Strategy and the Multinational Enterprise

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12 Strategy and the Multinational Enterprise
Stephen B. Tallman George S. Yip
Abstract: Introduction – Analytical Frameworks – The Goals of Multinational Strategies – External Analysis – Internal Analysis—Resources and Capabilities – Strategic Options for Multinational Enterprise – Conclusions and Issues for Further Research Keywords: goals, option, multinational enterprise, strategy

12.1 Introduction
THIS chapter uses a strategic analysis framework to examine the key strategic issues facing multinational enterprises (MNEs). While much of the discussion of international business has to do with the external conditions of international markets and industries (see Chapters 6 through 11), and much of the discussion of MNEs addresses their organizational structures and systems (see Chapter 13), we believe that a distinct role exists for multinational strategy. Using an explicitly strategic perspective is meant to emphasize this position. Within this overall framework, we will discuss strategic considerations of the multinational enterprise specifically and will tie different approaches to international strategic analysis back to standard strategy tools. The original version of this chapter, as was the case for most models of multinational strategy at the time, was focused on market-oriented strategy —expansion of firms across international boundaries in search of newer, larger markets. However, developments in the last six years suggest that multinational strategies are end p.307

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com) © Copyright Oxford University Press, 2009. All Rights Reserved focusing more on operating internationally integrated networks of activities on the ‘supply side’ of the value-adding chain as well as pursuing integrated international networks of markets on the demand side. Business process offshoring, whether outsourced or captive, while still in its early stages, is becoming a major issue for firms that are primarily focused on domestic markets as well as MNEs, and is forcing firms to consider the international ‘right sourcing’ of a variety of information-related activities as well as traditional manufacturing. As MNEs are seen more and more as being in the business of managing—finding, absorbing, adapting, distributing, and applying—information, this is becoming the hallmark of forward- looking international strategies. Therefore, the marketfocused strategies in the original chapter will be supplemented by a stronger focus on strategic-asset seeking (to include specifically knowledge / intellectual property / services / etc. seeking) strategies. As teachers and researchers in international business, we are often asked, ‘What is the difference between international strategy and domestic strategy?’ Our

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answer is that international strategy, while still business strategy, brings forward an explicit consideration for the effects of locational differences and institutional contexts that requires adaptations in the application of classic strategic analysis techniques and adoption of additional analytical frameworks. Our approach in this chapter is to use the basic steps in the strategic analysis process as our overarching framework and to then introduce international strategy concepts to develop each stage of analysis in an explicitly international context.

12.2 Analytical Frameworks
Business strategy involves identifying and exploiting the resources and capabilities of the firm in the marketplace for the purpose of gaining competitive advantage and superior financial performance. Inherent in this definition is the need to continuously renew these firm-specific resources and capabilities (FSRCs), to determine a set of goals and objectives for the enterprise when it does gain competitive advantage, to...
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