12.3) What do you see as the main organizational
problems that are likely to be associated with implementation of a
There is a lot of room in
this question for individual judgment and interpretation. Implementation difficulties include
communication issues, trust issues, multiple roles, flexibility and cultural
issues, among many others. For example,
with GM, some European operations may need to collaborate with operations in
13.5) If a firm is changing its strategy from an international to a transnational strategy, what are the most important challenges it is likely to face in implementing this change? How can the firm overcome these challenges?
The most important
challenges are likely to be related to control, as the firm moves from at least
a partial reliance on output measures and bureaucratic methods to one that will
require many formal and informal controls and integration mechanisms.
Significant performance ambiguities may occur with transnational
strategies. A way to address these
challenges is with a very strong culture and many integrating mechanisms.
Examples of companies addressing the complex challenges of a transnational
strategy are Ford, GM, Caterpillar, and ABB.
14.2) Discuss how the need for control over foreign operations varies with firms’ strategies and core competencies. What are the implications of the choice of entry mode?
If a firm’s competitive
advantage (its core competence) is based on control over proprietary
technological know-how, licensing and joint venture arrangements should be
avoided if possible so that the risk of losing control over that technology is
minimized. For firms with a competitive
advantage based on management know-how, the risk of losing control over the
management skills to franchisees or joint venture partners is not that great.
Consequently, many service firms favor a combination of franchising and
subsidiaries to control the franchises within particular countries or regions. The subsidiaries may be wholly owned or joint
ventures, but most service firms have found that joint ventures with local
partners work best for controlling subsidiaries.
14.5) A small Canadian firm that has developed some valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union. Its choices are given below. The cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside its reach. If these are the firm’s only options, which one would you advise it to choose? Why?
(a) Manufacture the product
at home and let foreign sales agents handle marketing.
(b) Manufacture the products at home and set up a wholly owned subsidiary in
(c) Enter into a strategic alliance with a large European pharmaceutical firm. The product would be manufactured in
If there were no significant barriers to exporting, then option (c) would seem unnecessarily risky and expensive. After all, the transportation costs required to ship drugs are small relative to the value of the product. Both options (a) and (b) would expose the firm to less risk of technological loss, and would allow the firm to maintain much tighter control over the quality and costs of the drug. The only other reason to consider option (c) would be if an existing pharmaceutical firm could also give it much better access to the market and potentially access to its products and technology, and that this same firm would insist on the 50/50 manufacturing joint venture rather than agreeing to be a foreign sales agent. The choice between (a) and (b) boils down to a question of which way will be the most effective in attacking the market. If a foreign sales agent can be found that is already quite familiar with the market and who will agree to aggressively market the product, the agent may be able to increase market share more quickly than a wholly owned marketing subsidiary that will take some time to get going. On the other hand, in the long run the firm will learn a great deal more about the market and will likely earn greater profits if sets up its own sales force.