The drive of this study is to understand what is the purpose of transnational strategy, how does it work for MNEs and to what extant does it help global companies to deal with issues of global efficiencies and local responsiveness. In order to provide deeper understanding of transnational strategy term the analysis of existing studies would take place. It is important to understand what is current global situation for MNEs. The literature will go through essential terms such as Globalisation and Multinational enterprises in order to help highlight the affects on transnational strategy.
After applicable literature would be observed the answer to the question “to what extent do you this such strategy can help MNEs to deal with the conflicting demands of global efficiencies and local responsiveness?” would be provided in the conclusion. Globalisation We live in fast moving world where many different businesses provide different products and services in different markets around the world. However the way organisations operate today is very unlike to what they used to a couple of decades before. There were several big shifts that have helped to transform the market. The Globalisation made it easier for companies to do business abroad but term Globalisation is still poorly understood and needs more studies in order to apply it (Rugman and Verbeke, 2004).
Although it was stated in the studies of Hartungi (2006) Globalisation maximize the markets for goods, services and capital while minimizing the boundaries of markets. Hence other studies have showed that Globalisation opens a lot of advantages such as economy of scale or bigger markets to various businesses. However it could also bring some challenges such as cultural differences, language barrier or government policies. It is very hard to be global brand and function business the same way in different countries because consumers have different perceptions, background and cultural standards. Due to Globalisation many countries have opened up the trading barriers so they can increase their GDP of the countries (Johnson, 2002). It also opened up the opportunities for foreign investments, which local businesses could benefit from.
There is an affect of Globalisation on the world for example because of open boundaries and accesses to other courtiers’ goods the global market became more alike, which have made it easier for business to operate globally with same products and services. However there are still some issues due to background of the costumers and cultural differences (Swyngedouw, 2004). GlocalisationIt was previously mentioned that the world is in constant change and in order to survive everyone should adapt to the changes.
So Globalisation have also faced the affect of the change and had to evolve with it. Therefore the term Glocalisation have appeared. The Glocalisation is combination of local and global (Robertson, 2012). It could additionally be considered to be know as a expression for more direct meaning of micro-marketing, when the firm is modifying marketing campaigns of their services or products on global premises to differentiate on local markets. Even though the global market is considered to be more opened and similar there are still some essential factor that each company should consider at any stage of their strategies e.
g. culture, history or ethics (Swyngedouw, 2004). Therefore the perceptions on same object could never be the same to several groups of individuals. Thus the issue of “local assertions against globalising trends” arises.Multinational Enterprises MNEs or Multinational Enterprises are companies that operate different businesses among many countries in the world with its subsidiaries and affiliates (igi-global.com, 2018). The multinational enterprises play huge role in global scale for R;D, innovations and patenting. As they are operating in many different markets MNEs could usually benefit from economy of scale and they have large capital that they could spend on innovations as they are more secure about the risk decisions due to their financial stability (Innovation Policy Platform, 2018).
The Internet has also brought some benefits to the organisation and made it easier to trade with other courtiers. As the world is constantly changing there is a need to adopt and evolve according to the change. Thus companies might face pressures such as global-scale efficiency, local responsiveness or opportunities for leveraging knowledge and skills among worldwide operations. Therefore there are different strategies that could be used by MNEs in order to achieve the goal and be efficient globally while considering cultural differences and needs (Opentextbc.ca, 2018). The MNEs are the companies that are targeting different markets with similar products globally, but the needs of each market are unique so the best solutions for MNEs are to adopt their goods and services according to local preferences.
Transnational Strategy “An international business structure where a company’s global business activities are coordinated via cooperation and interdependence between its head office, operational divisions and internationally located subsidiaries or retail outlets. A transnational strategy offers the centralisation benefits provided by a global strategy along with the local responsiveness characteristic of domestic strategies” – Monash Business School (2018). Even though the global market has become more similar some parts of the business should be adopted according to the target market e.g. R;D and Marketing (Rugman and Verbeke, 2004). So the key feature of this transnational strategy is to implement the culture to the basis of operations in the target market. The company that adopts this strategy combines components of Global and Multinational organisations as they are trying to response at the same time to strategic needs of local responsiveness and global efficiency (Harzing, 2000).
