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2006 Introduction to International Strategy

Introduction to International Strategy
The Strategy course began with the study of business unit or competitive strategy, addressing the
question of how a firm becomes a superior performer within a single, clearly defined business. The
frameworks taught earlier enabled us to understand how Wal-Mart came to dominate the discount
retailing industry, and why Edward Jones outperformed all other retail brokerages. Most firms start
out this way, competing within a single business, but as they grow they confront the question of
whether or not to expand their scope into other markets or businesses. Some firms choose to diversify
horizontally into new product markets, as Wal-Mart entered the grocery business with its supercenter format. Others choose to vertically integrate, as Apple’s i-Tunes service moved the hardware
company into the music distribution business. Yet others choose to expand geographically, as
Edward Jones has entered Canada and the U.K.
Whichever vector firms use to expand their scope of activities, they face similar strategic issues.
The previous module and note addressed issues of corporate strategy and vertical integration that
concern diversification into new product areas.1 Here we focus on the geographic dimension for
expansion by a successful company, and the issues that are raised by such a move—issues of
international strategy.
Economic Justification for Expanding Scope across Geographic Markets
International strategy has much in common with corporate strategy, since both fields address the
question of the optimal scope of the firm across markets. In corporate strategy, we were concerned
with the optimal scope of the firm across product markets. In international strategy, we are
concerned with the optimal scope of the firm across geographic markets. As a result, many of the
theoretical underpinnings of corporate strategy apply to international strategy.
Both strategies begin with the presumption that a firm has a competitive advantage in its core
business in the domestic market. Firms without an underlying competitive advantage will always
struggle to diversify, regardless of the direction in which they choose to diversify.2 Critically, both
strategies recognize that a firm is justified in diversifying into a new market if it can exploit scope
economies by virtue of that multimarket activity. Therefore, an effective international strategy that
creates value through a firm’s activity across national borders must pass the same two tests as
effective corporate strategy.
This module note was prepared by Professors David Collis and Jordan Siegel to aid students in the Strategy course.
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Module Note—Introduction to International Strategy
The “Better off” test To justify its presence in more than one country, a firm must create some
value from performing an activity in the new market or country.3 This value can arise either from
introducing or leveraging something from its home country to the new market, or exploiting or
accessing something in the new market that is valuable in its home market.
The first can be thought of as a demand-side scope economy—selling the original domestic
product in a new country, or replicating the domestic strategy in the new market. Most traditional
horizontal multinationals,4 like the consumer packaged goods giants, emerged this way. Perhaps
they began by exporting their original product overseas, then set up a distributor in that country, and
finally established a full subsidiary in that country and began to manufacture as well as sell in that
country.5 The value created by such a strategy lies in replicating a strategy that has been
demonstrated to work well domestically, in a country that was previously missing that particular
product or service.
The alternative way to create value from multimarket activity is to access and exploit a valuable
resource from within the new market. This can be thought of as a supply-side scope economy. Today
offshoring allows firms based in developed countries to exploit the comparative advantage of
developing countries. In particular, locating some activities in a less-developed country allows
multinationals to access lower-cost labor than is available in their home market. In the old days, the
resource that vertical multinationals sought to exploit in foreign markets was not labor but natural
resources. The oil giants grew by acquiring drilling rights and reserves in countries with oil fields.
The big agricultural firms, like the United Fruit Company, developed huge overseas plantations to
exploit the comparative advantage of tropical countries in growing fruit.
