Week 3_Class 1_Developing Transnational Strategies

There are 3 main goals of worldwide competitive advantage (WCA)

1.Building Global Efficiency (based on need for global integration)

2.Building Multinational Flexibility (based on need for local responsiveness)

3.Building worldwide Learning (based on need for worldwide learning)

Similarly, there are 3 fundamental tools for building worldwide competitive advantage (WCA):

1.National differences

2.Scale economies

3.Scope economies

Efficiency = value of outputs / value of inputs

•The higher the value of outputs, the better the efficiency.

•The lower the cost of inputs, the better the efficiency.

In the global context:

•Global integration lowers the cost of inputs

•Local responsiveness increases the value of outputs

What is Multinational Flexibility?

The ability to manage risks and exploit opportunities arising from the diversity and volatility of the global environment

Sources of Diversity and Volatility:

•Macroeconomic risks (e.g. changes in prices and exchange rates),

•Political risks – think managing political risks!!!!!

•Competitive risks (e.g. uncertainties about competitors actions),

•Resource risks (e.g. availability of raw material)

•Diverse labour force

Multinational flexibility requires:

•Scanning and responding to discontinuities in the global environment – Think deglobalization or slowbalization!!!!

•Selecting most attractive markets, sensing their needs, and developing adaptive responses

•Understanding and managing different forms of risk

Building Multinational Flexibility - One Key take away

One Key take away is that companies should not try to go to every country. The decision to internationalize to any country should be strategic based on current threats or opportunities to globalization.

How to build Worldwide Learning (2)

Capture external diversity:

•Worldwide stimuli as a potential source of competitive information advantage and learning opportunities.

Leverage internal variety:

•Worldwide human resources and capabilities as potential sources of competitive advantage.

•Opportunity to leverage central and local innovations.

•Create true global innovation by linking sensing, response, and implementation capabilities – more on this in the next classes.