I always wondered what's the healthiest amount of control Headquarters should exert over their offices abroad.
I'm not talking legal or administrative; I'm not debating branch vs. subsidiary as incorporation form; I'm wondering about the intricacies of headquarters' control over the local offices - how much freedom should the latter have in terms of market strategy?
Working in subsidiaries, I sought independence in some marketing decisions and had to fight for it; working in Headquarters, I'm looking for absolute control over the communication and actions, although I'm fully aware of how important local business culture knowledge is.
- The main repository of experience is at the Headquarters. There's no point in re-inventing the wheel or going through the same failures and successes as the central team.
- In the initial years of the subsidiary, the [financial] resources are at the Headquarters.
- After opening a new external office, the Headquarters team needs a learning period.
- Having local staff keeps the Headquarters out of making risky assumptions about the cultural differences.
- No strategic planning can be done by the Headquarters without knowledge about the local market.
- In emerging economies, the valuable market knowledge is mostly available in the local language [publications, studies].
- The local staff, being in direct contact with the market, filters better the relevant information.
- Dismissing local ideas in favor of the global strategy will discourage initiatives.
- Local management authority may lead to faster reactions to clients' requests.
- Imposing the group strategy on all markets, disregarding the differences between the home market and the targeted market, means a waste or resources and time, if not to failure. Read my previous blog post about "deaf" international expansions.
"Our study shows that subsidiaries which have a high level of strategic choice and receive attention from headquarters perform better than their peers. More specifically, we find that the interactions of subsidiaries’ autonomy, inter-unit power and initiatives with attention increase subsidiary performance."
I guess I'm in favor of local autonomy, with central support. After all, intelligence means the capacity to adapt, doesn't it?