Green & Black's: An Entrepreneurial Subsidiary Case Study

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CASE STUDY
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Table of Contents
TASK 1............................................................................................................................................ 3
a) HOW EASY IT IS FOR A MULTINATIONAL FIRM TO PURSUE A TRANSNATIONAL STRATEGY,
AND WHY? WHAT DIFFICULTIES WOULD LIKELY EMERGE, AND WHY?.....................................3
b) TO WHAT EXTENT IT IS LIKELY FOR THE MULTINATIONAL FIRM THAT IMPLEMENTS A
TRANSNATIONAL STRATEGY TO GENERATE AND DISSEMINATE KNOWLEDGE WITHIN ITS
BOUNDARIES, AND WHY? WHAT DIFFICULTIES WOULD LIKELY EMERGE, AND WHY?..............6
TASK 2............................................................................................................................................ 8
2. PERFORM A SECONDARY SEARCH AND IDENTIFY ONE EXAMPLE OF AN ENTREPRENEURIAL
SUBSIDIARY (OR BEING CLOSE TO BEING AN ENTREPRENEURIAL SUBSIDIARY) IN THE UK OR
ELSEWHERE................................................................................................................................8
a) WHAT ARE THE REASONS YOU WOULD CHARACTERISE THIS SUBSIDIARY AS
ENTREPRENEURIAL?.................................................................................................................. 8
b) WHAT ARE THE LIKELY EFFECTS OF THE ACTIVITIES OF THIS SUBSIDIARY ON.....................10
i) Its INNOVATIVE OUTPUT...................................................................................................... 10
ii) PERFORMANCE OF THE SUBSIDIARY....................................................................................10
iii) ECONOMIC DEVELOPMENT CONTRIBUTION IN THE LOCAL ECONOMY..............................11
REFERENCES.................................................................................................................................13
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TASK 1
a) HOW EASY IT IS FOR A MULTINATIONAL FIRM TO PURSUE A
TRANSNATIONAL STRATEGY, AND WHY? WHAT DIFFICULTIES WOULD LIKELY
EMERGE, AND WHY?
International Labor Organisation has defined MNC as a business organization that has several
operating branches in the different countries with a single operating headquarters based in one
country. The headquarters is located in the home country and the other countries are called
host countries (Mudambi, et al., 2014). On the other hand, the United Nations commission has
defined a transnational corporation as an organisation that owns or control operations and
facilities outside the country of their origin. TNC’s are borderless and do not consider a
particular country as their base. The multinational companies have branches and the
transnational companies have subsidiaries in other countries (Schweiger, et al., 2003).
The multinational companies promote and sales its products in the global market through a
single marketing strategy and pricing whereas the transnational strategies involve a
personalised approach in selling and marketing products by keeping the customer demand and
preferences in mind (London & Hart, 2004). Therefore, the transnational strategies enable the
multinational organisation to expand in the global market by offering goods and services while
considering the societal and cultural differences in the native environment of the targeted
consumers.
HOW AND WHY PURSUING A TRANSNATIONAL STRATEGY IS EASY FOR MULTINATIONAL
FIRMS
Rather than simply imposing the global business practices and model to each nation, the MNC’s
should realise the potential of the individual market by showing a strong visible commitment,
empowering local operations and making investments in the local talent. By paying close
attention to the local customer needs the MNC’s can easily customise the requirements of the
local market (Mozhi & Nedelea, 2017). During internationalisation, P&G has expanded its
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operations in 27 countries by 1980. Throughout its expansion, the company has adhered to the
principle of tailoring its products in each nation to meet customer demand. The company has
focused on creating local country subsidiaries that follows the structure and policies of the
home country while formulating marketing strategies according to the needs of the local
market. The multinational companies can easily apply the transnational strategies as they offer
their products in the different countries and can easily identify the different market needs and
demands of the customers in different nations by studying their cultural and buying habits.
