Accenture Emerging Markets Create Global Operating Models

Are Emerging-Market Multinationals Creating
The Global Operating Models of the Future?

Stéphane J.G. Girod, Joshua B. Bellin and Robert J. Thomas
May 2009
Research Report
Are Emerging-Market Multinationals Creating The Global Operating Models of the Future?
3 Executive summary
Chapters
7 1. Rising interest in global operating models
9 2. What is a global operating model?
13 3. Diverging and converging global operating model configurations
17 4. How global operating models may work according to the literature
27 5. Remaining questions
30 About the research

32 About the authors
32 About Accenture
32 About the Accenture Institute for High Performance
32 Notes
2 | Accenture Institute for High Performance | Copyright © 2009 Accenture. All rights reserved.
Are Emerging-Market Multinationals Creating The Global

Operating Models of the Future?
Executive summary The rise of the multi-polar world raises have to change often, roles need to be
a number of questions related to precisely defined to avoid ambiguity
For multinational enterprises (MNEs), global operating models. Is there one and chaos in execution.
the rise of the multi-polar world creates model that is best suited? How do
an additional layer of complexity that developed-market and emerging- Processes and technology are also an
makes global operating model config- market multinationals’ operating models essential component of their global
urations and organizational capabilities differ? What can they learn from operating models. When they gained
more important than ever. A recent each other? Accenture is researching an edge in innovation processes in
Accenture survey shows that 95 percent the answers. Ahead of the full results— the 1980s, Japanese MNEs pioneered
of senior executives say that they scheduled for publication in August sophisticated knowledge management
doubt their companies have the right 2009, this research report compares processes to make knowledge more
operating model to support their the literatures on emerging- and explicit and broadly shared by orga-
international strategy. Consequently, developed-market MNEs and sets out nizational members. On-demand
they are seeking to strengthen their the six core research-based hypotheses workplace portal sites—for example,
organizational capabilities to achieve that the Global Operating Models at General Electric and at BP— become
better performance. program is testing. essential knowledge management
tools to support human resource
Accenture defines a global operating management practices where highly
model as the set of organizational Hypothesis 1 mobile employees can connect and
capabilities that allow multinational Developed-market multina- communicate all around the world.
managers to coordinate the relation- tionals tend to emphasize hard Supply chain and innovation processes
ships between the multinational’s operating model components can even lead to fundamentally new
headquarters and the geographic organizational structures, for example
business units to effectively support Developed-market MNEs’ global oper- in multinational pharmaceutical
the company’s international strategy. ating model configurations tend to companies.
These capabilities include the config- emphasize hard components, meaning
uration of five organizational compo- that their distinctive strengths lie in Metrics for assessing the performance
nents which need to work in synergy. organizational architecture, processes of their global operating model are
Two components—leadership and and technology, and performance common among developed-market
people—are more intangible and often management metric capabilities. multinationals. They routinely measure
more invisible; as such we call them the quality of human resource man-
“soft components”. Three components— Developed-market MNEs tend to agement, innovation processes, supply
organizational structure, processes thrive on the multi-divisional, decen- chain effectiveness, knowledge man-
and technology, and metrics—are tralized hierarchy which allows top agement and leadership. In short, devel-
more formal, so we call them “hard managers to concentrate on strategy. oped-market MNEs’ global operating
components”. This architecture is associated with models appear to be geared to stability
explicit control processes based on high
formalization. It includes comprehen-
sive rules and policies. Even if they
and a reduction of uncertainty. market MNEs. Their CEOs, who have Hypothesis 3
Architecture, process and metrics are often a very “hands on” style, tend to Operating models must be
critical for anticipation, forecasting, concentrate much more power in the assessed in the context of
risk-limitation and prevention of centre, which results in individual-based MNEs’ international strategies
threats to the core. Their organiza- leadership structures more than in
tional culture relies on formalized team-based leadership structures, There is no “one best way” to configure
organizational components and empha- where power is more distributed. Their a global operating model. A global
sizes the reassurance of investors who leadership is also more entrepreneurial, operating model configuration, that
are risk- and uncertainty-averse. more risk-oriented and prone to accept is the specific combination of organi-
In other words, their model is geared long-term more than immediate returns. zational components, need to fit the
towards complexity reduction and well context of a MNEs’ home market and
suited to developed countries where A distinctive strength of emerging- the characteristics of its host markets
the level of turbulence and complexity market MNEs seems to be their people’s as defined by its international strategy.
can be comparatively lower than in expertise for creating powerful
emerging economies—for example, clear inter-personal networks. In support Regarding the home market, we
and enforceable intellectual property of a leadership style based on highly distinguish between MNEs coming
regimes, relative homogeneity in personalized interactions, networking from emerging countries and MNEs
customer tastes and behavior due to on- is second nature and deeply ingrained coming from developed countries. As
going processes of regional integration. in emerging-market MNEs’ culture and regards host markets, we distinguish
often reflected in the home-country between (a) multinationals that operate
culture as well. The effective manage- in regions with levels of development
Hypothesis 2 ment of inter-personal networks can similar to those in their home country
Emerging-market multinationals be a critical capability to secure (i.e., developed-to-developed or
tend to emphasize soft the success of inter-organizational emerging-to-emerging); and (b)
operating model components networks (particularly in knowledge multinationals that operate in regions
and resource intensive industries); with similar and different levels of
By contrast, emerging-market MNEs’ by contrast, many developed-market development to their home country
distinctive strengths stand on soft multinationals seem to struggle to (developed-to-emerging and emerg-
component capabilities in leadership make these networks work. ing-to-developed). The former can be
and people. Research suggests that said to result in a “narrow” multi-polar
their leadership tends to be strong Because their home-market conditions footprint and the latter can be said to
and highly personalized, as opposed have been rather volatile, emerging- lead to a “broad” multi-polar footprint.
to institutionalized in processes and market MNEs are at ease with volatility, The breadth of a multinational’s multi-
structure as in many developed-market risk taking, change and flux. In con- polar footprint can vary greatly—thus
multinationals. The fact that many trast with developed-market multi- influencing the configuration of a
emerging-market MNEs are privately nationals, their global operating model global operating model. Thus, it is
owned leads to a greater unity of is geared to complexity absorption both where the MNE “starts” from
ownership and control than in developed- and this is perfectly appropriate to and where it goes to that influences
conduct business in other emerging the choice of an appropriate global
markets. For this reason, this type of operating model configuration.
configuration requires little adapta-
tion when emerging-market MNEs
operate in other emerging economies.
Hypothesis 4 Hypothesis 5 complexity that their global operating

Configurations which follow Home-country based configu- model needs to accommodate. Neither
home-country characteristics rations need to change as highly independent geographic subunits
can be appropriate for narrow multinationals’ international nor highly centralized operations
multi-polar international strategies become more global are satisfactory. Operating in more
strategies heterogeneous host markets creates
When both developed- and emerging- more uncertainty and risks.
When their multi-polar footprint is market multinationals expand beyond
narrow, emerging-market and devel- regions similar to their own, and try For such situations, studies of devel-
oped-market multinationals may suc- to operate in regions with different oped-market multinationals have
cessfully internationalize and yet rely levels of institutional and economic established that global operating
on global operating model configura- development simultaneously, they model configurations which emphasize
tions which vary little from those they will face significant hurdles if they only hard components cannot address
have always used in their home envi- try to manage based on their intrinsic this complexity. A broad multi-polar
ronments. Indeed, in this case, they strengths alone. For example, it is strategy requires a networked global
operate in regions whose economic, far from certain that managers and operating model configuration which
cultural and institutional characteristics employees of developed-market units balances the soft and the hard com-
are similar to those of their home owned by an emerging-market MNE ponents because here, the potential
environment. These multinationals can will accept very hands-on and inter- pay-offs of such complex arrangements
then emphasize cross-border stan- ventionist CEOs. Conversely, employees will compensate for their costs. This
dardization over local adaptation at home may aspire to benefit from networked global operating model
since there is only a minimal need some of the human resource, supply is based on the high differentiation
for adaptation. chain or knowledge management but also high integration of cross-
processes that make the strengths of border resources that a multi-polar
Since we hypothesize that emerging- their colleagues in the developed- strategy requires:
market MNEs rely mostly on soft market units. For developed-market units and people inter-dependence,
global operating model components multinationals, there is already some high knowledge exchanges, revision
and developed-market multinationals evidence that they are working to of the headquarter roles, centres
may tend to rely mostly on hard improve their networking skills by of excellence for supply chain and
global operating model components, relying more on local managers rather innovation, global talent pools.
we conclude that it might be only than on expatriates, for example to
when their multi-polar footprint is facilitate the relationships with local Consequently, we propose that when
narrow that they might be able authorities and other local companies. emerging- and developed-market
to configure their global operating Yet, their efforts remain inconclusive multinationals become more global,
models in this way and achieve high because their rigidly standardized the differences may start fading.
performance. Consequently, we can structure and processes hamper the Indeed, they may need to converge
expect that emerging and developed- required emphasis on people and towards a relatively similar configu-
market multinationals’ global operating networking talent. ration which dynamically balances
model configurations will differ in hard and soft components. Emerging-
the most significant ways when their When multinationals broaden their market MNEs may have to increase
multi-polar footprint is narrow. multi-polar footprint, their managers focus on the hard components of their
have to face the more challenging developed-market competitors, while
task of adapting to more varied local the latter may need to adopt the soft
conditions and environments. They components of their emerging-market
not only have to deliver a high level peers. For this reason, we see an
of cross-border economies of scale, opportunity for two-way learning.
but they also have to be more locally
responsive and adaptable at the same.
These combined pressures increase the
Hypothesis 6 Conclusion
In the medium-term, emerg-
ing-market MNEs may have a By testing these hypotheses, this
competitive advantage due research project will be able to provide
to their advance in soft answers to the following strategic
component capabilities questions:
We should not expect emerging- How can developed-market multina-

