BUS804 - Transnational Strategy: MNEs Balancing Global Efficiency

This essay provides a critical literature review of the transnational strategy concept and assesses its effectiveness in helping multinational enterprises (MNEs) manage the conflicting demands of global efficiencies and local responsiveness. It begins by defining transnational strategy and differentiating it from global strategies, highlighting its role in balancing efficiency and adaptation to local preferences. The essay explores the key aspects of transnational strategies, including multidimensional perspectives, distributed interdependent capabilities, and flexible integrative processes. It further discusses the organizational structures and challenges associated with implementing transnational strategies, emphasizing the importance of cultural awareness and adaptation. The essay concludes that transnational strategy plays a crucial role in achieving competitive advantages in the international market, while acknowledging the challenges and complexities involved in its implementation. Desklib offers additional resources, including past papers and solved assignments, for students studying this topic.

Running head: International business strategy
International business strategy

International business strategy
(Essay on “critical literature review on the concept of transnational strategy and explain to
what extent you think such a strategy can help MNEs to deal with the conflicting demands
of global efficiencies and local responsiveness?)
The primary aim of this essay is to discuss about the transnational strategy that helps to deal with
the issues and conflicts of local responsiveness and global efficiency. Transnational is one of the
significant strategies that being exercised by the various companies to set up the business
activities in the new market. A brief literature review on transnational strategy has been
explained in the task. Additionally, the paper portrays that how MNE’s deal with conflicts and
issues by using transnational strategy. There is a close relationship between culture and
transnational strategy that further helps to meet the long term needs and requirements of the
business. The impacts of culture on the transnational strategy also have been shown in the task
briefly. More detail of this essay is drawn below.
It is stated by Stonehouse, Campbell, Hamill and Purdie (2009), an organization uses
transnational strategy to grow and survive business in the international market. It has been
analyzed that transnational strategy is quite different from the global strategy in that a global
strategy or approach takes one product and sells and encourages it the same way around all
channels to all people (Opentextbc, 2018). Transnational strategy may be defined as a more
personalized approach to sell the products and services in the international market. It further
helps in increasing and enhancing the sale of goods and services globally (Rudberg and West,
2008). It is elucidated that transnational strategy is a formation or hybrid strategy between
multidomestic and global strategies that helps in growing the business internationally. It is noted
that transnational strategy is used or initiated by the companies to balance the desire for
efficiency and effectiveness with the need and requirement to adjust to domestic preferences and
expectations within various countries (Sauvant, 2009). For a transnational strategy, the power
and responsibility are simultaneously decentralized and centralized and the activities are grouped
into a international matrix structure. The need and requirement for difficult integrating
mechanism is very high and the organizational culture and value are very significant (Sauvant,
2009).
Transnational strategy seeks to unite the best of multidomestic strategy and a global strategy to
get an effective and local responsiveness as well. For example, large fast food companies such as

