Explaining Transnational Strategy
The primary aim of this essay is to discuss about the transnational strategy that helps to deal with the issues and conflicts of local responsiveness and global efficiency. Transnational is one of the significant strategies that being exercised by the various companies to set up the business activities in the new market. A brief literature review on transnational strategy has been explained in the task. Additionally, the paper portrays that how MNE’s deal with conflicts and issues by using transnational strategy. There is a close relationship between culture and transnational strategy that further helps to meet the long term needs and requirements of the business. The impacts of culture on the transnational strategy also have been shown in the task briefly. More detail of this essay is drawn below.
It is stated by Stonehouse, Campbell, Hamill and Purdie (2009), an organization uses transnational strategy to grow and survive business in the international market. It has been analyzed that transnational strategy is quite different from the global strategy in that a global strategy or approach takes one product and sells and encourages it the same way around all channels to all people (Opentextbc, 2018). Transnational strategy may be defined as a more personalized approach to sell the products and services in the international market. It further helps in increasing and enhancing the sale of goods and services globally (Rudberg and West, 2008). It is elucidated that transnational strategy is a formation or hybrid strategy between multidomestic and global strategies that helps in growing the business internationally. It is noted that transnational strategy is used or initiated by the companies to balance the desire for efficiency and effectiveness with the need and requirement to adjust to domestic preferences and expectations within various countries (Sauvant, 2009). For a transnational strategy, the power and responsibility are simultaneously decentralized and centralized and the activities are grouped into a international matrix structure. The need and requirement for difficult integrating mechanism is very high and the organizational culture and value are very significant (Sauvant, 2009).
Transnational strategy seeks to unite the best of multidomestic strategy and a global strategy to get an effective and local responsiveness as well. For example, large fast food companies such as McDonald’s and KFC rely on the same core menu items and same core brand names across the globe. These companies make some concessions to domestic tastes too. In France, wine could be bought at McDonald’s. This strategy makes sense for the company just because wine is a central and core factor of French diets (Opentextbc, 2018). Apart from this, some other examples such as BMW and Ford motor Company are pursuing a transnational strategy to cope up with rivals in the international market. Ford motor company for example is identifying and focusing on the “world car”, developing and improving one core car that would be sold internationally. This strategy helps in reducing and eliminating the ford’s development costs. The company follows transnational strategy to take global benefits in the competitive market (Saylordotorg, 2018).
Examples of Transnational Strategy In Action
It shall be noted from the various analysis that organizational model for an adapted and implemented transnational marketing strategy which is completely different from all other strategies such as global and multi-domestic strategy. The main aim of this strategy is to capture or penetrate the local and international market as well. The transnational strategy endeavors to strike a balance between the level of standardization and the extent to which they must include country particular needs and requirements to their business functions, operations and activities. The transnational strategy is followed and exercised with the objective of attaining all three benefits such as international flexibility, global efficiency and worldwide learning. Rothaermel (2015) distinguish between three key aspects that transnational strategies develop and improve. In the following part an explanation of each of these attributes would be given.
Multidimensional perspectives: This aspect is managing and handling the national subsidiary management. A subsidiary is a firm that is partially or completely owned by another firm which is often referred to the parent company. This parent firm establishes the rules, regulations, norms and laws that subsidiaries in the foreign markets have to follow and the parent firm also posses the financial statements of the subsidiaries. This strategy is adopted by MNE’s to address and reduce the conflicts and issues in the competitive market. A strong, unique and national subsidiary management are addressing and resolving country’s specific needs, requirements and are able to sense and gauge changes and shifts in the international market. Working with subsidiaries is seen as a competitive benefit, due to the evidence that organizations effectively and fundamentally evaluate and response according to a country’s culture, preferences, tastes, views and systems. It shall be further portrayed that subsidiaries are able to keep an eye on the rivalries and act proactive when required. By implementing transnational strategy, MNE’s could able to attain a participative tool or framework, in which the parent firm and subsidiaries play a major role together.
Distributed, interdependent capabilities: After analyzing and evaluating the various nation needs, a transnational firm should make choices between these needs and requirements based on their significance and then response efficiently and dynamically. When the decision making process of multinational organizations is centralized, which is the case for example in a global strategy policy. It is further very difficult to react frequently and proper to various demands and expectations across the globe. The transnational strategy model is found as an integrated network of all parties included.
Organizational Model for Implementing Transnational Strategy
Flexible integrative process: This aspect handles and deals with the co-existence of formalization, socialization and centralization. In this situation, the parent company can make decisions that affect the national units, which is explained or outlined as centralization. Delegating and allocating activities and operations from subsidiaries and taking roles and responsibility are prescribed with formalization. Along with this, socialization is about the cooperation and collaboration of each of the national subsidiaries in the whole network, to share information, knowledge and experience. A literature given by Stonehouse et al (2009), transnational organizations aim to gauge and find a balance between the customization and standardization in their products and processes. As per the Rugman and Verbeke (2017), there are ample of elements that force organizations in today’s modern world to adapt their approaches and to shift more towards a transnational strategy. Thus, MNE’s has been able to gain various competitive benefits in the foreign market. It shall be noted that each and every country is differ in various ways because they follow different rules, norms and legislations that may affect the business operations. Along with that, each of these things could be the crucial reason for a market failure for various innovative retailers. It is elucidated that by implementing the transnational strategy, MNE’s can explore and expand the activities and functions in the foreign market.