market MNEs to resemble their devel- tionals retain their strengths in hard
oped-market peers in the short-term. components and at the same time
Indeed, they may retain some of remedy some of their weaknesses if
their home-country characteristics, they adopt some of their emerging
particularly when the latter exerts a competitors’ organizational practices?
strong influence, as it is in the case
for Chinese, Indian, Russian, and Should developed-market multina-
Brazilian multinationals. In particular, if tionals learn the lessons of their
their source of competitive advantage emerging-market peers only when
relies on their ability to orchestrate it comes to managing in emerging
the soft components better than markets, or would changing their
their developed-market counterparts, entire global operating model confer
they should have an advantage when advantages in developed markets as
they start implementing a networked well? In other words, what aspect of the
global operating model. Indeed, the new practices should stay local and
latter is highly based on people and what aspect should become global?
leadership capabilities. If these multi-
nationals succeed in maintaining Which aspects of developed-market
this advantage, extending it to their MNE’s architecture, processes and
developed-market units, and strength- technology and metrics should emerg-
ening hard operating model compo- ing-market MNEs emulate? How can
nents simultaneously, then they will they reconcile those with their current
become more threatening for their strengths and try to retain them?
developed-market counterparts.
By providing a ground-breaking empiri-
This advantage might only be tempo- cal analysis of global operating models
rary, however. The history of multina- for both developed world and emerg-
tionals’ evolution illustrates that as ing-market multinationals, this study
new organizational models emerge, will provide key lessons for MNEs as
the most successful incumbents they go about seeking global expan-
have always learned from their new sion in an increasingly challenging
challengers, sometimes even defeat- multi-polar world.
ing them at their own game.
1. Rising interest in global operating models
Globalization was once characterized somewhat invisible yet still important challenges that developed-market
by developed-market multinationals “soft” components such as leadership multinationals face when competing
looking for low-cost factories and and people.3 in emerging economies.7 To further
call centers. Now it is a complex complicate matters, researchers high-
game of chess played by developed- In this new phase of globalization, it light the radically new and highly
and emerging-market multinational is perhaps not surprising that nearly flexible business models of some
enterprises (MNEs) encroaching on one 95 percent of senior executives sur- emerging-market champions but
another’s home turf and employing veyed recently by Accenture doubt don’t explain how these companies
what could be dramatically different whether their companies have the achieve this flexibility.8 In other words,
operating models. In this new phase right operating model to support their researchers provide little detail about
of globalization—what Accenture calls international strategies and, ultimately, how emerging-market multinationals
a “multi-polar world”—economic power achieve high performance.4 Managers organize themselves to enable differ-
is more broadly distributed across all in developed- and emerging-market ent types of international strategy.
regions of the globe and the search multinationals are anxious to get
for growth now extends well beyond answers to critical questions. Developed-
the developed markets. As more market MNE managers primarily want Objectives of this report
and more mature-market MNEs are to know whether emerging-market
expanding into faster-growing multinationals have pioneered the The principal objective of this report
emerging economies, they are con- global operating models for the future is to assess what is currently known
fronting increasingly powerful local and if so, what they should change not about global operating models in
competitors. And these emerging only to succeed better in emerging developed-market and emerging-
champions are now competing in markets, but also to operate differ- market multinationals. In reviewing
more affluent economies.1 As the ently at the global level. For their the existing literature on MNEs, we
international strategies become more part, emerging-market multinational extract several hypotheses.
global, the geographic, cultural and managers want to know how they
institutional distance between home can maintain their advantage, if their 1. There is no “one best way” to
and host-countries widens and puts global operating models are indeed configure a global operating model. To
new pressures on MNEs’ ability to giving them an edge. Or, if they are at achieve high performance, managers
achieve high performance through a competitive disadvantage in relation of emerging market MNEs need to
their global operating models.2 to the developed-market MNEs’ global configure their companies’ global
operating models, they will want to operating models to fit with their
A global operating model is the set of know how they can close the gap. international strategy and specific
organizational capabilities that allows competitive and economic environ-
multinational managers to coordinate Attempts to answer these questions ments, just as it is the case for man-
operations between the corporate are complicated by a lack of empirical agers of developed-market MNEs.
center and the geographic business research on emerging-market multi-
units. In addition to the more tangible nationals.5 As this report will make
“hard” components such as organiza- clear, a great deal of literature exists
tional structure, metrics, and man- on how developed-market multina-
agement processes and technology, a tionals should configure their global
global operating model also includes operating models in order to compete
with one another.6 However, little has
been written about the organizational
2. A MNE’s international strategy is 4. As MNEs’ broaden their multi-polar operating model configuration of both
characterized by its geographic footprint—and operate in markets much emerging-market and developed-
scope—that is, by the type and range different than their home market— market MNEs with narrow multi-polar
of host and home countries it operates their global operating models are footprints will not converge and why
in. We refer to this scope as an enter- likely to converge. Developed-market the configurations of emerging and
prise’s “multi-polar” footprint. We MNEs will need to strengthen their developed-market MNEs with broad
distinguish between multinationals soft components in order to be more multi-polar footprints will converge.
that operate in regions of similar market-responsive in emerging nations. In the fourth section, we will explain
development (i.e., developed-to- Meanwhile, emerging-market MNEs the logic behind these hypotheses by
developed or emerging-to-emerging) will need to strengthen their hard examining past research about global
and multinationals that operate in components in order to consolidate operating model configurations in
regions of both similar and different their international business on a global MNEs. And finally, in the fifth section,
development (developed-to-emerging scale. But this convergence will not we will speculate on what the impli-
and emerging-to-developed). The be total and neither should it be. cations of these hypotheses could be,
breadth of a multi-polar footprint can if they are empirically supported.
vary greatly—thus influencing the con- In the next phase of our research,
figuration of a global operating model. we will test these four hypotheses in
an empirical study of the wireless
3. Fundamental differences between telecommunications and oil and gas
developed-market and emerging-market industries. Based on the results of
MNEs appear when they operate in that study, we will then come up with
regions with similar development. a set of recommendation for MNE
Developed-market MNEs that operate managers about how to reconfigure
solely in developed markets emphasize their global operating models, if
the hard components of their operat- indeed they need to.
ing model (structure, processes and
metrics). Conversely, emerging-market This report is organized as follows: in
MNEs that operate solely in emerging the next section, we will define global
markets emphasize the soft compo- operating models and introduce the
nents (leadership and people). notions of configuration and fit. In
this section, we will also explain how
both environment and location strategy
determine the configuration of global
operating models needed for high
performance. In the third section, we
will explain why we think the global
2. What is a global operating model?
At the core of business today are two For a global operating model to Accenture’s framework combines
high-level challenges: strategy and succeed, it needs five organizational many of these theories and stresses
execution. At the heart of strategy is a components working in synergy with the importance of five core compo-
business model or value proposition one another. These components must nents (see Figure 1.)
that answers the question, “How do we also be aligned with the MNE’s inter-
make money?” At the heart of execution national strategy which influences its We make a distinction between
is a global operating model that answers host country environments and with the more formal, hard components
the question “Are we properly organized its home country environment. (shown in light green) and the more
and aligned to execute that strategy informal (often invisible) soft compo-
across geographic borders?” To succeed nents (shown in dark green).10 The
in a multi-polar world, a company’s Five organizational components content and the relative importance
global operating model must be as given to each of the five organiza-
robust as its business model is sound. Management researchers have proposed tional components characterize the
a number of different frameworks and global operating model configuration.
terminologies to characterize the com- The meaning of the term “configuration”
ponents of a global operating model. may be clearer if you think of each
Figure 1: Global operating model according to Accenture
International strategy
Alignment
Operating model components
Leadership
Home-country Processes & Organizational

