1. Developing a Transnational Organization Managing integration, responsiveness, and flexibility

2. Global Strategy: Course Outline
Session 1: Why and how do firms expand internationally? Session 2: How can firms manage conflicting environmental forces for global integration and local responsiveness? Session 3: What is a “transnational” strategy and how can firms develop layers of competitive advantage to develop such a strategy? Session 4: How can managers build and structure transnational organizations? Session 5: How can transnational firms create worldwide innovation & learning and exploit it as a competitive advantage? Session 6: How can firms implement “transnational” strategies?

3. Integration Responsiveness Framework: Evolving Strategic Perspectives
High
Global
Transnational
Global Integration
International
Multinational
Low
Low
High
National Responsiveness

4. Transnational Strategy: Goals and Means
Three strategic objectives (goals):
Efficiency
Flexibility
Learning
Three ways to achieve the objectives (means):
National differences
Scale
Scope

5. Building Global Efficiency
Efficiency = value of outputs / value of inputs
Achieved by increasing value of outputs or lowering cost of inputs (or doing both simultaneously – as in the case of transnational strategies)
In global context
Costs of inputs lowered through global integration (lower costs from scale and scope economies)
Value of outputs increased through local responsiveness (higher revenues from more effective response to local market conditions)

6. Building Multinational Flexibility
The ability to manage risks and exploit opportunities arising from the diversity and volatility of the global environment
Understand and manage different forms of risk
Scan and respond to discontinuities in global environment
Select most attractive markets (i.e., for different value chain activities)

7. Building World-Wide Learning
Capture external diversity
Worldwide stimuli as potential source of competitive information advantage
Need to convert “delivery pipelines” into “sensory feelers”
Leverage internal variety
Worldwide human resources and capabilities as potential sources of competitive advantage
Opportunity to leverage central and local innovations
Create true global innovation by linking sensing, response, and implementation capabilities
Key issue: Need to develop a world-wide learning system; innovative capability as the emerging source of competitive advantage

8. Worldwide Advantage: Goals & Means
Sources of Competitive Advantage
National Differences
Scale Economies
Scope Economies
Achieving efficiency in current operations
Benefiting from differences in factor costs – wages and cost of capital
Expanding and exploiting potential scale economies in each activity
Sharing of investments and costs across markets and businesses
Managing risks through multinational flexibility
Managing different kinds of risks arising from market- or policy-induced changes in comparative advantages of different countries
Balancing scale with strategic and operational flexibility
Portfolio diversification of risks and creation of options and side bets
Innovation, learning & adaptation
Learning from societal differences in organizational and managerial processes and systems
Benefiting from experience – cost reduction and innovation
Shared learning across organizational components in different products, markets, or businesses

9. Four Strategic Orientations: Asset & Resource Configurations
Multinational
International
Global
Transnational
Strategic Orientation (goals)
Building flexibility to respond to national differences through strong, resourceful and entrepreneurial national operations
Exploiting parent- company knowledge and capabilities through worldwide diffusion and some adaptation
Building cost advantages through centralized, global-scale operations
Developing global efficiency, flexibility, and worldwide learning capability simultaneously
Configuration of assets and capabilities (means)
Decentralized and nationally self-sufficient
Core competencies centralized, others decentralized
Centralized and globally scaled
Dispersed, interdependent and specialized

10. The I/R Framework & the AAA Triangle
What are the similarities between the I/R framework discussed in class and the AAA framework described in the “Managing Differences” article?
What are the differences? What new insights does the AAA framework provide?

11. Worldwide Competitive Advantage: The Strategic Tasks
Major global players > defend worldwide dominance
Smaller regional companies > Challenge the global leader
Purely domestic firms > Protect domestic niches

12. Defend Worldwide Dominance: Balancing Act Required
Competitive environment forced firms to develop new capabilities
But this was problematic and eroded core competency
New balancing act required:
Reinforce existing competencies and develop new assets and capabilities
Compensate for deficiency or approximate competitor’s source of advantage

13. Challenge the Global Leader: Step-by-Step Approach
Firms with low-profile foothold have dominated industries, e.g. Dell, Magna, Electrolux, AB-InBev
Focus on developing strong competence in a narrow niche
Careful expansion along both product and geographic dimensions; step-by-step

14. Protect Domestic Niches: Three Courses of Action
Defend against competitor’s global advantage (e.g. influence industry structure or market conditions)
Offset competitor’s global advantage (e.g. lobby for government tariff assistance)
Approximate competitor’s global advantage

15. Pressures for Integration/Responsiveness
High
Medium
Low
Globalization Pressures:
Homogeneous customer needs
Global buyers
Investment intensity
Global competitors
Economies of scale/scope
Localization Pressures:
Trade barriers
Differences in technical standards
Unique distribution channels
Cultural differences (that impact product use)
Strong local/national competitors

16. The Global Branding of Stella Artois: Key lessons
Illustrates how historically “multinational” industries can become more “transnational”
Changes in the external environment
Change agents (i.e., competitors) within the industry
Demonstrates how MNEs may simultaneously pursue competing strategic objectives (efficiency, flexibility, learning; aggregation, adaptation, arbitrage)
Shows how a company with historical strengths in one area (local adaptation) can to build competencies in others (global efficiency)
Demonstrates how to build layers of competitive advantage over time

17. Case update: The World’s Largest Brewers