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In dealing with the environmental forces, global efficiency, flexibility and learning, to achieve success, worldwide operational managerial methods led to four management strategies known as international, multinational, global, and transnational (Bartlett & Beamish, 2014, p. 215). The following discussion compares and contrast how each strategy handles these forces.
An international strategy initially focuses on exporting products to foreign overseas markets with the product’s life-cycle as the time-based driving force and is very innovation driven (Bartlett & Beamish, 2014, p. 113). It is less efficient like a multinational but unlike a global strategy which has very well developed scale operations (Bartlett & Beamish, 2014, p. 216). Furthermore, because it’s not flexible to forces, it leaves the strategic responses to its local units; on the contrary, the multinational relies on its worldwide enterprise to respond to competition by responding in other areas while a global strategy uses an all-is-one approach by using all of its resources when responding to competition (Twarowska & Kąko, 2013, p. 1005). Finally, its learning is very challenging because flows from headquarters to subunits like globals but unlike multinational subunits which have localized learning with resource support from headquarters.
This strategy builds up local units and very resource rich national subsidiaries that can respond to local market needs or opportunities with localized products and strategies (Bartlett & Beamish, 2014, p. 113). For this reason, it is not very efficient like internationals and very far behind the curve when compared to global strategy. In addition, its
inflexibility like an international to change forces it to counter by strengthening areas of least resistance which differs from the flexibility in globals. This strategy has subunit-based learning which has difficulty producing good managers like internationals which contrasts from the global headquarter-to-subunits flow.
This strategy relies heavily on scope economies to place its products in the least cost and high value position (Bartlett & Beamish, 2014, p. 216). Unfortunately, it sacrifices flexibility like the latest developments in other countries and usually centralizing learning is sensitive to macroeconomic forces. However, studies show that they attempt to be flexible in responding to economic forces by deploying assets to other subunits and by creating allied networks to share knowledge from unit to unit (Johnson, Arya, & Mirchandani, 2013, p. 50).
The aforementioned strategies attempt to be competitive worldwide; however, they are incomplete and each have weaknesses that handicap their ultimate goal of gaining the ultimate advantage globally. That is why the transnational strategy strives to achieve efficiency, flexibility, and learning by responding to national differences, building up scale economies and achieving scope economies simultaneously which is a very ambitious endeavor (Bartlett & Beamish, 2014, p. 216).
The international company focuses on innovation while the multinational strives for differentiation and the global seeks to find the best-cost position. When seen from a transnational point of view, these are not whole or complete approaches. Unfortunately, a transnationals goal of applying all the strategies simultaneously presents another level of uncertainty that is not easy or straightforward to obtain (Bartlett & Beamish, 2014, p. 222).
Bartlett, C. A., & Beamish, P. W. (2014). Developing Transnational Strategies: Building Layers of Competitive Advantage. In Transnational Management Texas, Cases, and Readings in CrossBorder Management (7th ed., pp. 208-222). New York, NY: McGraw-Hill. Johnson, J., Arya, B., & Mirchandani, D. (2013). Global integration strategies of small and medium multinationals: Evidence from Taiwan. Journal of World Business, 48(1), 47-57. Retrieved from
https://login.databases.wtamu.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true &AuthType=ip,cookie,url,uid&db=bth&AN=83298781&site=ehost-live Twarowska, K., & Kąko, M. (2013). International Business Strategy – Reasons and Forms of Expansion into Foreign Markets. Paper presented at Active Citizenship by Knowledge Management & Innovation Proceedings of the Management, Knowledge and Learning International Conference 2013 19–21 June 2013, Zadar, Croatia, pp. 1005-1011. Retrieved from http://www.toknowpress.net/ISBN/978-961-6914-02-4/papers/ML13-349.pdf
In Reading 3.1 (Managing differences: The Central Challenge of Global Strategy); what are the main issues in Reading 3.1? How do you apply Reading 3.1 to Chapter three? Please discuss. Problematic business assumptions like balancing economies of scale and responsiveness to local differences in addition seeking to be more global strategically by emphasizing worldwide scale economies calls for a framework, Ghemawat calls it the AAA strategy, which can get around these issues of global integration (Bartlett & Beamish, 2014, p. 267).
The framework has three different types of global strategy. Adaptation pursues boost in revenues and market share by making the most of local relevance; aggregation delivers economies of scale with regional or global operations and opts for product or service standardization and combining development and production while arbitrage exploits differences between national or regional markets (Bartlett & Beamish, 2014, p. 267-268). The implementation of the AAA triangle is not straightforward, it’s challenging to implement two As, and almost impossible to achieve AAA status.
Implement an A Strategy
After financial statement analysis, high dollar values in advertising calls for adaption, if R&D dollars high aggregation, and arbitrage if labor cost high (Bartlett & Beamish, 2014, p. 269). Additionally, the type of organization is also taken into consideration, adaptation indicates a local relevancy like a multinational, aggregation cross-border integration like an international, and arbitrage that balances supply and demand across its global enterprise similar to a global strategy (Bartlett & Beamish, 2014, p. 268).
Implement an A to AA Strategy
Implementing AA, there are three different strategies, demands that organizations meet complex managerial demands and asset innovation; standing up structural buildings and style and socialization (Bartlett & Beamish, 2014, p. 269). First, adaptation and aggregation requires localized units with business sensitive market development units and only experience in both units qualify for higher than director level management. Second, aggregation and arbitrage requires a structure where global units focus on large customers and high scales; regional centers server medium scales and exploits regional differences, and nearshore centers offer small scales and build customer rapport locally (Bartlett & Beamish, 2014, p. 271).
Finally, arbitrage and adaptation may invest heavily in local units in selected markets and implement a two-person team responsible for that market’s success; in addition, the placement of the right skillsets are difficult to manage, thus IBM developed an algorithm to assist them manage those resources (Bartlett & Beamish, 2014, p. 272). A company may win by concretely beating them on any two dimensions or by striking a very good balance between any two dimensions.
Quest for AAA Strategy
The simultaneous implementation of AAA presents very complex it stresses managers across the enterprise, it forces an organization into unwanted multiple cultures which limits hitting more than one strategic target, competition savvy competitors can dictate what A a company has to beat them on, and finally it can force a refocusing of external partners (Bartlett & Beamish, 2014, p. 273). In summary, the tension between the three A’s must be weak or if they have a high-impacting advantage over competitors.
It’s difficult to integrate more than one A and the reading highlights a few of the integration issues. It recommends focus on one or two A’s, that the strategies fit well organizationally, use more than one integration method, don’t build from bottom-up try to externalize integration, and integration is not always the solution (Bartlett & Beamish, 2014, p. 277).
Integrating more than one A is a process, just like an MNE may start out with an international strategy and progress through multinational, global and some even to transnational. In applying both different types of strategies, AAA framework and transnational ones, the environmental factors play a big role in determining how to approach the implementation. Both types of strategies present complex challenges when trying to implement more than one simultaneously.
Bartlett, C. A., & Beamish, P. W. (2014). Developing Transnational Strategies: Building Layers of Competitive Advantage. In Transnational Management Texas, Cases, and Readings in CrossBorder Management (7th ed., pp. 208-222). New York, NY: McGraw-Hill. Bartlett, C. A., & Beamish, P. W. (2014). Managing Differences: The Central Challenge of Global Strategy. In Transnational Management Texas, Cases, and Readings in Cross-Border Management (7th ed., pp. 267-278). New York, NY: McGraw-Hill.