Metrics
environment technology architecture
People
Execution
Superior business results
“Soft” components “Hard” components
component as a dial that can be set Organizational architecture. This hard to assess whether the global operating
at different levels (high or low, for component refers to “the way in which model is performing well is the top
example); the configuration is the responsibility, reporting, and account- talent geographic rotation metric, which
unique combination of five dial settings. abilities are defined”.17 It includes the measures how effectively the most
mechanisms of differentiation and talented employees are assigned in
Leadership. Accenture defines this first integration a MNE uses to connect foreign units. Multinationals can use it
soft component as “the senior team geographic business units and the to tell if their top talent has a broad
of people and associated governance corporate center, including the orga- international exposure and a sufficient
that substantially influence and serve nizational structure, the degree of understanding of all key businesses.
as an example for how an organization centralization and formalization, and
should operate”.11 This component has the control mechanisms utilized.18
several characteristics: the personalities Internal alignment
of a company’s leaders; the number of Processes and technology. Accenture
leaders there are; their position in the defines the processes and technology Conventional research focusing on
MNE (are they at headquarters, in the component as “the clusters of activities developed-market MNEs has estab-
geographic subunits or both); how and enabling technologies that pro- lished that to enable high perfor-
diverse they are; who makes decisions; duce measurable outputs”.19 This second mance, the configuration must be
how the decisions are made; and the hard component includes all the man- internally aligned—that is, all five
leaders’ communication and leadership agement processes that help coordinate components must work in synergy
styles.12 Ownership structure influences input-output activities in the value with one another.22 Indeed, a global
the leadership component and conse- chain across geographic subunits. Some operating model is a holistic system
quently the other components. Research examples of processes are strategic where the decisions about one
shows that private companies tend to planning, resource allocation, knowledge component also affect the others.
have more long-term oriented and management, innovation management, For example, when a MNE seeks to
bolder decision-making styles because customer relationship management, and implement a cooperative, network-
contrary to publicly listed firms, they are supply chain management. Enterprise based global organizational structure,
shielded from the regular and short-term resource planning software and intranet but the incentives and rewards (HR
oriented stock markets’ sanction.13 knowledge portals help to support processes) are based on countries’
these management processes.20 individual performance and results, the
People. This second soft component desired inter-unit cooperation might
refers to “the individuals in an Metrics. This last hard component ties not be achieved. This is a frequent
organization in terms of their skills, together all aspects of the operating cause of company underperformance.23
capabilities, experience, and individual model and drives organizational
competencies”.14 It refers to how behavior.21 Metrics include the strategic Internal alignment does not mean
talent is managed internationally (for and operational, financial and non that each component plays an equal
example, sourcing, training, developing financial indicators that reflect how the role in the configuration. A MNEs’
and retaining talent); how engaged global operating model is performing. international strategy as well as its
employees are; and how networked For instance, measuring the direction home and host-country environments
they are across geographic boundaries.15 and intensity of trade between geo- may require more emphasis on some
This soft component also includes the graphic business units will tell how organizational components than others.
cultural dimension of the organization— well they are operating as a network; For example, studies of developed-
that is the beliefs, norms and shared it may indicate whether managers need market MNEs have demonstrated
values that bind its members, even to strengthen inter-unit cooperation to that successful MNEs which operate
across geographic locations16—and even develop synergies across locations. An in fairly homogenous host markets
internal politics (power, coalitions, operational metric that can tell if the compared to the home market, may
succession and promotion games, etc.). company generates a sufficient number give a greater role to the organiza-
of economies of scale across boundaries tional structure to coordinate
is the ratio of central purchases over foreign operations.24
local purchases for each geographic
unit. A non financial measure used
External alignment similar and different economic and Many MNEs still derive the majority
institutional development. For example, of their revenues and profits from their
To enable high performance, a global Petrobras operates in Latin America, home country, particularly if the home
operating model must be externally Africa and the United States; France country is large (Chinese, Indian, and
aligned too—as we have noted, it must Telecom operates in Western Europe, American MNEs derive most of their
fit the MNE’s home-country environment Eastern Europe and Africa. In these cases, revenues at home compared with
and its international strategy which the host-market environments are more Swedish, Singaporean, or South African
shapes the host-country environments. diverse and sometimes drastically MNEs which generate a majority of
For example, when a MNE operates in different from the home-market envi- their revenues overseas).28 Thus, the
host markets that are relatively similar ronments, creating the need for more home country may have a variable
to one another and to its home market, complex global operating models. influence on global operating model
it can apply a global operating model configurations when the company
that emphasizes economies of scale over We also argue that where MNEs come internationalizes. When referring to
the creation of highly locally responsive from also shapes their global operating home countries, we do not want to
strategies. In this case, a more cen- models. The home country, with its dismiss the important differences
tralized hierarchy will outperform a economic, cultural and institutional between, say, Japan and the United
decentralized organizational structure.25 specificities, embodies much of the States in the developed world and
identity that subsequently influences between China and India in the
MNEs’ international strategy consists of global operations. Bartlett and Ghoshal emerging world. Yet, some common
the market entry choices and location refer to the home country’s lasting characteristics among countries
decisions that determine their geo- effect on the global operating model allow us divide them into two groups
graphic footprint, i.e. the number and as MNEs’ “administrative heritage”.27 (see Table 1). Consequently, we could
type of host markets used for sourcing
and/or selling.26 Consequently, interna-
Table 1: A comparison of emerging and developed countries
tional strategy shapes the nature of
a MNEs’ host environments. Location Emerging countries Developed countries
decisions are crucial since they can make
internationalization easier or more Wealth: low GDP per capita Wealth: high GDP per capita
difficult depending on the countries
selected. We use the term “narrow Growth rate: rapid, usually Growth rate: slow, usually below 3
multi-polar” footprint to describe MNEs above 6 per cent per year per cent per year
whose international strategy focuses
solely in regions of similar economic and Growth volatility: high; markets Growth volatility: low;
institutional development. For example, are promising but volatile markets are mature
China National Petroleum Corporation
which operates mostly in Africa and Institutional context: in phase of Institutional context: relatively stable
South-East Asia and Deutsche Telekom deregulation; partial privatization;
which operates in Western Europe reduction of state bureaucracies
and the United States have a narrow
multi-polar footprint. Their host envi- Institutions: weak legal, accounting, Institutions: very strong and established
ronments are relatively similar to their intellectual property and labor legal, accounting, intellectual property
home environment. This creates fewer market institutions and labor market institutions
pressures on the domestic operating
model to accommodate foreign oper- Consumers: very segmented and Consumers: very segmented and
ation specificities. We also use the differentiated with prevailing poor demanding with predominance of
term “broad multi-polar” footprint to class but rising middle classes middle classes
describe MNEs whose international
strategy is positioned in regions of Adapted from Luo (2002)29
expect to find differences of global We hypothesize that MNEs that want to performance remains a hypothesis
operating model configurations between achieve higher performance will want because it has been tested only in
MNEs originating from the developed to align their global operating model developed-market MNEs. It is not
world and from the emerging world. configuration with their environmental entirely clear whether this rule is also
and location strategy conditions. Thus, relevant for emerging-market MNEs.
within each cell, MNEs will seek to Some researchers argue that western-
Comparing global operating adopt a similar configuration to fit based theories are not relevant to
model configurations similar home and host country effects. understand emerging-market organi-
But across cells, due to the differences zations’ behavior.30 They explain that
To reiterate, we suggest that both created by home and host country the notion of internal and external
home country and host country effects, the configurations will be alignment for high performance is
conditions (associated with the more likely to differ. This hypothesis based on models where economic
international footprint) influence a also hints that as its location strategy performance is a primary driver of
MNE’s choice of a suitable global changes (the home country is usually organizational behavior. But they
operating model configuration. We more immutable, unless a MNE relocates explain that in China, for example,
use Figure 2.—which shows three itself to another country), a MNE’s politically driven behavior is as impor-
scenarios of interaction between global operating model will also need to tant as—or maybe more important
country of origin and international change. This study will highlight how. than—performance-driven behavior.
footprint—to hypothesize how MNEs’ However, other researchers argue
global operating model configurations The notion that the configuration of that China has substantially shifted
may vary to be externally aligned components as well as internal and toward performance.31 Moreover,
and generate high performance. external alignments matter for high some researchers indicate that
the notion of alignment is equally
applicable to emerging-market
Figure 2: A framework for comparing global operating models
MNEs that want to achieve high
performance. As Cantwell and
Barnard32 put it:
Location strategy (host-country effects)
Group of origin (home-country effects)
Similar Diverse Whether outward-foreign direct

investment is directed to a neighboring
developing country, to a developing
Operates only in country in another region (South-
Developed
developed markets South development) or to the
Operates in both developed world, the destination of
developed and foreign direct investment is likely
emerging markets to affect the types of challenges
Operates only in faced by firms, and therefore also
Emerging the types of corporate learning
emerging markets
that may affect their continuing
competitiveness. (p 56)
narrow wide
On this basis, our hypothesis is that
Multi-polar footprint the configuration perspective is also
applicable to emerging-market MNEs.
3. Diverging and converging global operating model configurations
We now delve deeper into the hypoth- strengthen the hard components in Similarly, it is easier for emerging-
esis just presented—and Figure 2—by their global operating model configu- market MNEs to do business in other
comparing the different global oper- ration. Likewise, developed-market emerging countries rather than in
ating model configurations that result MNEs with a broad multi-polar foot- developed markets where institutions,
from different interactions between print may need to strengthen their soft human resource behavior, market
the home environment and the loca- components which seem to be key structures and consumer preferences
tion strategy (host environments). On success factors in emerging economies. tend to differ from those in their
the basis of an in-depth review of the In doing so, we may observe a two- home markets. Researchers note the
literature, we believe that successful direction convergence process. However, cultural similarities across emerging
MNEs operating only in regions of this convergence may be partial only markets: acceptance of power
similar development can retain most of because MNEs may still retain speci- distance and hierarchical differences;
their home-country global operating ficities from their home country (for acceptance of benevolent paternalism;
model configuration. We note that the example, emerging-market MNEs may and collectivism.34 They also note
global operating models of emerging- retain an advantage in their command that because consumers tend to have
market MNEs, particularly those with of soft components). These ideas are more homogeneous expectations
a narrow multi-polar footprint, are summarized in Figure 3. than in developed markets (the
configured predominantly around soft emerging middle classes are still
components. Conversely, developed- very price-sensitive and value the
market MNEs—again, particularly those Global operating model convenience that overcome poor
with a narrow multi-polar footprint— imperatives for narrow infrastructures), innovations that
emphasize hard components in their multi-polar MNEs originate in one emerging country
configurations. Thus, we hypothesize can be more easily transferred into
that if a “narrow multi-polar” footprint MNEs with a narrow multi-polar other emerging countries than into
enables MNEs to retain more charac- footprint tend to have a firm grasp developed nations.35 For example,
teristics of their home region in their of their particular foreign markets MTN, the leading South-African
global operating model, we will observe and host environments. For example, mobile phone operator, is able to roll
diverging configurations between developed-market MNEs doing business out across its African markets conve-
developed and emerging-market in the U.S., Japan and the EU benefit nient banking services that enable
MNEs which are “narrow multi-polar”. from equally predictable intellectual customers to conduct banking opera-
protection and contract enforcement tions in the absence of such banking
However, when MNEs start operating regimes. And while different, the branches around them. For these
in regions that are economically and consumer tastes and market mecha- reasons, emerging-market MNEs tend
institutionally different from their nisms in these regions have con- to make foreign direct investment
home countries, relying predominantly verged following regional integration in other emerging economies.36
on existing soft or hard components processes in North America and the
may not be sufficient to manage the EU in particular. Therefore, an American Because their host-markets often
increasing level of complexity imposed multinational will have more oppor- resemble their home market, MNEs with
by a broader global footprint. tunities to easily standardize various a narrow multi-polar footprint can
Consequently, we hypothesize that operations across geographies when favor economic integration and
emerging-market MNEs with a broad it operates in other developed coun- minimize local adaptation. They can
multi-polar footprint may have to tries. For this reason, a vast majority
of developed-market MNEs have a
“narrow multi-polar” footprint and
are home-region based.33
emphasize synergies and the stan- As a result, we expect to find the availability of utility infrastructures;
dardization of their competitive greatest global operating model dif- the presence or absence of business
strategy across countries. Consequently, ferences across emerging and devel- schools; the presence or absence
many do not need to significantly oped-market MNEs with a narrow of accounting, law and advertising
alter their global operating models multi-polar footprint (see Figure 3.) suppliers, etc.38 For example, it seems
for their host environments. In fact, that to secure access to resources in
studies on developed-market MNEs emerging economies, international
have concluded that when MNEs can Global operating model oil companies (IOCs) need to change
favor economic integration, their imperatives for broad their approach to government rela-
global operating models can largely multi-polar MNEs tionships in these countries. They
reproduce the model implemented need to forge different relationships
at home.37 Thus, emerging-market When a MNE’s multi-polar footprint with national oil companies (NOCs)
MNEs which thrive on soft compo- broadens, managers have to face the and the states that control them.39
nents for home-country reasons, and more challenging task of adapting
developed-market MNEs which succeed to much more varied local conditions At the same time, technological,
mostly with hard components—as and environments. These variations competitive and institutional pressures
we will demonstrate below—may between developed and emerging are forcing MNEs with broad multi-polar
reproduce this model when they markets are felt in the geographic footprints to develop more economies
internationalize towards economically spread or concentration of customers; of scale and scope across countries.
and institutionally similar regions— regulated or deregulated labor and As Table 2 shows, wireless telecom-
and still be economically successful. capital markets; the strength of intel- munications and oil and gas MNEs are
lectual property right regimes; the
Figure 3: Emerging-market and developed-market MNEs’ global operating model configurations
Multi-polar footprint
narrow wide
Developed-market
MNEs
Transition
Leadership
Metrics
Emerging-market Architecture
MNEs Processes &
technology
People
Components of greater
importance are in darker shade
facing several industry-specific pressures subunits and headquarters; ensure that other emerging markets. Meanwhile,
to increase the economic integration informal and formal networks stimulate they also need to leverage their scale
of their international operations.40 employee commitment; introduce more more effectively across heterogeneous
diversity into the strategy formulation markets as their internationalization
In general, the MNEs in these two stage and enhance the exchange of progresses. To achieve this double
industries will not succeed with either best practices across borders. objective, they might have to rely
highly independent geographic sub- more on formal coordinating processes,
units or highly centralized operations. Rely on trusted, charismatic leaders on standardized technologies, on a
Operating in more heterogeneous host who will take risks and who can differentiated-network organizational
markets will require global operating also empower others and appreciate structure, etc—that is on hard compo-
model configurations that balance soft diversity. Such leaders can foster an nents. Building a differentiated network
and hard components.41 For developed- entrepreneurial culture in which structure in particular, highly depends
market MNEs that operate in hetero- change and adaptability are the norm. on interpersonal networking capabilities—
geneous host markets, leading research that is, on soft components. So, when
suggests that they need to move The recommendation of balancing soft strengthening their hard components,
beyond their traditional reliance on and hard components was developed emerging-market MNEs will also have
hard components. In addition to those, and tested solely for developed-market to retain their soft component strengths,
they need strong soft components too.42 MNEs. But as they become more global, in which they may have an edge.
They should not only: emerging-market MNEs may need to
increase their local responsiveness Thus, to create a more balanced
Create an organizational architecture since operating in developed markets global operating model configuration
based on the differentiated network of will be different from operating in developed-market MNEs with a broad
interdependent geographic subunits.
This means that some subunits are
Table 2: Pressures for economic integration on MNEs with a global footprint
highly autonomous and can adapt
strategy to the local market (in markets
Wireless telecommunications Oil and gas
which are highly different from the
home market); they can also receive
a global mandate for developing Convergence of handset and technological Expectations from institutional
strategies or innovations in their areas investors offerings around the world for higher returns quarter after quarter
of expertise. Other subunits simply
implement the strategy decided by The need for building scale and buying Sustainability pressures related to
headquarters (in markets that are power around the world to countervail climate change
more similar to the home market); handset manufacturers’ larger size
they are less autonomous.
Technological convergence towards More cross-geographic coordination
Build this differentiated network “cloud information technologies” which using information technologies
around an efficient supply chain and integrate network providers, IT equipment
learning-focused knowledge manage- manufacturers, software and Internet
ment and communication processes. service providers and other related service
providers around the world
Create the right metrics capable of
continually spotting and correcting Globalization of innovation processes Increasingly sophisticated and costly
internal and external misalignments. and cycles exploration and production techniques
But they should also: Increased competition from ever-larger

