The transnational model

Topics: Strategic management, Globalization, Strategy Pages: 21 (1623 words) Published: November 15, 2013
The Transnational Model
by
A. Bartlett and Sumantra Ghoshal

Dr. Stephan Buse, The Transnational Model

Challenges of Globalization

Need for Global Efficiency
Need for Local Responsiveness and Flexibility
Need for Cross-Market Capacity to Leverage Learning on a
Worldwide Basis (Worldwide Learning)

Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Global Efficiency
Converging consumer tastes and preferences
Technological innovations force companies to develop and produce on a global basis (realize experience curve economies)
This requires internal restructuring (rationalized product lines, standardized parts design, specialized manufacturing operations)

Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Local Responsiveness and Flexibility

National government (regulations concerning local content,
import restraints)
Large and growing group of consumers rejects homogenized product designs and performance
Concept of flexible manufacturing

Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Cross-Market Capacity to Leverage Learning on
a Worldwide Basis (Worldwide Learning)
Knowledge-clusters emerge throughout the world
fast diffusion of technology
increasing costs of R&D (avoidance of double inventions), coupled with shortening product life cycle (take advantage of already available internal know-how)

Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Common Basic Strategies

High

Global
Strategy
International
Strategy

Cost
pressure

Multinational
Strategy

Low
High

Low

Pressure for local responsiveness
Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Maximize local responsiveness
develop the product and
marketing strategy according
to national demands
Shift all value-creation
activities to local business units
high cost structure due to duplication of
production facilities
Portfolio of independent business units
E.g.: Food industry

Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Global Efficiency

Multinational Strategy

Multinational Organization Model
Decentralized Federation:
Many key assets,
responisiblities, and decisions
decentralized
Subsidiary

Headquarter

Multinational Mentality:
Management regards overseas
operations as a portfolio of
independent businesses
Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Personal Control:
Informal Headquarter-Subunit
Relationships overlaid with
Simple financial controls

The Advantages and Disadvantages of the
Multinational Strategy
Strategy

Disadvantages

Advantages

Multinational Customize product
offerings and marketing
in accordance to local
responsiveness

Inability to realize location
economies
Failure to exploit
experience curve economies
Failure to transfer Know-how
to foreign business units

© Dr. Stephan Buse

Core product developed at home and adaptation
to local needs in foreign units
Manufacturing and marketing functions in each
major country (but this tends to be limited)
Head office retains tight control over marketing
and product strategy
Intl. strategy makes sense if a firm has a valuable
core competence that indigenous competitors in
foreign markets lack
Go where locals don’t have your skills
Examples: McDonald´s, IBM, Kellog, Microsoft

Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Global Efficiency

International Strategy

International Organization Model
Coordinated Federations:
Many assets, resources,
responsibilities, and decisions
still decentralized, but controlled
from headquarters
Subsidiary

Headquarter

International Mentality:
Management regards
overseas operations as
appendages to a central
Domestic corporation
Dr. Stephan Buse, The Transnational Model
© Dr. Stephan Buse

Administrative Control:
Formal management planning
and control systems allow tighter...
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