There were five main motives categories behind the RHQ mandate loss in the study. These categories were given in the interview for the respondent. As Table 11 shows, parent MNC reorganisation has been the most common motive for RHQ mandate loss, following the parent MNC regionalization. 17% of the respondents mentioned growth of markets, while 15% of the RHQ mandates were lost due to acquisitions.
Table 11: Motives behind the RHQs mandate loss in 1999-2010 Motives 91 RHQ* lost % 25 RHQ* % 14 RHQ* terminated % 38 RHQ* relocated % ->parent Parent MNC reorganization 23 24 % 8 27 % 3 18 % 12 25 % Parent MNC regionalization 20 21 % 3 10 % 3 18 % 14 29 % Growth of markets: 16 17 % 8 27 % 0 0 % 8 16 % Acquisition 14 15 % 5 17 % 4 24 % 5 10 % Diminishing of market 4 4 % 1 3 % 3 18 % 0 0 % Other or unknown 19 20 % 5 17 % 4 24 % 10 20 % Total 96 100 % 30 100 % 17 100 % 49 100 %
*One RHQ may get multiple values
Next we will examine the motives behind the RHQ mandate loss in the case of responsibility transfer to the parent and the RHQ termination. The motives behind RHQ relocation will be examined in the last part of this chapter.
Motives for the RHQ responsibility transfer to the parent company
As already mentioned, there were 25 cases where the Finnish subsidiary lost the RHQ mandate and subunits started to report directly to CHQ. For those subsidiaries, the growth of markets was one of the most important motive that interviewees mentioned why the RHQ was terminated. An interviewee explained why the RHQ was terminated: “[It was due to] the growth of the companies [subunits abroad] while getting independent and naturally letting go of Finland. Now they are working independently”. There seems to be a link between growth of markets, subunits growing into independence and diminishing role of the tutor and later on there happens a natural shift in responsibilities between the three parties. The subunit takes the responsibility of itself and there happens RHQ responsibility transfer from the RHQ to the HQ. The Finnish subsidiary is left out from the middle, because the large subsidiary is strong enough to report to the HQ on its own. On the opposite side, only one interviewee mentioned a shrinking market as the reason for closing the RHQ and explained that “in a heavy competitive situation you can not compete with a small organisation structure”. This shows that sometimes the subunit might need support and resources from a stronger organisational unit, like the group HQ, in a case of too small organisation size and lack
of resources to handle the difficult market situation abroad. In the case, the Finnish subsidiary had the RHQ mandate of exporting to Estonia and Russia and when the market situation got difficult the Swedish CHQ transferred the RHQ responsibility of the markets for herself.
Parent MNC reorganization/restructuring represents 27% of the motives mentioned for ending the RHQ in Finland. For example, one interviewee explained the restructuring situation of their company that Russian operations were transferred right under the HQ in Denmark. Often the interviewees explained that Russia became independent (from Finland) and reports directly to HQ today. It occurred several times in the data that there was parent MNC restructuring linked to the Finnish subsidiary losing the RHQ mandate of Russian subunit after its growth of independence and after that the reporting structure was changed to CHQs (or relocated out of Finland to somewhere else in the organisation).
In 17 % of the cases (five) when the RHQ was shut down and responsibility was transferred to the parent company an acquisition had played a part. There were several different acquisition cases on the different organisation levels that all lead to the closing the Finnish RHQ unit. In one case, the acquisition concerned the group and due to this the subunits (under the Finnish RHQ responsibility) in the Baltic states were transferred directly under the responsibility of the new parent company. In another case, the Finnish subsidiary was sold and the new owner, well established in the Russian market, had a large sales unit over there. Thus, there was no point to continue the previous direct exports from Finland in the current situation that led to the closing of the Finnish RHQ.
Parent MNC regionalization was mentioned in 10 % of the answers as a reason to close the Finnish RHQ. In one case the parent company restructured its sales organisation to a global one that lead to the closing the Finnish RHQ concerning the subunits in Latvia, Lithuania, Russia, Poland, Hungary, Slovakia, the Czech Republic and Ukraine.
In 17% of the cases the motives were others than mentioned above or unknown. For example, one company representative explained that earlier there was a problem with customs in Russia and the goods had to be delivered through Finland. However, after
local people started to handle the operations in Russia, there was no role for Finland anymore and the RHQ was closed.
Motives for the RHQ termination
This part focuses on the 14 cases where the RHQ mandate was terminated and shows that the RHQ mandate is not necessarily transferred in the organisation to some other unit.
As the table 11 shows, acquisitions represent the most common motive (24%). In one case, the parent company bought the subunit from Lithuania that was under the Finnish RHQ responsibility, leading to a termination of the RHQ mandate along with the acquisition. In another case, the Estonian subunit was sold out from the company and the Finnish RHQ position was lost.
The parent MNC reorganization represents a motive in 18% of the cases. For example, the production was ended in Finland, and therefore the RHQ was closed down as part of wider restructuring. In 18% of the cases, the parent MNC regionalization affected the termination of the RHQ mandate. In the interview data there were signs of regionalization process in the Eastern European area. MNC’s have shifted their strategic focus more to the region and are building the regional organisation over there. One interviewee explained that the company’s strategy concentrates on the Eastern Europe and the RHQ responsibility of the area has been given to Poland.
The growth of markets was not mentioned as a motive, however, the diminishing of the market/shrinking market as a reason represented 18% of the answers (three cases). The responders also described the situation as “uncertainty of markets” or “risks had grown (e.g., especially in credit financing) in the Baltics”. The termination of the mandate can be a consequence of the difficult market situation in the subunit countries and it can be a conscious decision to get away from uncertain markets if there are too many risks involved. This kind of decision, leading to a RHQ mandate loss, can actually be a relief for the Finnish subsidiary.
In the case of RHQ termination, 29% of the motives are other than mentioned above or not known. For example, problems in pricing and with customs in Russia were mentioned as a reason to give up the Russian market (loss of RHQ mandate) and now Russians are handling the market themselves. Another respondent explained that the strategic focus of the company is in the Eastern Europe and therefore they ended up giving up the Russian market.