MIT Sloan Management Review

Corporate Strategy, International Business

 

Managing Across Borders: New Strategic Requirements

By Christopher A. Bartlett and Sumantra Ghoshal

July 15, 1987

INTERNATIONAL BUSINESSES FACED NEW STRATEGIC challenges in the 1980s. Corporations that had once succeeded with relatively one-dimensional strategies—efficiency, responsiveness, or ability to exploit learning—were forced to broaden their outlook. Successful “transnational” corporations integrated all three of those characteristics. They did so by building on the strengths— but accepting the limitations—of their administrative heritages. This is the first of two articles; the second will describe how actual companies made that transition. Ed.

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THE DEMANDS OF MANAGING in an international operating environment changed considerably over the past decade. In an increasing number of industries, the benefits of exploiting global economies of scale and scope enhanced the need for integration and coordination of activities. At the same time, volatile exchange rates, industrial policies of host governments, resistance of consumers to standardized global products, and the changing economies of flexible manufacturing technologies increased the value of more nationally responsive differentiated approaches.1 And with the emergence of competitive battles among a few large firms with comparable resources and skills in global-scale efficiency and nationally responsive strategies, the ability to learn— to transfer knowledge and expertise from one part of the organization to others worldwide—became more important in building durable competitive advantage. Managers of multinational companies (MNCs) are now faced with the task of optimizing efficiency, responsiveness, and learning simultaneously in their worldwide operations—which suggests new strategic and organizational challenges.

This is the first of two articles that explore this new situation; they are based on a research project that involved extensive discussions with more than 250 managers in nine of the world's largest multinational companies.2 In this article we will describe the strategic challenges these companies faced because of increasing complexity of environmental demands, and the ways in which they tried to respond to those... To read the complete article, login or sign-up using the form below.

 
 

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