What is transnational strategy?
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A coordinated approach to internationalization in which the firm strives to be more responsive to local needs while retaining suffcient central control of operations to ensure efficiency and learning. Further, the transnational strategy combines the major strengths of both multi-domestic and global strategies while minimizing their disadvantages. Transnational strategy implies a flexible approach : standardize where feasible; adapt where appropriate.
How the strategy works?
The transnational strategy expects overseas subsidiary units to develop core competencies and contribute actively to the overall development of firm’s knowledge management capabilities and share it with other international locations. This strategy also uses both centralized and decentralized methods to promote interdependence and specialization of units. However, achieving this strategy is difficult because it puts conflicting requirements on firms to integrate activities across all units while being very responsive to local market needs.
In practice, managers implement transnational strategy by:
Exploiting scale economies by sourcing from a reduced set of global suppliers and concentrating the production of offerings in relatively few locations where competitives advantage can be maximized. Organizing production, marketing, and other value-chain activities on a global scale Optimizing local responsiveness and flexibility
Facilitating global learning and knowledge transfer
Coordinating competitive moves – that is, how the firm deals with its competitors, on a global, integrated basis.
What the Strategy requires?
Transnational strategy requires :
Uniform policies on a global basis.
Firm standardize products as much as possible while adapting them as needed to ensure ample sales in individual markets.
What are advantages
Transnational strategies can provide businesses with many advantages: A transnational strategy provides organizations with a web of global alliances that enable virtual operation of the business. Transnational strategy allows from mass customization; meaning that the basic processes are uniform but can be customized to individual countries. Transnational strategies also facilitate global e-commerce and customer service, better resource management, and streamlined manufacturing processes. These three items can help boost profits for companies and create competitive advantages. The empowerment of overseas business units to become the powerhouse of specialized innovation.
What are disadvantages
The disadvantages of focusing on a transnational strategy include cultural challenges, political and economic challenges, and infrastructure challenges. Cultural challenges include the difference of opinions, beliefs, values, tastes, and preferences of people of different countries or subsections of the world.A transnational strategy focuses on uniformity. What citizens of the United States like or demand may be different from what consumers in Asia, Europe, Africa, South America, or Australia want. Each of these areas has different values and beliefs that they favor.Different cultures also value different workstyles and relationships.
Companies may need to tailor strategies to the local preferences in order to be successful. Political and economic challenges can result from regulation practices, monetary policy, government involvement, or even censorship laws. Google decided to remove itself from China due to the censoring of the Internet by Chinese officials. Unrestricted Internet access is taken from granted in America, but longed for in other parts of the world. Finally, transnational organizations can face infrastructure challenges. Developing nations may not have the data capabilities or a fiber-optic network like those of the world’s superpowers. This and other infrastructure issues, including transportation, could impede the progress of a transnational strategy.