Strategic Management: Formulation and Implementation

Goals: Strategic Objectives

The goals of a multinational corporation (MNC) can be classified into three broad categories:

  1. The firm must achieve efficiency in its current activities.
  2. It must manage the risks that it assumes in carrying out those activities.
  3. It must develop internal learning capabilities so as to be able to innovate and adapt to future changes.

The overall framework can be particularly useful in identifying the trade-offs between those objectives and therefore in understanding not only the benefits but also the potential costs associated with different strategic alternatives.

Achieving Efficiency

The field of strategic management is currently dominated by efficiency perspective. The overall efficiency of the firm can be defined as the ratio of the value of its outputs to the costs of all its inputs. It is by maximizing this ratio that the firm obtains the surplus resources required to secure its own future.

The generic strategies of Porter (1980), different versions of the portfolio model, as well as overall strategic management frameworks such as those proposed by Hofer and Schendel (1978) and Hax and Majluf (1984) are all based on the underlying notion of maximizing efficiency rents of the different resources available to the firm.

In the field of global strategy this efficiency perspective has been reflected in the widespread use of the integration-responsiveness framework. This framework originally proposed by Prahalad (1975) and subsequently developed and applied by a number of authors including Doz, Bartlett and Prahalad (1981) and Porter (1984) .

The framework is a conceptual lens for visualizing the cost advantages of global integration of certain tasks vis-a-vis the differentiation benefits of responding to national differences in tastes, industry structures, distribution systems, and government regulations.

The same framework can be used to understand differences in the benefits of integration and responsiveness at the aggregate level of industries, at the level of individual companies within an industry, or even at the level of different functions within a company.

As illustrated in Figure 1-4, apply the framework to even lower levels of analysis, right down to the level of individual tasks. Based on such analysis, a multinational firm can determine the optimum way to configure its value chain so as to achieve the highest overall efficiency in the use of its resources (Porter,