Case Analysis On Foreign Subsidiary/ MBA Capstone

Introduction and Background

With the introductory statement of the case yes I firmly believe that managing our operation in the foreign location is obviously a challenge to any of the business. As I never had detail idea on this topic hence I have viewed some of the journals and articles that give the insight about how to do operation. For any organization being global could be the one part of challenge thus managing them without any issue is another big part where the operations actually lie.

·         There are more than 2000 foreign subsidiaries operating globally

·         There are 165000 direct while 100000 are indirect jobs

·         13% of the private jobs while 9 % of the all jobs

·         Almost there are 40 % all subsidiaries belongs to Aerospace, health technology and life sciences with information and communications technology

·         $5.1 billion annual government Revenue

·         Source of innovation and productivity

Top ten companies and article I viewed are hence explained details below along with the questions asked by the case.

Q. 1 Challenges of Managing operations and Personnel in Foreign Subsidiary

What we have learnt up to the date is foreign subsidiary is the company wholly or partially a part of a larger corporation somewhere in the world. Simple being global and operating through the international boundaries is about foreign subsidiary. There are always challenges hidden with the managing operations and when all those factors come with the global operations then it is really hard for the any of the organization to deal with.

I would like to give example of the companies that are global and associate with the challenges of them with personal examples:

McDonalds Corporation:

As they are operating in 144 countries and more to explore, they customize themselves in order to meet the requirements suppose they introduced Maharaja Burger as they knew 58 % of Indian population was Vegetarian. And they do not consume Beef so, considering so many factors they come up with the solution of Maha Raja Burger (Veg Burger) for the first time in their history. So, they were accepting the challenges of managing operations in foreign subsidiary, corporation of California is operating with 5.50 billion dollars yearly is not a joke.

Dabur Nepal Pvt. Ltd

Another example includes of Dabur Nepal pvt. Ltd though it has more than 1500 products enlisted with them they faced one challenge of Real Juice (Health Issue) it was not made with the quality. So Nepalese people boycott the products of Dabur for limited time but after some months they manage to recover with the quality trauma. With the same company another example of Pro style dandruff hair oil, that’s one of the dabur top selling product in Nepal but it is only launched at Nepal, Dabur research the market and they found out that the dandruff hair oil was on demand and they endorsed Nepali all time Hit singer Nima Rumba for the advertisement and they launch the product in nepali style. It’s a hit among our youngsters Men.

Alibaba.com

I just would like to add one another example of alibaba. Com as it the Chinese wholesaler company opened up with the American mind , so while operating in foreign country with high level of language restriction many times they used to talk via sign language while operating globally but with the foreign subsidiary Alibaba is one of the highly revenue generating online site.

We have challenges everywhere small or big companies but with foreign subsidiary companies we face it more because may be our vision, mission and strategies does not match with the international boundaries.

I have segregated the managerial challenges and with the average problems faced by many foreign subsidiary companies am:

Initial cost:

It is always expensive to start a new venture going with the article readings I came to know that it could cost us up to $5k inU.K. Just to set up a limited company, whereas for the same thing for the Brazil it costs around $ 35000. While going on and average it will cost from $5k- $20K.

Setup Time

While working with foreign subsidiaries it takes a lot of time to make up for the business, all the countries have different rules so going along with the norms and rule could take simply more time. On and average plan it will take 3-4 months of the set up time. But only in U.K. it will not take more than two Weeks while in Brazil it will just take more than 8 Months just to set up a new subsidiary.

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Maintenance Cost:

This is always a hassle to maintain their operations completely new place with new culture and all those things are not an easy task to make a rapo so, foreign subsidiary costs a lot to make maintenance. It costs around $ 40 k for just an employee in an average.

Crisis cost/ Difficulty cost

It is always harder to maintain crisis in the foreign land whereas difficult cost might goes higher while doing foreign subsidiary.

On site requirements

Smaller and smaller documents are to care while doing foreign subsidiary even one simple signature failure can return all the bank documents. There is too much hassle while working on site requirements. There may be a chance that one of the employees has to continuously fly back to everywhere to make all the legal procedures go easy.

