Strategic &

structure

Strategic Objectives
Multinational companies need to meet the challenges of
global efficiency, multinational flexibility and worldwide
learning.
Global efficiency can be enhanced both by increasing revenues
and by lowering costs.
Multinational flexibility is defined as the ability of a company to
manage the risks and exploit the opportunities of the global
environment
macro-economic factors, such as wars, interest and wage rates, exchange rates;
policy actions of national governments, such as expropriation and changes in

exchange rates;
Responses of competitors in the host market;
Resources, including natural, financial and human resources.

The very presence of multinational companies in diverse

national environments creates opportunities for worldwide
learning.

Linking Means and ends

Companies that follow a multidomestic1 strategy will give

prime

importance

to

one

of

the

means

national

differences to achieve the different strategic objectives.

increasing revenues,
through differentiating their products and services to respond
to differences in consumers tastes and preferences and
government regulations.

Companies that follow an international strategy focus

primarily on one of the ends worldwide learning and use
the three different means available to achieve this end.
The drawback of this strategy is that although it is very efficient
at transferring knowledge across borders, it does not do a very
good job in achieving either global efficiency or flexibility.

For companies that follow a global strategy, meeting the

objective of global efficiency takes pride of place and all
means are used to achieve this objective. (Mean)
differences in factor costs
by locating production in low cost countries
Concentration and centralization of production and R&D
activities

Companies following a transnational strategy acknowledge

that all of these different combinations of means and ends
have their own merits and might be very suitable in specific
industries.

Structuring Multinational
companies

The

period

between

the

two

world

wars

was

characterized by a rise in nationalistic feelings.

Countries became more and more protectionist and
erected high tariff barriers.
There were large national differences in consumer
preferences

and

communication

and

logistical

barriers remained high.

Led to a decentralization of decision-making.
Family ownership had been the dominant tradition
and therefore organizational processes were built on
personal relationships and informal contacts rather
than formal structures and systems.

International Organizational
Model

US companies developed new technologies and

products.
They were almost forced into the international
market

by

spontaneous

export

orders

and

opportunities for licensing.

Later they started making their products in
manufacturing facilities in Western Europe and in
developing countries.
It involves sequential diffusion of innovations that
were originally developed in the home market.
Subsidiaries

are

dependent

on

the

parent

Global
Organizational Model

In the 1960s and 1970s the successive reductions in

tariff barriers began to have their full impact.
This was accompanied by declining international
transport costs and communication barriers.
Furthermore, new electronic technologies increased
the minimum efficient scale in many industries.
In this kind of industry, a firms competitive position
in one country is significantly influenced by its
position in other countries.
Rivals compete against each other on a truly
worldwide basis.

Transnational
Organizational Model

Trade barriers were erected again to limit exports

and foreign direct investments were regulated by
industrial policies.
Flexible manufacturing reduced the minimum
efficient scale by employing robotics and
CAD/CAM technologies.
The use of software became important in a
growing
number
of
industries
(from
telecommunications to computers and consumer
electronics).
A transnational strategy would be a deliberately
planned strategy to have an adaptive,
incremental, muddling through or emergent
strategy.
Assets, resources and capabilities are neither