IOCs and more assertive NOCs
Foster employees’ interpersonal net-
works by sourcing talent globally and
rotating talent between geographic
multi-polar footprint may have to To comply quickly with the “go global” market MNEs may be better off com-
converge toward the more soft-com- directive in 1999, Chinese state-owned pletely relying on their peculiar orga-
ponent-oriented configuration of enterprises (SOEs) had to international- nizational form.
emerging-market MNEs. Conversely, ize even before they had the operating
the latter may have to converge capabilities.44 Chinese SOEs would not However, a recent Accenture analysis
toward the more hard-component- seriously pioneer new global operat- found that 25 of China’s highest-
oriented configuration of developed- ing models because they don’t have performing companies (they are China’s
market MNEs. We may then observe this type of firm-specific advantages, most international companies) still
a two-way convergence process. in particular compared with Chinese underperform their developed-market
private firms.45 high performer counterparts in terms
To summarize, we hypothesize that of profitability, an indication that
while we will observe more global Yet, we can cite examples to the their growth may not be sustainable.49
operating model configuration diversity contrary. In the light of the noticeable We believe that a new emphasis by
for “similar multi-polar” strategies, international success of some emerging- Chinese MNEs on hard global operat-
the configurations will converge for markets MNEs, other researchers ing model components may change
“diverse multi-polar” strategies to argue that emerging-market MNEs that picture. In fact, there are signs
cope with the additional complexity have begun to develop distinctive that Chinese multinationals are already
entailed by a broader international organizational capabilities, such as learning in that direction. Some have
footprint. This also means that glob- being able to rapidly adapt and to been keen to benchmark themselves
alization substantially influences anticipate market changes, make against developed-market MNEs and
multinationals’ operating model savvy acquisitions, and think uncon- to learn from them, for example
trajectories so that the direct impact ventionally.46 Moreover, Chinese SOEs through alliances, joint-ventures and
of home-country specificities, while have already undertaken deep trans- study visits in developed-market
not disappearing altogether, will formations since the mid-1990s and MNEs.50 Many Chinese MNE leaders
have less impact on global operating the acceleration of corporate reforms look to people like Jack Welch and
models as globalization progresses. has developed their organizational Michael Porter as role models—making
capabilities.47 So, it might be a mistake their companies an interesting mix
to complacently ignore these strengths. of Western management techniques,
Empirical uncertainties In the late 1970s, many Westerners Confucian philosophy, communist
dismissed the rise of Japanese MNEs indoctrination and discussion groups,
As it can be observed, we assume on the basis that they merely copied and Japanese-style executive training.51
here that emerging-market MNEs do Westerners and benefited from
already have some global operating cheaper labor costs. In the following section, we turn
model strengths. But it is important to explaining the hypotheses of
to point out that several researchers Some researchers think that emerging- divergence and two-way convergence
would disagree with us. Dunning and market MNEs should not converge hypotheses just proposed. We also
colleagues write (p 177): towards developed-market organiza- explain that while many emerging-
tional practices because many Chinese market MNEs with a diverse multi-polar
Unlike yesterday’s developed-country and Indian global firms have provided footprint are successfully adopting
transnational corporations, today’s them with successful alternative aspects of developed-market MNEs
emerging-market transnational models.48 It may be that emerging- global operating models, total conver-
corporations rarely have the firm- market MNEs’ soft component skills gence has not taken place. We ques-
specific ownership advantages are sufficient to achieve flexibility in tion whether that should be the case.
(notably organizational and man- a more uncertain multi-polar world,
agement skills) to ensure success in and that these MNEs will not need to
their foreign direct investment.43 add hard components, even to operate
in developed markets. What’s more,
the notion of alignment may not be
relevant to them if nonalignment
allows for more agility. Emerging-
4. How global operating models may work according to the literature
We now turn to explain the previous- emphasis on entrepreneurial leader- best”.58 In Islamic countries, the dis-
ly developed hypotheses by reviewing ship might be a disadvantage to them course of democratic leadership is
in detail the existing literature dealing operating in emerging economies. not as important as the discourse of
with the five operating model com- They may have to learn from their justice—employees expect a powerful
ponents and their role in the configu- emerging-market counterparts. but just ruler.59 For this reason, decision
ration of MNEs from the developed making can be highly consultative
and emerging worlds. For each of the Centralized versus institutionalized (structured in the very personalized
five operating model components, we leadership structure. Because many networking process called “diwan”)
highlight first why we believe that emerging-market MNEs are privately but not participative. In China,
emerging-market MNEs and devel- owned, they often have greater although strategizing includes bot-
oped-market MNEs differ most when unity of ownership and control than tom-up consultations, decisions are
they have a narrow multi-polar developed-market MNEs do.52 The concentrated at the top where man-
footprint. We conclude with the bur- CEO, who is often the owner, usually agement by consensus apparently
geoning evidence that global operat- has more power than the CEO of prevails but where the ability to
ing model configurations partially developed-market MNEs. This results create powerful networks among
converge to support more global in individual-based leadership struc- leaders, within and outside the firm
footprints. It is important to remem- tures more than in team-based lead- (in the communist party), is even more
ber that this evidence is challenged. ership structures where power is more determinant to influence decisions.60
It is also scarce and does not discuss distributed.53 The CEO is also highly
the implications of a relative two-way visible throughout the company By contrast, leadership in developed-
convergence for global competitors. and top executives are often family market MNEs tends to be more insti-
members or members of the same tutionalized: the CEO’s personality
political party (ownership-related) or surely counts, but it influences
Leadership clan (political clan); by contrast, in employees’ collective thinking and
developed-market MNEs, the leader- behavior less than in emerging-market
Today’s business literature suggests ship is almost exclusively composed of MNEs (clearly, there are some excep-
that the global operating models professionals.54 There are exceptions, tions: Steven Jobs at Apple, Jack
of emerging-market MNEs strongly of course, in which leaders have only Welch at General Electric to name a
rely on the leadership component. professional links to one another couple). In most developed-market
Leadership at these companies is (Tata Sons; Sasol).55 MNEs, leaders’ personalities are not
personalized and centralized; it is also as important as rules, processes and
more entrepreneurial in that top The tendency to centralize power is organizational structure. Leadership
executives make fast, bold decisions often embedded in traditional values. in these companies revolve around
and are oriented toward long-term In China for example, it is important planning and structured and formal
risk. Yet, we observe that the most that leaders do not lose face, so decision making more than around
multi-polar emerging-market MNEs employees rarely contradict them.56 direct interactions and personal con-
have introduced a more formalized It does not mean that leaders behave tacts with employees.61 Leadership
and structured leadership style, bor- like tyrants. By the contrary, many is not concentrated just at the very
rowing from their developed-market Indian CEOs are extremely active in top but distributed throughout the
counterparts. We also observe that promoting social welfare for India.57 hierarchy and the top-management
developed-market MNEs’ under- In Confucian cultures (China, South
Korea), the CEO is associated with the
benevolent father and “father knows
team.62 Like the democratic societies decided that the poor can be target innovation, entrepreneurship and
they usually operate in, developed- customers, that emerging-market flexibility—a serious problem when
market MNEs tend to diffuse authority consumers can appreciate and pay for host markets are very different and
and to create an operating model new technologies, and the bottom of particularly dynamic.
that emphasizes empowerment and the pyramid is important for a multi-
decision-making.63 They also offer national’s long-term survival. The Convergence. Indeed, although these
talent management programs that amount of red-tape and bureaucracy respective leadership styles may work
identify, train and develop leaders to that emerging-market leaders have well for narrow multi-polar strategies,
ensure the succession of good leaders. had to deal with in their home coun- there is some, albeit limited, research
These programs emphasize interna- tries is also a sign of their leaders’ and anecdotal evidence suggest both
tional assignments in which leaders are strong entrepreneurial spirit.69 It has can limit MNEs as they become more
encouraged to network and to draw a equipped them with a superior ability global. To overcome these limitations,
more holistic view of the company.64 to create networking skills within some emerging-market MNEs with
their ecosystem and to deal with a “broad multi-polar” footprint are
Entrepreneurial versus conservative political stakeholders. They are much introducing Western-based leadership
leadership style. Possibly because less politically naïve than their devel- practices. And although few developed-
many emerging-market MNEs are oped-market counterparts, and this market MNEs have adopted emerging-
state-owned or privately-held and can help them in their efforts to market practices, they should do well
don’t need to meet the short-term internationalize.70 They tend to lever- to consider a more entrepreneurial
demands of shareholders, their top age their ecosystem and their net- leadership style. In China, for example,
leaders are more comfortable with risks work to quickly solve problems.71 the leaders of SOEs are using a more
and look more to the long-term.65 Thanks to their political connections structured strategic agenda. Strategy-
But even leaders from publicly-listed with the Chinese state, for example, formulation includes more bottom-up
emerging-market MNEs seem to be CNPC, Sinopec and CNOOC have initiatives and leaders are using portfolio
more comfortable with stretch goals been able to include resource-access management based on performance
than Westerners are66, probably because negotiations as part of larger bi-lat- metrics and core-capability analysis
they know that stock markets are eral talks. They have entered African to make strategic decisions.76
more willing to accept the emerging markets with all-encompassing deals
world’s performance volatility com- that include development aid, educa- We should note, however, that the
pensated by higher growth prospects. tion programs and social infrastruc- propensity of emerging-market CEOs
For example, in the mid-1990s, against ture financing, which most IOCs have to centralize decision making—a
industry rationales, Russia’s Lukoil not been able to do.72 possible flipside of their personalized
decided to establish strong upstream leadership style—could be a handicap
footholds in unexplored areas and to In developed countries, stock market to their success in developed markets.
sacrifice immediate gains in produc- pressures lead to more emphasis on The autonomy of subsidiaries might be
tion growth.67 the short term as weel as a more stifled when they need it the most.
conservative attitude toward risk.73 For example, Hyundai has suffered
This entrepreneurial leadership style Cascading committees also tend to important setbacks recently in the
is precisely what has led many emerg- delay decisions despite distributed United States (market share loss, high
ing economies to take off. Prahalad leadership structures created to foster executive turnover) due to the feudal
explains that fast decision making and individualized organizations.74 The leadership style of its CEO.77 Evolving
low risk-avoidance led to the inversion decentralized approach, which gives partially toward the more Western
of the decision-criteria pyramid.68 considerable discretion to business distributed-leadership model might
Taking the opposite view of their unit managers and which is expected then make sense.
mature-market competitors, emerging- to foster internal entrepreneurship,
market MNE leaders foresaw and often results in fiefdoms and rivalry
at the top.75 This structure can stifle
Because family, cultural or political In other words, developed-market the Western model would be desirable.
clan relationships matter for leader- MNEs might be wise to look to lead- Developed-market MNEs that want to
ship selection and appointment, and ers like Pat Davies (Sasol), the Ambani succeed in emerging economies may
because the clan is likely to be home brothers (Reliance Communications and well have to learn from their emerg-
country-based78, leadership in emerg- Reliance Industries), Carlos Slim Helu ing-market counterparts how to
ing-market MNEs also needs to (Telmex), and Naguib Sawiris (Orascom). develop their internal and external
become more geographically diverse It needs to be further explored. networking capabilities.
to manage a broad multi-polar foot-
print. More global emerging-market Thus, emerging-market MNEs with a Networking as second nature versus
MNEs are beginning to understand broad multi-polar footprint seem to networking as second best. In align-
this. Companies like Tata manage the embrace some of structural leadership ment with a leadership style based
career of future leaders with multiple attributes of their developed-market on highly personalized interactions,
foreign assignments, which creates counterparts. Although there are networking is second nature and
more sensitivity to international currently no signs that their leaders deeply engrained in emerging-market
markets.79 At Orascom, the top team have become less bold, charismatic, MNEs’ corporate and national cultures.
includes non-Egyptian citizens to visionary, and inspiring as they Called “guanxi” in China or “wasta”
meet the more specific needs of their implement some Western leadership in Islamic countries, interpersonal
developed markets. practices, we still don’t know how networks are at the root of all corpo-
they will be able to reconcile more rate operations and of extensive
Developed-market MNEs, on the other structure and their current agility and interorganizational relationships. In
hand, may have problems because speed of decision making. There are fact, relationships between organiza-
of excessively structured leadership. signs that these features might tions are essentially seen as extended
Some experts argue that the West become more important, not less in interpersonal networks, i.e. as rela-
needs to move from an emphasis on a multi-polar world. So, despite some tionships between individuals, which
management, in which good managers two-way convergence, emerging- is more personal and less abstract.
produce predictable results, to an market MNEs may well have a leader- As Zhang explains:
emphasis on leadership, where leaders ship advantage that they should
are charismatic, risk-taking, fast consolidate, not lose. Interpersonal relations are not a
moving and far sighted. Grantham prerequisite for inter-firm networking
and colleagues explain this shift: in the West, while in China, personal
People networks are particularly important
If your strategy is to deliver break- as they set the premise and form the
through performance, you need a Past research suggests that the global basis of institutional networks.81 (p 60)
different type of leader to make operating models of emerging-market
that happen. Seems logical enough; MNEs’ typically rely heavily on people In emerging-market MNEs, networks
but the problem, we believe, lies skills. These companies excel at foster- are based on reciprocal obligations,
within existing workplace structures ing and leveraging wide inter-personal long-term commitments, kinship and
and business processes that are con- and interorganizational networks, trust. The criteria for being part of
structed not for breakthroughs, but although we don’t know if and how a network vary from region to region:
for predictable performance. Simply they replicate these skills globally. For in Asia, the Middle-East and Africa
put, successful leaders of the 2000s developed-market MNEs, the emphasis family and political ties are important82,
will not be cut from the cloth of on people means extensive, formal while in Latin America, class and
managers of the old. Can’t you just international human-resource man- education are key.83 Since exclusion
see General Motors recruiting agement processes. Some research
Richard Branson as its new CEO (as suggests that more global emerging-
if he would want the job)?80 (p 244) market MNEs have started to implement
these processes, yet we don’t know
whether a full convergence towards
from a network can have severe con- a stronger local image in consumers’ It is also formally specified so that
sequences, emerging-market MNEs and employees’ minds, especially if the employees always know what and
commit themselves to promoting image is linked to a strong local partner. what not to do.
and extending their networks. In
the automobile sector, for instance, Despite these advantages of building Continuous training and development.
Chinese carmakers are very loyal to effective networks, developed-market Knowledge and experience are pre-
their suppliers. Instead of subjecting MNEs like IOCs find it difficult to requisites for internal promotions but
them to strict competition, they manage a portfolio of relationships also for external job mobility in
provide them with the monopoly of and to change their transaction- countries where job markets institu-
supply, which stimulates trust on both based mindset.87 On the other hand, tions tend to be efficient.89 Thus, the
sides.84 By contrast, in developed- NOCs—mostly from emerging markets— employer institutionalizes continuous
market MNEs, networks tend to be are more comfortable dealing with learning opportunities.
rational and calculated, which limits one another because they trust one
trust due to the higher risk of free another more and identify more with Rotation of managers and key
riding and opportunism. One exception one another’s cultures. Gaining these employees across geographies.
is Japan. Though Japanese MNEs rely networking skills might be key for
heavily on the processes and structural IOCs’ long-term survival. Convergence. Recent studies indicate
elements of their global operating that emerging-market MNEs with
model—which their North American Reliance of developed-market MNEs multi-polar footprints are converging
and European counterparts borrowed on extensive, formal international toward the human resource culture of
from them—they also have a network HR processes. By contrast, the people their developed-market counterparts.90
culture that is much like that of other component in developed-market As they acquire developed-market
Asian countries. This global operating MNEs is typically focused on human companies, engage with them into
model balance may be one of the factors resource processes. According to Luo, joint ventures, or recruit their talent
of their current world domination. successful developed-market MNEs in Western business schools, they are
emphasize international human increasingly implementing career-
While interpersonal networks can be resource management processes that development training, annual reviews,
critical to the success of interorgani- create a “culture of human resources”.88 performance-based rewards and
zational networks (particularly in Contributing to this strong culture are: international job assignments as part
knowledge and resource-intensive of their practices. More multi-polar
industries), many developed-market Performance-based promotions and Chinese MNEs, for example, use the
MNEs seem to struggle to make them incentives. These processes encourage normative and systematic Japanese
work. That is a significant disadvan- forecasting and tracking of individuals’ management style which includes
tage because research shows that the performance. To increase commitment, motto recitations and experience
ability to manage alliances and part- stock option plans across borders exchanges in ritual morning sessions.91
nerships provides multinationals with: become a norm so that financial ties, By introducing more standardization
perhaps more than personal ties, and transparency, these practices
greater access to resources and with shape employees’ engagement. can prevent emerging-market MNEs
key opportunities for learning,85 from focusing too much on the inner
Empowerment and accountability. groups within their networks. When
easier international expansion by help- The assumption is that talent requires the strategy is more global, exclusion
ing them to reduce capital investment new challenges and some autonomy. and lack of diversity may hamper
exposure in some markets and to over- Empowering employees provides them their adaptation to local markets.
come institutional impediments in host with leaning and growth opportunities.
countries—for example, those related
to hidden protectionist barriers,86 Broader job content. Job content is
expanded (for example, through more
delegation) to increase employees’
skills and commitment to the company.
This convergence in relation to the knowledge. These strong interpersonal Of course, once again, empirical evi-
people component may have excep- networks have the added benefit of dence is scarce and focuses on a limited
tions and vary by market. In their creating strong identifications with number of emerging nations, which
developed-market business units, for the company and of fostering the hampers generalizations. But it seems
example, Chinese MNEs converge more emerging-market entrepreneurial that more global emerging-market
completely toward developed-market culture that helps employees become MNEs keep the interpersonal net-
practices. But in their domestic oper- more comfortable with change. working advantage of their country
ations, Chinese multinationals seem of origin. Reciprocally, more global
to retain their local specificities: care Research suggests that more multi- developed-market MNEs are willing
for employees, strong union-practices, polar developed-market MNEs are to converge towards networking
paternalistic style for harmony in trying to emulate these networking practices but they do not necessarily
the society, a culture of face-saving.92 capabilities. Some researchers actually succeed. They may have to try harder
These modifications indicate that find that while developed-market and differently. In this two-way con-
global Chinese MNEs are able to dif- MNEs in China tend to use networking vergence, convergence is partial only.
ferentiate their human resource man- ties as much as their Chinese com-
agement between the home and host petitors (an indication that they have
countries—a positive sign for their seemingly converged towards this Organizational architecture
performance.93 practice), an increase in the number
of ties for these developed-market We still know little about emerging-
Furthermore, convergence toward companies produces diminishing market MNEs’ organizational architec-
more systematic international HR returns. It cannot equal the skills of ture (See Table 3 for a description of
processes does not—nor should it— the Chinese. One explanation is that what constitutes organizational
entail the loss of networking skills networking “requires a different architecture).
and original specificities. Despite a mind-set that is incompatible with the
progressive adoption of Western entrenched, efficiency-based routines Most of the literature on the organi-
human resource practices, the emerg- of foreign firms”96 (p 386). Indeed, if zational architecture of emerging-
ing-market networking capability broad multi-polar MNEs from devel- market MNEs focuses on how these
seems enduring. It influences both oped-markets do not realign their architectures support domestic oper-
organizational and individual perfor- global operating model thoroughly ations. The literature suggests that
mance. Against expectations, “the (for example by developing employee’s organizational architecture is not the
historical importance of networks in ability to network, by letting ties to most developed component of their
Chinese organizations remains largely be created by local people and not by global operating models, even when
unchanged by the corporatization”— senior expatriates, by creating struc- they have a diverse multi-polar foot-
a convergence process toward more ture and performance metrics which print. Developed-market MNEs with
developed-market style management allow foreign subsidiaries to lead broad global footprints, on the other
that began in the mid-1990s.94 more initiatives that go out from the hand, have begun implementing net-
Anecdotal evidence suggests that corporate standard), the convergence work-based organizational structures
more global emerging-market MNEs towards one soft practice may not that both create cross-border synergies
like Tata are using international be sufficient. This relative lack of and respond to local market specifici-
networking extensively to leverage success highlights the need for new ties. We observe that emerging-market
knowledge across borders.95 They not alignments and new configurations MNEs’ emphasis on hierarchical
only keep the senior management of for broad multi-polar strategies. structures might not be ideal when
acquired foreign companies but also Although the benefits of networks they have broad multi-polar strate-
connect them with all employees in have been largely publicized97, deep gies. They may have to adopt some of
and outside India who hold valuable global operating model impediments their developed-market competitors’
prevent many developed-market
MNEs to reap their benefits.
more sophisticated structural more difficult for them to rely on spread around the developed world
arrangements. The competitive informal contacts only.103 In India between the 1950s and the 1980s, is
advantage emerging-market MNEs as well, innovation efforts seem to based on highly formalized control
may have over their developed- be based on individual efforts rather processes around supervision.107
market counterparts, however, is that than on teamwork, which strongly Supported by elaborate financial
the former already possess the soft contrasts with Western and Japanese and budgeting control mechanisms,
component skills that are essential cross-divisional and cross-geographic the multi-divisional has favored the
to coordinate these networks. innovation styles.104 convergence in the developed world
towards a transparency and account-
Centralized versus decentralized By contrast, developed-market MNEs ability culture where governance depends
hierarchies. As explained earlier, in tend to rely more heavily on their on precise role definitions.108 Even if they
emerging-market MNEs where CEOs organizational architecture to coordi- have to change often, roles need to be
and top managers seem to concen- nate their international operations. precisely defined to avoid ambiguity
trate more authority, organizational Since Chandler105 highlighted the in execution and chaos.109
structures are more centralized and benefits of operational decentraliza-
hierarchical than in developed-market tion to business units functioning as The multi-divisional architecture in
MNEs.98 High power-distance accep- semi-autonomous profit centres, developed-market MNEs has changed
tance and benevolent paternalism are developed-market MNEs have primar- considerably over time with waves
common traits of emerging countries ily relied on this type of organization- of delayering to empower employees
which could explain this reality.99 In al architecture.106 This multi-divisional at home and abroad110, periodic
Russia, for example, intracorporate architecture, which first appeared in organizational restructurings and reg-
knowledge exchanges tend to be pre- the United States in the 1920s and ular modular reconfigurations of busi-
dominantly horizontal because people
are reluctant to share knowledge with
Table 3: Organizational architecture
organizational members they consider
to be inferior in the hierarchy. They
also fear punishment from their supe- 1. Organizational structure:
riors.100 In Latin America, despite
some exceptions such as Embraer’s Vertical axes of differentiation and integration which shape the hierarchy.
successful flat multidivisional struc- For example the extent of hierarchical, hierarchical structure or flatter, network
ture101, companies seem to remain configuration of interdependent elements.
highly hierarchical and centralized.102
Horizontal axes of differentiation and integration. This is the way activities are
Anecdotal evidence suggests that regrouped, for example around geography, customers, products, functions, etc.
some emerging-market MNEs may
lack the lateral structures necessary 2. Centralization or decentralization: extent to which power and authority are
to formally coordinate international concentrated (centralized) or distributed (decentralized)
operations. These structural difficul-
ties seem to be a problem for rapidly 3. Formalization and standardization: written policies, rules, job descriptions
growing Middle-Eastern telecommu- and standard procedures.
nication MNEs like Zain and Saudi
Telecom: as their global footprints 4. Output and behavior control: financial performance, technical reports, sales
have become wider, it has become and marketing data and direct supervision.
5. Lateral and cross-departmental relations: direct managerial contact,