MNCs have an access to the market of the different countries and thus, could easily formulate
differentiated strategies for successfully expanding its business to the domestic market. The
transnational management approach has enabled the worldwide blood collection team (WBCT)
of Becton Dickinson to introduce two new major products like HEMO-GUARD safety closure and
Plastics PLUS TUBE line.
DIFFICULTIES THAT WOULD LIKELY EMERGE IN FOLLOWING TRANSNATIONAL STRATEGIES
The transnational strategy allows businesses to attain the inherent benefits of both;
multinational and global strategies. This involves sharing of vision under a corporate umbrella
with altering business operations according to the local demands. Nowadays, it is critical as well
as difficult for the MNC’s to align their business strategy with the need to become
internationally integrative and locally responsive (Wasilewski, 2002). The transnational strategy
supports the MNC’s to create local knowledge and competency base as the decision-making
and resource allocation is kept to each subsidiary.
While evolving from the typical international business strategy to the transnational business
management, Becton Dickinson has faced three major issues; first is where to develop the R&D
resources and capabilities. The second issue is to align the human resource system to the new
transnational strategies, changing the structure and the key decisions related to the
development of worldwide products. The third issue sis difficulties in managing unevenly
matched and skilled managers and how to measure and evaluate their contribution to
worldwide businesses.
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P&G has confronted with many difficulties while adopting transnational strategies. The
company’s profit is limiting due to the cost of running product development labs and
manufacturing plants and the autonomy of the national subsidiaries preventing the global
rollout of new products and technology improvements. The local subsidiaries have resisted
these improvements as it may negatively affect the local profit. This results in a delay in
introducing a new product in the worldwide.
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b) TO WHAT EXTENT IT IS LIKELY FOR THE MULTINATIONAL FIRM THAT
IMPLEMENTS A TRANSNATIONAL STRATEGY TO GENERATE AND
DISSEMINATE KNOWLEDGE WITHIN ITS BOUNDARIES, AND WHY? WHAT
DIFFICULTIES WOULD LIKELY EMERGE, AND WHY?
From being a unitary organisation to differentiated inter-organisational network, the
multinational companies have gradually transformed over time. The multinational corporate
exists because they are able to transfer and share knowledge and resources. The success of
knowledge sharing among the subsidiaries of MNC’s is determined by the extent of the
characteristics of the relationship between the involved units (Makela, et al., 2007). The
relationship between the MNCs and its units can be stated in terms of autonomy, arduous
relationship, and frequent communication and interaction. The cooperative and cohesive
behaviour among the different units of MNC’s is very crucial for resource and knowledge
transfer and effective functioning of the MNC. For instance, during its multinational expansion,
Philips has decentralised its sales organisation with autonomous marketing companies in
different countries. This states the Philips has implemented autonomous relationship with its
units to disseminate knowledge within its boundaries.
The multinational firms that implement transnational strategy have to maintain and manage
the knowledge sharing at a great extent. The ability to share and integrate knowledge across
the different units of the MNC’s is important for developing a competitive edge (Makela, et al.,
2007). For instance; for ensuring effective knowledge management, Mckinsey and company
have evolved its knowledge management process. A constant flow of consultants across the
different offices has contributed to the transfer of knowledge and information in the company.
The McKinsey partnership believes that the company’s future is around developing CSTs and
integrating across them with a common knowledge agenda. Being a dispersed social entity the
multinational companies can combine, create and exploit knowledge across the variety of
context. This dispersion of knowledge benefits in improving the capacity to integrate unique
internal knowledge, having wider opportunities for the companies to bring external knowledge
into the firm, contributing in creating organisational value and competitive advantage for the
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company. With the transnational strategy, P&G was able to integrate all of its units that has
benefited the company in having knowledge of the external marketing environment to
formulate effective strategies within the company.
