential because political risks have the potential of affecting activities of a MNC considerably. Examining Adaptation and Dependency, which are the two major strategies for managing political risks, is essential in empowering transnational companies.
The concepts of Adaptation and Dependency
Adaptation regards to the idea of adjusting to political environment. The company should formulate strategies that would enhance its survival after suspending it operations by identifying alternatives (Keillor & Wilkinson, 2011). This means the company should initially evaluate the implication of suspending its operations and develop a strategic plan with the potential of addressing consequences of the practice. For example, the company should establish a plan that would enable it manage challenges such as loss of technology, interference in decision making, discriminatory procedures including the alteration of contractual deals and extortion demands among others (Sinha & Sinha, 2008). Alternatively, Dependency refers to the idea of ensuring that the host nation remains dependent on the parent corporation. The company should develop strategies that would entangle the host country into its activities. In essence, the host country will remain faithful to the corporation if it can hardly obtain services from other sources (Kamp, 2007).
Characteristics of Adaptation and Dependency
Adaptation presents various attributes that differ considerably with the ones witnessed in Dependency. Initially, Adaptation is characterized with the idea of equity sharing. This entails establishing joint ventures with other countries or entities to minimize political risks (Sinha & Sinha, 2008). The corporation engages strategies partners to cover the gap created after suspending its operations in one country. Another characteristic includes participative management that demands the corporation to involve other countries including the ones in labor agencies in the management of its subordinates (Kamp, 2007). Adaptation is also associated with the localization of operations where the corporation modifies its subsidiary name and operational style to align with local preferences. Localization aims at transforming the subsidiary from an international dimension to a nation firm. Lastly, adaptation includes development assistance to foster the establishment of the company’s new environment. Consequently, the corporation participates actively in infrastructure development. The corporation gets involved in activities such as foreign exchange creation, technology transfer, securing external debt and management training (Keillor & Wilkinson, 2011).
Dependency is characterized with input control where the corporation retains control over major inputs such as technology, production components and raw materials. Another attribute of dependency includes market control where the firm maintains control of the avenues of distribution. Furthermore, dependency is associated with the idea of position control. This entails retaining particular essential subsidiary management position under command of expatriate or central-office managers (Kamp, 2007). This ensures that the firm has control over subsidiary’s activities even after withdrawing its activities from a particular country. Lastly, dependency presents an aspect of staged contribution strategies. Under this strategy, the corporation plans to increase the subsidiary’s activities in the host nation progressively (Keillor & Wilkinson, 2011). This targets developing the company’s relevance ensuring that the host country remains in need of the firm’s services. Effective utilization of these models can enable a transnational company suspend its operations from a country and remain successful. Essentially, calculative application of such strategies can increase the firm’s authority in the local and international market.
References
Kamp, B. (2007). Location Behaviour and Relationship Stability in International Business Networks: Evidence from the Automotive Industry. New York: Taylor & Francis.
Keillor, B. D., & Wilkinson, T. J. (2011). International business in the 21st century. Santa Barbara, Calif: Praeger.
Sinha, P. K., & Sinha, S. (2008). International business management: A global perspective. New Delhi: Excel Books.
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