Part 1: The Strategic Imperative Part 2: The Organizational Challenge Part 3: The Managerial Implications

Part 1 : The Strategic Imperative
Part 2 : The Organizational Challenge
Part 3 : The Managerial Implications
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Part 1 : The Strategic Imperative facing the emerging MNE
Chapter 1 # Expanding Abroad

Examine the internal strategic motivations that drive, attract,
or compel MNEs to expand offshore
Chapter 2 # Understanding the International Context

Helps to understand the complex and often conflicting external
environmental forces that shape the strategy of the MNE as it
expands abroad
Chapter 3 # Developing Transnational Strategies

Explores how MNEs resolve the tension between their internal
motivations and the external forces and to develop a strategy based
on building layers of competitive advantage
Part 2 : The Organizational Challenge flowing from strategic imperatives
Chapter 4 # Developing a Transnational Organization

Examines the task of building an organization able to deliver the multi-layered
strategic capabilities required by a multidimensional transnational strategy
Chapter 5 # Creating Worldwide Innovation and Learning

Focuses on the critical strategic task of developing the capability to develop and
diffuse innovations on a worldwide platform
Chapter 6 # Engaging in Cross-Border Collaboration

Explore the growing organizational challenge of managing collaborations across
corporate boundaries.
Part 3 : The Managerial Implications
of both the strategic imperatives and the organizational
challenges we have identified
Chapter 7 # Implementing the Strategy

Explore the managerial roles and responsibilities required in implementing
MNEs strategy
Chapter 8 # The Future of the Transnational

Considers the evolving roles and responsibilities of transnational
organizations and managers in today’s global political economy
Part 1 : The Strategic Imperative
Part 1 : The Strategic Imperative facing the emerging MNE
Chapter 1 # Expanding Abroad

Examine the internal strategic motivations that drive, attract,
or compel MNEs to expand offshore
Chapter 2 # Understanding the International Context

Helps to understand the complex and often conflicting external
environmental forces that shape the strategy of the MNE as it
expands abroad
Chapter 3 # Developing Transnational Strategies

Explores how MNEs resolve the tension between their internal
motivations and the external forces and to develop a strategy based
on building layers of competitive advantage
CHAPTER 1
Expanding Abroad:
Motivations, Means, and
Mentalities
Expanding Abroad: Motivations, Means, and
Mentalities
The purpose of this chapter is to address the
following questions:
1. What is a multinational enterprise (MNE)?
2. What provides the motivation for companies’
international expansion?
3. By what means will companies internationalize (e.g.
through modes such as exports, licensing, joint
ventures, wholly owned subsidiaries, etc.)?
4. How will companies’ management mentalities—
attitudes, assumptions, and beliefs—affect their
chances of internationalization success?
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 1-8
What is a Multinational Enterprise (MNE)?
Characteristics of a true MNE:

Substantial direct investment in foreign
countries (not just trading relationships of
an export business)
Active coordinated management of these
offshore assets (not simply holding them
as a passive financial portfolio)
Strategic and organizational integration of
operations located in different countries
What’s Different about MNE Management?
Multiple operating environments

Diverse patterns of consumer preferences,
channels, legal frameworks, etc.
Political demands and risks
Need to mesh corporate strategy with host
country policies
What’s Different (Continued)?
Global competitive game

Multiple markets, new strategic options
Currency fluctuation and exchange risk
Economic performance measured in multiple
currencies
Organizational complexity and diversity
Need to manage complex demands across
barriers of distance, time, language and
culture
MNE Influence in the Global Economy
Largest MNEs are as large as (and

perhaps more influential than) mid-sized
countries
Wal-Mart’s revenues 2010: $408 billion
Venezuela’s GDP 2010: $392 billion
Some industries completely dominated
by MNEs, including automobiles,
computers, and soft drinks
Motivations: Pushes & Pulls to Internationalize
Traditional motivations
Resource Seeking: Secure supplies, exploit factor
cost differences, e.g. TopGlove – Brazil & Indonesia
Market Seeking: Fill capacity, exploit economies of
scale and scope, e.g. China
Emerging motivations
Competitive positioning (or “global chess”): Need
global operations to pre-empt others, cross-subsidize
markets, secure profit sanctuaries, etc.
Global scanning: Access emerging trends, new
technologies, and best skills worldwide
International Expansion Motivation
Pre-1970
Market and Resource Seeking
 Secure raw materials
 Exploit factor cost differences
 Protect exports
 Provide growth 70s/80s
Competitive Positioning
 Match competitors
 Capture global scale
 Preempt markets
 Play “Global Chess” 90s/00s
Global Scanning/ Learning
 Global intelligence scan
 Access scarce knowledge
 Recruit skills, expertise
Means of Internationalization: Prerequisites
Foreign countries must offer location-specific