International business strategy
McDonald’s and KFC rely on the same core menu items and same core brand names across the
globe. These companies make some concessions to domestic tastes too. In France, wine could be
bought at McDonald’s. This strategy makes sense for the company just because wine is a central
and core factor of French diets (Opentextbc, 2018). Apart from this, some other examples such
as BMW and Ford motor Company are pursuing a transnational strategy to cope up with rivals in
the international market. Ford motor company for example is identifying and focusing on the
“world car”, developing and improving one core car that would be sold internationally. This
strategy helps in reducing and eliminating the ford’s development costs. The company follows
transnational strategy to take global benefits in the competitive market (Saylordotorg, 2018).
It shall be noted from the various analysis that organizational model for an adapted and
implemented transnational marketing strategy which is completely different from all other
strategies such as global and multi-domestic strategy. The main aim of this strategy is to capture
or penetrate the local and international market as well. The transnational strategy endeavors to
strike a balance between the level of standardization and the extent to which they must include
country particular needs and requirements to their business functions, operations and activities.
The transnational strategy is followed and exercised with the objective of attaining all three
benefits such as international flexibility, global efficiency and worldwide learning. Rothaermel
(2015) distinguish between three key aspects that transnational strategies develop and improve.
In the following part an explanation of each of these attributes would be given.
Multidimensional perspectives: This aspect is managing and handling the national subsidiary
management. A subsidiary is a firm that is partially or completely owned by another firm which
is often referred to the parent company. This parent firm establishes the rules, regulations, norms
and laws that subsidiaries in the foreign markets have to follow and the parent firm also posses
the financial statements of the subsidiaries. This strategy is adopted by MNE’s to address and
reduce the conflicts and issues in the competitive market. A strong, unique and national
subsidiary management are addressing and resolving country’s specific needs, requirements and
are able to sense and gauge changes and shifts in the international market. Working with
subsidiaries is seen as a competitive benefit, due to the evidence that organizations effectively
and fundamentally evaluate and response according to a country’s culture, preferences, tastes,
views and systems. It shall be further portrayed that subsidiaries are able to keep an eye on the

International business strategy
rivalries and act proactive when required. By implementing transnational strategy, MNE’s could
able to attain a participative tool or framework, in which the parent firm and subsidiaries play a
major role together.
Distributed, interdependent capabilities: After analyzing and evaluating the various nation needs,
a transnational firm should make choices between these needs and requirements based on their
significance and then response efficiently and dynamically. When the decision making process
of multinational organizations is centralized, which is the case for example in a global strategy
policy. It is further very difficult to react frequently and proper to various demands and
expectations across the globe. The transnational strategy model is found as an integrated network
of all parties included.
Flexible integrative process: This aspect handles and deals with the co-existence of
formalization, socialization and centralization. In this situation, the parent company can make
decisions that affect the national units, which is explained or outlined as centralization.
Delegating and allocating activities and operations from subsidiaries and taking roles and
responsibility are prescribed with formalization. Along with this, socialization is about the
cooperation and collaboration of each of the national subsidiaries in the whole network, to share
information, knowledge and experience. A literature given by Stonehouse et al (2009),
transnational organizations aim to gauge and find a balance between the customization and
standardization in their products and processes. As per the Rugman and Verbeke (2017), there
are ample of elements that force organizations in today’s modern world to adapt their approaches
and to shift more towards a transnational strategy. Thus, MNE’s has been able to gain various
competitive benefits in the foreign market. It shall be noted that each and every country is differ
in various ways because they follow different rules, norms and legislations that may affect the
business operations. Along with that, each of these things could be the crucial reason for a
market failure for various innovative retailers. It is elucidated that by implementing the
transnational strategy, MNE’s can explore and expand the activities and functions in the foreign
market.
According to Doole and Lowe (2008), initiating or implementing an effective transnational
strategy is quite difficult task that have to be dealt by the companies. The process is often based
on a international matrix structure. The organizations that motive to use a transnational strategy

International business strategy
also need to accept or adapt such kind of hierarchically structure. It also includes intra
organizational trade, knowledge transfer and strategic cooperation. It has been found that
subsidiaries are highly interdependent on the operational and strategic level. The below diagrams
depicts a global matrix structure entails of both the product and functional expertise that are
aligned and integrated into various teams (Stonehouse et al, 2009). This further enables quick
responses to the ample of needs and requirements in the global market.
(Source: Guetz and Ahrens, 2015)
By using such kind of structure, the company is more unique and flexible in all operations and
activities. These operations include the design of products, service or a proactive responding to
the key target audience for fulfilling the needs and requirements of them. It is stated that
headquarter (HQ) has to be a flexible and invariable with both, countries and product groups.
Due to the complexity of the structure, the managers and leaders have to face ample of issues in
the new countries. Additionally, a worker could be a member of the multiple cross functional
team. This makes MNE’s difficult to build and develop devotion to either one of the team or
groups. Decision making process is also affected due to this strategy. It is further analyzed that
transnational strategy is quite difficult and expensive to run the business functions in the new
market. The implication is that organizations who use transnational strategy, needs to follow
complex framework, structures and dynamic culture to communicate, collaborate and cooperate