In many ways, these two types of scope economies can be thought of as exploiting static arbitrage
opportunities. In the case of the horizontal multinational, the firm arbitrages a product or a strategic
capability into a new market. In contrast, the vertical multinational arbitrages the factor cost
advantage of the foreign market. Another way to think about these scope economies is as filling
institutional voids or exploiting institutional differences between countries.6
The “Ownership” test Just as corporate strategy must explain why the firm itself has to be
active in the new market rather than simply licensing or selling its valuable resource to a firm that
already competes in that market, so a firm that competes internationally also has to address the
question of why it cannot simply license or sell its valuable resource to an indigenous firm (or buy it
from an indigenous firm in the case of supply-side scope economies). In other words, why does the
firm have to become a multinational? Unilever, for example, might have developed a wonderful new
detergent technology and a great advertising campaign to promote the product in the U.K., but why
can it not just license that product and marketing program to a U.S. firm? Why should Unilever itself
have to compete in the U.S. market to realize the rents that the new product generates? After all,
many firms, such as the Walt Disney Company, compete in many geographic markets in exactly this
As with corporate strategy, the answer to this question lies in identifying the market failure that
prevents efficient contracting between the parties in different countries.8
In many cases it is easy to see why markets for transactions that cross borders will fail or be
absent. International contracts are difficult to write because so many of the preconditions for the
effective governance of market transactions are missing in many countries.9 The rule of law, a mutual
trust in business relationships, and effective contract enforcement mechanisms are often missing or
incomplete, in many countries. If a firm is to compete in such countries, it will have to do so itself, or
face enormous risks, such as the expropriation of its assets or the lack of effective recourse against
partners that renege on contractual terms.
Module Note—Introduction to International Strategy
More generally, however, the same factors that underlie market failures across product
boundaries are also relevant across geographic boundaries.10 Whenever the asset being transferred
across countries is intangible or difficult to define, or whenever the asset is information whose value
is transferred when it is revealed, contracts can be impossible to write. This explains why Microsoft is
loath to license its code to a Chinese firm to convert to Mandarin and sell in China.11 Similarly, when
an asset is specific to a particular relationship, the risk of hold-up by either party leads to market
failure. This explains why Alcan owns bauxite mines in Jamaica to supply its alumina refineries, since
the refinery’s equipment has to be matched to the specific grade of ore from a particular mine.
Whatever the reason, there has to be some market failure present to justify the firm extending its
own operations to the foreign market. A retailer in the U.K. that imports all of its products from the
Far East is not a multinational, nor does it need an international strategy. It is only when the firm
extends the scope of activities under its own management to a foreign country that it enters the
domain of international strategy.
What’s Different about International Strategy?
Having argued that international strategy shares many of the same theoretical underpinnings as
corporate strategy, we need to recognize that there is something fundamentally different about the
subject. While we do not worry inordinately about whether a Massachusetts firm should sell in Texas
or locate its manufacturing in Alabama, when we expand our perspective to the global domain we
introduce the separate discipline of international strategy.
The reason for this is that when a firm’s activities cross national borders, it confronts factors that
introduce new strategic tradeoffs and new strategic choices. The three factors—heterogeneity across
markets, the scale and complexity of global operations, and the unpredictability of economic
conditions between countries—should be obvious to anyone who has experience in international
business. Each factor has profound implications both for the type of competitive advantage or scope
economy that justifies geographic expansion, and for critical decisions concerning how the firm
configures itself to compete internationally. While each factor is present to some extent within a
country—Texas is, after all, different from Massachusetts, and the two states’ economies are not
perfectly correlated—the differences become noticeable and have real strategic ramifications when a
company’s domain is extended across national borders. Within countries, firms typically face a
common legal and political system in addition to broad similarity in cultural beliefs, whereas across
countries institutional differences are far more varied.