advantages
To motivate the company to invest there, e.g. local
government support, raw material source
Company must have ownership-specific
advantages or strategic competencies
To counteract its relative unfamiliarity with foreign
markets, i.e. what you are good in
Company must have organizational capabilities
To get better returns from leveraging strengths
internally rather than through external market
mechanisms such as contracts and licenses
Means of Internationalization: Processes
Classic internationalization process:

Incremental process of increasing
commitment and understanding of foreign
market (Uppsala Model – foreign market
entry as a learning process)
Today many companies short-cut this
process
In an Internet Age, today many companies
are even “Born Global” (e.g. Facebook,
Google, etc.)
How are companies ‘born global’?

By global entrepreneurs who “don’t automatically
buy raw materials from nearby suppliers or set
up factories close to their headquarters [but
who] … hunt for the planet’s best manufacturing
locations and scout for talent across the globe,
tap investors wherever they may be located, and
learn to manage operations from a distance – the
moment they go into business.”
Source: Isenberg, Daniel (2008). The global entrepreneur: A new breed of entrepreneur is thinking across borders – from day one. Harvard
Business Review, December.
These global entrepreneurs:

See distance as an opportunity; they use
distance to create new products or services
Articulate a clear global purpose
Strike alliances from positions of weakness
Manage global supply chains
Establish multinational organizations from the
outset
Source: Isenberg, Daniel (2008). The global entrepreneur: A new breed of entrepreneur is thinking across borders – from day one. Harvard
Business Review, December.
Entry Mode Alternatives
Export Investment
Indirect Greenfield
Direct (e.g. agent) Acquisition
Controlled (e.g. sales branch) Joint Venture
Capital Participation
Contractual
License
Franchise
Management/Service Contracts
Cooperation Agreements
Process of Internationalization
High Wholly-owned
Control over foreign activities
subsidiary
Joint venture
Franchising (local partner)
Licensing
Export (agent
or distributor)
Indirect
Low Export
Low High
Amount of resources committed to foreign market
Evolving Mentality:
International to Transnational
International Mentality: Company leverages its
domestic capabilities worldwide; managed as a
coordinated federation
Multinational Mentality: Company overseas markets
as portfolio of local opportunities; managed as a
decentralized federation
Global Mentality: Company views world as a single
unit of analysis; operations managed centrally
Transnational Mentality: Company simultaneously
responds to local needs, global demands, and cross-
border learning opportunities; managed as an
integrated network
Evolving Mentality
High
Global Transnational
Global Integration
International
Multinational
Low
Low High
National Responsiveness

Part 1: The Strategic Imperative Part 2: The Organizational Challenge Part 3: The Managerial Implications

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Part 1: The Strategic Imperative Part 2: The Organizational Challenge Part 3: The Managerial Implications

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Part 1 : The Strategic Imperative

Part 2 : The Organizational Challenge

Part 3 : The Managerial Implications

Chapter 1 # Expanding Abroad

Chapter 2 # Understanding the International Context

Chapter 3 # Developing Transnational Strategies

Chapter 4 # Developing a Transnational Organization

Chapter 5 # Creating Worldwide Innovation and Learning

Chapter 6 # Engaging in Cross-Border Collaboration

Chapter 7 # Implementing the Strategy

Chapter 8 # The Future of the Transnational

Chapter 1 # Expanding Abroad

Chapter 2 # Understanding the International Context

Chapter 3 # Developing Transnational Strategies

Characteristics of a true MNE:

Multiple operating environments

Global competitive game

Largest MNEs are as large as (and

Foreign countries must offer location-specific

Classic internationalization process:

How are companies ‘born global’?

These global entrepreneurs:

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