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  • Aligning Local Office Management Plan to Global Corporate Strategy Ip-Shing Fan, Chia-Ping Huang Cranfield University, Cranfield, Bedfordshire, MK43 0AL, UK Email: i.s.fan@cranfield.ac.uk, c.huang.1998@cranfield.ac.uk Tel: +44 (0) 1234 754073; Fax: +44 (0) 1234 750852 Abstract This paper presents a framework for planning the deployment globalisation strategy in the local office of global enterprises. The research aims to construct and validate a theoretical framework to structure published knowledge on how to design management strategy to go global, and also on how local management structure and decision-making can be harmonised with the corporate strategy. Working with the local offices of two global PC component manufacturers, the authors developed a novel framework incorporating both the context and content manufacturing strategy approaches. The issues and factors could be systematically considered for successful manufacturing globalisation strategy deployment. The deployment process uses traceable reasoning to guide the local office in formulating its action plan. The knowledge and understanding already captured in existing manufacturing research is thus made available to local offices in a coherent way, so that they can evaluate and improve their business performances. 1. Introduction Manufacturing for the global market may necessitate the setting up of offices in a range of countries or regions that offer good business prospects. The local office may be a sales or buying office, a distribution or service centre, or a fully equipped manufacturing facility. The effectiveness of these local offices is crucial to the success of the global enterprise. Mechanisms used to align the local operations with the global strategy vary greatly. Some enterprises just use simple financial projections and reports as the management tool. This research aims to develop a practical tool that the local office can use to develop strategic deployment plans aligned with the global corporate strategy. The term ‘glocalisation’ (from global and localisation) is introduced to refer to the creation of the local(country or regional) presence of a global enterprise. In the context of global manufacturing, published work on globalisation focus on the nature and form of globalisation. There is very little work that offers guidance on how the local offices should design and run their operations. As manufacturing becomes global, the transferability of strategy related theories and practices across national borders and different cultures has increasingly become a matter of debate. Increasingly, researchers and practitioners arrive at the conclusion that the exportability of managerial theories and practices is determined by the compatibility between the exporting and importing nations. There is a large body of research on management theory and practice that lies unused. In practice, managers cannot easily make use of the published work in helping them to formulate strategy. On the one hand, the sheer volume of literature makes it hard for managers to find and isolate what may be relevant to their own particular context. On the other hand, published work often prescribe the steps needed for strategy formulation but do not provide context appropriate suggestions. The wealth of the research is locked away by the difficulty of its application. 72
  • This study attempts to investigate manufacturing strategy and action planning in the glocalisation context. The focus is on the local units’ role as a strategic unit. The two main research objectives are: • to construct a theoretical framework that structures existing manufacturing strategy research in a form usable to industrial managers, in the context of globalisation deployment, and • to develop and test a strategy deployment workbook that the local office management can use to set up improvement and operations actions that are aligned with the global corporate strategy. 2. Manufacturing globalisation and local adaptation Manufacturing globalisation is a complex concept that involves political, economic, technological and socio-cultural changes. It is often seen not just as a one-way process with commands flowing from the headquarters to the local units, but a two-way dynamic relationship between them. Manufacturing enterprises react to the forces of globalisation by taking up new configurations. Some researchers redefine the manufacturing scene as a globally distributed and coordinated network, as distinct from the traditional plant model (Flaherty, 1996; Ferdows, 1997; Shi and Gregory, 1998). Many studies suggest that multi-national corporations could be at a competitive disadvantage if they do not think and act globally (Hout et al., 1982; Turner and Hodges, 1992; Yip, 1995). Manufacturing globalisation is defined here as the study of the qualitatively different nature of globalisation, the process by which a manufacturing enterprise builds its strategies and competence to operate seamlessly across national boundaries on a global scale. The style of corporate decision-making should determine how the local offices manage their structure and resources. Little has been done to explore the linkages between strategic control and local adaptation. Chung et al. (2000) concluded that with an open strategic style the role of the subsidiary in the multinational corporation’s network is largely left to local managers to define for themselves. This view assumes a high level of subsidiary autonomy. Global manufacturers appreciate that global strength rests in part on local adaptation. Local differences are becoming more important despite the ongoing globalisation of business. There has been some debate on how far companies should adapt to local markets as opposed to maintaining a global image. Historically, the