According to Doole and Lowe (2008), initiating or implementing an effective transnational strategy is quite difficult task that have to be dealt by the companies. The process is often based on a international matrix structure. The organizations that motive to use a transnational strategy also need to accept or adapt such kind of hierarchically structure. It also includes intra organizational trade, knowledge transfer and strategic cooperation. It has been found that subsidiaries are highly interdependent on the operational and strategic level. The below diagrams depicts a global matrix structure entails of both the product and functional expertise that are aligned and integrated into various teams (Stonehouse et al, 2009). This further enables quick responses to the ample of needs and requirements in the global market.
By using such kind of structure, the company is more unique and flexible in all operations and activities. These operations include the design of products, service or a proactive responding to the key target audience for fulfilling the needs and requirements of them. It is stated that headquarter (HQ) has to be a flexible and invariable with both, countries and product groups. Due to the complexity of the structure, the managers and leaders have to face ample of issues in the new countries. Additionally, a worker could be a member of the multiple cross functional team. This makes MNE’s difficult to build and develop devotion to either one of the team or groups. Decision making process is also affected due to this strategy. It is further analyzed that transnational strategy is quite difficult and expensive to run the business functions in the new market. The implication is that organizations who use transnational strategy, needs to follow complex framework, structures and dynamic culture to communicate, collaborate and cooperate with customers in the new market. Thus, various challenges and issues are faced while implementing the business in the new market (Wilkins and Huisman, 2012).
Cultural Considerations for Transnational Strategy
It shall be observed by many authors in their research that when a MNE’s decides to move towards a transnational strategy, cultural preferences and differences shall be considered since each and every market has different and unique values. It is noted that cultural awareness is highly and extremely related to adaptation and standardization, cultural differences and knowledge sharing. Luthans and Doh (2012) stated that people cultural background, experiences, knowledge and values lead them unconsciously to do and see the things the way they do. It states that lack of knowledge and understanding of other culture, may end up people acting ineffectively and inappropriately. Thus, it is recommended that to be careful and efficiently with interpretations and differences. Otherwise misunderstandings and issues will occur that can turn into an unwanted and dangerous situation. Looking and analyzing the literature, there are various authors discussing and explaining about the cultures, values, norms and their culture related behavior and actions in various terms. Lichbach and Zuckerman (2009) stated that cultural awareness becomes central and unique when MNE’s has to interact and collaborate with people from other cultures while initiating the business activities. Culture is a capability to engage in a set of actions, behaviors and values that uses skills and qualities that are turned significantly to the culture based and attributes of the people with whom one communicates and interacts (Weber and Dacin, 2011).
It is concluded from the above discussion that transnational strategy plays a major and fundamental role in attain various competitive advantages in the international market. The common theories of transnational strategy or approach which holds the perspective that MNE’s in today’s globalization world need to consider a move from a international to a transnational strategy, which takes into account cultural habits, values and preferences of the new market. On the other hand, various challenges are encountered by the company while functioning internationally.
References
Doole, I. and Lowe, R., 2008. International marketing strategy: analysis, development and implementation. Cengage Learning EMEA.
Guetz.T. and Ahrens.I.2015. Transnational strategy shift: The importance of cultural awareness [Online]. Available from https://hb.diva-portal.org/smash/get/diva2:849153/FULLTEXT01.pdf [Accessed as on 25th October 2018].
Lichbach, M.I. and Zuckerman, A.S., 2009. Comparative politics: Rationality, culture, and structure. Cambridge University Press.
Luthans, F. and Doh, J.P., 2012. International management: Culture, strategy, and behavior. New York: McGraw-Hill.
Opentextbc.2018. Types of international strategies [Online]. Available from https://opentextbc.ca/strategicmanagement/chapter/types-of-international-strategies/ [Accessed as on 25th October 2018].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Rudberg, M. and West, B.M., 2008. Global operations strategy: Coordinating manufacturing networks. Omega, 36(1), pp.91-106.
Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Sauvant, K.P. ed., 2009. The rise of transnational corporations from emerging markets: threat or opportunity?. Edward Elgar Publishing.
Saylordotorg.2018. International strategy [Online]. Available from https://saylordotorg.github.io/text_international-business/s14-03-international-strategy.html [Accessed as on 25th October 2018].
Stonehouse, G., Campbell, D., Hamill, J. and Purdie, T., 2009. Global and transnational business: Strategy and management. John Wiley & Sons.
Stonehouse, G., Campbell, D., Hamill, J. and Purdie, T., 2009. Global and transnational business: Strategy and management. John Wiley & Sons.
Weber, K. and Dacin, M.T., 2011. The cultural construction of organizational life: Introduction to the special issue. Organization Science, 22(2), pp.287-298.
Wilkins, S. and Huisman, J., 2012. The international branch campus as transnational strategy in higher education. Higher education, 64(5), pp.627-645.
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