- responses of competitors in the host market;
- resources, including natural, financial and human resources.
The very presence of multinational companies in diverse national
environments creates opportunities for worldwide learning. MNCs are exposed
to a wide range of different stimuli and this allows them to develop the diverse
resources and capabilities that give them the ability to innovate and exploit
these innovations worldwide (Bartlett and Ghoshal, 2000: 246). It is important
though that the MNC creates the mechanisms and systems to facilitate learn-
ing. The existence of diversity alone does not guarantee learning.
Linking means and ends: four different strategies
for multinational companiesTable 2.1 combines the sources of competitive advantage we discussed in
Chapter 1 with the strategic objectives summarized above. Bartlett and
Ghoshal (2000) distinguish four different strategic approaches that focus on
different combinations of the sources of competitive advantage (the means)
and strategic objectives (the ends).
Companies that follow a multidomestic^1 strategy will give prime importance
to one of the means– national differences – to achieve the different strategic
objectives. Global efficiency is realized mainly by increasing revenues, which
these companies achieve through differentiating their products and services to
respond to differences in consumers’ tastes and preferences and government
regulations. Through this responsiveness to national differences they also real-
ize the opportunities associated with multinational flexibility. Although com-
panies following this strategy do learn from local differences, most of this
learning remains within country borders: subsidiaries identify local needs, but
also use their own local resources to meet these needs. Bartlett and Ghoshal call
this local-for-local innovation.
Companies that follow an internationalstrategy focus primarily on one of
the ends– worldwide learning – and use the three different means available to
achieve this end. However, as Bartlett and Ghoshal indicate, most companies
following this approach limited it primarily to exploitation and transfer of
technologies developed at home to less-advanced overseas markets. They were
in fact following Vernon’s product life cycle theory as discussed in Chapter 1.
The drawback of this strategy is that although it is very efficient at transferring
knowledge across borders, it does not do a very good job in achieving either
global efficiency or flexibility.
For companies that follow a globalstrategy, meeting the objective of global
efficiency takes pride of place and all means are used to achieve this objective.
With regard to the means of national differences, however, global companies
focus on exploiting differences in factor costs, by locating production in low
Strategy and Structure of Multinational Companies 37