The means and ends of creating worldwide advantage
Sources of competitive advantageStrategic National Scale economies Scope economies
objectives differences
Global efficiency Exploiting Expanding and Sharing of
differences in exploiting investments and
factor costs (wages, potential scale costs across markets
cost of capital) economies in each and businesses
and national activity
preferences
Multinational Managing risks Balancing scale Portfolio
flexibility and opportunities with strategic and diversification of
arising from operational risk and creation of
national flexibility options and side
differences bets
Worldwide Learning from Benefiting from Shared learning
learning societal differences experience – cost across
in organizational reduction and organizational
and managerial innovation components in
processes and different products,
systems markets or
businesses
Source: adapted from Bartlett and Ghoshal, 2000: 251
cost countries. This contrasts with multidomestic companies who, as we have
seen above, focus on differences in national preferences. The concentration
and centralization of production and R&D activities associated with a global
strategy limits flexibility and leaves companies following this strategy vulnera-
ble to political and currency risks. It also limits their ability to learn from
foreign markets.
Companies following a transnationalstrategy acknowledge that all of these
different combinations of means and ends have their own merits and might be
very suitable in specific industries. However, they realize that in today’s com-
petitive environment in many industries it might be necessary to achieve all
three strategic objectives at the same time(see also Section 4). And in contrast
to companies following a multidomestic strategy, companies following this
strategy use all the means available to achieve this end. However, as we will see
in Section 4, this is not an easy task and requires a very different organizational
structure.
38 International Human Resource ManagementTABLE 2.1