temporary or permanent teams, task forces, committees, integrative functions
or departments across geographic locations.
Adapted from Martinez and Jarillo (1989) and Girod (2008)
ness units. These changes indicate how replace their multi-divisional archi- example, in the 1990s, Ford chose
important formal structure is in devel- tecture. This new architecture is based Australia to lead its development in
oped-market MMEs.111 Despite more on more horizontal and inter-dependent four-wheel drive vehicles; in the early
decentralization, the multi-divisional relationships between headquarters 2000s, Nokia chose China to develop
architecture remains relatively hierar- and geographic subunits, and between low-cost handset capabilities.
chical, with strategy and knowledge the subunits themselves (see Figure 4.).114 Meanwhile, less-strategic subsidiaries,
originating mostly from headquarters.112 or those where local adaptation
This architecture is appropriate when The result is that some responsibilities is not as necessary, remain more
economic integration is more impor- like knowledge and learning don’t centrally controlled.
tant than local adaptation, as is often necessarily originate from headquarters
the case when MNEs have narrow yet still flow throughout the network. In these networks, developed-market
multi-polar footprints. In function of their distinctive capa- MNEs often balance the local and the
bilities and their host-country specific global by using sophisticated matrix
Convergence. Following influential advantages, some subunits become structures that combine two or even
research on new organizational mod- centres of excellence and become three organizing principles. Indeed,
els for multinational enterprises, such largely autonomous, generating strate- the matrix usually seeks a balance
as the “transnational multinational,” gies not only for their own market between global products or functions
the “multi-focal multinational,” and but for markets globally.115 This type of and geographic responsiveness. Nokia
the “heterarchy,”113 many developed- architecture (differentiated network) and Procter & Gamble are examples
market MNEs with broad multi-polar fosters local autonomy and entrepre- of multinationals that use successful
footprints have strived to implement neurship and generates synergies matrix structures. Cisco currently uses
a network-based architecture to across geographic operations.116 For a front-back structure that subordi-
nates technological platforms depart-
ments to customer-facing business
Figure 4: Multinationals as networks
units themselves organized by type of
customer and geography.117 Other
developed-market MNEs with a global
multi-polar footprint now organize
their operations according to the
economic development of their markets.
For example, in 2004, Kimberly-Clark
pioneered a structure that regroups
its operations for the “North Atlantic
markets” and for the “emerging
markets”. Relying more on formal
structural arrangements than on
informal coordination with key
expatriates, many developed-market
MNEs have also created regional
headquarters that are closer to the local
operations than world headquarters:
this prevents geographic subunits
from gaining too much power.118
To create these networks and foster a

