Multinationals, when they are planning for the expansion, need to develop appropriate international strategies. MNCs and to a lesser extent other organizations conducting business in the international arena, must weigh two important factors â€“ the need to make optimum economic decisions on global basis and the requirement to be responsive to significant host-country differences. Accordingly, MNCs have three major strategy options: worldwide integration, national responsiveness and multi-focal emphasis.
World wide Integration:
A strategy aimed at developing relatively standardized product with global appeal, as well as rationalizing operations throughout the world.
Rationalization involves assigning activities to those parts of the organization, regardless of their location, that are best suited to produce the desired results and then selling the finished products where they are likely to yield the best profits. Thus, a multinational might consider such factors as costs, expertise, raw materials, and availability of capacity in deciding where particular work is to be done.
Economies of Scale:
An advantage that accrues from high-volume production; as the number of units produced increases the cost of producing each individual unit decreases.
Rationalization facilitates taking advantage of economies of scale and making the best use of worldwide organizational resources.
A strategy of allowing subsidiaries to have substantial latitude in adapting products and services to suit the particular needs and political realities of the countries in which they operate. Hence, this strategy sacrifices many of the potential advantages of worldwide integration. Subsidiaries operate almost as if they were national companies, although they retain many of the substantial benefits of being affiliated with a MNC, such as shared financial risks and access to global R&D resources. A national responsiveness strategy may be a successful approach in situations in which globalization is not feasible.
Strategy is aimed at achieving the advantages of worldwide integration whenever possible, while still attempting to be responsible to important national needs.
Thus this strategy encompasses both worldwide integration and national responsiveness. Organizations with multi-focal strategies are typically more difficult to mange because they need to be concerned with two dimensions simultaneously.