An explanation of multinational operating efficiency.
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You are the global subsidiary branch manager of a U.S. based MNE, Leather Extraordinaire, which manufactures leather goods. The Latin American division exports the largest volume of goods due to the high quality of leather and cheap labor, of which the majority is produced in Argentina. The Argentine subsidiary is proposing to Headquarters to be given the mandate to produce all of the leather clothing goods exported to Canada and the U.S. and be termed the "Center of Distinction" for leather clothing. What factors will you consider to determine if the Argentine subsidiary is acting on good-faith efforts in the best interest of the MNE, or if it is promoting its own self-interest, such as power, prestige and jobs. How will you respond to the Argentine subsidiary?
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Solution Summary
This solution examines Leather Extraordinaire, and discusses if the intent is to increase their own best interest, or the best interests of their subsidiaries.
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It can be assumed that the Argentine division is probably acting out of both good faith efforts and self interest. With any accomplishment as being the best in anything, the good faith efforts for the company will likely come with distinction that adds to the prestige of the division. The key issue here would be to determine which is stronger, the self-interest and prestige, with a creation of jobs, or good faith interest for the MNE, which would be to keep expenses low, produce quality products, and help to drive the company forward. I would inform the subsidiary that it is under consideration, but we must do a little research and discussion before the request is granted.
I would then investigate to determine if the Argentina location is really up to par. I would consider the actual quality ...
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