Countries are fundamentally different. It only takes a visit to another part of the world for us to
realize how different other nations can be. On myriad dimensions from language and humor, to the
housing stock and retailing environment, dramatic differences between countries abound. Where
these differences originate—in culture, politics, geography, or other deep-seated institutional
legacies—is a matter of interest, since it defines how we might identify strategically different
countries. If language is the most powerful determinant of country differences, we might treat
Francophone countries as similar. In contrast, if it is cultural beliefs or legal differences that underlie
differences, we might partition the world differently.12 Regardless of how we might group countries,
the fact is that they are different, both in their underlying institutions, their resulting product markets
(the final outputs of production, such as washing machines and television shows), and their resulting
Module Note—Introduction to International Strategy
factor markets (inputs into production, such as capital and labor). One recent study, for example, has
shown that the same industries have dramatically different profitability in different countries.13
Competitive advantage: STATIC ARBITRAGE These differences are what justify
international activity. Product market differences create demand-side scope economies or arbitrage
opportunities. The fact that Argentineans love a caramel spread called Dulce de Leche that is not
eaten outside Latin America, allowed Haagen Daaz to develop a new flavor of ice cream that was
successfully introduced around the world. Factor market differences create supply-side scope
economies or arbitrage opportunities. European multinationals, like Telefonica, for example, with
easier access to capital than indigenous Latin American firms, were favorably positioned to buy
newly privatized businesses in the region.14
As mentioned earlier, these sources of advantage give rise to the horizontal multinational and the
vertical multinational. As they evolved historically, such firms tended to leave their operations in
foreign countries to relatively autonomous local managements. Part of this was just the
communication difficulties that impeded coordination with domestic headquarters. Until the 1970s,
for example, there were limited telephone lines across the North Atlantic, and a three-minute call
between London and New York cost $45 in today’s dollars.15 Another reason was that before
globalization led to some convergence of product and factor markets, a firm’s product or service
offering had to be adapted by local management to meet local requirements. More importantly, the
underlying competitive advantage that is being exploited by these strategies allows for the replication
of the original strategy in different countries with minimal coordination across countries. Unilever’s
competitive position in detergents in Egypt is relatively independent of how the firm competes in
Australia, so that if Egypt chooses not to introduce a product that Australia sells, there are no
negative consequences in either country. Multinationals pursuing such strategies have the
appearance of a portfolio of separate country organizations, each of which succeeds by adapting the
parent company’s core strategy to local market conditions.16
Strategic decision: WHAT PRODUCT TO SELL More generally, because markets are
different around the world, any firm that competes internationally has to make a basic decision about
the product it will sell around the world. Should that product be the same everywhere?—the way
that a Mars bar in South Africa is the same as the Mars bar in Germany—or should it be adapted to
local market conditions?—the way that Ford’s European cars are smaller than their American models.
Even if the product itself is the same, if factor market conditions differ, the way that product has to be
manufactured and sold might differ around the world. Palletizing a product for rail transportation
would, for example, be useless in a country that lacked a good railway infrastructure.
This implies that there is an underlying choice that multinationals have to confront with respect to
product selection. They must weigh the tradeoffs between customizing the product for local market
conditions against the consequent loss of efficiency and simplicity from not manufacturing one
standard product the same way everywhere. Historically, the multidomestic strategy favored local
adaptation, but as the world became more integrated after WWII, a new strategy emerged that
favored the standard global product approach.
Firms that compete internationally have the potential to access a substantially larger market than
is available to the firm that competes in a single country. While the U.S. is still the world’s largest
economy, it accounts for only about 30% of the globe’s economic activity. In many areas the U.S. is a
much smaller player. In terms of patents, for example, U.S. nationals contribute only 51% of the U.S.’s
own patent filings.17 In terms of electrical engineers, the U.S. is now contributing only one-quarter of
Module Note—Introduction to International Strategy
the number of graduates as India and China.18 On these and a host of other dimensions, the world’s
largest economy is just a fraction of the total output.
When a firm competes internationally, it therefore has the potential to achieve a much larger scale
than if it stayed within its own borders. And what is true for the U.S. is even more true for firms that
are based in smaller countries. With a population of less than 4 million, how can a New Zealand firm
hope to achieve the scale of its Chinese competitors unless its sells beyond its own borders?
