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Global strategy and the multinational corporation
Published on May 30, 2022 3 min
Other Talks in the Series: Key Concepts: Introduction to Strategy
Hello and welcome to this series of introductory talks on business strategy. My name is Robert Grant. I'm a professor of strategic management, at Bocconi University in Milan, Italy. I'm also the author of 'Contemporary Strategy Analysis', a leading strategic management textbook used in business programmes throughout the world.
What about when a firm has internationalised? That is when it is a multinational corporation. How does it determine its international strategy? There are two basic choices here. A multi-domestic strategy or a global strategy. A multi-domestic strategy is when a firm views the world as a set of separate national markets and establishes national subsidiaries with a high degree of autonomy in serving each market. A global strategy involves viewing the world as a single market. A classic global strategy would have been that that many Japanese companies undertook during the 1960s and 1970s. For example, Honda produced all its motorcycles within Japan and then exported them to the rest of the world. However, most multinational corporations have moved to what I refer to as Global strategy 2.0. This involves reconciling global scale economies with national differentiation.
How the reconciliation between global scale economies and national differentiation takes place depends upon the characteristics of the industry. In some industries, the benefits of global integration as a result of very massive levels of scale economy, and conversely, there are few benefits of national differentiation. In industries such as jet engines and semiconductors, a very global approach will be followed. Conversely, in some other industries, there may be very few benefits of global integration. Whereas, there may be substantial need to nationally differentiate the offerings. In some of these industries, we may see that there are in fact very few multinational corporations, as is the case of funeral services.