companies with strong identities and business models, like Macdonald’s and Coca-Cola, have a great competitive advantage and shun local adaptation. But, aside from these world-leading brands, Hayes and Pisano (1996) have observed that to be successful there has to be something more than the right match of manufacturing system to business objectives. Otherwise, firms with identical technologies and similar business goals would perform more or less equally. Local responsiveness is becoming more important because the process of local adaptation creates the opportunity for sharing experiences company-wide, and for adaptation the product in response to local demand. A number of empirical studies have confirmed the importance of a strong role for manufacturing within the hierarchy of corporate strategy for improving overall business performance. (Roth & Miller, 1990; Marucheck, et al., 1990; Minor, et al., 1994). Anderson et al., (1991) stress that it is difficult to argue against the importance of having an effective manufacturing strategy. In the globalisation environment there is a need to clarify the issues of international manufacturing, external drivers, and internal responses. Despite the emphasis put on the need for consistency between manufacturing strategy and business objectives, this appears to be a gap in many firms. This lack of alignment is a common problem that has received significant attention in the literature (Porter, 1996; Swink and Hegarty, 1998; Tracey et al., 1999). Much of this failure has been pinned on the actual practices of firms. Frequently, actual practice differs from strategic 73
  • intention. Often there appear to be two manufacturing strategies at work – the one that identifies the plan and the one that has been implemented (Hayes and Wheelwright, 1984; Gupta and Lonial, 1998; Platts et al., 1998). Many firms do not have mechanisms, that is, strategy formulation and implementation processes, to bring about the desired alignment. Operational decisions are carried out by reference to the firm’s “way of doing things”, rules built on past experience, which may not be suited to the new situation. Further, the often alluded to pace of technological change and market volatility tends to exacerbate misalignment. To apply these academic research results, the differences of existing theories and models need to be clarified. 3. Existing theories and models differences Although the existing models and theories may prove to be appropriate in particular situations, it is still difficult to represent the strategic decision in both cognitive and practicable terms for industries to follow. This is because global strategies are exercises in the unknown and further complicated by the presence of a large number of other driving forces. Generalising, manufacturing strategy studies adopt a deductive and top-down approach; provide a prescriptive know-how process without the reasoning, and present detailed content and context at a strategic level. This approach to strategy formulation limits the scope that local management can become a team player and contribute its strategic strength. Usually, a performance measurement model is goal-directed and uses inductive inference to align measures to strategic goals. A brief summary of the manufacturing and performance measures theory in the context of a glocalisation tool is in Table 1. Manufacturing strategy approaches Performance measures models Glocalisation dimension Strategic objectives, key issues Alignment to strategic goals Framework reasoning Deductive Inductive Content logic Causes and effects Goal directed Context comprehensiveness Function based Model based Process adaptability Know-how Know-how Table 1 Manufacturing strategy and performance measures models 4. Research Process A spiral research approach is designed to refine the framework that structures existing research results into an applicable format. This research methodology uses three iterations to propose a theoretical construct and then validate/test the framework with industrial input. The first iteration develops an initial framework to structure manufacturing strategy deployment into four stages. The structure is drawn from the Quality Function Deployment concept. An initial framework is used to provide a common reference point for the different industrial managers to express their glocalisation strategy requirements. Five cases companies were used for face to face interviews at the companies’ sites to build an understanding of the manager’s glocalisation decision process and the tools they use. These case companies were chosen through a range of industries and geographic regions within Britain. The companies were not selected for their ability to be representative of their sector but for the extensiveness of their manufacturing glocalisation activities and willingness to be part of study. The second iteration takes the requirements identified and develops the detail framework and its application process. The detail framework uses seven viewpoints to structure knowledge gathered 74 View slide
