International Business Strategy

Lectorial 6
MNE’s Strategic Options
This Week’s Objectives
After the lecture, seminar and linked readings and reflection,
to
 Discuss the different strategic options available to MNEs in

building and sustaining competitive advantage

 Evaluate the challenges of managing innovation and

change processes within multinational enterprises

 Compare and contrast incremental and transformational

approaches to change
 Identify the role you would prefer to play within the

change process – do you see yourself as a manager, a

leader, and/or a change agent?
 Linking this week’s learning
to previous topics

 Having covered environmental issues at

the macro, industry and firm levels, we
are now ready to consider strategic
options available to the MNE. There are
many ways to do so, but we will focus
on innovation and change management
since these align with current market
trends (see figure on the next slide)
 Generating strategic options from
your prior analyses using TOWS
matrix List here the company’s key external
opportunities (O) as indicated in your
List here the company’s key external
threats (T) as indicated in your prior
prior analysis e.g. analysis e.g.

1.Key threat from megatrends analysis
2.Key opportunity from macro environmental
analysis
3. Key opportunity from industry analysis
4. Key opportunity from an analysis of your
stakeholder.
1. Key threat from megatrends analysis
2. Key threat from macro environmental
analysis
3. Key threat from industry analysis
4. Key threat from an analysis of your
stakeholders

List here the company’s key S0 SW

internal strengths (S) as
indicated your prior analysis ‘Max- Min’ Strategies
‘Max- Max’ Strategies’
1. Combine key strengths and key threats to
Combine key strengths and key opportunities
2. generate strategies that use strengths to
to generate strategies that use strengths to
3. minimise or defend against threats. E.g.
maximise opportunities. E.g. S2+O1
4 S3+T2
5.

List here the company’s key W0 WT

internal weakness (W) as
indicated your prior analysis ‘Mini- Max’ Strategies ‘Min- Min’ Strategies
1. Combine key weaknesses and key Combine key strengths and key opportunities
2. opportunities to generate strategies that to generate strategies that allow the firm to
3. minimise weaknesses by taking advantage of minimise weaknesses as well as defend
4 opportunities E.g. W2+O2 against threats. E.g. W2+T2
5.
Willetts (2021) Adapted from various
sources
Changing The Business Model
1) Customer Value Proposition
 Who are your target customers?

 What is the problem or need you will help them with?

 How will you meet their needs?

2) Key Resources (needed to deliver the CVP)

3) Key Processes (Porter’s Value Chain activities)
4) Profit Formula (costs and revenues)
Managers look at how these factors will vary
 as the SCALE of output rises

 over TIME – lead times, throughput, cash flows

 over SPACE – do you need to adapt the business model

when you move beyond your home market?

(Johnson, M.W., Christensen, C.M. and Kagermann, H. (2008)
Reinventing Your Business Model. Harvard Business Review.
86/12 p: 50)
 Innovation within the Life Cycle
(Frynas & Mellahi 2015: 350)

Product innovation: the development of a new or

enhanced product
Process innovation: the implementation of a new or
improved production or delivery method
 The Strategic Management Process:
Supports Innovation and Change
 Strategic management is “the process of strategic
decision-making that sets the long-term direction for
the organisation” (Frynas & Mellahi, 2011: 8)
 The central thrust of strategic management is achieving
a sustainable competitive advantage
 The strategy-making process involves ‘key decisions’
made by negotiation within the organization and with
its business partners and other interested parties
(stakeholders - Week 5)
 Many MNEs are in fact business groups with interlocking
shareholdings and a complex network of relationships
linking subsidiaries incorporated separately in each
location – this complicates negotiations further
 Capabilities and
Competitive Advantage
 Competitive advantage: The ability to use resources
effectively and to deliver
 a combination of price and performance valued by the
target group of buyers
 better than the competition
 generating superior profit levels for the firm
 Distinctive capabilities: a wide range including
innovation, flexibility and reputation (Week 4)
 Must create value for customers, be rare and hard to copy
 If they are valuable but not rare, they are necessary or
threshold – rather than distinctive or core – resources
 Innovation as a capability: springs from an
organisation’s ability to manage change and to learn
from experience and from environmental cues
 Three Models of Innovation
(Bartlett et al 2011: Ch 5)
 Central: pursuing efficiency
 Global strategy, centralised hub configuration, strong
product (business) managers
 Local: building responsiveness
 Multinational strategy, decentralised federation
configuration, strong geographic (area) managers
 Transnational: sharing learning
 Transnational strategy, integrated network
configuration, locally leveraged and globally linked
 MNEs: Motives, Strategies and
Organizational Configurations

