Whether the ever-expanding transnational linkages of an MNC consist of different companies, subsidiaries, suppliers, or individuals, they result in relational networks. These networks may adopt very different structures of their own because they operate in different local contexts within theft own national environments.30 By regarding the MNC's overall structure as a network of interconnected relations, we can more realistically consider its organizational design imperatives at both the global and the local levels. Exhibit 8-5 illustrates the network structure of N. V Philips, a multinational with headquarters in the Netherlands and operating units in 60 countries. These units range from large subsidiaries, which might be among the largest companies in a country, to very small single-function operations, such as research and development or marketing divisions for one of Philips's businesses. Some have centralized control at Philips's headquarters; others are quite autonomous.
The network of exchange relationships shown in Exhibit 8-5, say Choshal and Bartlett, is as representative of any MNC as it is of Philips. The network framework makes clear that the company's operating units link vastly different environmental and operational contexts based on varied economic, social, and cultural milieus. This complex linkage highlights the intricate task of a giant MNC to rationalize and coordinate its activities globally to achieve an advantageous cost position while simultaneously tailoring itself to local market conditions (to achieve benefits from differentiation).31 In fact, N. V. Philips has recently fallen far behind its Japanese competitors in productivity because of its lumbering bureaucratic organization, which it needs to simplify and decentralize.
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