more entrepreneurial culture, more
global MNEs from developed-markets
have also increased collaboration by seems to suggest that emerging- global emerging-market MNEs are
establishing rapidly reconfigurable market MNEs have not yet imple- matching their Western counterparts
project management teams and cross- mented the differentiated network, in processes and technology deploy-
unit and functional project manage- even when they are more global. ment. However, if convergence takes
ment teams, and by favoring intense Ownership structure and leadership place, emerging-market MNEs should
managers socialization across geo- peculiarities hamper further convergence. be careful to retain their distinctive
graphic locations.119 To create more According to Zhang, in Chinese SOEs strengths.
synergies across the globe, they also
increasingly rely on central functions The roles of HQ are changeable at Little versus strong emphasis on
and shared services for the supply all times, depending on their own processes and technologies. Some
chain, information and knowledge government’s needs, which makes researchers argue that when emerg-
management and technology man- it difficult for their subsidiaries to ing-market MNEs have not been
agement. This structure gives carry out responsibilities and causes exposed to Western process-based
more customer-facing autonomy to numerous problems in their strategic management (as is often the case for
the subsidiaries yet centralizes the development.122 (p 239) MNEs that do not have operations in
back-office and reduces costs. the developed world), these MNEs have
Thus, a tight hierarchy among emerging- very few skills related to processes
Despite these impressive efforts, market MNEs with wide multi-polar and the technologies underpinning
many developed-market managers footprints may be hindering integra- them. For example, some observers
still struggle with the complexity and tion and responsiveness. On the other argue that weak processes of China’s
costs that these arrangements entail. hand, as the strong interpersonal “new dragons’” prevent these compa-
A network organizational architecture networks of these companies may nies from coordinating and running
requires then to reconfigure their someday be an advantage in helping complex, systemic businesses, includ-
global operating models sot that them to manage the differentiated ing international supply chains.123
more informal, soft components can networks needed to manage success- In India as well, “there are no long
play the necessary lubricating role.120 fully broad multi-polar footprints, we established rules to treat knowledge
For example, it has been well docu- may expect emerging-market MNEs as a resource.”124 (p 114) One of the
mented that networks require intense to progressively converge towards reasons is that emerging-market
inter-personal communication121, a this arrangement. MNEs tend to subordinate processes
capability well found among emerg- to people. In countries that make up
ing-market MNEs. This is where more Again, both groups of MNEs can learn the former Soviet Bloc, for instance,
global developed-market MNEs which from one another, though we believe knowledge management is treated
re-balance their configuration to at this time that developed-market with suspicion because explicit
include more of the soft components MNEs have a stronger organizational knowledge is often associated with
will gain. architecture capability. repression and top-down authority.
Knowledge and information, which is
We cannot determine the extent to mostly implicit in these firms, flows
which global emerging-market MNEs Processes and technology through personalized networks with
have begun converging toward this well-chosen partners rather than
network model. It seems that most Research indicates that processes and through more impersonal, process-
of them still rely on a variant of technology have a smaller space in driven exchanges.125
the multi-divisional form. While this the global operating model configu-
variant also departmentalizes func- rations of emerging-market MNEs with By contrast, processes and technology
tions and creates more autonomous a narrow multi-polar footprint than in developed-market MNEs are an
business units, it is more hierarchical in those of developed-market MNEs essential component of their global
and uses more central control mecha- with narrow footprints. This compo-
nisms. A limited amount of research nent is also less important than their
leadership and people components.
But research also indicates that more
operating models, even when these Baldrige Award standard and on Kaplan relocate their call centers to Scotland
MNEs operate in regions of similar and Norton’s balanced scorecard for the or Ireland from India because British
economic development. When they development of strategic initiatives.131 customers were resenting a service
gained an edge in innovation processes that was too distant from their reality.
in the 1980s, Japanese MNEs pioneered Samsung was a very early adopter Customer relationship processes that
sophisticated knowledge-management of Japanese quality circles. are too complex or fragmented can
processes to make information more de-personalize the company-client
explicit and broadly shared by organi- Cemex was the first cement company relationship. That is because many
zational members.126 Many other in the world to use GPS technologies of these highly formalized and rigid
large companies like General Electric in its product delivery, giving them processes don’t allow for non-standard
and BP – and Accenture for that matter— more speed than its competitors. decisions that customer interactions
have created on-demand-workplace sometimes call for.
portal sites that have become essential Infosys thrives on quality and process
knowledge management tools: the objectives, quality performance moni- Perhaps, developed-market MNEs
portals support emergent human toring and improvement initiative with diverse multi-polar footprints
resource management practices where processes. should work to balance processes and
highly mobile employees can connect people, in particular to succeed in
and communicate all around the Yet, most studies find that emerging- emerging markets. The key for them
world.127 The result is that planning market MNEs have a long way to go. might be to differentiate where stan-
and strategic processes no longer For example, many leading Brazilian dard processes work best (for efficiency
begin and end with corporate head- MNEs have not established global and maximization) and where they should
quarters.128 Emphasizing the predom- diversified supply chain networks, even rely more on people’s skills and net-
inance of processes in developed- among their operations in developed works. In other words, in some locations,
market MNEs, supply chain and inno- nations.132 As a result, they are not human-based solutions might be the
vation processes can even become sufficiently integrated and responsive least expensive and most satisfying
the paradigms of new organizational in those markets. To what extent, to customers.134
architectures, for example in multina- however, should the processes of
tional pharmaceutical companies.129 emerging-market MNEs with a more
global footprint converge toward those Metrics
Convergence. While many global of their developed-market peers? It
emerging-market MNEs will need to seems that while emerging-market Accenture places metrics at the center
increase the role of processes and MNEs may need to strengthen the of the global operating model because
technologies, some are already using role of processes and technologies in they help to determine whether the
the newest and most sophisticated their configuration, they should also global operating model is performing
technologies and organizational be wary of the rigidities that processes well and whether each of the compo-
processes to coordinate their interna- can create. In fact, we believe emerg- nents is internally and externally
tional operations. They have repro- ing-market MNEs should continue to aligned. Table 4 presents examples of
duced those used by developed-market subordinate processes to people. two common metrics used to measure
MNEs and sometimes beaten them Although formal processes and tech- the effectiveness of the leadership
at their own game.130 For example: nologies are important in a differenti- component and the people component.
ated network, excessive reliance on
Tata implements the “Tata Business them can inhibit the creation of We know little about whether metrics
Excellence Model” across its business interpersonal ties133 and thus, hinder matter for emerging-market MNEs’
units and newly acquired divisions. the creation of customer intimacy global operating model alignment, and
This model is based on the Malcom and the adaptation to local markets.
Examples of customer dissatisfaction
with call centers abound. Many British
service firms have been forced to
if so, which type of metrics they use. change the game by creating deals Developed-market MNEs typically
But it seems that emerging-market that involve aid and infrastructure use metrics to assess the quality of
MNEs do not use metrics as much packages.138 This signals a market- human resources, innovation, supply
as developed-market MNEs136 where development mind-set as opposed to chain effectiveness, knowledge
the adage “what gets measured gets a market-exploitation mind-set. management and leadership. Some
done” is popular and where competing examples are time and cost compli-
on analytics is important.137 In our review of the literature, we ance of new product development,
also found differences in how metrics teamwork effectiveness, learning,
Low versus high importance of are used to measure the alignment and supplier performance.140
metrics. It is perhaps not surprising between leadership, people and
that emerging-market MNEs use fewer organizational structure. In emerging- Convergence. We have not found
metrics than developed-market MNEs market MNEs, metrics used to any literature comparing the use of
since the former may have fewer measure individual performance and metrics in emerging- and developed-
tracking processes in place to generate productivity do not seem to be as market MNEs that have broad multi-
the metrics. In the oil and gas industry, important as they are in developed- polar footprints. Yet, if our hypothesis
for instance, emerging-market NOCs market MNEs. Emerging-market is correct that the alignment of global
do not seem to rely as systematically MNEs appear to place more emphasis operating model components will be
on the strict net-present-value metric on loyalty, kinship and political con- increasingly important to emerging-
that IOCs use in their decision-making nections for talent management and market MNEs’ performance, more
process—which is consistent with a incentives, rewards and promotions emerging-market MNEs whose foot-
more-risk conscious leadership style. decision more than on formal individ- print is more global may also need
Rather than adopting this metric, NOCs ual performance metrics.139 to employ more metrics.
Table 4: Examples of metrics for global operating model alignment
Metrics What they tell us Measurable Costs Measurable Benefits

