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- Strategy Formulation and Implementation by Multinational Corporations
- Approaches to Strategy Formulation and Implementation
- Comparison of Vodafone, MEC and Benetton in Strategy Formulation and Implementation
- Related Management essays
As the borderless economy continues to spread across different regions, most companies inclined to global dealings expand their operations beyond the borders of their home country. These firms are referred to as multinational corporations (MNCs) or multinational enterprises (MNEs). By definition, a multinational corporation is a commercial business enterprise, which engages in the manufacture and distribution of goods and services across geographical boundaries of different nations. Multinational corporations have been recognized as valuable contributors to the global economy especially with the advent of the globalization era (Ghemawat, 2003; Ghemawat, 2013). Increased breakage of the economic barriers coupled with improved technological trends has led to a significant rise in the number of multinational companies operating in major markets (Bradley, 2005). However, only the best fit corporations survive. The ability of a multinational corporation to survive a global competition is determined by how well it practices strategic management (Hill, 2008). Strategic management entails the creation and enactment of the objectives and initiatives taken by the corporation’s top management. The exercise is based on the consideration of resources and assessment of settings in which the corporation functions (Contractor, 2007; Hill, 2008). The aim of this paper is to discuss how multinational corporations formulate, evaluate and implement their international strategies. The paper will consider three multinational corporations namely Vodafone, MEC and Benetton. The paper will employ such theories as Dunning’s eclectic theory and the CSA and FSA matrix.
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Strategy Formulation and Implementation by Multinational Corporations
Modern multinational corporations such as Vodafone, MEC and Benetton are looking for the best ways to survive in the volatile and highly competitive global business environment. The multinational corporations are less likely to survive if they remain in their comfort zones (Bradley, 2005; Doole and Lowe, 2008; Ghemawat, 2013). For the reason that competition in the global business has increased, multinational corporations are supposed to remain overly alert and updated on all the trends in the global commerce environment (Ghemawat, 2003). Also, as a result of the entry of many participants into the international business, multinational corporations are forced to endure stiff competitions. The implication is that the chances of failure are extremely high if carefully thought strategies are not formulated and implemented (Contractor, 2007; Pearce and Robinson, 2000). As such, strategy formulation, evaluation and implementation are among the primary tasks involved in the strategic management of multination corporations. Formulation of the strategies and their implementation is a result of a vigilant scrutiny of the environments in which the businesses operate. Through it, multinational corporations can quickly and accurately identify the markets for their goods and services (Doole and Lowe, 2008; Johansson, 1997; Pearce and Robinson, 2000). Consequently, they can evaluate their ability and competitive advantages in capturing bigger shares of the market.
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For many companies, regardless of their degree of decentralization, the top management handles strategic planning. The middle-level management has primarily been thought to implement the strategic plans. However, the trends are changing nowadays seeing that companies realize that all levels of management are imperative to the success of an enterprise in the global business (Czinkota, Ronkainen, Moffett, Marinova, and Marinov, 2009). As more companies gain an international status, strategic planning continues to gain an added dimension. One of the primary reasons why multinational corporations such as Vodafone, MEC and Benetton embrace strategy formulation and implementation more is the increased need to track their ever diversifying operations in a constantly changing international environment.
Approaches to Strategy Formulation and Implementation
Multinational corporations adopt specific main styles of formulating and implementing policies. These are the economic imperative, political imperative and quality imperative. Each of the approaches to strategy formulation and implementation is based on pressures for cost reduction and local responsiveness of each of the countries served.
Firstly is the economic imperative. Under this approach, many multinational corporations sell their products for which a significant percentage of worth is augmented in the upstream activities of the value chain of the specific industry. Precisely, this is a worldwide strategy based on the aspects of cost leadership, differentiation and segmentation (Rugman and Collinson, 2012). Managers of many multinational companies such as Vodafone, MEC and Benetton use strategies that build upon the interactions of the Country-Specific-advantage and Firm-Specific-Advantage matrix, commonly referred to as the CSA/FSA Matrix. The aim of this is to ensure that they are positioned in a unique strategic space. The CSAs represent natural resources of a nation. The FSAs are based on the firm’s internal assets such as the production knowhow, managerial experiences and marketing competences (Glynn and Barnes, 1995; Griffin and Pustay, 2005). As such, the CSAs and FSAs form the basis for a global platform from where a firm gains a competitive advantage in world competitions. Multinational corporations such as Vodafone, MEC and Benetton can differentiate and segment their markets effectively for better penetration based on the elements of the matrix.
