Evaluation of International Strategies and their Implementation Essay Example

is considered the future and one of the most difficult to achieve and pursue.

This scheme, which was previously considered impossible to implement and succeed, is now being proven otherwise by companies today (Hout et al., 1982). Despite being improbable to believe in, these companies show that this scheme can be successful. Practice demonstrates that it is still possible to have a cost-effective and personalized strategy at the same time.


Problem

The research aims to propose and hopefully solve the following inquiry: What is the essence of a multinational strategy and how can we determine if a company is implementing it?


Aim

This research paper aims to examine the theory behind multinational growth strategies and what makes them feasible. A real-life example will be used to analyze the application of multinational strategy in practice.


Theoretical framework

Growth serves as the driving force for organizations, leading to higher sales, profits, returns, or market share.

Every individual has their own interpretation regarding the proper strategies that organizations should adopt and implement in order to grow. It is widely understood that companies should first succeed in their domestic markets before considering expansion into other markets. Throughout the developmental process, companies must carefully analyze the conditions, costs, revenues, growth potential, cultural factors, political risk, and environmental issues to make the correct decision. There are various methods for establishing growth strategies, such as the Uppsala model, transaction costs approach, born global model, etc. (Andersson, 2009). This research paper primarily focuses on global strategies as a growth solution and specifically delves into the detailed application of multinational strategy.

According to Hill and Jones (1998), if a company gains typical competences, location economies, and experience curve advantages over

rivals, then global expansion is considered justified and approved. Many multinational enterprises have developed corporate multinational strategies in recent years by combining high levels of global standardization with high levels of local responsiveness (Engle et al., 2001). This literature review will examine the theoretical background of multinational growth strategies using Barlett and Ghoshal's (1989) 3-dimensional model. The authors describe three types of organizations: global organizations associated with a network striving for global productivity, transnational organizations fighting for local responsiveness, and international organizations focusing on worldwide learning within the network.

However, Bartlett and Ghoshal ( 1989 ) also recognized that the strategic demands of markets and industries are constantly changing. In many cases, single-dimensional strategies are no longer enough. Instead, companies must develop capabilities in all three dimensions. They can no longer rely solely on global scale efficiency. There is also a need for local responsiveness and global knowledge distribution and adaptation. Companies that want to succeed must excel in all three areas. Bartlett and Ghoshal ( 1989 ) describe the combination of all three single-dimensional strategies, in varying proportions, as the multinational solution. The first dimension includes the benefits of global integration, with cost efficiency being the most important.

The key characteristic of planetary companies that produce standardized products is their emphasis on global integration. This concept of global integration can also be utilized by multinational companies (Bartlett and Ghoshal, 1989). According to Hennart (2001), the concept of a multinational company revolves around using employment to establish mutual dependence between companies in different countries. This means that the costs of such an organization are outweighed by the benefits.

According to Hennart (2001), common dependence is advantageous for multinational

companies in various areas, such as certain types of knowledge, raw materials and components, marketing and distribution, and sometimes even financial capital, based on the theory of transaction costs. However, global presence offers more benefits than just cost efficiency. For instance, Sugden (1991, as cited in Pitelis, 2002, p.

Provinces that multinational houses gain control over working force and influence on trade brotherhoods. Besides, the mobility of TNC operations is contrasted with unconditioned stationariness of country-specific working force, which gives the former extra power to deal for favourable conditions. The 2nd and most delicate dimension in this theoretical account is national reactivity. Harmonizing to Hill and Jones ( 1998 ) , local reactivity, which can be understood as national, includes differences in costumiers ' gustatory sensations and penchants in substructure and traditional patterns, distribution channels and demands of the host authorities. In this manner, transnational endeavors create the competency centres or net income centres ( Taylor, 1991 ) which are responsible for both success of the centre and success of the MNE ( Barteltt and Ghoshal, 1989 ) . Trying to set to local fortunes, chief people in the MNE besides define the compensation scheme for payment which is from one side aligned to a corporate scheme, and from another side adjust to local system ( Festing, Eidems and Royer, 2007 ) .