Competitive advantage: GLOBAL EFFICIENCY The gradual integration of economies
after WWII led some firms to take advantage of the scale economies and efficiencies that are available
to an international competitor that treats the world as a single market. While some U.S. firms, like
Caterpillar and Boeing, began to take this approach, it was the Japanese who exploited this strategy
most successfully. In a series of industries, from motorbikes to televisions and machine tools,
Japanese firms in the 1960s and 1970s developed what became recognized as a true global strategy.19
In the extreme, this strategy exploits global scale economies by developing, manufacturing, and
selling a single product everywhere around the world.20 While the product might not be optimal for
every country, the cost advantage from global production volumes allowed firms like Honda,
Matsushita, and Mori Seiki to achieve market leadership in many countries even with a limited array
of standard products. The global strategy did not leverage an existing advantage to justify geographic
diversification; instead it created its own scope economies by virtue of the scale of the firm’s
international activity.21
Such a strategy obviously requires a very different management approach than the previous
multidomestic strategy. Firms must be more centrally controlled, and country management must be
prevented from adapting the product for local needs, since that would compromise the efficiency of
producing one product. Global companies, therefore, tend to have global product or business
divisions with authority over country managers. This results in more conformity around the world
and exploits the benefits of standardization and simplicity. However, it still leaves open the question
of which countries the global firm should compete in. If the standard global product does not exactly
meet the needs of some markets, should it nevertheless be sold in those countries in order to generate
incremental sales that reduce overall production costs?
Strategic decision: WHERE TO COMPETE More generally, all multinationals have to
decide in which countries to compete, and how to prioritize resource allocation among the markets in
which they already compete. The tradeoff faced with this decision is between extending geographic
coverage to increase sales and exploit scale economies, and the increased complexity and
coordination difficulties involved in meeting the needs of increasingly heterogeneous markets.
Most multinationals resolve this tension by following an evolutionary path that gradually extends
their geographic footprint. They begin by serving countries that are physically and culturally close in
order to minimize market heterogeneity. Indeed, world trade occurs disproportionately between
neighbors, within the old Empires, and among countries with similar institutions.22 Thus, a British
company that has developed software for university administration might first enter the Australian
and New Zealand markets, then go to the U.S. before entering France and Germany, while ignoring
the large and growing Chinese market.
Over time, multinational firms evolve various geographic footprints that match their underlying
international strategy. Some firms, like Star TV, seek to cover the globe because they are pursuing a
global strategy that leverages their media content. Others, like Zara, adapt a primarily regional
strategy because they realize that their business model is hard to replicate outside Europe. Yet others,
like Hershey in the chocolate business, decide to remain purely domestic, believing that the U.S.
Module Note—Introduction to International Strategy
preference for poor-quality chocolate protects their market.23 Thus, the choice of geographic footprint
becomes a critical strategic decision that has to be aligned with other configurational choices.
Because nation-states have their own governments and institutions that set their own economic
policies, there is limited correlation between the economic performance of countries around the
world. In spite of globalization and appeals to the homogenization of the world, there is even less
cultural convergence among countries.24 As a result, international competition is characterized by
unpredictable and substantive changes between countries in economically significant phenomena.
Within a given year, exchange rates move against a trade-weighted basket of currencies by greater
than 7% about one-third of the time.25 Political turbulence suddenly closes off a large developing
market, as happened to China after Tiananmen Square. The album that breaks through to become top
of the charts in Argentina is rarely the same as the one that becomes No. 1 in Uzbekistan.
These unpredictable exogenous global events cover both supply-side phenomena, such as
dramatic shifts in factor costs and innovations in process technologies, and demand-side phenomena,
such as variation in market growth rates and product and fashion innovations. As a result,
international competition exposes companies to a degree of uncertainty and volatility that they do
not face when they compete only domestically.
