Balancing Strategic Capabilities for Multinational Corps: Efficiency, Flexibility, Learnin, Slides of International Management

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• Building Strategic Capabilities Given the forces for localization, regionalization and globalization what are the options for a MNC?

Different and sometimes contradictory views

• Levitt suggests standardization
• Some suggest production of wide variety of products to achieve economies of scale and meet national requirements. MNCs must manage interdependently
• Some suggest exploiting economies of scope, sharing technologies and other things

Building Strategic Capabilities

• Achieve simultaneously the three

objectives of global scale efficiency,

multinational flexibility and

worldwide learning.

Need to exploit differences in markets among

many countries

• Need to look for opportunities to develop economies of scope
• Need to leverage scale economies from different activities around the world.

• Global Efficiency
• Increasing revenues vs. lowering costs
• Global Integration vs. national responsiveness
• e.g..... of Toyota and Fiat. Toyota is more globally integrated, but Fiat is more dispersed taking advantage of country specific advantages
• Analyzing the industry and company value chain, and focusing on forces that drive cost.

• Multinational flexibility
• Managing risks and exploiting opportunities that

result from operating in diverse environment.

• Requires scanning the environment to detect

changes and discontinuities that present new risks

and new opportunities

• Sources of national differences generally include:
• macroeconomic variables such as interest rates,

wage rates, exchange rates and commodity prices.

• Worldwide Learning
• Presupposes that competencies are not the

monopoly of HQ

• foray into different countries to exploit home

country capabilities, exposed many MNCs to

different stimuli.

• some have used this exposure to learn from the

diverse environment.

• mere exposure to diversity does not guarantee that

learning will take place.

• appropriate structure and systems must be developed

to allow such learning to take place.

• Means - National differences
• Differences in factor endowments
• National differences in output market will necessitate different marketing strategies.
• Rationalized production- producing in different places to take advantage of differences in costs of production.
• Note that comparative advantage does not necessarily lead to competitive advantage.

• Means - Scope Economies
• Sharing of cost across value chains of two or more products, e.g... sharing of information, or distribution channel to market different products, or expanding product line to meet the requirement of existing customers
• STRATEGIC ORIENTATIONS FACING MNCS?

Strategic Orientations Global Strategy Transnational International Strategy Multidomestic Strategy

Multinational Strategy

• responding to national differences by focusing on flexibility, and emphasizing revenue enhancement. Innovations tend to be for local market, and cost benefit analysis is based on market by market analysis. Assets are decentralized and self sufficient for local market.

Global strategy -

• global efficiency is goal, with focus on best cost and product/service quality. Assets and competencies are centralized and on a global scale.

Strategic Orientations

• Note that it is possible to use a combination of strategies for different businesses, activities within these businesses, and geographical areas within these activities.

The Strategic Tasks for Worldwide

Competitive Advantage.

• Defending worldwide dominance.

• Need to defend and reinforce existing assets and

capabilities.

• Challenging the Global Leader

• Using a different business model to operate in the

industry. (Amazon, Samsung, MOOCs )

• Protect domestic niches

• Changing domestic competitive landscape, tariff

protection, some form of strategic alliance.