“Managing Across Borders, The Transnational Solution”

By: Christopher A. Bartlett and Sumantra Ghoshal - is about the Challenges of International Business

Particularly in 1980s.

Three Main Parts

“The Transnational Challenge” “Characteristics of the Transnational”

“Building And Managing The Transnational”

The first part, called “The Transnational Challenge”, deals mainly with conceptual issues like the definition of multinational, global and international companies as well as structural fit and administrative heritage. It tries to answer the question "why” nowadays transnational organizations are needed.

The second part, called “Characteristics of the Transnational”, describes mainly the three key attributes of the transnational organization. Which are the integrated network configuration of assets and activities, flexibility due to specialized roles and responsibilities and last but not least the facilitation of learning due to multiple innovation processes. It tries to answer the question “what” is the transnational organization.

The third part called “Building And Managing The Transnational” prescribes mainly what managers have to do in order to build and manage an organization that corresponds to the model of the transnational organization. Tries to answer the question “how” can a transnational organization be build.

The Transnational Challenge

Bartlett and Ghoshal argue that because of new pressures, which have transformed the global competitive environment, even the largest companies worldwide have to rethink their traditional strategies of doing international business. This means that especially these companies, but not only these companies, have to consider the adequacy of their organizational structures and processes.

During their studies Bartlett and Ghoshal investigated nine leading American, European and Japanese companies of the following three worldwide businesses: consumer electronic business (Matsushita, Philips, General Electric’s [GE]), branded packaged products business (Unilever, Procter & Gamble [P&G], Kao) and telecommunications switching business (Ericsson, NEC, ITT). They argue that three of the studied companies were losers or laggards.

“MANAGING ACROSS BORDERS:THE TRANSNATIONAL SOLUTION”

Regarding the new challenges (GE, Kao, ITT) and six companies survived but were battling to maintain viable competitive positions in the new environment (Matsushita, Philips, Unilever, P&G, Ericsson, NEC). As reasons for that the authors mention the very different strategic and organizational responses of different companies in different industries as well as rather organizational deficiencies than inappropriate strategic analysis.

Thus for example GE lost competitiveness because of a lack of global efficiency; Kaos internationalization failed because of its lack of national responsiveness and ITT struggled through because of its lack of worldwide learning and innovation. This means that the problem for managers of worldwide companies was not to recognize what they had to do to enhance their global competitiveness, the challenge was rather how to do this respective how to develop the organizational capabilities to do it. In short: The answer was obvious but the way of answering was obscure.

Bartlett and Ghoshal identify very different strategic characteristics of the three studied businesses during the past. Thus the consumer electronic business demanded basically global efficiency whereas the branded packaged products business required mainly national responsiveness and the telecommunications switching business called for innovations and there global transfer. Regarding the different strategic characteristics the author’s distinct three models of strategy respective three types of companies in international business: multinational, global and international companies

Three Types of Companies in International Business:

Multinational Companies build strong local presence through sensitivity and responsiveness to national differences.

Global Companies build cost advantages through centralized global-scale operations and,

International Companies exploit the knowledge and capabilities of the parent company through worldwide diffusion and adaptation.

The authors state, that because of the dramatically change of the strategic demands through environmental forces during the mid-1980s, the traditional approaches of managing worldwide businesses are not anymore an adequate response to the new challenges. Indeed the new solution and strategic challenge of managing a company’s worldwide operations in a highly competitive, volatile and changing business environment, is the transnational organization.

The reason for this is, that the performance of a company is no longer based on the fit of one-dimensional strategic requirements (responsiveness or efficiency or knowledge transfer) and the company’s dominant strategic capability, but rather on the ability of a company to achieve the three requirements at the same time. In order to develop these multidimensional strategic capabilities, companies have to go beyond the pure structural fit and have to increase their organizational flexibility by reshaping their administrative systems, communication channels and interpersonal relationships.