DIFFICULTIES THAT WOULD LIKELY EMERGE IN DISSEMINATING KNOWLEDGE WITHIN THE
BOUNDARIES OF A MULTINATIONAL FIRM
The three major issues in knowledge sharing within the boundaries of MNC’s implementing
transnational strategies are language, identity, and feedback sharing. A language serves as the
basis for creating an informal network between the different units of MNC’s that may influence
the informal power of involved actors within the MNC (Blomkvist, et al., 2012). Matsushita
believes that experience is more important than the language to build a relationship and
understand management process. The company has emphasised on appointing experienced
managers to the local subsidiaries by appointing 700 Japanese Expatriates on foreign
assignment.
By implementing the transnational strategies, the MNC’s have difficulties in maintaining
organisational identity as the local units may not implement the structure, values, and
strategies of the corporate headquarters in order to achieve the local goals. Therefore,
Hierarchical control and coordination mechanism should be implanted by the organisation to
attain a satisfactory combination of resilience and flexibility. An organisational identity is made
of its culture and values and the MNC’s are facing difficulties in maintaining their identity
(Michailova & Minbaeva, 2012). Moreover, the age-old organisational culture should need to
improve over time to effectively generate and disseminated knowledge within the boundaries
of MNc’s. For instance, P&G has faced sluggish annual volume growth and loss of global market
due to risk-averse, conformist and slow organisational culture. This has affected the
organisational identity of the company and exchange of knowledge within its boundaries.
Moreover, the increased self-regulation of subsidiaries due to the devolution of the
responsibilities from the corporate headquarters may affect the knowledge and feedback
sharing. Thus, a self-regulating aspect is very important as it necessitates feedback from formal
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or informal cues. The WBCT team of BD has effectively managed the difficulty in knowledge
sharing and feedback by employing self-regulated strategies at all of its units.
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TASK 2
2. PERFORM A SECONDARY SEARCH AND IDENTIFY ONE EXAMPLE OF AN
ENTREPRENEURIAL SUBSIDIARY (OR BEING CLOSE TO BEING AN
ENTREPRENEURIAL SUBSIDIARY) IN THE UK OR ELSEWHERE.
The secondary research is carried out by analysing the primary research obtained from books,
journals, online articles and the company websites in the discussion. The parent company taken
is Cadbury and the subsidiary company is taken as Green & Blacks which manufactures organic
chocolates in the UK.
Green & Black is a British chocolate company founded in 1991. The company manufactures
organic chocolates, ice cream, biscuits and hot chocolate. The locations of manufacturing
products are located in Canada, Poland and Italy. The company was acquired by Cadbury in the
year 2005 (Hill, 2011).
a) WHAT ARE THE REASONS YOU WOULD CHARACTERISE THIS SUBSIDIARY
AS ENTREPRENEURIAL?
Green & Blacks is an entrepreneurial subsidy as it manufactures products organically. The cocoa
is ethically sourced and the best methods of making the chocolate are used to create the finest
chocolate bars. The company is found on the principles of ethical sourcing of cocoa and other
raw materials. The company believes that the finest taste in the chocolate comes from the
finest ingredients. The name Green & Black means stands for Green which is to source cocoa
from ethical sources and Black that stands for high quality and the intensity of the chocolate.
The company was founded by Craig Sams and Jo Fairley. The first product was launched was an
organic dark chocolate bar with 70% cocoa which is still available today.
The reasons why Green & Blacks can be termed as a subsidiary is that the company prides in
using no additives, preservatives, artificial colours or unethical practices for sourcing the
materials. This is what makes Green & Blacks an entrepreneurial subsidy company as it is a
subsidy also and is unique in making its products (Hill, 2011).
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The signature chocolates of Green & Black use the cocoa beans are sourced through Cocoa Life
which is a third party verified cocoa sustainability program. The program was launched in 2012
where Cocoa Life will invest $400 million by 2022 to empower 200,000 cocoa farmers and reach
out one million community members in the six key regions of cocoa growth- Brazil, India, the
Dominican Republic, Indonesia, Ghana and Cote d’Ivoire. The farmers working with Cocoa Life
gain considerate knowledge; skills and expertise that help them empower their livelihood and
strengthen their communities. It gives a chance for women to succeed and empowers them
with a way to support the families (Loney, 2018).