  • from over 150 publications. The resultant framework consists of a set of relationship tables that correlate 165 foci and 620 key issues. The industrial study to validate this framework requires in depth support from managers of local offices. Gigabyte UK was invited and agreed to be the pilot to evaluate the detail framework and the application process. Gigabyte (www.giga-byte.com) is a leading PC main-board manufacturer with offices in USA, Western Europe, Russia and Australia. It has nearly 4000 employees of which one third is ‘overseas’. The large volume of information captured within the framework requires a structured and efficient procedure for the company to follow. The third iteration develops the framework into an embryonic workbook. Its usability as a strategy tool was validated with Gigabyte and another company. The second company has similar characteristics and manufactures other PC components. Both are representative of many young Multi-National Companies (MNC's) in the Taiwanese IT component manufacturers. The evaluation shows that the framework is a feasible strategy deployment tool. The validation approach is descriptive, the two case companies uses the embryonic workbook to conduct glocalisation analysis. A key characteristic of these case studies is the heavy investment of time to provide the longitudinal access and sharing the wealth of experience. The workbook was refined through a sequence of trial studies with the participating companies. 5. The reasoning structure of the proposed framework The framework uses the viewpoints of competitive factors, policy area, CSFs, responsibility, initiatives, operation tasks and actions. The reasoning structure of this glocalisation deployment framework is described in Figure 1. The input into the glocalisation process is the stated business objectives (BO) and the related strategy. The main elements of the proposed framework are the seven viewpoints in three levels: first a macro level, then a medium level and then a micro level. The policy, competitive factors are derived from manufacturing strategy studies as a top level content directory. The CSFs, responsibility, and initiatives provide a further interpretation as a middle level index. The operations tasks and actions represent operational level activities as a micro level fact list. These seven viewpoints are used to develop the company-wide integrated action plan. The policy and competitive factors derived from manufacturing strategy provide a solid structured context to be reasoned deductively. CSFs aim to identify the company’s strengths and local office opportunities. Responsibility assignment aims to identify the appropriate department or function to receive the authority and responsibility in the global company. The initiatives provide directions for improvement actions. These three viewpoints diagnose the glocalisation domain to identify the key issues, which are related to achieving the stated business objectives. These medium level viewpoints also provide an extensive diagnosis of the operation tasks and action, which can provide in-depth information. Operations tasks provide a day-to-day activity checklist. Actions are additional activities aim to implement the strategy and business objectives. The impact analysis aims to align actions with strategy and helps to monitor the execution of actions. The analysis provides an inductive reasoning approach to verify whether the provided content and context are applicable or not. The reasoning structure aims to ensure that this framework provides an integrated and coordinated mechanism to represent practical knowledge and select the appropriate strategic action plans. 75 View slide
  • Figure 1 The reasoning theory of the proposed framework 6. Scale of the proposed framework A substantial body of work has been distilled into seven issues tables and nine relationship tables. Despite a total of 165 foci and 620 detailed considerations in Table 3, the proposed framework is maintainable. It has been structured for the users to select relevant issues and add their expertise as well. Viewpoints Focu Examples Key issues s Policy 45 Structure policy area 182 Competitive factors 9 Cost, quality, flexibility CSFs 8 Agility, knowledge 37 Responsibility 15 Manufacturing, sales Initiatives 10 Cost related, feature related 67 Operations tasks 72 Product, process analysis 192 Actions 6 New product, process 102 Total 165 620 Table 3 The main foci and key issues in the proposed framework 76
  • The local management can use the knowledge in these databases to support the strategy deployment process. At each stage of the process, the management is presented with a range of options from the databases. These options help the management to rationalise their choices. The options could be selected if appropriate. For choices not in the option list, the framework has an open structure to capture the decisions of the management team as additional options. An example of a policy viewpoint is illustrated in Table 4. The policy areas are the areas of strategic policy decision. For example, the policy area of capacity is related to the focus of capacity planning; the related key issues are plant, equipment and labour to be provided within a manufacturing system. Other capacity key issues include the identification of new facility, sub- contracting agreements, outsourcing, capacity increment costs. The key issue list provides the company with a comprehensive review of its strengths and weaknesses with respect to the capacity decision area. From an examination of the literature covering the contents of manufacturing strategy studies, it can be seen that a substantial number of these policy foci and key issues can be regarded as macro level strategy references. The other viewpoints and relationship tables are distilled in a similar way for further analysis. Table 4 An example of policy viewpoints 7. Analysis process 77