Competitive advantage: INNOVATION AND DYNAMIC ARBITRAGE Many firms
see such volatility as a headache, and as a drawback to competing internationally: for example, a
foreign competitor suddenly gains an 8% cost advantage because its currency depreciates that
amount, or a critical overseas manufacturing facility is disrupted by political strikes. However, some
firms see the glass not as half empty but as half full, because volatility creates the opportunity for
dynamic arbitrage. If a company has a manufacturing facility in a country that experiences a
devaluation, it can exploit that site as a low-cost production location. If a music firm has A&R
executives in South Africa, it might be able to identify the next World Music phenomena before
competitors. As we learned in finance, volatility creates an option value that can be realized through
appropriate arbitrage strategies.26
The key aspect of this competitive advantage is that it is a dynamic phenomenon. Rather than the
vertical multinational, which arbitrages current factor cost advantages, this strategy exploits volatility
by continually reoptimizing or rebalancing the firm’s activities. Obviously this can be achieved only if
the firm has a presence in many different countries. Becton Dickinson, for example, the manufacturer
of blood containers, shifts production of its standard global products between plants in three
different regions in order to concentrate on the currently low-cost location.27 That same firm would
also be in a position to transfer a process innovation, perhaps developed in one plant in response to
specific material shortage in that country, to the rest of its plants. Similarly, if the firm has many
R&D centers, it can be an insider with access to product innovations or even fashion trends from
those many countries.28
The need for a wide geographic presence beyond just the sales function in order to realize
dynamic arbitrage opportunities highlights the key challenge for this strategy—coordination.29
A multinational, like the European electrical products giant ABB in its heyday, has to coordinate the
development, manufacturing, and marketing of multiple products at multiple locations. This is an
enormous management challenge, which many firms, including ABB itself after Percy Barnevik
retired, often balk at undertaking. Indeed, while this has the appearance of an ideal strategy, it is
debatable whether it is managerially feasible to balance the competing demands of local
responsiveness, global efficiency, and dynamic innovation and arbitrage inside one organization.
Module Note—Introduction to International Strategy
Strategic decision: WHERE TO LOCATE ACTIVITIES More generally, the enormous
volatility in international competition forces multinationals to decide where to locate their activities.
Simply choosing to locate all manufacturing in one site in the country that has the lowest current
labor rates might, for example, not be optimal over the long term. Other countries might emerge with
lower wage rates. A dock strike in that country could halt production. Or a breakthrough technology
might be missed because it was developed in another country.
The overall geographic configuration of a firm’s activities, therefore, represents a key strategic
choice for every multinational. This choice concerns both the number of sites and the specific location
of each site. The tradeoff between the scale efficiency of a single site and the option value of being
able to reallocate production among different locations, for example, concerns the number of sites.
The tradeoff between the current penalty of locating in a high-cost region, and the stability offered by
that country’s developed institutional structure, concerns the location of those sites. The result of a
firm’s decisions about these issues yield an implicit posture toward risk that is critical to successful
international strategy.
While it is natural to be concerned with the location of manufacturing facilities, the decision is no
less important for the rest of a firm’s activities. The number of marketing organizations, or the
location of a regional research center, can be just as important to firm success. As a result, firms
seeking to become more proactive in their attitude toward managing volatility have distributed many
of their critical activities away from the traditional domestic headquarters.
Strategic Implications
We are now in a position to see the impact of the factors that firms confront when competing
across international borders. First, they give rise to very different sources of competitive advantage.
Second, they compel multinationals to make some very basic choices about the products they offer
around the world, which markets they compete in, and the locations of their activities. Since strategy
is all about the consistency and alignment of activities in support of a competitive advantage, what
we have described is the need for firms to choose a single coherent international strategy.
Generic international strategies We have intimated that there are, in fact, a set of distinctive
international strategies.30 Each of these strategies describes a unique source of competitive advantage
that the firm exploits through its international activity, and how that advantage determines the
choices the firm makes about which markets to compete in, the product to offer, and the location of
its activities. These are what can be thought of as generic international strategies, or archetypes, of
idealized strategies. While no multinational will look exactly like any one of those archetypes, the
presence of these very different strategies, even in the same industry, explains why firms that
compete internationally can appear to be so different.