For the company's growth, the main obstacle to expanding the business could be the lack of national or local responsiveness. This strategic model includes a unique third dimension, which is not commonly seen in other strategy models, called global learning. Global learning involves innovation and sharing of knowledge within the company. It is the

main distinguishing factor between international strategy and other strategies, where core competencies are transferred from the domestic market to foreign markets. On the other hand, Bartlett and Ghoshal (1989) offer a different understanding of global learning.

Multinational companies engage in planetary acquisition, which involves both acquiring foreign subordinates from the home country and acquiring home country companies from abroad. This process occurs in both directions, making it a two-way procedure. The transfer of innovation and knowledge occurs in both directions, raising questions about their effectiveness. To achieve efficiency, central offices establish multiple linkages with subordinates, fostering innovation and knowledge flow. By empowering local management and involving them in corporate decision-making processes, local innovation is supported. Additionally, multinational companies employ a combination of cost-leadership and differentiation strategies, transferring knowledge and competencies. This approach allows for cost effectiveness, local responsiveness, and global acquisition. By striking this balance, multinational companies achieve global competitiveness and flexibility in international operations.

However, all of these cannot be effectively handled without proper organization, which is equally important as strategy preparation. Therefore, they suggest a multinational organization that combines the three mentioned organizational structures and strives for competitiveness in all three dimensions. This form of corporation is also known as "being local worldwide" (Berggren, 1995). In this type of organization, the management structure is very clearly defined.

Global directors are responsible for centralizing resources such as merchandise, people, and information in one location, while also distributing resources to foreign countries using the integrated web (Henry, 2008). During the implementation process, their role also includes assigning international tasks to specialists and managers such as worldwide functional directors and country subordinate managers (Berggren, 1994; Bartlett et al., 2008).

It is important not to underestimate the role of middle managers in structures like this (Judge and Stahl, 1995). Cultural issues and language also play a significant role in this aspect.

According to Marschan, Welch and Welch (1997), language is essential in all aspects of business and should not be overlooked, but instead used strategically. They argue that language is a means of control and coordination within multinational companies and can be considered as part of the third dimension (Bartlett and Ghoshal, 1989). It is important to note that without a good level of language proficiency among employees, communication issues and barriers to knowledge transfer may arise. Global organizations use socialization to foster shared vision and encourage employees to identify with and support their company's vision. Understanding how multinational organizations balance local and global pressures in designing and implementing international compensation and rewards systems is also crucial (Bloom, Milkovich, and Mitra, 2002). This strategic approach reflects a high degree of internationalization, where achieving global competitiveness requires a combination of standardization and adaptation to local conditions.

After providing suitable definitions for the rudiments of the multinational growth scheme, it becomes evident that the existence of the multinational scheme is closely linked to the ultimate power of globalization. These multinational companies strive to achieve global presence and influence by operating at three dimensions and by targeting one country at a time, gradually. This tactic of working locally in order to attain global reach has proven successful for numerous companies and is heralded as the strategic approach for the future. However, there are authors such as Douglas and Wind (1998) who argue that if we have to work locally in

order to go global, then it is not truly globalization. It is suggested that the mere presence of numerous local companies and businesses operating solely within a specific market and owned by one company does not make the parent company global.

Despite being the story of "the coin," which represents two sides of the same object, it is important to mention that there are other approaches to multinational growth strategies.

Methodology

According to Denzin and Lincoln (2005, p.23) in their "Handbook of Qualitative Research," the impact of stages in the research process is defined. We apply their plan's logic to describe our methodology, including the theoretical paradigm we work within, choice of research strategy, and methods of collecting and analyzing data. This study is conducted within the rationalist paradigm, which means that the phenomenon being researched can be investigated through empirical observation. Additionally, positivism determines the scientific analysis methods that researchers should adhere to, specifically logic and deduction (Denzin and Lincoln, 2005, p.24).

