Subsidiary Level Strategy
When we talk of the corporate level strategy it deals with the question that what business or businesses should the firm compete in, it deals with the overall strategy of the firm. Whereas in subsidiary level strategy it is concerned with what is the game plan of each subsidiary and how will the subsidiary would position itself in in the local or global market to achieve its desired objectives. The managers at the corporate level should give the freedom to each of its subsidiary to make its own strategic decisions and deal by itself with the high environmental uncertainties. The corporate managers should give this freedom to the subsidiaries so that each subsidiary can comply with its local conditions by its own.
The subsidiaries are classified under two categories : –
- Support and implementation subsidiaries
- Autonomous subsidiaries
Support and implementation Subsidiary
In this approach the power lies under corporate level strategy, that is the firm has dominance in the corporate strategy and the role of subsidiary is only to support the corporate level strategy. The main center of the firm controls and takes all the important decisions and the role of the subsidiary is to only implement those decisions without taking part in it. There are many advantages of support and implementation strategy :
- Since every subsidiary follows the same strategy, therefore the costs are reduced through economies of scale.
- Another important factor to earn cost advantage is through better learning from the corporate level.
- The efficiency of the organization is also increased since they have to produce few product varities in the longer production runs in different pants.
There are also few disadvantages of Support and implementation subsidiary :
- This type of approach is not suitable in regions where the customers deny to accept the global standard for product and need product that is suited in their local conditions.
- This approach is also not successful when the subsidiaries face high environmental uncertainities.
- This approach can sometimes spoil the relationship between the headquarters and the subsidiaries because it shows that the headquarter do not have trust and confidence for the subsidiary.
Under this approach the subsidiaries acts as replica of the parent firm. Under this the subsidiaries are free to take their own decisions and select their own strategies with little or no intervention from the headquarters.
Some advantages of this type of subsidiary :
- The more is the power in the hands of the subsidiaries the more opportunities they would have.
- Helps in attaining better decision making skills to the subsidiary level managers
- Makes the subsidiaries more accountable for their actions.