Local directors

There are always local director hired by the international policy. There is no sure that the director learning and knowledge will give an output to the organization goals. Outsourcing someone whom we have never thought of and met, giving all the keys and bank account number is also important for the companies doing foreign subsidiary. there are examples where company have gone wrong while directing the director and miss use of the property and all the bank money have been drain.

Human resources loss

Hiring someone with whom we have barriers of language, culture, face and perception is extremely harder and challenging.

Finding agent to establish

While operating foreign subsidiaries there may be a chance while we can’t get in touch with the right agent where we can speak up about the legal procedures and there could be the chance where we could go in the wrong path.

So, for the foreign subsidiary it has always been a headache to very companies while setting up their business in another country initial cost is really high as we have to set our brand name with the customers and eventually every point I explained above comes in their way in order to give challenge. Except then this for the country like us government intervention, political instability, Legal procedures, corruption is the challenges for any of the foreign subsidiary.

Q.2 Suggestions for overcoming subsidiary challenges

 In the article of” global challenges and local solutions” I came to know that there are many ways how we can deal with the above mentioned challenges we can always fix an agent with another contract or unseen contract with the help of the international law that we can operate other than  this

Acording to the radius worldwide they view challenges as the opportunities to do a lot more than expected they see the solutions through

Advisory services in this category they have motioned other points like

·         Human resources

·         Tax accounting

·         Global mobilation

·         Legal requirements

Whereas in another part they have mentioned Managed services where they put four main factors which are:

·         Establishment services

·         F and A services

·         Hr operations management

·         Compliance services

While another article that triggered me was blab la that explained how we can escape with the challenges according to Grace Author of global solutions there are nothing impossible but doing with excellence is what we need while operating internationally. Caring others feelings respect to the attachment and culture will lead to the ethical understanding of international boundaries which I personally feel that’s right.

With the help of the strategies we also can minimize the risk and increase our chances of survival. Here are the some of the strategies for the foreign subsidiaries:

Present Strategies:

·         Understanding culture of the country or the Place

·         Maintaining networks to the important bodies

·         Good communication system

·         Matching standards and wants of the customers

I would like to add one example of KFC of Nepal

KFC Nepal:

As KFC started its operation it was highly praised by the customers, but the charm was slightly reduced as the price youngsters can afford is not with KFC, besides being a very successful venture we youngsters does not go there and eat frequently. And with the lack of Personnel management, KFC already shuts down Twice. There are always hindering labor laws which do not match with the management of the KFC.Strikes, salary issues are the burning issues of KFC Kathmandu. I think this is the perfect real time example for the foreign subsidiary failing to the market.

Future strategies for the foreign subsidiary:

·         Trying to understand what actually customers want as a product

·         Learning organization

·         Friendly and bounding relationship within the organizations

·         Nurturing creative ideas that come from employees.

·         Implementation of P’s of marketing

·         Up to date with the newest technology

·         Relationship marketing

·         Line and category extension

Conclusion and recommendations

If any day when I will extend my current business of website content writing to the international level I am just going to put these things on mind and will work through this way’s will be caring each and every segment of the emotional as well as cultural attachment so that no one’s pride gets hurt.

I recommend every foreign based subsidiary to be more concerned on the factors like:

·         SWOT and PESTEL analysis

·         Learning organization

·         Sharing culture

·         Team building

·         Replication of strategy

·         Innovative Product or approach to serve customer.

In spite of having any challenges to the organization, we have to extend to the opportunities whereas we have to back out for the threat that’s a general rule for any organization to be sustained in the market. Strategies and Tactics for the longer term and the broad vision will take very organization to its desired level. Clear and ambiguous strategies are factors for the development of foreign subsidiaries

Bibliography

Agrawal, G. R. (2010). Strategic Management. Kathmandu: M.K. publishers.

Pearce II, J. &. (2011). Strategic Management:Formulation, Implementation, and control. New york:McGraw Hill: MC Graw Hill.