Decision-mapping (leadership)
Time to decision Time necessary for decisions Time wasted Competitive advantage from
decisiveness
Degree and diversity of Where decisions are made Unnecessary people involved Savings in time and resources
managers involved
Time on value Elapsed time Resources used Increased leadership capacity
Number of strategic decisions Productivity of Failed execution Increased innovation capability

divided by costs decision-mapping
Organizational network analysis (people)

Density: percentage of How work really gets done Resources used to build
existing relationships in the network
geographic subunits
Cohesion: average number of Levels of cross-geographic

steps to reach any other person collaboration
in the geographic subunits
Centrality: average number of

relationships per person across
geographic subunits
Adapted from Accenture135 (2006)
5. Remaining questions
The first systematic comparison of the When their multi-polar footprint is Due to various constraints, the models
global operating model configurations narrow, emerging-market and developed- used by developed- and emerging-
of emerging and developed-market market MNEs may successfully rely on market MNEs may converge toward
MNEs in function of their internal a global operating model that largely one another. In the case of emerging-
footprint shows that researchers still follows the characteristics of their market MNEs, home-market employees.
know little about how successful home environment. Indeed, the global May begin to question the broad
emerging-market MNEs sustain their operating model used in the home differences in empowerment or benefits
internationalization. For example, we market is appropriate in regions which between them and their host-market
could find no literature on how they are rather similar to those of the home colleagues in the developed world. In
make decisions about what should be environment. Since emerging-market the case of developed-market MNEs,
local, regional and global in their MNEs with narrow multi-polar managers will begin to feel the
global operating models—what are footprints tend to rely mostly on soft need for more radical innovation and
the rules. Moreover, the current liter- global operating model components strategic renewal by means of an
ature does not explain if or how the (leadership and people) and developed- entrepreneurial operating model.
components of their global operat- market MNEs with narrow multi-polar What’s more, all MNEs with a broad
ing models work in synergy with one footprints rely mostly on hard com- multi-polar footprint will experience
another. These gaps make the new ponents (architecture, processes, and the difficulties of operating in
Accenture research project based on an metrics), we can expect these two regions with different economic and
exploratory case study methodology groups of MNEs to have very different institutional structures. To manage
in the energy and wireless telecom- global operating model configurations. these constraints, emerging-market
munication industries (see “About MNEs may implement some of the hard
the research”) highly necessary. For The current business literature components of their developed-market
this reason, our conclusions remain indicates that the global operating competitors, while developed-market
mostly hypotheses: models of developed-market MNEs MNEs may adopt some the soft com-
are configured to create stability and ponents of emerging-market MNEs.
To achieve high performance, both reduce uncertainty. (See Figure 5.)
developed-market and emerging-market These MNEs emphasize forecasting and Even if the global operating model of
MNEs may have to configure their risk-management and are wary of some emerging-market MNEs begins
global operating models according to threats to the core. Some researchers to converge with the global operating
their location strategy—in order to fit have argued that their model is geared models of developed-market MNE’s,
the constraints of their host markets— towards “complexity reduction”.141 the convergence will be only partially.
and on their home-market specificities. The competitive advantage of emerging-
They may also need to align the global Because the home-market conditions market MNEs, as far as their organi-
operating model components with of emerging-market MNEs are often zational model is concern, is in their
one another. unpredictable, these MNEs are at
ease with volatility, risk and change.
In contrast with mature-market
MNEs, their model is geared toward
“complexity absorption”.142
ability to orchestrate the soft com- their mistakes and inventing new complex international problems—the
ponents better than their developed- solutions to new problems. This capa- necessity to succeed in faster growing
market counterparts. Thus, even if bility has incubated in their more emerging economies. (See Figure 6.)
they adopt some hard component volatile domestic environments.
skills, they should retain some of Managers of more global developed-
their original strengths. As doing business in a multi-polar world market MNEs cannot afford to remain
becomes imperative for companies, complacent. In industries where
We believe that emerging-market emerging-market MNEs that are networking and alliance management
MNEs represent a new organizational successfully going global may provide capabilities are important (for example
form whose capability to manage some solutions to the complexities of in energy and wireless telecommuni-
the required open organizational doing business in emerging economies. cations) and where creating networked-
boundaries (alliances, joint-ventures), Just as European models had to catch- based organizational structures requires
and the interpersonal and interorga- up with American global models in new leadership and people capabilities,
nizational networks necessary to the middle of the last century, and developed-market MNEs will have to
sustain a global strategy, is superior. American models had to catch up with learn from emerging-market MNEs. But
They try to combine previous genera- the Japanese in the 1980s—they were first, it will be important to determine
tions’ best practices while avoiding better able at fostering cross-border exactly how developed-market MNEs
innovation and at combining local can retain their strengths in hard
responsiveness and economies of components while adopting their
scale, today’s international companies
will need to look to global emerging-
market MNEs for answers to new
Figure 5: Traditional and new models of multinational enterprises
Traditional model of developed-market MNE New model of emerging-market MNE
• Configuration emphasizes hard • Configuration emphasizes soft

components components
• Anticipate • Embrace volatility
• Forecast • Keep things in flux
• Prepare • Don’t buffer
• Prevent threats to core (complexity reduction) • Complexity absorption
• Home country as incubator for “learning to cope”
Culture: systems geared toward stability and reassurance of
investors Culture geared toward risk-taking; investors expect volatility
Constraints / sustainability: Constraints / sustainability:

• Radical innovation • Demographics
• Expansion into emerging markets • Attracting and retaining talent (employee satisfaction)
• Expansion into developed markets
emerging competitors’ soft practices.