Qualitative research was chosen as the research method for this survey, according to its purpose. Qualitative research is defined by Denzin and Lincoln (2005) as focusing on aspects of the research subject that cannot be quantified. This type of research gives priority to the socially constructed nature of reality, the close connection between the topic and object of study, and considers real-life situations in formulating inquiries. The aim of qualitative research is to understand the behavior of the subject and its underlying reasons. Since this investigation deals with data that will not be used for statistics, a large sample size is unnecessary. In fact, qualitative research allows for analyzing individual objects, such as specific cases, with

results applicable only to them (Denzin and Lincoln, 2005; Churchill and Iacobucci, 2005).

The primary factor that influenced our choice of research methods was their capacity to provide us with the most pertinent information for our work. This is in line with Denzin and Lincoln's (2005) argument that methods should be linked to theoretical paradigms and data collection methods. Consequently, we opted for case analysis as our primary research method. According to Churchill and Iacobucci (2005), case analysis refers to the examination of a specific instance of the phenomenon under investigation, and they emphasize the significance of documenting all data associated with the researched phenomenon.

It should also be noted that an additional method called a literature search was used to find suitable theories. This search was conducted in the university's library catalogue and the Science Direct database. The following keywords were utilized: organization scheme, multinational schemes, MNC, TNC, multinational schemes, growth schemes, multinational corporation. As a result, various books and articles were chosen that addressed the scope of our study. The case study approach includes several sources of information, such as interviews, observations, and document analysis.

Due to time constraints, it is not possible to conduct interviews and observations in the selected company. Therefore, the main method used in this research is the analysis of documents. These documents contain external information (i.e. not solely used within the company) that has been published, according to Churchill and Iacobucci's categorization (2005). They also include other scientific works on similar topics, interviews with the company's management, annual reports, etc. However, a questionnaire will be created for this company and included as a suggestion for future research.

Empirical information:

ABB (Asea Brown Boveri)

is a leading multinational company specializing in power and mechanization engineering. With approximately 117,000 employees, it operates in around 100 countries (Unknown, 2010b). The company was formed in 1987 through the merger of the Swedish company Asea and the Swiss company Brown Boveri, both of which were industry leaders with a century-long history (Taylor, 1991). ABB initially grew through active mergers and acquisitions worldwide (Taylor, 1991). However, it has now shifted its focus towards organic growth. Currently, around 60% of ABB's revenues come from markets outside Europe, and the company aims to expand its presence in emerging markets (Unknown, 2010a). ABB's strategy is to be "local global," meaning that it aims to benefit from both global integration and local sensitivity (Taylor, 1991; Berggren, 1996).

On a global level, the company benefits from an economic system achieved through global rationalization. The company's global rationalization program, focused on clients and supported by time-based management and a low-cost approach, has helped the company gain a competitive advantage (Beggren, 1996). Another strategic focus of the corporation is the specialization of local companies' products, resulting in better quality control and cost advantages (Taylor, 1991). However, ABB's preference for rationalization has a downside, which includes restructuring and downsizing low-performing firms after acquisitions. The extent of retrenchment and the importance of the acquired company to the host country's industry can lead to resentment (Taylor, 1991; Beggren, 1996).

However, these steps have proven effective for ABB by allowing them to reorganize underperforming units, reduce excessive costs, and increase net income, visibility, and accountability (Taylor, 1991). ABB also benefits from global integration by gaining significant power over suppliers as a major buyer. The company achieves economies

of scale by purchasing standardized products in bulk from a limited number of sellers (annual report). Additionally, ABB uses its influence to demand the highest quality and favorable conditions, including just-in-time deliveries and limited price increases (Taylor, 1991). ABB's accounting system called Abacus serves as an important tool for controlling the entire corporation.

