Autumn Ives
Kier Hanratty
Economics Geography
22 February 2016
Chapter Five Case Study
BMW and ZwoBank are both German transnational corporations. ZwoBank kept banks in major cities to take advantage of financial markets and to benefit German clients. Zwobank became hands-on by implementing some knowledge transfer. They have limited local activity and keep most of their German culture in their offices overseas. BMW has staff exchanges at all levels, causing a large amount of knowledge transfer. They participate in local philanthropic activity and create local ties. These two companies differ greatly in aspects such as local integration, multinational strategy, and convergence and divergence activities.
The Bartlett and Ghoshal’s multinational strategy that best fits ZwoBank is international. ZwoBank is headquartered in Germany and most employees are from the country and was created for German international bankers. So it is a very domestic bank, and does not have local ties with the cities that the international branches are in. I believe it is categorized as international because first, its development and diffusion of knowledge. ZwoBank adapted a matrix that caused the heads of departments and higher-ups to report to headquarters. They report back while still having a fair amount of autonomy, but this matrix introduced a small amount of knowledge transfer. This fits under the category because the knowledge comes from the center but is transferred to the higher-ups. Another reason I believe it fits under international is its management towards overseas operations. Because, “Overseas operations
seen as appendages to a central domestic corporation.”ZwoBank’s foreign banks are run the same way as the banks in Germany and have very limited local ties. They are appendages of the main bank and were built to benefit German clients and to help “produce different financial products for sale in Germany.” Therefor, the international banks were built to benefit the headquarter bank. The structural configuration also fits the international category because they do report back to headquarters but many of their actions and decisions are decentralized and they have a good amount of autonomy while still following headquarters rules. Bartlett and Ghoshal’s model categorizes Zwobank as an international corporation.
Using Bartlett and Ghoshal’s typology I categorize BMW as integrated network. BMW was initially hands off but integrated policies to help bring together the branches. The company takes pride in its local branches and forms very close ties, and also relies heavily on the workforce. BMW transfers employees and moves them around, causing the knowledge to be developed at the center and shared throughout the whole company. It has different branches forming ties with local cities, which fits the structural configuration of an integrated network. BMWs attitude towards overseas operations is, “an integral part of complex network of flows of components, products, resources, people, information amongst interdependent units” which fits perfectly. Integrated networks share a lot of information and knowledge throughout branches. BMW is known for “encouraging international staff transfer.” Its local ties and large knowledge transfer is the main focus of why it is an integrated network. The development and diffusion of knowledge fits because of the policy they implemented in the 1990’s after the company decided to not be so hands-off. BMW also fits some characteristics of a multinational company because it exploits the local opportunities.
The impact of locality on BMW is a lot different than BMW. BMW has a big impact on location because it has local ties and uses the work force. The locality of ZwoBank is important because it is in major cities, where they can take advantage of the market. They are a greenfield company, meaning they have the advantage of where they are. The locality of Zwobank is more for the market whereas BMW is more for the people and ties, seeing as how it is not located in areas where the market would be the best because it is a brownfield company. Both companies have some similar local integration strategies because they use markets to their advantage. ZwoBank uses financial markets and BMW uses labor markets, so by using local markets, they integrate themselves into the economy. They contrast because on the level of the consumer, BMW looks like a more appealing firm. BMW looks more appealing because people like that the company is giving workers jobs, whereas Zwobank has a strong German presence which may turn off consumers. Zwobank has a totally separate way of local integration, which makes them more efficient in terms of use of local financial markets, but not to the consumer. They are there to benefit their headquarters and German consumers, which makes them look invasive. BMW is also there to benefit headquarters but also there to supply jobs and form local ties and create more jobs, which appeals more to the consumer, but in an economics point of view, ZwoBank has the better idea integrating solely to take advantage of markets and benefit their headquarters.
BMW and ZwoBank compare in their convergence activities because both companies take on characteristics of their host environment. ZwoBank keeps about one-third of their staff from the original country, but every company, over time, has to have some sort of convergence with culture because they are constantly exposed to it. Both companies show similarities in divergence by keeping their national identity. Both companies are widely known as being German. BMW may have other factories around the world making their product but when someone purchases a BMW they always think of it as a German car, not an international car. ZwoBank is a German bank made to satisfy the needs of their German consumers. So both companies, though being produced in countries other than where their headquarters are located, brand their products and services as being German. They contrast because BMW tends to converge with the culture of where the factory is located creating a large local culture presence, where as ZwoBank tries to keep a German presence on purpose. On the ‘global integration- local responsiveness’ grid I plot BMW as multifocally oriented. I plot it in the middle of the graph because it equally supports the pressures for global strategic coordination and also the pressures for local responsiveness. For example, they focus on cost reduction, access to raw materials and energy, and importance of multinational consumers but also focus on the need to adapt, availability of substitutes, and differences in consumer needs. I plotted ZwoBank as having an area emphasis. I plotted the company there because it focuses mainly on market structure, differences in distribution channels, and host government demands. It also focused on investment intensity and presence of multinational competitors, so I plotted it is with an area emphasis because it focuses more on pressures for local responsiveness than pressures for global strategic coordination.
In conclusion, ZwoBank and BMW are both companies with operations in foreign countries but have totally separate purposes and ways of doing it. BMW is more of a converged, integrated network and ZwoBank is a very diverged international corporation keeping its culture present and benefitting its German consumers. BMW is a brownfield company using local ties, and ZwoBank has the advantage of locality because it is a greenfield company. Both companies are successful but have very different ways of running their business.