And it will be interesting to know
whether they should continue using
existing global operating model in
regions of similar economic and insti-
tutional development and converge
towards emerging-market forms for
their emerging-market operations only.
In other words, what aspect of the

new practices should be local and
what aspect global?
Finally, it’s important for managers to

understand how to change their global
operating model configurations as
their international strategy changes.
This study is a step in this direction.
Figure 6: Evolution of global operating models
Emerging-market
multinationals ?
Japanese
multinationals
Complexity
American
multinationals
European
multinationals Catch-up process/
convergence
Exit/decline
1910s-1940s 1950s-1970s 1980s-1990s 2000s

Multi-local model Global model Distributed model Multi-polar model
• Decentralized, • Centralized, integrated • Excellence in supply-chain • Global and local

independently run markets market and innovation process • Networked operations
• Key goal: local profit • Increased formalization • Growing role of • Global integration of
maximization regional units back-office activities
• Constellation of partners • Growing role of
centralized functions
• Decentralization of
customer operations
About the research
We have selected a case study Analyzing the data for each case and After a detailed analysis of all industry-
methodology because it is the most across cases in order to identify pat- groups, we decided to focus on the
suitable for exploring a new phenome- terns of similarities and differences. wireless telecommunications and the
non—the organizational models of oil and gas industries, because they
emerging-market MNEs.143 This satisfy several criteria of comparability:
methodology involves: Industry selection
Industry diversity. We have selected
Selecting industries and companies We have chosen to look at different industries with a sufficient number
that are relevant to test the frame- types of multinationals within of players per country so that if one
work just developed (see decisions two industries. This approach has MNE does not grant access, we can
criteria below), two advantages. First, it allows us to still have a relevant alternative.
account for specific industrial contexts.
Gathering data through a number of Second, we can control for similar Multi-polar industries. The wireless
methods in order to triangulate and industry trends and factors which telecommunications and oil and
contrast different sources of information, may compete with our hypotheses gas industries are truly multi-polar.
and explain the findings. The number of directly comparable
MNEs is evenly spread across all
regions of the world so that there is
Sample
no asymmetry between contenders
Similar Multi-polar Diverse Multi-polar from the triad and those from
(multinationals operating in markets (multinationals operating in both emerging economies. There are large
of similar economic development) developed and emerging markets)
and directly comparable players all
Wire-less Telecom Kuwait Telecom Orascom around the emerging world, not just
Industry Etisalat Hutchinson Whampoa in China and India.
MTN Tata Communications
China Mobile Singapore Telecom Transnational industries. Both
America Movil NII Holdings industries experience similar forces
MTS Telefonica (although to a different extent). In
Deutsche Telecom France Telecom both industries, MNEs need to build
Telenor synergies and economies of scale, as
Vodafone well as be locally responsive and
adaptive. This double and conflicting
Energy Industry Sasol CNOOC challenge makes the pressures on
Lukoil Petronas global operating models more acute.
ONGC Petrobras Since transnational forces will
CNPC Kuwait Petroleum become stronger as industries become
Chevron more multi-polar, we are focusing on
BG two trend-catching industries.
Total
ExxonMobile Network industries. Both industries
BP require extensive networking skills in
ENI order to gain market access. In the
Statoil Hydro oil and gas industry, networks are
required for resource access; in wireless
Emerging markets Developed market origin
telecommunications, networks are In the following table, we present the chief strategy officer, the chief
required to create beneficial roaming the complete list of target MNEs information officer, the chief financial
agreements and serve clients seamlessly but we aim to study eight MNEs officer—help us understand the global
across countries. in each industry. operating model in greater depth.
The primary data also include any

Company selection Data collection company proprietary material that
the interviewees entrust us to read.
We selected our companies on the In the empirical phase of our research,
basis of the following criteria: we gather data from three sources. Second, we complement these inter-
First, we interviews eight to nine views with interviews of Accenture
Size and age comparability. We chose senior executives in each selected senior executives and of their collab-
emerging- and developed-market MNE and obtain rich descriptions of orators who are in charge of the
MNEs that are comparable in size and their companies. Each interview lasts sampled companies’ accounts.
age. Smaller and younger firms tend one hour each and is recorded for
to be more agile and entrepreneurial subsequent content analysis with Third, to check the validity of the
while older and larger ones tend to specialized software. interviewees’ responses, to embed
be more conservative and to favor ourselves in the deep context of
the status quo. We want to be certain Following a multi-layer interview each case, and to control for the bias
that our findings are not affected by strategy where some of the questions introduced by the interviewer-inter-
differences in size and age. are common and some of the questions viewee relationship145, we triangulate
differ in function of the respondent’s these primary data with externally
Multinationality. Since this is a study position, at each company we interview: available information. Before each case
about global operating models, our study begins, we prepare a detailed
companies have to be multinational— The chief executive officer, the company profile that includes:
that is they need to operate through executive chairman and the chief
directly owned subsidiaries in at least operating officer who provide us The interviewees’ biographies.
two countries and generate more than with an overview of their company’s
5 percent of their total sales abroad.144 global operating model and of its Companies’ international journey that
internal and external alignment. retraces the dates of country entries
Industry leadership. The selected They are also primary respondents or exits, the modes of entry, the
MNEs we have selected are market to inform us about the leadership evolution of international sales, and
leaders in their home country and component in their global operating the moments of crisis or success that
in several other host countries. model configuration. follow these steps.
Matched comparisons. To control Two to three heads of the main A detailed historic performance
for home-country specific effects, we geographic business units give us analysis of the company against
have sought to create three matched- their perspectives on how their industry benchmarks (total return to
paired comparisons of MNEs from a companies’ global operating models shareholders, growth and efficiency).
similar home region or home country accommodate the differences
but with a different international between local and global operations. Details of corporate and business
footprint: Kuwait Telecom (similar Contrasting the possible perception strategies: company history; strengths
multi-polar) and Orascom (diverse differences between headquarters and weaknesses; and opportunities
multi-polar); Deutsche Telekom and the geographic subunits is and threats.
(similar multi-polar) and Telefonica important to understand how the
(diverse multi-polar); and CNPC global operating model works. Published articles and case studies
(similar multi-polar) and CNOOC about the company.
(diverse multi-polar). The heads of the main corporate
functions—the head of human
resources, the chief technology officer,
About the authors About Accenture About the Accenture Institute

for High Performance
Stéphane J.G. Girod, PhD, is a research Accenture is a global management
fellow with the Accenture Institute for consulting, technology services and The Accenture Institute for High
High Performance. He is based in London. outsourcing company. Combining Performance creates strategic insights
unparalleled experience, comprehensive into key management issues through
Joshua B. Bellin is a senior research associ- capabilities across all industries and original research and analysis. Its
ate with the Accenture Institute for High business functions, and extensive management researchers combine
Performance in Boston. He is based in Boston. research on the world’s most successful world-class reputations with Accenture’s
companies, Accenture collaborates extensive consulting, technology and
Robert J. Thomas, PhD, is the executive with clients to help them become outsourcing experience to conduct
director of the Accenture Institute for high-performance businesses and innovative research and analysis into
High Performance. He is based in Boston. governments. With more than 181,000 how organizations become and remain
people serving clients in over 120 high-performance businesses.
countries, the company generated net
Acknowledgement revenues of US$23.39 billion for the
fiscal year ended August 31, 2008.
The authors gratefully acknowledge Its home page is www.accenture.com.
the contributions of Professor Eleanor
Westney (M.I.T. and York University) and
of Professor Mauro Guillen (University
of Pennsylvania, The Wharton School).
Notes 7 Luo, Y., Multinational Enterprises in 13 Knorr-Cetina, K. and A. Preda, The

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Are Emerging-Market Multinationals Creating

The Global Operating Models of the Future?

30 About the research

Are Emerging-Market Multinationals Creating The Global

Hypothesis 4 Hypothesis 5 complexity that their global operating

We should not expect emerging- How can developed-market multina-

1. Rising interest in global operating models

2. What is a global operating model?

Figure 1: Global operating model according to Accenture

Operating model components

Home-country Processes & Organizational

Superior business results

“Soft” components “Hard” components

Similar Diverse Whether outward-foreign direct

3. Diverging and converging global operating model configurations

Figure 3: Emerging-market and developed-market MNEs’ global operating model configurations

But they should also: Increased competition from ever-larger

4. How global operating models may work according to the literature

5. Lateral and cross-departmental relations: direct managerial contact,

Adapted from Martinez and Jarillo (1989) and Girod (2008)

To create these networks and foster a

Table 4: Examples of metrics for global operating model alignment

Metrics What they tell us Measurable Costs Measurable Benefits

Time on value Elapsed time Resources used Increased leadership capacity

Number of strategic decisions Productivity of Failed execution Increased innovation capability

Organizational network analysis (people)

Cohesion: average number of Levels of cross-geographic

Centrality: average number of

Adapted from Accenture135 (2006)

Figure 5: Traditional and new models of multinational enterprises

Traditional model of developed-market MNE New model of emerging-market MNE

• Configuration emphasizes hard • Configuration emphasizes soft

Constraints / sustainability: Constraints / sustainability:

emerging competitors’ soft practices.

In other words, what aspect of the

Finally, it’s important for managers to

Figure 6: Evolution of global operating models

1910s-1940s 1950s-1970s 1980s-1990s 2000s

• Decentralized, • Centralized, integrated • Excellence in supply-chain • Global and local

About the research

The primary data also include any

About the authors About Accenture About the Accenture Institute

Notes 7 Luo, Y., Multinational Enterprises in 13 Knorr-Cetina, K. and A. Preda, The

Accenture, its logo, and

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