Decentralized
Centralized Hub Federation
(Japan, 1970s) (Europe, 1930s)
Competitive
Resource seeking motives
positioning motives
Global strategy Multinational strategy
Integrated Network
(worldwide, 1990s onwards)
Global scanning motives
Transnational strategy Coordinated
Federation
(USA, 1950s)
Market seeking motives
International strategy
 Central Innovation (Japan 1980s)

I I

I S-R-I I

I I

• Headquarters Senses world-wide opportunities

• Centralised assets and resources favour unitary global Responses
• Implementing strategy is decided centrally and executed locally
• Typical of centralised hub configuration, positioning perspective
 Local Innovation
(Europe since 1930s)
S-R-I S-R-I

S-R-I S-R-I S-R-I

S-R-I S-R-I

• National units Sense local needs

• Distributed assets and resources allow local Response
• Local-for-local Implementation
• Typical of decentralized federation configuration, resource seeking
approach
 Transnational Innovation:
Two Emerging Processes
 Locally leveraged
 Local opportunity sensed – and responded to –
by subsidiary
 Implementation carried out worldwide
 Globally linked
 Shares the resources and capabilities of many
operations
 New activity is jointly created and managed
 The Integrated Network:
Locally Leveraged and Globally Linked

Centre: Co-ordinates flows of people, money and information

supporting a complex process of shared strategic decision
making

Centre

Subsidiaries: Develop specialised resources and capabilities

and then share them
Overall: this is a learning organisation, that is, a
knowledge-creating company (Nonaka 1991)
Managing Global R&D Networks
(Frynas & Mellahi 2011: 370)
 Networking Beyond the
Boundaries of the Organisation
 The learning organisation has its limits: tends to adopt
 evolutionary (small-step, or continuous) rather than

 revolutionary (episodic, disruptive) patterns of change

 Experience of Procter and Gamble (Huston and Sakkab 2006)

 example of Pringles potato crisps: application of radically

new printing technology to add words and pictures

 P&G had adopted the integrated network configuration in

late 1980s, but couldn’t make this leap alone

 Networking with outsiders (entrepreneurial SMEs)

supported cutting-edge new product development

 Markides C. And Geroski P. (2005) Fast Second. Wiley ebook:
suggests that
 SMEs are best at creating radical new markets

 Established corporations are best at scaling up and

consolidation - so both sides can gain from alliances
 Connection to our core text:
Frynas & Mellahi (2015) Ch 10
 Evolutionary, continuous change is also known as
incremental change (pp. 318-9)
 Revolutionary, disruptive change is also known as
transformational change (pp. 319-20)
 Our core text authors have referenced their table
on this (p. 319) to UHBS’ own Professor Ralph
Stacey – but beware...
 In Stacey’s view, transformational change (in
products and delivery methods: top down) is
different from transformational management
processes (interactions which change people’s
way of thinking through conversation)
 Differences between Incremental
and Transformational Change
Incremental change Transformational change

