MNC/Global Strategy

S.Subramanian IIMK 1
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

S.Subramanian IIMK 2
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

S.Subramanian IIMK 3
 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

S.Subramanian IIMK 4
Pressures for Local
Responsiveness
• Differences in customer tastes and preferences
• Differences in infrastructure and traditional
practices
• Differences in distribution channels
• Host government demands

S.Subramanian IIMK 5
Four Basic Strategies

S.Subramanian IIMK 6
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

S.Subramanian IIMK 7
 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

S.Subramanian IIMK 8
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

S.Subramanian IIMK 9
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

S.Subramanian IIMK 10
Cost Pressures and Pressures for
Local Responsiveness Facing
Caterpillar

S.Subramanian IIMK 11
Advantages and Disadvantages of Different
Strategies for Competing Globally

S.Subramanian IIMK 12