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b) WHAT ARE THE LIKELY EFFECTS OF THE ACTIVITIES OF THIS SUBSIDIARY
ON
i) Its INNOVATIVE OUTPUT
The innovative output is still predominant even after the acquisition of Green & Blacks by
Cadbury. Cadbury acquired Green & Blacks in the year 2005. The products sold by the company
are innovative and the company Cadbury has managed to take forward the brand and sell the
products of Green & Blacks to many other regions as well. The innovative output of Green &
Blacks which are the ethically sourced beans and superior methods of making chocolates is still
prevalent. The activities of the subsidiary are governed by the parent company which is
Cadbury. Cadbury acquired Green & Blacks at a sum estimated to be £20m and makes most of
the decisions for Green & Blacks. The company was acquired as a subsidiary because of its
innovative approaches to making chocolates and using ethical practices for sourcing the cocoa
beans (Robertson, 2016).
ii) PERFORMANCE OF THE SUBSIDIARY
The performance of the subsidiary has been steady. It has recently launched its new line of
chocolates namely G&B Velvet Edition range which comes in many flavours and has 70% dark
chocolate content. It offers many innovative products without losing the crux of the company
which is to source the cocoa beans in an ethical manner. The performance of the subsidiary
under Cadbury has been improving as Cadbury has financed the company to partner with Cocoa
Life which provides best quality cocoa for Green & Blacks. The performance of the subsidiary
has also helped Cadburys to gain a significant advantage over those consumers who like the
products which are ethically sourced. The success of Green & Black after the acquisition can be
attributed to the fact that Cadbury runs Green & Black as a separate business and not mix with
the traditional Cadburys products. The company operates the businesses in the Us, UK,
Canada, Australia and a number of other nations as well (Loney, 2018).
The performance of the subsidiary has a direct impact on the success and sales of the parent
company. The subsidiaries when not performing well impact on the sales of the parent
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company as the parent company spends millions on the subsidiary companies and expects to
generate sales and revenue from the subsidiary companies. It is therefore important for the
subsidiary companies to perform well and bring revenue to the parent company (Anwar, 2019).
iii) ECONOMIC DEVELOPMENT CONTRIBUTION IN THE LOCAL ECONOMY
The economic development and the contribution of Green & Black to the success of Cadbury
can be attributed to the fact that by 2019, all Cadbury products will bear the Cocoa Life logo
which is characteristic to the chocolates of Green & Black. Cadbury procures its cocoa from the
Cocoa Life of which is it a major funder and this move will help Cadbury to be an ethical
company. The contribution of the subsidiary company to the success of the parent company
can be attributed to the fact that subsidiary companies have a better reach in the local
audience as they are well-versed with the local economy and the societal culture. The
subsidiary companies understand the market better and the brand gets recognised easier and
faster (Clark & Ramachandran, 2015).
In terms of financial considerations as well, the subsidiary company gets the help and aid from
the parent company which counts for brand recognition of the subsidiary and the parent
company as well. The subsidiary companies owned by the parent companies also help the
company to raise capital and increase the foothold in the market. The parent companies rely on
the subsidiary companies to fetch them newer markets and gain a newer customer base. The
subsidiaries also bring variety to the brand and the products sold by the parent company.
Cadbury has acquired a number of subsidiary companies selling chocolates, confectionary and
beverages and thus has become the second largest chocolate company in the world after Mars.
The relation between the parent and the subsidiary company is managed by the stake of the
parent company in the subsidiary company. The company Green & Black is wholly owned by
Cadbury and hence Cadbury is in a position to make decisions for the subsidiary company. The
decisions to launch new products for Green & Black are managed by Cadbury. However, the
subsidiary company directors are allowed to manage the company and participate in the
decision making progress (Li & Lee, 2015).
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