Management Leadership

Doing things better Doing things very differently

or doing more of them or doing different things

Bottom-up Top-down

Fundamental beliefs unaffected Fundamental beliefs changed

Efficiency Effectiveness
 Transformational Conversations
and Organisational Learning
De Wit & Meyer (2010: Ch 9, The Organizational Context)
 The organizational leadership perspective (Kotter 1990: What
Leaders Really Do. Harvard Business Review, 68, 3: 103-111):
organizations thrive when a strong leader runs them well
 Develops a distinctive vision and decides what to do: proposes
transformational change
 Inspires others and uses central control to ensure compliance
 The organizational dynamics perspective (Stacey 2007):
whether leaders like it or not, they are involved in an
interdependent relationship with their followers: they struggle
to make a difference and on a good day, they engage in
transformational conversations
 Through the interplay of intentions, people change their thinking
 Leaders help order to emerge by setting simple rules, influencing
the way followers think when solving problems: people use their
learning to make better business decisions
 Emergent strategy develops as organized chaos (Brown and
Eisenhardt 1998: Competing on the edge : strategy as
structured chaos . Harvard Business School Press)
Maybe it depends on their
style… (Frynas & Mellahi 2011: 331-333)
 Or maybe it depends on the skills of the
change agents
who work for them...
Change Agents: Key skills
(Frynas and Mellahi 2011: 325-331)
 Clear understanding of top management objectives

including how and why these change

 Political awareness – ability to mediate conflict

 Sensitivity to the views of employees including classic

phases of the coping cycle (denial, defence,

discarding, adaptation, internalization)
 Communication and negotiation

 Team-building and leadership

 Individual characteristics: energy, enthusiasm, high

tolerance of ambiguity and risk

 Maybe it depends on changes
in a firm’s industry
• McGahan, 2000, suggests changes in an industry vary
and therefore a firm’s response/ innovation should be
aligned to trajectory of evolution in its industry and
strategic response will depend on what is threatened by
the change (see figure on next slide) .
• The 4 trajectories of industry evolution identified by
McGahan include
• Progressive
• Creative
• Radical
• Intermediating
• Unlike other models, it addresses the different types of changes and
offers insights and approaches to addressing these 4 industry
changes.
 Types of industry change

McGahan, 2000
 Maybe change requires a
different mindset
McGrath (2013) suggests instead of
aligning strategies to changes in an
industry firms should instead focus on the
customer;
- Argues in an environment characterised by forces such as
digital revolution, weak barriers to entry and globalisation,
‘firms cannot afford to spend months crafting a single long
term strategy. They need a portfolio of multiple transient
advantages that can be quickly build and abandoned just as
rapidly.’
- Examples of companies that have adopted this mindset include
Cognizant, Brambles and Milliken & Company. The firms view
strategy as ‘more fluid, more customer- centric, less industry-
bound.’
 Strategy for Transient
Advantage
-Sustainable competitive advantage seen as an exception,
not a norm;
-To create a portfolio of transient advantages firms need the
following shifts in the way they operate
 Think about arena, not industries (industries boundaries are
increasing blurred and difficult to delineate);
 Set broad themes and let employees experiment (Adopted in firms
like Cognizant);
 Adopt metrics that support entrepreneurial growth;
 Focus on experiences and solutions to problems;
 Build strong relationships and networks;
 Avoid brutal restructuring; learn health disengagement;
 Get systematic about early- stage innovation
 Experiment, iterate, learn
Source: McGrath (2013)
 Given all the advice from experts why is
it difficult for MNEs to change

Münter, 2017
 Disruptive Innovation (A major
threat to MNEs)

Münter, 2017
 How firms can develop
capability to compete

https://youtu.be/KsJ4yTh9sMc
(Watch the video to get the most
from this diagram
Frugal Innovation

 With firm's struggling to find a profitable

niche some have turned to creative
solution to serve the bottom billion
profitably. This aligns well with some of
the megatrends discussed in week 1.

 Watch this video for more insights

(https://youtu.be/QH3p5WDpM3Q)
This Week’s Objectives
After the lecture, seminar and linked readings and reflection,
to
 Discuss the different strategic options available to MNEs in

building and sustaining competitive advantage

 Evaluate the challenges of managing innovation and

change processes within multinational enterprises

 Compare and contrast incremental and transformational

approaches to change
 Identify the role you would prefer to play within the

change process – do you see yourself as a manager, a

leader, and/or a change agent?