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Secondly is the political imperative, where multinational corporations use strategies that are receptive and intended to safeguard the local market niches. The success of the products and services of a multinational company depends significantly on the marketing, service and sales (Glynn and Barnes, 1995). The multinational corporations using this approach use a country centered or multi-domestic approach. The approach can be explained by the Dunning’s eclectic theory, which is primarily based on the internalization theory. Here, it is supposed that firms only concentrate on the activities that are likely to benefit the company more by bringing benefits that exceed the costs. As such, multinational corporations will only engage in activities that are responsive and probably lead to more benefits (Rugman and Verbeke, 2004; Rugman and Verbeke, 2008).
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The third approach is the quality imperative, an approach that is designed to implement management practices designed to make quality improvements on a continuous basis. The approach entails a change in attitudes and raising the expectations for better service delivery. Multinational corporations that use this approach intend to meet and exceed customer expectations, and then continually improve the products and services (Rugman and Verbeke, 2004). Using the CSA/FSA matrix, a multinational firm should evaluate itself to ensure that it is well endowed with country-specific-advantages and firm-specific advantages. Having particular advantages would enable such companies to develop products and services that meet or exceed their customers’ expectations better than rivals in the same industry.
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Finally is the administrative coordination approach where multinational corporations make strategies based on distinct situations and merits rather than preset political and economic circumstances. In this approach, the multinational corporations may use the CSA/FSA matrix to determine their advantages and situations. The approach of the administrative coordination is the least used strategy due to the MNCs’ wish to coordinate its operations globally and regionally.
Comparison of Vodafone, MEC and Benetton in Strategy Formulation and Implementation
Vodafone, MEC and Benetton are companies in different industries, and thus, they practice strategic management differently. Each of the multinational corporations faces competition from various rivals. As such, they formulate and implement their strategies differently seeing that their competitors are different. Vodafone is in the telecommunication sector while MEC is in the sporting and recreation sector. Further, Benetton is in the clothing industry. In comparing their strategy formulation and implementation, we start with Vodafone. Vodafone’s current business strategy is growing through geographical expansion, acquisition of new customers, retention of existing clients and increasing the usage through innovations in technology (Rugman, 2005). Vodafone’s strategy appears successful apparent from the firm’s success in the UK. Secondly is Mountain Equipment Co-op, MEC, a multinational corporation that deals with outdoor clothing and gear for cyclists, hikers, mountain bikers, and active everyday users. The company has remained relevant as more competitors enter the market year after year. The company has remained keen to meet the needs of its customers by producing and offering high-quality products at affordable prices. The elements of its success strategy include knowing its customers better, maintaining consistency and trust, passion for outdoors, and providing ‘rock solid guarantee.
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Finally is Benetton, a global fashion brand based in Italy, with more than 6000 stores in the major international markets. Benetton’s strategies encompass spread of production, use of unique and flexible sales channels, use of unique marketing strategy, and spreading geographically through innovation (Rugman, 2005). The groups strategies are seemingly fruitful seeing that the annual sales turnovers near 1.6 billion Euros. Also, over the years the group has continued to penetrate new markets across the world.
The current paper has discussed how multinational corporations formulate and implement strategies. The paper has revealed that only the corporations that make and enact strategies effectively are successful in the competitive and highly volatile global market. Multinational corporations utilize four main approaches to strategy formulation and implementation. These are the economic imperative, political imperative, quality imperative, and administration coordination approaches. Multinational corporations such as Vodafone, Benetton and MEC are among the most successful in their areas of operations. Their success is attributable to well thought-out strategic planning and implementation. As such, the paper notes that effective formulation and implementation of strategies is the key to achievements in the global market.