  • Figure 2 presents the detail input and output of the four stages analysis process and illustrates how the viewpoints work with the associated relationship tables. The detail process is explained as follows. • Strategy analysis stage: the business objectives are mapped with the seven viewpoints tables (from V1 to Table V7) to get a set of strategic viewpoints tables. Based on these refined strategic viewpoints tables, a set of improvement operation tasks and actions are derived from mapping with the relationship tables (from Table R1 to R9). • Glocalisation analysis stage: using Table R1, the glocalisation challenges are translated into the seven viewpoints to get a set of strategic glocalisation viewpoints tables. Based on this information, a similar reasoning process infers a set of improvement operation tasks and actions. • Initiative actions analysis: the improvement actions and operation tasks are collected to check for overlaps and gaps. • Actions and impact analysis: the effectiveness and impact of the actions are evaluated by using performance measures. The validation process is an in-depth, longitudinal examination of an exploratory case study. It is a systematic way of looking at what is happening, collecting data, analysing information, and reporting the results. Hence, this validation approach is especially well suited to generating the glocalisation scenario and testing the existing theories. The proposed framework and embryonic workbook combine to provide a 'how-to' approach for glocalisation strategy deployment and provide the database of issues that may be important to considered for I.T. manufacturers to set up local offices in similar situations. An example of the actions selected by a case company is illustrated in Table 5. 78
  • Actions Current status H.Q. aspect Gaps Policy areas Q DL DR DF VF C I New product Working with New product R&D ability is Working with H.Q. Product scope X introduction vendors and qualified to be OEM Vertical Integration X distributors Product volume Promotion for the Increase production capacity Local responses Vertical Integration X improvement phase-out product in China Production control X and star product MIS and operating Build-up I.T. system Improve MIS systems, Local responses Quality system X X process improvement form H.Q. technical controls & reports Capacity X X supports New product Working with R&D Improve product design H.Q. control Facility X X X X development process to supply local quality and ability Vertical integration X X demands Competitiveness Expand local market New product introduction Local responses Organisation X X improvement – sale shares time to market improvement Human resources X X X performance HR Resources Head-hunter Workforce with multiple, Local responses Human resources X improvement company supports flexible skills Process & Tech X Product standard Enhance RMA ISO 9000 implementation Working with H.Q. Quality system X X X improvement services company-wide Human resources X Distribution process Contract control and Improve distribution network Local responses Process & Tech X X X improvement market survey and channel Quality system X Competitiveness Marketing survey and New product introduction Working with H.Q. Human resources X improvement – strategic alliance improvement Product Scope X X product performance Improve vendor Contract and deposit Improve distribution network Local responses Quality system X quality control and contract management Human resources X X Internet service Be compatible with Improve MIS support Working with H.Q. Product scope X X build-up H.Q. MIS system Quality system X Functionality design Report to H.Q. R&D Introduce computer-aid H.Q. control Vendor relation X and manufacturing technology Process & Tech. X department Upgrade existing Control overhead I.T. infrastructure H.Q. control Production control X X facility expenditures improvement Vendor relation X X Site office set-up Closed to vendors Global branch offices set-up Local responses Facility X X Improve H.Q. windows set-up Company Intranet build-up H.Q. control Organisation X Office automation Overheads control Hardware set-up Local responses Facility X X Inert-functional work Support from H.Q. Field services team build-up H.Q. control Human resources X X Capacity expansions Market share Production bases build-up Local responses Capacity X X X Worker training On-job training TQA training programmes Local responses Human resources X X 79
  • Financial (Budget) Software selection Evaluation and testing H.Q. control Financial X X Table 5 An example of actions selection from case study 80
  • Conclusions This research is an experiment to devise a structure and process to organise the vast amount of existing manufacturing research results for practical application. A review of the manufacturing strategy literature found evidence that a formalised approach is beneficial. With the structured content and traceable context, local management can effectively formulate the strategy to contain all the necessary primary and secondary improvement actions and the associated performance measures. This framework with four stages and seven viewpoints is developed to assist in assessing the key considerations used by local management. The case studies demonstrated that it is feasible to use the framework to effectively capture key issues and factors. It is also adaptable to accommodate different requirements and operation patterns for glocalisation deployment. Another achievement in this work is the ‘glocalisation’ manufacturing strategy deployment process and the prototype workbook. Case companies find the traceable reasoning of the proposed framework effective to guide their alignment of their local office management plan to the global corporate strategy. Figure 2 The detail input and output of the analysis process References Anderson, J.C., and Schroeder, R.G., and Cleveland, G., (1991). The process of manufacturing strategy: some empirical observations and conclusions, International Journal of Operations and Production Management, 11 (3), 86-110. Chung, L. H., Gibbons, P. T., and Schoch, H. P. (2000). The Influence of Subsidiary Context and Head Office Strategic Management Style on Control of MNCs: The Experience of Australia. Accounting, Auditing & Accountability Journal. 13 (15), 647-666. Ferdows, K. (1997). Making the Most of Foreign Factories. Harvard Business Review, Mar- April, 75 (2), 73-88. 81
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