MNC/Global Strategy

Selecting an International Corporate-

Level Strategy
• The type of corporate strategy selected will have an impact on
the selection and implementation of the business-level
strategies
– Some strategies provide individual country units with the
flexibility to choose their own strategies
– Others dictate business-level strategies from the home
office and coordinate resource sharing across units

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International Corporate-Level Strategy
• Focuses on the scope of operations:
– Product diversification
– Geographic diversification
• Required when the firm operates in:
– Multiple industries, and
– Multiple countries or regions
• Headquarters unit guides the strategy
– But business or country-level managers can have
substantial strategic input

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 Pressures for Cost Reductions
(Need for Integration)
• When companies produce commodity products
• Where differentiation on non-price factors is difficult
and price is the main competitive weapon
• Where competitors are based in low-cost locations
• Where there is persistent excess capacity
• Where consumers are powerful and face low
switching costs
• The liberalization of the world trade and investment
environment
Pressures for Local Responsiveness
• Differences in customer tastes and
preferences
• Differences in infrastructure and traditional
practices
• Differences in distribution channels
• Host government demands
Four Basic Strategies
 International strategy
– Creating value by transferring competencies and
products to foreign markets where indigenous
competitors lack those competencies and
products
– Makes sense if a company has a valuable
competence that indigenous competitors in
foreign markets lack and if it faces weak pressure
for local responsiveness and cost reductions
 Multi-domestic Strategy
• Developing a business model that allows a company to
achieve maximum local responsiveness
• Products and services are tailored to local markets and
focus on the local competition
• Makes sense when there are high pressures for local
responsiveness and low pressures for cost reductions
• Companies may become too decentralized and lose the
ability to transfer skills and products
• Business units in one country are independent of each
other
• Prominent strategy among European firms due to broad
variety of cultures and markets in Europe

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 Global Strategy
• Focusing on increasing profitability by reaping cost reductions
that come from experience curve effects and location
economies; pursuing a low-cost strategy on a global scale-
Emphasizes economies of scale
• Products are standardized across national markets
• Decisions regarding business-level strategies are centralized in
the home office -Often lacks responsiveness to local markets
• Strategic business units (SBU) are assumed to be interdependent
-requires resource sharing and coordination across borders (hard
to manage)
• Makes sense when there are strong pressures for cost reductions
and demand for local responsiveness is minimal
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 Transnational Strategy
• Simultaneously seeking to lower costs, be locally
responsive, and transfer competencies in a way
consistent with global learning
• Difficult to achieve because of simultaneous
requirements:
– Strong central control and coordination to
achieve efficiency
– Decentralization to achieve local market
responsiveness
• Must pursue organizational learning to achieve
competitive advantage

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Advantages and Disadvantages of Different
Strategies for Competing Globally