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A global strategy is based on the assumption that the consumption and production patterns of goods and services are homogenous worldwide and countries are interconnected. Multinational enterprises keep total control of their activities by centralizing decision-making global strategy to increase profits while reducing production costs. MNEs can execute global strategy and practice centralization by franchising, and creating whole subsidiaries, and transnational and standardization strategies.
The franchising strategy allows franchisees to legally sell goods and services according to the franchiser’s standards and rules. The franchiser sets the rules and manages, marketing, and selling the product (Hill & Hult, 2018). This strategy allows the franchiser to set the instructions to guide their franchisees on the business’s outlook and staff training (Hill & Hult, 2018). Creating whole subsidiaries occurs when a firm sets up a new operation in another country or acquires an already established firm and uses it for marketing its products. This global strategy allows the parent company to control the whole subsidiary’s operations (Hill & Hult, 2018). The parent companies have the right to take management and the subsidiary’s operations with immediate effect and control the strategies of the subsidiaries without facing disputes.
Adopting the transnational strategy enables the firm to run the business through a global perspective. The national borders do not affect the decisions of firms adopting this strategy (Hill & Hult, 2018). Therefore, the central firm’s managers use the world market as their management frame and make core decisions throughout its ventures (Hill & Hult, 2018). Additionally, standardization strategy enables the firm to produce goods and sell services to a broader market without customizing local conditions. The managers of the firms make significant decisions on the common activities of the firm. Examples of such activities are decisions to reduce global marketing costs and the design of the product.
Worldwide Product Structure
The organizational structure is the usual and system of value that an organization shares with its employees. The organizational structure of a firm is dependent on its business strategy. The appropriate global structure for an MNE with a worldwide strategy and has many alliance partners would probably be the worldwide area structure. This structure allows the division of the world market into different geographical areas, which are entirely independent and have their set of value creation activities (Hill & Hult, 2018). Additionally, the worldwide area structure allows decentralization of the authority of the firm’s operations and strategic decisions relating to the value creation activities (Hill & Hult, 2018). However, the headquarters maintain the control of finances and the authority for the firm’s strategic directions. The result enhanced responsiveness between partners, and they are allowed to make customizations of their product offerings, marketing, and business strategies to the local conditions.
Some of the adjustments that could be made are ensuring that the relationships between the partners are enhanced, and the organizational structure ensures the inclusivity of every partner’s ideas. Enhanced relationships build trust within the firms, thus allowing smooth operations and maximizing profits (Hill & Hult, 2018). Improving the relationships between the partners may present an opportunity for enhancing the local responsiveness and easing the transfer of core competencies. This would have a positive impact on the adoption of the worldwide area structure. Additionally, inclusivity ensures that every partner’s ideas are catered for and considered during decision-making processes (Hill & Hult, 2018). This allows the partners to feel a sense of belonging in the deal and reduces cases of conflict and dissolution that might arise due to differences in the strategies for the business.
Reference
Hill C. W.L. & Hult G. T. M. (2018). International business: Competing in the global marketplace, 13th edition. McGraw-Hill Education.
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