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In this chapter, we discuss how the numerous conflicting demands and pressures described in the first two chapters shape the strategic choices that MNEs must make. In this complex situation, an MNE determines strategy by balancing the motivations for its own international expansion with the economic imperatives of its industry structure and competitive dynamics, the social and cultural forces of the markets it has entered worldwide, and the political demands of its home- and host-country governments. To frame this complex analysis, this chapter examines how MNEs balance strategic means and ends to build the three required capabilities: globalscale efficiency and competitiveness, multinational flexibility and responsiveness, and worldwide innovation and learning. After defining each of the dominant historic strategic approaches – what we term classic multinational, international, and global strategies – we explore the emerging transnational strategic model that most MNEs must adopt today. Finally, we describe not only how companies can develop this approach themselves but also how they can defend against transnational competitors.
The strategies of MNEs at the start of the twenty-first century were shaped by the turbulent international environment that redefined global competition in the closing decades of the twentieth century. It was during that turmoil that a number of different perspectives and prescriptions emerged about how companies could create strategic advantage in their worldwide businesses.
Consider, for example, three of the most influential articles on global strategy published during the 1980s – the decade in which many new trends first emerged. Each is reasonable and intuitively appealing. What soon becomes clear, however, is that their prescriptions are very different and often contradictory, a reality that highlights not only the complexity of the strategic challenge that faced managers in large, worldwide companies but also the confusion of advice being offered to them.
• Theodore Levitt argued that effective global strategy was not a bag of many tricks but the successful practice of just one: product standardization. Here the core of a global strategy lay in developing a standardized product to be produced and sold the same way throughout the world.
• In contrast, an article by Michael Porter and his colleagues suggested that effective global strategy required the approach not of a hedgehog, who knows only one trick, but that of a fox, who knows many.
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