MNC/Global Strategy

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
2

Selecting an International CorporateLevel 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

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
Ex- TV Channels & Newspapers

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 scaleEmphasizes 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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Cost Pressures and Pressures for Local

Responsiveness Facing Caterpillar

Advantages and Disadvantages of Different

Strategies for Competing Globally