Some strategists promote one or other of the generic strategies as the ideal way to compete
internationally.31 In fact, the appropriate international strategy will vary by industry, segment, and,
over time, according to the underlying economic structure of the business. There is no one optimal
international strategy. Indeed in many industries, such as chocolate, successful competitors pursue
one of many generic strategies. Mars has a tightly coordinated global strategy, Hershey is a purely
domestic U.S. player, while Cadbury’s competes with a more traditional multidomestic approach. It
is therefore more important for a firm to choose and implement its own international strategy than to
seek to emulate the firm that supposedly has the “best” international strategy.
Module Note—Introduction to International Strategy
Organizational design The reason multinational firms must choose among strategies is that
they face one last configurational choice—their organizational structure and management processes.
Indeed, the most contentious issues of international strategy typically include a discussion of the
appropriate organizational design for the firm.
The fact that strategy determines structure is a mantra of organizational design.32 If a firm seeks to
exploit scale economies with a standard product sold the same way everywhere around the world,
then it probably should adopt a global product division structure. Conversely, if a horizontal
multinational seeks to simply replicate its strategy in a foreign country and is willing to let local
management adapt the product to fit the particular needs of their country, the firm’s organizational
design should be based on the delegation of authority to country managers. To achieve the benefits of
dynamic arbitrage requires intense coordination of functions, geographies, and products in a way
that was traditionally believed to be manageable only in a matrix organization.33
If this is the case, then changing an international strategy requires altering everything about the
firm. While there is obviously much to be learned about the details of the strategies themselves and
the tradeoffs that underpin them, the key to competing successfully on the international stage forces
multinationals to be explicit about their source of competitive advantage which they exploit by
competing internationally, and how that choice determines the configuration of the activities.
Module Note—Introduction to International Strategy
Mikolaj Jan Piskorski, “Note on Corporate Strategy” HBS No. 705-449 (Boston: Harvard Business School
Publishing, 2005).
In the international business literature this is called the “Ownership” advantage. The firm must own some
valuable resource or capability that gives it a basic competitive advantage. John Dunning, “Toward an Eclectic
Theory of International Production: Some Empirical Tests,” Journal of International Business Studies 11 (Spring
1980): 9–31.
This is referred to as the “locational” advantage. Ibid.
4 For more information, see Richard E. Caves, Multinational Enterprise and Economic Analysis, Second Edition
(Cambridge: Cambridge University Press, 1982).
5 Ray Vernon, “International Investment and International Trade in the Product Cycle,” Quarterly Journal of
Economics 80, (1966) pp. 190–207.
6 Tarun Khanna and Krishna Palepu, “Spotting Institutional Voids in Emerging Markets,” HBS No. 106-014
(Boston: Harvard Business School Publishing, 2005).
Michael G. Rukstad and David Collis, “The Walt Disney Company: The Entertainment King,” HBS No.
701-035 (Boston: Harvard Business School Publishing, 2005).
In the International Business literature this reason is called “internalisation” John Dunning, “Toward an
Eclectic Theory of International Production: Some Empirical Tests,” Journal of International Business Studies 11
(Spring 1980): 9–31.
Tarun Khanna and Krishna Palepu, “Spotting Institutional Voids in Emerging Markets,” HBS No. 106-014
(Boston: Harvard Business School Publishing, 2005); Bharat Anand, Tarun Khanna and Jan Rivkin, “Market
Failures,” HBS No. 700-127 (Boston: Harvard Business School Publishing, 2000).
Bharat Anand, Tarun Khanna, and Jan Rivkin, “Market Failures,” HBS No. 700-127 (Boston: Harvard
Business School Publishing, 2000).
11 Tarun Khanna, “Microsoft in the People's Republic of China—1993,” HBS No. 795-115 (Boston: Harvard
Business School Publishing, 1995).
12 For evidence of why cultural beliefs determine the location of cross-border mergers and acquisitions, see
Jordan I. Siegel, Amir Licht, and Shalom Schwartz, “Egalitarianism and International Investment,” unpublished
working paper (Boston: Harvard Business School, 2006).