The system collects financial data from local companies with balance sheets, allowing directors to access important figures and control the public performance of each company. It also helps identify underperforming companies and take prompt action to address the issue. ABB has implemented multidomestic organizations at the local level, which consist of national companies working together to support a multinational strategy. These organizations are designed to meet local demands and maintain productive relationships with stakeholders. ABB often manufactures products in the countries where they are sold, employing experts from local universities and maintaining positive relationships with local governments. This approach aims to create a "superlocal" business with specific expertise and profitable centers specialized for each activity in countries that offer the most benefits. In cases where local specialization is not feasible due to legal constraints, ABB can supply other countries from these locations (Taylor, 1991).

ABB places a strong emphasis on meeting local demands. An example of this is their production of engines for the Swiss Federal Railways, where they extensively analyzed various factors, including the terrain of the Alps, to ensure that their merchandise was suitable (Taylor, 1991). In terms of personnel, knowledge, and continuous learning, ABB provides opportunities for employees to improve and grow if they want to. They treat everyone with respect and provide thorough training to ensure they can adapt to

the ABB way of working. English is the official language used within ABB, and all employees are expected to be proficient in it (Berggren, 1996).

The purpose of giving people opportunities and chances to work with different ABB subordinates around the world is so that they can exchange experience and learn from each other. Additionally, this promotes interaction among employees and helps them build their own networks of contacts. There is free flow of information between different levels of the organization, and the company strives to maintain a low hierarchy and high visibility. This is why ABB uses the matrix structure. To facilitate the learning process, ABB has implemented a special Time Based Management system that helps the company understand what customers want and need in order to improve their service and products.

The organizational structure of the company is based on a 3-dimensional strategic matrix. This matrix includes a global division by business areas, a division by geographic regions, and a division by projects (Taylor, 1991; Berggren, 1996). At the business area level, product strategies are developed, production tasks are allocated to various factories, and export markets are determined for each factory. The division by business areas aims to achieve complete standardization of products and processes across all manufacturing units within a business area, making all industries interchangeable. Additionally, it facilitates the spread of established "best practices" as global standards among all plants (Berggren, 1996).

Standardization is important for maintaining consistent quality across all business units, regardless of the host country's local conditions (Beggren, 1996). At a broader level, the business unit dimension allows for efficient integration and opportunities for global economies of scale (Egelhoff, 1999). ABB

organizes its operations at a national level, with each national company being responsible for its performance and meeting local demands (Taylor, 1991). Local companies serve both domestic customers and export markets assigned by the business unit leader. For management purposes, ABB employs country managers who are responsible for developing customer-focused strategies and maintaining good relationships with local clients, governments, and communities (Taylor, 1991).

ABB has a significant level of autonomy to carry out executions. Directors at the local level are hired from the host country, allowing for increased knowledge and adaptation to local business practices. Payment systems are implemented for each competency center and management structure. The payment scheme is influenced by institutional, political, and cultural factors within the local system of each specific country.

Local force per unit areas have a significant impact on the definition of the rewards and compensation system. The concept of task dimension emerged in response to large-scale orders that required specialists from different business areas, making a planar matrix unsuitable (Berggren, 1996).

Analysis

The research paper will apply the theory of multinational strategy to the real-life case of the Swedish-Swiss merger ABB. From an outsider's perspective, a company that operates in over 100 countries and has more than 100,000 employees is considered a global company.

It is a known fact that ABB is a global company. However, this paper focuses on the application of ABB's multinational strategy and its implications. The analysis of ABB's multinational strategy will be conducted using the 3-dimensional model proposed by Bartlett and Ghoshal (1989): global integration, national responsiveness, and global learning.

Global integration

Based on empirical data, ABB has achieved global efficiency in various areas. This includes implementing a unified strategy

throughout the entire corporation, optimizing performance and structure, benefiting from global sourcing advantages, exploiting economies of scale, having capabilities to compete in large-scale projects, and optimizing geographic presence. These advantages align with Bartlett and Ghoshal's (1989) model, which suggests that improved efficiency is the primary benefit of a company's global integration.

