Transnational Replication - A case study of Volvo Car Corporation

Abstract

Replications of organizational practices and routines are used by many MNCs as an efficient strategy for growing economies of scale and improving brand recognition. When replicating on international levels, i.e. from one market to another, it is evident that there is also a need to adapt to local markets. Researchers have argued for the need to balance global integration with local responsiveness, in order for firms to be viewed as transnational. However, little research has been made on how the transnational solution applies to international replications. Therefore, the purpose of this research has been to study how international replications can be adapted in order to increase their local responsiveness and become more transnational. The research has shed light on this matter by intending to answer the following research question: How can MNCs adapt international replications in order for them to become transnational?In order to achieve the purpose of the research, a qualitative case study was made of the Swedish automotive firm Volvo Car Corporation, and their local Malaysian subsidiary, Volvo Car Malaysia. Qualitative interviews were carried out with members from both the central unit in Sweden as well as the Malaysian subsidiary. The conduction of the research took place while being present in the Malaysian sales office. The theoretical framework of the research is mainly based around literature on replication strategies, as well as literature on transnational solutions. Replication strategies are based on a two-stage model, including phases of exploration and exploitation. The exploration stage includes developing the format for replication known as the Arrow core, which is gained through experiential learning achieved by a central unit that represent all the practices and activities developed in order to support the replication. Eventually, templates are created and used for replication. Since this strategic viewpoint is mainly developed around firms on national levels, this becomes challenged by theories on international levels, including the need to adapt and become locally responsive. Hence, theories are further discussed on transnational solutions, where global integrations are in need to be balanced with local responsiveness. In order to do so, MNCs need to view their subsidiaries as strategic partners, with differentiated roles and responsibilities and where each subsidiary is an individual contributor to knowledge. In order toachieve this, efforts have to be put into knowledge and communication flows, including the sharing of experiential learnings, where changes also need to be made to individual’s mind-sets and attitudes. Once this is done, subsidiaries are able to be viewed as strategic partners by taking on higher decision-making roles. The results from the empirical data showed that, from a transnational viewpoint, Volvo lacks in their knowledge and communication flows when replicating internationally. Despite allowing for certain local adaptations to be made of their international replications, it is evident that the company does not fully take local responsiveness into consideration. The company has ruled out experiential learnings to be shared from subsidiaries back to headquarters in order to become locally responsive. Also, they have not invested fully in their internal communication. This has led to difficulties within the replications, where the approach taken by Volvo’s central unit has not been able to be defined for international replications on their Malaysian market. Therefore, the main findings in the case of Volvo shows that experiential learnings need to be shared back to the headquarters, as well as between subsidiaries. Such learnings need to be applied to the exploration phase of the replication strategy and in the development of the Arrow core in order for the international replication to become transnational. Moreover, internal communication proves to be important in order to create the right mind-sets of the local individuals during replications. This will increase the knowledge and understandings of individuals, which is essential in order for the international replication to properly balance integration with responsiveness. Hence, the research provides recommendations for Volvo to develop global learning systems where experiential learnings and knowledge from replications are shared from subsidiaries back to headquarters, and to improve their internal communication. In conclusion, knowledge and communication are crucial for the adaptation of international replication, where adaptations are needed to be made in the exploration phase in order for international replications to become transnational. Also, replications need to be properly communicated internally. The research also gives managerial implications for future research.