13 See Tarun Khanna and Jan Rivkin, “The Structure of Profitability Around the World,” unpublished
working paper No. 01-056 (Boston: Harvard Business School, 2001).
14 Steven R. Fenster and Rajiv Gharalia, “Telefonica de Argentina S.A.,” HBS No. 292-039 (Boston: Harvard
Business School Publishing, 1992).
Investment banks in those days had a separate department whose only job was continuously dialing the
U.K. in order to access one of those scarce lines!
Multinationals pursuing this strategy have accordingly become known as “multidomestic.” Michael
Porter, Competition in Global Industries (Boston, MA: Harvard Business School Press, 1986).
Patents by country, state and year (December 2004): U.S. Patent and Trademark Office.
Pete Engardio, “Engineering: Is the U.S. Really Falling?” BusinessWeek, December 27, 2005,, accessed January
Module Note—Introduction to International Strategy
Accordingly, this strategy is commonly referred to as the global strategy. Michael Porter, “Global
Strategy: Winning in the World-Wide Marketplace,” in The Portable MBA in Strategy, Liam Fahey, and Robert M.
Randall, eds. (New York: John Wiley & Sons, Inc., 1994).
Ted Levitt was the most famous early proponent of this approach in his classic work “The Globalization of
Markets,” Harvard Business Review (May 1983).
Although as we noted above, each of these firms internationalized after having established a competitive
advantage domestically.
22 The results reported in this paragraph are from Jeffrey Frankel and Andrew Rose, “An Estimate of the
Effect of Common Currencies on Trade and Income,” Quarterly Journal of Economics 117 (May 2002): 437–466. For
a description of different types of cultural and institutional distance and how they affect globalization, see
Pankaj Ghemawat, “Distance Still Matters: The Hard Reality of Global Expansion,” Harvard Business Review 79
(September 2001): 137–147.
Chocolate is a product for which tastes acquired early in life are hard to change. One of the authors was
brought up in Bournville, home of Cadbury’s chocolate(!).
See, for example, Naomi Klein, No Logo (London, U.K.: Flamingo, 2001).
Author analysis from IMF data.
Prior research has shown that one of the most significant ways in which multinational firms exploit
the option value of volatility is to buy assets at reduced prices as soon as an emerging economy faces a
currency depreciation and local firms are temporarily constrained financially. Mihir A. Desai, C. Fritz Foley, and
Kristin J. Forbes, “Financial Constraints and Growth: Multinational and Local Firm Responses to Currency
Depreciations,” working paper, Harvard Business School and MIT Sloan School of Management, 2005.
George S. Yip, Total Global Strategy (Prentice Hall Trade, 1992).
Christopher A. Bartlett and Sumantra Ghoshal, Managing Across Borders (Harvard Business School Press,
Terminology is a nightmare in the international strategy field. Different authors use different terms to
describe essentially the same strategy. This is particularly true for this sort of strategy, which is perhaps most
commonly called “transnational.” Ibid.
Sumantra Ghoshal, “Global Strategy: An Organizing Framework,” Strategic Management Journal 8
(Sep/Oct 1987): 425. Susan Segal-Horn and David Faulkner, The Dynamics of International Strategy (London,
International Thomson Business Press, 1999).
George S. Yip, Total Global Strategy (Prentice Hall Trade, 1992), Alan M. Rugman, The Regional
Multinationals (Cambridge University Press, 2005); Yves L. Doz, Jose Santos, and Peter J. Williamson, From Global
to Metanational: How Companies Win in the Knowledge Economy (Harvard Business School Press, 2001).
Alfred D. Chandler, Strategy and Structure: Chapters in the History of the American Industrial Enterprise (The
MIT Press, 1962).
Christopher A. Bartlett and Sumantra Ghoshal, Managing Across Borders (Harvard Business School Press,