Over the last few decades, the role of corporate subsidiaries has undergone some major transformation. Initially, the MNCs assigned relatively low-value tasks to the small-sized subsidiaries. However, now they heavily rely upon the capabilities of their smaller counterparts to deliver exceptional business value and product excellence. In fact, most small affiliates have started operating as ‘centers of excellence (CoE)’ for their parent companies.
In this article at Strategy+Business, Matt Palmquist shares a case study to illustrate how a small-sized firm can eventually transform itself into a CoE.
How Did It Happen?
Palmquist talks about a real-life instance of an IKEA supplier to validate his viewpoint. IKEA, popularly known for its reasonably priced furnishing range and global market share, is a perfect subject for this study.
During a research, some authors conducted nearly 50 interviews with managers at IKEA and one of its subsidiaries during 2001 to 2014. The interview questions were focused on the relationship of IKEA with its subsidiary since 1980s, the capabilities and resources of the subsidiary, and so on.
During this time frame (1986 to 2014), the subsidiary had successfully transformed into a major production unit for IKEA. Reason being that IKEA became heavily impressed with the subsidiary’s capabilities and manufacturing technology. Moreover, the unit was also innovating simultaneously to cut down production costs and boost productivity.
Thus, over the years, the relationship between IKEA and the unit deepened and eventually, the subsidiary assumed a more prominent role in IKEA’s business functions. By 2014, the unit was officially designated as the product development CoE of IKEA.
To read the original article in detail, click on the following link: https://www.strategy-business.com/blog/How-subsidiaries-can-emerge-as-centers-of-excellence?gko=a133b