In addition, these highly efficient countries can be compared to Hennart's (2001) assertion about multinational companies gaining significant advantages through factors sharing, such as expertise (as seen in ABB's optimization and streamlining of production processes) and materials or components (as exemplified by ABB's global sourcing and standardization). By redistributing job responsibilities globally, ABB obtained greater control over its workforce compared to if it operated solely within one country. This is because country-specific workers are inherently immobile, tied to one country, whereas multinational company operations are flexible, easily movable to different countries (Sudgen, 1991, as cited in Pitelis, 2002, p.).

132). Overall, the aforementioned benefits of ABB's cost-effective performance are enhanced by a planetary approach, whether directly or indirectly promoted.

Local responsiveness

In accordance with this strategy, ABB has established a multidomestic organization that allows them to promptly adapt to local conditions when conducting business locally. As a result, their ability to respond locally contributes to the overall success of their global operations. ABB aims to integrate and be perceived as a local entity in the host country through establishing local businesses with local employees, management, supply chains, adhering to local business practices, and fulfilling social responsibilities (Hill and Jones, 1998). They can thus focus on very specific regions in this way.

The CEO of ABB refers to the concern at this level as "superlocal". To achieve this, ABB

establishes specific competency centers or profit centers that are both profitable and independent. These centers also contribute to the overall success and profitability of the multinational enterprise (Bartlett and Ghoshal, 1989). From a management perspective, country managers (Berggren, 1994, Bartlett et al., 2008) are responsible for operating within their own country. They receive assistance from ABB's expertise worldwide in case any problems arise.

The success of net income centres relies on the recruitment of local directors who possess the skills, knowledge, talent, and dedication necessary for the job. Additionally, the successful implementation of multinational strategies requires a clear structure and defined roles for these directors to prevent confusion. Furthermore, to effectively manage a complex entity like ABB, it is crucial to use an appropriate payment system. ABB applies payment systems in each country taking into account the influence of the local system.

Employees should experience fairness in intervention in both local and global contexts. ABB must consider all factors, especially in developing countries that require significant adjustments to political and legal systems. To meet local demands, preferences, and requirements identified by Hill and Jones (1998), ABB customized a product for Swiss federal Railways. By creating global products that also adapt to local needs, ABB can maintain a competitive advantage and continue to grow.

Worldwide learning

The third dimension, and perhaps the most specific to a multinational strategy, is the continuous learning process and knowledge transfer, also known as worldwide learning.

ABB maintains its advanced position in the global market by integrating the third dimension of Barlett and Ghoshal's theoretical model (1989). Research indicates that ABB highly values Swedish culture and strives to incorporate elements of the Swedish way of conducting

business across all levels of the organization. This is achieved through continuous international training and by instilling awareness among the management level. ABB ensures that all of its directors undergo extensive management training to align with the corporation's culture, values, and beliefs. Once directors understand these aspects, they can effectively lead the company in the right direction. ABB aims to foster a sense of belonging to a unified global family among its employees, encouraging trust and belief in this family structure and reinforcing the knowledge that they can always rely on it.

The only way to develop this is through the sharing of information and experiences, which helps to build knowledge that can be passed on from employee to employee for many years to come. ABB demonstrates their support for the theory of the importance of middle management in a corporation, as discussed by Judge and Stahl (1995), by valuing and investing in the well-being and development of their middle management. ABB strives to provide opportunities for personal growth and challenges their employees to work in international settings. They encourage employees to apply for positions abroad and gain experience in other ABB offices around the world. This enhances the learning process and allows employees to gain a deeper understanding of the corporation's culture and global presence. This aligns with the network approach to managing people and resources, as discussed by Henry (2008) in theory.

According to Bloom, Milkovich, and Mitra (2002), ABB always abides by local compensation laws and ensures fair treatment of its employees.