Section Twelve • Strategic Methods - International Business Strategies (Bartlett and Ghoshal) Flashcards
Explain how multinationals can be difficult to manage effectively
1) The management strategies needed to run a multinational are very different
from those needed to run a domestic business.
2) Multinationals are very complex - different parts of the business are subject to the laws, culture, economy and markets of the country they operate in.
3) For example, if a multinational only operates in countries with similar laws, cultures and market conditions it may be able to take a centralised approach to management.
However, a multinational that operates across countries with very different laws, cultures and market conditions may have to take a decentralised approach to management.
What are **Bartlett and Ghoshal’s International Business Strategies **look like?
What two things can be used to help a business decide on a strategy?
The level of pressure for local responsiveness (e.g. adapting products for different locations) and the level of pressure to reduce costs through global coordination can be used to help a business decide on a strategy.
List out Bartlett and Ghoshal’s International Business Strategies.
- International Strategy
- Multidomestic Strategy
- Global Strategy
- Transnational Strategy
Explain International Strategy.
(2bullets)
- If the demands of markets in other countries are similar to the demands of the home market, the pressure for local responsiveness is low. If pressure to reduce costs through global coordination is also low, then an international strategy is adopted.
- The business structure will remain very centralised with most of the research, big decisions and development being carried out at head office. These decisions can then be implemented in the
parts of the business that are located abroad.
Explain multidomestic strategy
(3bullets)
- When the demands of the different markets are very different and there is little pressure to reduce costs through global coordination, a multidomestic strategy should be implemented.
- The business structure becomes decentralised and the business operates as if it were lots of independent companies each running itself. Most decisions are made locally to meet the local needs.
- Different branches of the business will look and work differently - products will be adapted and promoted to suit the local markets, and knowledge won’t be shared between the separate branches.
What is a global strategy?
(3 bullets)
- A global strategy is used when the demands of the different markets are similar and global coordination of the business could reduce its costs significantly.
- The business structure will be centralised and it will coordinate operations across countries to take full advantage of economies of scale.
- Products will remain standardised and innovation and development will take place at a central location, with knowledge and resources being passed on to the different branches.
A business may decide to only sell specific products in certain countries rather than its full range.
Explain transnational strategy.
(2 bullets)
- When pressure to reduce costs and meet local needs are both high, a transnational strategy is best.
- The focus of a transnational strategy is on developing knowledge and ideas locally and sharing them globally in order to benefit the whole business.
The business structure will be a balance between centralisation and decentralisation, where the responsibilities passed down to each branch of the business are based on its experience and capabilities.
How can management of finance become more complex?
(4bullets)
1) If finance remains based at a central location then staff will have to adapt to work with different currencies and ensure that the different branches of the company have a healthy cash flow.
2) Trade laws limit the amount of money that multinationals can take out of a country’s economy – finance will need to comply with the trade laws of the different countries.
3) They also need to know and understand the tax laws in different countries so that they can provide detailed analysis of **expansion opportunities **and point out any risks of planned expansions.
4) Due to the complexity of multinationals, financial functions might be spread across different locations.
How can management of marketing become more complex?
(3 bullets)
1) If products have been adapted to meet the needs of local markets, marketing will need to have different campaigns and strategies to promote the different products.
2) If products are standardised, then marketing may still need to adapt their promotional message to appeal to the different markets. E.g. in developed countries they might highlight the ethical nature of the product, whereas in **developing countries **they might emphasis the functionality of the product.
3)
Depending on the type of product that a company sells, marketing campaigns may need to be adapted to take into account the different advertisement laws in a country.
How can management of operations become more complex?
1) If the business is producing standardised global products, the different manufacturing facilities will need to be coordinated - they will all need to work in the same way using the same materials and machinery in order to make products that are all up to a consistent standard.
2) If the products are being adapted for the different local markets then it’s less important that the manufacturing facilities are coordinated - it’s more important that each one runs efficiently, even if that means independent facilities using different processes.
How can management of IT become more complex?
1) IT functions will often be carried out at each branch of the business in order to manage the day-to-day IT problems that are specific to that branch’s machines and IT systems.
2) If the business is trying to adapt to local markets, IT might need to create, manage and update several different websites which may result in the department expanding.
How can culture clashes and language barriers affect MNCs badly?
This will be a bigger problem if the business structure is centralised as they will need to think about how decisions will affect and be communicated to all the branches of the business.
