In a globalized Tech World we are often consumers and /or employees of multi-nation or international companies more than firms that operate within the domestic confines of a single country. According to UN estimates by 1991 there were about 36,000 multi-national companies with 170,000 subsidiaries, and total revenue in excess of $ 15.5 trillion. Together these firms accounted for 25% of world’s GNP.
Bartlett, Brikinshaw and late Sumantra Ghoshal, in their book “Transnational Management” have classified 4 types of multi-national firms:
- International
- Multinational
- Global
- Transnational
There are 2 criteria set by Bartlett, Brikinshaw and Ghoshal for a firm to be termed as a Multi National : "(1) have substantial direct investment in foreign countries and (2) actively manage those operations and regard those operations as integral parts of the company both strategically and organizationally."
Firms typically start at International stage in a foreign market to “test waters”. Then based on positive experiences or business needs become Multinational or Global. However, the increasing clout of such globally powerful firms sets in motion opposing forces. Governments for example would pressure “Global” firms to invest in transfer of technology, management know-how, and local requirements. Customers would tire of homogenized global products and demand local variations without reducing expectations of high quality and low costs. Also, volatile international currency, political, and financial conditions would undermine efficiency of a centralized global approach.
Firms could logically evolve through these 4 types from International to Multinational to Global and Transnational in stages. There are other paths a firm can take e.g. From International directly to Global. Newer firms, with the learning from experiences of other firms could leapfrog the International stage and directly go into a Multinational, Global or Transnational framework based on their business goals.
Bartlett, Brikinshaw and Ghoshal acknowledge that “depending on the industry, the individual company’s strategic position, the host countries’ diverse needs, and a variety of other factors, a company might reasonably operate with any one of these strategic mentalities. More likely, bearing in mind that this is an arbitrary classification, most companies will probably exhibit some attributes of each of these different strategic approaches.”
Continued Understanding International, Multinational, Global, and Transnational firms