International business strategy
with customers in the new market. Thus, various challenges and issues are faced while
implementing the business in the new market (Wilkins and Huisman, 2012).
It shall be observed by many authors in their research that when a MNE’s decides to move
towards a transnational strategy, cultural preferences and differences shall be considered since
each and every market has different and unique values. It is noted that cultural awareness is
highly and extremely related to adaptation and standardization, cultural differences and
knowledge sharing. Luthans and Doh (2012) stated that people cultural background, experiences,
knowledge and values lead them unconsciously to do and see the things the way they do. It states
that lack of knowledge and understanding of other culture, may end up people acting
ineffectively and inappropriately. Thus, it is recommended that to be careful and efficiently with
interpretations and differences. Otherwise misunderstandings and issues will occur that can turn
into an unwanted and dangerous situation. Looking and analyzing the literature, there are various
authors discussing and explaining about the cultures, values, norms and their culture related
behavior and actions in various terms. Lichbach and Zuckerman (2009) stated that cultural
awareness becomes central and unique when MNE’s has to interact and collaborate with people
from other cultures while initiating the business activities. Culture is a capability to engage in a
set of actions, behaviors and values that uses skills and qualities that are turned significantly to
the culture based and attributes of the people with whom one communicates and interacts (Weber
and Dacin, 2011).
It is concluded from the above discussion that transnational strategy plays a major and
fundamental role in attain various competitive advantages in the international market. The
common theories of transnational strategy or approach which holds the perspective that MNE’s
in today’s globalization world need to consider a move from a international to a transnational
strategy, which takes into account cultural habits, values and preferences of the new market. On
the other hand, various challenges are encountered by the company while functioning
internationally.

International business strategy
References
Doole, I. and Lowe, R., 2008. International marketing strategy: analysis, development and
implementation. Cengage Learning EMEA.
Guetz.T. and Ahrens.I.2015. Transnational strategy shift: The importance of cultural awareness
[Online]. Available from http://hb.diva-portal.org/smash/get/diva2:849153/FULLTEXT01.pdf
[Accessed as on 25th October 2018].
Lichbach, M.I. and Zuckerman, A.S., 2009. Comparative politics: Rationality, culture, and
structure. Cambridge University Press.
Luthans, F. and Doh, J.P., 2012. International management: Culture, strategy, and behavior.
New York: McGraw-Hill.
Opentextbc.2018. Types of international strategies [Online]. Available from
https://opentextbc.ca/strategicmanagement/chapter/types-of-international-strategies/ [Accessed
as on 25th October 2018].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Rudberg, M. and West, B.M., 2008. Global operations strategy: Coordinating manufacturing
networks. Omega, 36(1), pp.91-106.
Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Sauvant, K.P. ed., 2009. The rise of transnational corporations from emerging markets: threat or
opportunity?. Edward Elgar Publishing.
Saylordotorg.2018. International strategy [Online]. Available from
https://saylordotorg.github.io/text_international-business/s14-03-international-strategy.html
[Accessed as on 25th October 2018].

International business strategy
Stonehouse, G., Campbell, D., Hamill, J. and Purdie, T., 2009. Global and transnational
business: Strategy and management. John Wiley & Sons.
Stonehouse, G., Campbell, D., Hamill, J. and Purdie, T., 2009. Global and transnational
business: Strategy and management. John Wiley & Sons.
Weber, K. and Dacin, M.T., 2011. The cultural construction of organizational life: Introduction
to the special issue. Organization Science, 22(2), pp.287-298.
Wilkins, S. and Huisman, J., 2012. The international branch campus as transnational strategy in
higher education. Higher education, 64(5), pp.627-645.