International Human Resource Management-MJ Version

human resource management. In the next chapters we will see that human
resource management is of fundamental importance in realizing an efficient
and effective multinational company. In the remainder of this chapter, we will
discuss the strategy and structure of multinational companies.

3 SOURCES OF COMPETITIVE ADVANTAGE AND

STRATEGIC OBJECTIVES

In the previous chapter we discussed how Ghoshal (1987) identified three
fundamental ways of building global competitive advantage for multinational
companies. In later work these meansfor achieving worldwide competitiveness
were linked to the different endsin terms of strategic objectives. In this section
we will discuss the three major strategic objectives of multinational companies
and will show how MNCs following different competitive strategies use differ-
ent combinations of means and ends. In a final subsection, we will discuss
work by Rugman and Verbeke that links the transactions cost theory of inter-
national production as discussed in Chapter 1 to the competitive strategies
identified by Bartlett and Ghoshal.

Strategic objectives

Bartlett and Ghoshal (2000) discuss three different strategic objectives for
multinational companies. They argue that multinational companies need to
meet the challenges of global efficiency, multinational flexibility and world-
wide learning. It is important to realize that global efficiencycan be enhanced
both by increasing revenues and by lowering costs. Global integration of acti-
vities allows firms to realize economies of scale and scope and hence leads to
lower cost. Most authors have focused on this part of global efficiency.
However, firms can also increase their revenues by differentiating their prod-
ucts to respond to national differences in tastes, industry structures, distribu-
tion systems and government regulations (Bartlett and Ghoshal, 2000: 242).
Multinational flexibilityis defined as ‘the ability of a company to manage
the risks and exploit the opportunities that arise from the diversity and volatil-
ity of the global environment’ (Bartlett and Ghoshal, 2000: 243). Bartlett and
Ghoshal identify four sources of diversity and volatility that can offer both
risks and opportunities:

• macro-economic factors, such as wars, interest and wage rates, exchange rates;


• policy actions of national governments, such as expropriation and changes in
  exchange rates;

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