Hence the company could operate as an independent network due the local market situation. Therefore organisation could persuade general goal while adopting strategy to operational markets (Harzing, 2000). The best example of MNEs using transnational strategy is McDonald’s where they provide the same range of products e.g. Big Mac, French fries or Pies. Nonetheless some countries do require certain products that fit to their food culture such as rice options in Asian countries or wine beverage in France. As it was stated by Harzing (2000) that the actions head quarters are not as important as local subsidies of the organisation because subsidies do understand the market deeper and better.
However the knowledge from subsidies could be passed through organisation and provide solutions in different market. The opportunities of transnational strategy for MNEsThere are several benefits that MNEs could gain after adopting transnational theory. Those benefits could be both operational and product orientated (Rugman and Verbeke, 1992). The global market provides larger scale of suppliers and raw materials. Also corporations could benefit from options of labour source from different countries.
Labour could be seen as one of the competitive advantages of the company as each person could bring experience and new ideas to the business (Boyce, 2018). Moreover in terms of products there is one of the key benefits is that if the products are adapted to the particular market they fit better to local need of the target audience. Moreover if the products satisfy consumer’s expectations they are going to be build brand loyal and can create stronger brand relations. The chances of repeat purchase will increase due to close fit to consumer’s needs and wants.
As it was mentioned before corporations that adopt transnational strategy apply one ideology through whole company but with the adjustments to certain markets therefor the expertise is transferred through the company (Harzing, 2000), which means that experience of one sub-company could be implemented to another with in similar cultural standards e.g. Ukraine and Russia. However not all the business industries could adopt the transnational strategy. The example the educational sector, many universities have abroad campuses where they teach student the same way as in the host country (Wilkins and Huisman, 2012). Conversely the issues of culture and credibility arise and that does not benefit the market and the businesses the same time so this strategy should fit perfectly to core idea of business otherwise it will not work. There are some disadvantages of this strategy as well. If the company wants to adopt their products to target market they have to understand the culture and the needs better, therefore the costs of R&D would be higher.
Even though if the company might be already well established and has awareness in the market more localised campaigns has to be created, so the marketing costs would increase too. The challenges are different from MNEs to MNEs. For example for Disney they had evolve fundamentals of the businesses in order to operate in Hong-Kong. Disney had to adapt the price strategy, the sale strategy, marketing and had to renovate the premises to fit Chinese demand. Nevertheless if MNEs adopt transnational strategy there are higher chances for the company to succeed in particular market (Matusitz, 2009). Local responsiveness and global efficiencies Through the study it was highlighted many times that culture has huge influence over the consumer behaviour and that it is very important to adjusts business strategies according to the target market.
The Globalisation have made it easier for businesses to operate on large/ global scale and made market more alike, but the Glocalisation states that is it crucial for MNEs to imply different strategies for R&D and marketing departments due to micro-marketing concept. However the Globalisation have increased the competition so it is very important for global organisations be globally efficient as well as locally responsive (Paik and Sohn, 1994). The standardize products and operations are the key to economy of scale and global efficiency but it import not to forget that there are some market that do demand localisation otherwise companies will not succeed in the market. The best example of MNEs that has perfect balance of both criteria is Coca-Cola. Coca-Cola has one general product that is available all around there world, it is well established however they have adopted their operations in countries like China and India as well as in each country they provide adopted advertising that represents their value.
Conclusion To sum up the transnational strategy is when organisation operate their business through around the world with the application of micro-marketing concept and cultural aspects of target market into the ideology of the whole business. There many aspects that have force MNEs to have urge of adapting such strategy. As it was mentioned earlier Globalisation opened up a lot of opportunities for businesses to operate globally, however it also boosted challenges like competitions. In order to survive MNEs had to Glocalise their strategy so they can differentiate themselves from others and build strong image and relationship with consumers in the market that they are targeting.